<PAGE>
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 September 30, 2000
or
[ ] Transition Report Pursuance to Section 13 or 15(d) of the Securities
Exchange act of 1934.
For the transition period from _________ to _________
Commission File Number 0-23782
RENAISSANCE ENTERTAINMENT CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-1094630
------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
275 Century Circle, Suite 102, Louisville, Colorado 80027
---------------------------------------------------------
(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 November 14, 2000, Registrant had 2,144,889 shares of common stock, $.03
Par Value, outstanding.
<PAGE>
INDEX
<TABLE>
<CAPTION>
Page
Number
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<S> <C>
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
Balance Sheets as of September 30, 2000 (Unaudited)
and December 31, 1999 3
Statements of Operations for the Three Months
Ended September 30, 2000 and 1999 (Unaudited) 4
Statements of Operations for the Nine Months
Ended September 30, 2000 and 1999 (Unaudited) 5
Statements of Cash Flows for the Nine Months
Ended September 30, 2000 and 1999 (Unaudited) 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION 16
</TABLE>
--------------------------------
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.
2
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RENAISSANCE ENTERTAINMENT CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS 2000 1999
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<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 1,760,144 $ 1,049,044
Accounts receivable (net) 118,667 4,951
Note receivable, current portion 15,731 0
Inventory 202,672 201,493
Prepaid expenses and other 1,052,545 259,646
----------- -----------
TOTAL CURRENT ASSETS 3,149,759 1,515,134
Property and equipment, net of accumulated depreciation 4,267,388 4,294,163
Note receivable, long-term portion 132,862 0
Goodwill 430,791 468,798
Other assets 905,060 830,725
----------- -----------
TOTAL ASSETS $ 8,885,860 $ 7,108,820
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,446,356 $ 1,720,610
Notes payable, current portion 1,396,499 854,277
Unearned income 290,788 214,789
----------- -----------
TOTAL CURRENT LIABILITIES 3,133,643 2,789,676
Lease obligation payable 4,014,083 3,987,116
Note payable, net of current portion 193,261 311,873
Other 244,840 39,675
----------- -----------
TOTAL LIABILITIES 7,585,827 7,128,340
STOCKHOLDERS' EQUITY:
Common stock, $.03 par value, 50,000,000 shares
authorized, 2,144,889 and 2,144,889 shares
issued and outstanding at September 30, 2000
and December 31, 1999 respectively 64,346 64,346
Additional paid-in capital 9,430,827 9,430,827
Accumulated earnings (deficit) (8,195,140) (9,514,693)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,300,033 (19,520)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,885,860 $ 7,108,820
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
STATEMENT OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30
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2000 1999
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<S> <C> <C>
REVENUE:
Sales $ 7,083,007 $ 7,232,739
Faire operating costs 1,787,769 2,224,208
----------- -----------
Gross Profit 5,295,238 5,008,531
----------- -----------
OPERATING EXPENSES:
Salaries 1,191,446 1,543,476
Depreciation and amortization 93,676 139,157
Advertising 796,491 812,347
Other operating expenses 1,175,722 1,226,490
----------- -----------
Total Operating Expenses 3,257,335 3,721,470
----------- -----------
Net Operating (Loss) Income 2,037,903 1,287,061
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Other Income (Expenses):
Interest income 28,700 16,441
Interest (expense) (161,255) (151,382)
Other income(expense) 19,482 41,613
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Total Other (113,073) (93,328)
----------- -----------
Net Income (Loss) before (Provision) 1,924,830 1,193,733
Credit for Income Taxes
(Provision) Credit for Income Taxes -- --
----------- -----------
NET INCOME (LOSS) TO COMMON STOCKHOLDERS $ 1,924,830 $ 1,193,733
=========== ===========
NET INCOME (LOSS) PER COMMON SHARE $ 0.90 $ 0.56
=========== ===========
Weighted Average Number of Common Shares
Outstanding 2,144,889 2,144,889
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
STATEMENT OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
-------------------------------
2000 1999
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<S> <C> <C>
REVENUE:
Sales $ 10,937,567 $ 12,565,151
Faire operating costs 3,007,103 4,087,573
------------ ------------
Gross Profit 7,930,464 8,477,578
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OPERATING EXPENSES:
