<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For quarterly period ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ______________
Commission File Number: 018581
RENAISSANCE CAPITAL PARTNERS, LTD.
__________________________________________________________________________
(Exact name of registrant as specified in its charter)
Texas 75-2296301
__________________________________________________________________________
(State or other jurisdiction (I.R