Salaries 2,505,506 3,558,910
Depreciation and amortization 268,461 398,798
Advertising 1,188,825 1,475,257
Other operating expenses 2,135,154 2,520,423
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Total Operating Expenses 6,097,946 7,953,388
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Net Operating (Loss) Income 1,832,518 524,190
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Other Income (Expenses):
Interest income 60,143 38,784
Interest (expense) (458,801) (468,383)
Other income(expense) (114,307) 74,266
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Total Other (512,965) (355,333)
------------ ------------
Net Income (Loss) before (Provision) 1,319,553 168,857
Credit for Income Taxes
(Provision) Credit for Income Taxes -- --
------------ ------------
NET INCOME (LOSS) TO COMMON STOCKHOLDERS $ 1,319,553 $ 168,857
============ ============
NET INCOME (LOSS) PER COMMON SHARE $ 0.62 $ 0.08
============ ============
Weighted Average Number of Common Shares
Outstanding 2,144,889 2,143,542
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
STATEMENT OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
-----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 2000 1999
----------- -----------
<S> <C> <C>
NET INCOME (LOSS) $ 1,319,553 $ 168,857
----------- -----------
ADJUSTMENTS TO RECONCILE NET INCOME(LOSS)
TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization 268,461 398,798
Gain(loss) on disposal of assets 3,652 302
(INCREASE)DECREASE IN:
Accounts receivable (113,716) (88,627)
Note receivable (148,593)
Inventory (1,179) (161,307)
Prepaid expenses and other (871,204) (852,381)
INCREASE (DECREASE) IN:
Accounts payable and accrued expenses (274,256) 1,080,179
Unearned revenue and other 281,164 21,188
----------- -----------
TOTAL ADJUSTMENTS (855,671) 398,152
----------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 463,882 567,009
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) in property and equipment (203,358) (290,572)
----------- -----------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (203,358) (290,572)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued and additional paid-in capital -- 2,500
Proceeds from notes payable 609,967 1,265,571
Principal payments on notes payable (159,391) (627,607)
----------- -----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 450,576 640,464
----------- -----------
NET INCREASE (DECREASE) IN CASH 711,100 916,901
CASH, BEGINNING OF PERIOD 1,049,044 379,336
----------- -----------
CASH, END OF PERIOD $ 1,760,144 $ 1,296,237
=========== ===========
INTEREST PAID $ (458,801) $ (468,383)
=========== ===========
INCOME TAX PAID(REFUND) -- --
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 2000 (Unaudited)
1. UNAUDITED STATEMENTS
The balance sheet as of September 30, 2000, the statements of operations
for the three-month and nine-month periods ended September 30, 2000 and
1999 and the statements of cash flows for the nine-month periods ended
September 30, 2000 and 1999, 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, 2000 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, 1999, 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
During the first six months of fiscal 2000, the Company raised capital in
the amount of $575,000 through the issuance of 12% subordinated promissory
notes. The funds were provided by Charles S. Leavell ($250,000), Chairman
of the Board of Directors, J. Stanley Gilbert ($225,000), Member of the
Board of Directors, and one other investor. The notes were issued in units,
each unit consisting of two promissory notes of equal principal amounts,
identical in nature except that one note is convertible to common stock at
a price of $0.30 per share. Interest is due and payable quarterly and the
notes mature August 31, 2001.
4. BASIS OF PRESENTATION - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation
of the Company as a going concern. However, the Company has sustained
operating losses through 1999 and has limited working capital at September
30, 2000.
In view of these matters, realization of certain assets in the accompanying
balance sheet is dependent upon continued operations of the Company, which
in turn is dependent upon the Company's ability to meet its financial
requirements, raise additional capital, or the success of its future
operations.
Management is considering raising additional capital and is continually
monitoring the operations of the Company to attempt to provide an
opportunity for the Company to be profitable.
7
<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
Financial Statements, including the footnotes for the fiscal period ended
December 31, 1999.
The Company presently owns and produces four Renaissance Faires: the Bristol
Renaissance Faire in Kenosha, Wisconsin, serving the Chicago/Milwaukee
metropolitan region; the Northern California Renaissance Pleasure Faire, serving
the San Francisco Bay and Sacramento metropolitan areas; the Southern California
Renaissance Pleasure Faire in Devore, California serving the greater Los Angeles
metropolitan area; and the New York Renaissance Faire serving the New York City
metropolitan area.
The Renaissance Faire is a re-creation 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.
On January 28, 2000, the Company announced the closure of the Virginia
Renaissance Faire located in Fredericksburg, Virginia. The Virginia Renaissance
Faire has had a negative impact on the Company's cash flow and net income since
its opening. Efforts are underway to sell the 250 acres of land on which the
Faire is located.
On April 6, 2000 the Company entered into an Asset Purchase Agreement with
Willows Fare, LLC which conveyed it's interest in certain assets previously used
by the Bristol Faire in its food operation. As part of this agreement, Willows
Fare, LLC was granted a seven-year concession agreement with the Bristol Faire
to operate as a food vendor. The purchase price of the assets was $300,000, half
of which was paid upon execution of the agreement. The Company holds a 10%
promissory note for the balance of $150,000. Payments of principal and interest
begin August 1, 2000 based on a 7-year amortization with a balloon payment on
October 31, 2003.
The Company has a lease for the 2001 Faire season to operate the New York Faire
in Sterling Forest. The Company has a one-year lease for the 2000 Faire season
to operate the Northern California Faire at the same location used in 1999, near
Vacaville. On June 27, 2000, the Company signed a twenty-year lease with San
Bernardino County Parks and Recreation Department, securing a long-term home for
the Southern California Renaissance Faire. The Company has a long-term lease
expiring in 2017 for the Bristol Faire site. The Company is currently
negotiating a lease for the Northern California Faire site in 2001. It is
critical to the financial condition of the Company, that it obtain long-term
leases for its Northern California and New York Faires.
The Company had a working capital surplus of $16,118 as of September 30, 2000.
During the first six months of fiscal 2000, the Company raised capital in the
amount of $575,000 through the issuance of 12% subordinated promissory notes.
The funds were provided by Charles S. Leavell
8
<PAGE>
($250,000), Chairman of the Board of Directors, J. Stanley Gilbert ($225,000),
President and a Director, and one other investor. The notes were issued in
units, each unit consisting of two promissory notes of equal principal amounts,
identical in nature except that one note is convertible to common stock at a
price of $0.30 per share. Interest is due and payable quarterly and the notes
mature August 31, 2001. See "LIQUIDITY AND CAPITAL RESOURCES."
RESULTS OF OPERATIONS
It is important to note that the Company's 1999 Results of Operation include the
run of the Virginia Renaissance Faire. The effect of the closure of the Virginia
Faire will be disclosed as each line item on the income statement is discussed.
Additionally, the Company operated it's New York and Northern California Faires
eight weekends in 1999, compared to seven in 2000.
THREE MONTHS ENDED SEPTEMBER 30, 2000, COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1999
Revenues decreased $149,732 or 2% from $7,232,739 in 1999 to $7,083,007 in 2000.
This decrease is associated with the Company's Northern California Faire, which
experienced a decline in gross attendance for the 2000 operating season of 15%.
It is believed, the decreased attendance for this Faire is the result of it's
relocation in 1999. When this Faire was relocated, part of it's original core
audience was lost. Likewise, as part of the relocation, new demographic areas
have been tapped and it is believed that these new areas will eventually result
in an increase in attendance. The Company believes that overall attendance at
the Faire is good, considering the ramifications of relocating such an event.
Faire operating costs decreased $436,439 or 20% from $2,224,208 in 1999 to
$1,787,769 in 2000. Of this expense decrease, approximately $150,000 is
attributable to the sale of the Wisconsin food operation in 2000. In 1999 the
Company operated a Wild West show in Wisconsin during the month of September
which incurred approximately $50,000 in expenses. This event was subsequently
cancelled. The balance of the decrease is the result of overall reductions in
spending.
Operating expenses (year-round operating costs and corporate overhead) decreased
$464,135 or 12%, from $3,721,470 in 1999 to $3,257,335 in 2000. Of the decrease,
approximately $180,000 is attributable to the closure of the Company's Virginia
Faire. The balance of the decrease is associated with expense reductions
throughout the Company's operations.
Of the operating expenses, salaries decreased 23%, from $1,543,476 in 1999 to
$1,191,446 in 2000 reflecting a $352,030 decrease for the 2000 period as
compared to the 1999 period. Of this decrease, $83,000 is associated with the
closure of the Company's Virginia Faire. The balance of the change is the result
of decreased personnel expense for the Company.
Advertising expense showed a decrease of $15,856 or 2%, from $812,347 in 1999 to
$796,491 in 2000. Of the decrease, $10,000 is associated with the closure of the
Company's Virginia Faire.
Depreciation and amortization decreased $45,481 or 33%, from $139,157 in 1999 to
$93,676 in 2000. This decrease is the result of the Company's closure of the
Virginia Faire and the associated write-down of these assets in 1999. As a
result, the Company's fixed asset base decreased and overall depreciation
expense has decreased.
9
<PAGE>
Other operating expenses (all other general and administrative expenses of the
Company) decreased $50,768 or 4%, from $1,226,490 in 1999 to $1,175,722 in 2000.
Of the decrease, $44,000 is associated with the closure of the Virginia Faire.
As a result of the foregoing, net operating income (before interest charges and
other income) increased $750,842 or 58% from $1,287,061 for the 1999 period to
$2,037,903 for the 2000 period. The Virginia Faire's net operating loss for the
three-month period in 1999 was ($167,000).
A 7% increase in interest expense from $151,382 in 1999 to $161,255 in 2000
resulted from an increase in the Company's level of debt over the one-year
period.
Combining net operating income with other income/expense resulted in a $731,097
increase in net income before taxes, from income of $1,193,733 for the 1999
period to an income of $1,924,830 for the 2000 period.
Net income to common stockholders also increased $731,097, from $1,193,733 for
the 1999 period to $1,924,830 for the 2000 period. Finally, net income per
common share increased from $.56 for the 1999 period to $.90 for the 2000
period, based on 2,144,889 weighted average shares outstanding during the 1999
and 2000 periods.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2000, COMPARED TO NINE
MONTHS ENDED SEPTEMBER 30, 1999
Revenues decreased $1,627,584 or 13% from $12,565,151 in 1999 to $10,937,567 in
2000. This decrease is largely attributable to the closure of the Company's
Virginia Faire, which contributed revenue in the amount of $1,154,174 in the
first three quarters of 1999.
Revenue was down approximately $600,000, at the Company's Southern California
Faire, which experienced a decrease in gross attendance for the 2000 operating
season of 17%. It is believed, that the decreased attendance for this Faire was
the result of extremely hot weather through the eight-week run of the event.
The Company's Northern California Faire, experienced a decline in gross
attendance for the 2000 operating season of 15%. Revenue was down approximately
$350,000 as compared to the same time period in 1999. It is believed, the
decreased attendance for this Faire is the result of it's relocation in 1999.
When this Faire was relocated, part of it's original core audience was lost.
Likewise, as part of the relocation, new demographic areas have been tapped and
it is believed that these new areas will eventually result in an increase in
attendance. The Company believes that overall attendance at the Faire is good,
considering the ramifications of relocating such an event.
While the Company's Southern and Northern California Faires both experienced
sub-optimal operating seasons the Wisconsin and New York Renaissance Faires
collectively exceeded their 1999 revenue figures by approximately $400,000.
Faire operating costs decreased $1,080,470 or 20% from $4,087,573 in 1999 to
$3,007,103 in 2000. This decrease is largely attributable to the closure of the
Company's Virginia Faire with expenses totaling about $550,000 for the first
three-quarters of 1999. Additionally, about $150,000 is
10
<PAGE>
attributable to the sale of the Wisconsin food operation in 2000. In 1999 the
Company operated a Wild West show in Wisconsin during the month of September
which incurred approximately $50,000 in expenses. This event was subsequently
cancelled. The balance of the decrease is the result of overall reductions in
spending.
Operating expenses (year-round operating costs and corporate overhead) decreased
$1,855,442 or 23%, from $7,953,388 in 1999 to $6,097,946 in 2000. Of the
decrease, approximately $1,000,000 is attributable to the closure of the
Company's Virginia Faire. The balance of the decrease is associated with expense
reductions throughout the Company's operations.
Of the operating expenses, salaries decreased 30%, from $3,558,910 in 1999 to
2,505,506 in 2000 reflecting a $1,053,404 decrease for the 2000 period as
compared to the 1999 period. Of this decrease, $450,000 is associated with the
closure of the Company's Virginia Faire. The balance of the change is the result
of decreased personnel expense for the Company.
Advertising expense showed a decrease of $286,432 or 19%, from $1,475,257 in
1999 to $1,188,825 in 2000. Of the decrease, $220,000 is associated with the
closure of the Company's Virginia Faire. The balance of the decrease is the
result of the Company's utilization of alternative, less expensive forms of
marketing.
Depreciation and amortization decreased 33%, from $398,798 in 1999 to $268,461
in 2000. This decrease is primarily the result of the Company's closure of the
Virginia Faire and the associated write-down of these assets in 1999. As a
result, the Company's fixed asset base decreased and overall depreciation
expense has decreased.
Other operating expenses (all other general and administrative expenses of the
Company) decreased $385,269 or 15%, from $2,520,423 in 1999 to $2,135,154 in
2000. Of the decrease, $165,000 is associated with the closure of the Virginia
Faire. The balance of the decrease is associated with expense reductions
throughout the Company's operations.
As a result of the foregoing, net operating income (before interest charges and
other income) increased 250% from $524,190 for the 1999 period to $1,832,518 for
the 2000 period. The Virginia Faire's net operating loss for the nine-month
period in 1999 was ($346,220).
Other income decreased $188,573 from income of $74,266 in 1999 to expense of
($114,307) in 2000. In 1999, as a result of the closure of the Virginia Faire,
the Company recorded an allowance for discontinued operations in the fourth
quarter. This allowance was an estimate, representing the anticipated cost of
administering the Virginia site for the year 2000. In the second quarter of
2000, this estimate was re-evaluated and determined to be inadequate to cover
expenses through the year. As a result an additional allowance in the amount of
$184,416 was recorded to other expense.
Combining net operating income with other income/expense resulted in a
$1,150,696 increase in net income before taxes, from $168,857 for the 1999
period to $1,319,553 for the 2000 period.
Net income to common stockholders also increased $1,150,696 from $168,857 for
the 1999 period to $1,319,553 for the 2000 period. Finally, net income per
common share increased from $0.08 for the 1999 period to $0.62 for the 2000
period, based on 2,143,542 weighted average shares outstanding during the 1999
period and 2,144,889 weighted average shares outstanding during the 2000 period.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company had a working capital surplus for the quarter ended September 30,
2000. At December 31, 1999 the Company had a working capital deficit of
($1,274,542) at December 31, 1999 and at September 30, 2000 it had a surplus of
$16,118. 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 Faire of the season, the Southern California Faire.
During the first six months of fiscal 2000, the Company raised capital in the
amount of $575,000 through the issuance of 12% subordinated promissory notes.
The funds were provided by Charles S. Leavell ($250,000), Chairman of the Board
of Directors, J. Stanley Gilbert ($225,000), President and a Director, and one
other investor. The notes were issued in units, each unit consisting of two
promissory notes of equal principal, identical in nature except that one note is
convertible to common stock at a price of $0.30 per share. Interest is due and
payable quarterly and the notes mature August 31, 2001.
During March of 1999, the Company secured a second mortgage on its Virginia real
estate. The total amount of the loan was $750,000. This loan provides for
interest at 13% per annum. Payments of principal and interest, approximately
$11,500 each month, are due January and July through November 2000. Interest in
the amount of $7,262 each month is payable from February through June 2000. The
final payment on the loan is approximately $627,573 and is due December 31,
2000. The Company is currently negotiating with this lender for an extension of
the maturity date of this note. Should the Company be unable to extend the
maturity date of this note it will need approximately $600,000 to fund
operations prior to the opening of the 2001 Faire season.
Reviewing the change in financial position over the nine months, current assets,
largely comprised of cash and prepaid expenses, increased from $1,515,134 at
December 31, 1999 to $3,149,759 at September 30, 2000, an increase of $1,634,625
or 108%. Of these amounts, cash and cash equivalents increased from $1,049,044
at December 31, 1999 to $1,760,144 at September 30, 2000. Accounts receivable
increased from $4,951 at December 31, 1999 to $118,667 at September 30, 2000.
Prepaid expenses (expenses incurred on behalf of the Faires) increased from
$259,646 at December 31, 1999 to $1,052,545 at September 30, 2000. These costs
are expensed once the Faires are operating.
Current liabilities increased from $2,789,676 at December 31, 1999, to
$3,133,643 at September 30, 2000, an increase of $343,967 or 12%. During the
year, accounts payable and accrued expenses decreased $274,254 or 16%. Unearned
income, which consists of the sale of admission tickets to upcoming Faires, and
deposits received from craft vendors for future Faires, increased from $214,789
at December 31, 1999 to $290,788 at September 30, 2000. The revenue is
recognized once the Faires are operating. The Company's increased indebtedness
during the quarter is attributable to the aforementioned $575,000 in financing
raised during the first six months of 2000. This debt was incurred to cover the
Company's operating expenses prior to the opening of the 2000 Faire season.
Stockholders' Equity increased from ($19,520) at December 31, 1999 to $1,300,033
at September 30, 2000, an increase of $1,319,553. This increase is a result of
the net income earned during the three quarters of 2000.
The Company has no significant commitment for capital expenses during either the
fiscal year ending December 31, 2000 or 2001.
12
<PAGE>
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 operating losses since fiscal 1995.
The Company reported net income in the amount of $1,319,553 for the nine-months
ended September 30, 2000. There is no assurance that the Company will continue
to be profitable in any subsequent period.
NEED FOR ADDITIONAL CAPITAL. The Company had a working capital surplus of
$16,118 as of September 30, 2000. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS." The Company is currently
negotiating with the second mortgage holder on the Virginia property for an
extension of the maturity date of this note. Should the Company be unable to
extend the maturity date of this note it will likely need upwards of $600,000 to
fund operations prior to the opening of the 2001 Faire season. Should this
negotiation be successful, the Company believes that it has adequate capital to
fund anticipated operations for the balance of fiscal year 2000 through the
opening of the Southern California Faire in 2001. However, it may 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. In 1999 and 2000, the
Northern California Renaissance Pleasure Faire was held on the site of the
original Nut Tree Farm near Vacaville, California under a one-year lease. The
Company is currently negotiating an additional one-year lease for 2001 to
operate the Faire at the same location, the Nut Tree Farm. The Company is
seeking a long-term lease agreement at a location that would provide expense
savings by allowing the Faire structures to remain in place year-round and
provide the opportunity for additional income-generating events other than the
Renaissance Faire. There can be no assurance that the Company will be successful
in obtaining a long-term lease, or that it will be on terms acceptable to the
Company. Should the Company be unable to operate a Northern Renaissance Faire it
could have a material adverse effect on the Company's business, results of
operations and financial condition.
POSSIBLE RELOCATION OF NEW YORK FAIRE. The Company has a lease for the 2001
Faire season to operate the New York Faire in Sterling Forest. The Company is
negotiating with the owner of the Sterling Forest property and investigating
other possible locations for the New York Faire. However, there can be no
assurance that the Company will be successful in securing a site for the New
York Faire for the 2002 season, or that such arrangements will be on terms
acceptable to the Company. Should the Company be unable to operate a New York
Renaissance Faire it could have a material adverse effect on the Company's
business, results of operations and financial condition.
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 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.
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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
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 of 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 ending 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 and 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. Each of the Company's 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. 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 that 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 long-term leases, for the Southern
California and Bristol Faire sites. The terms and conditions of each lease will
vary by location, and to a large
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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
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company was not required to file a report on Form 8-K during the
nine-months ended September 30, 2000.
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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: November 14, 2000 /s/ Charles S. Leavell
----------------------------
Charles S. Leavell, Chief Executive and
Chief Financial Officer
/s/ Sue E. Brophy
----------------------------
Sue E. Brophy, Chief Accounting Officer
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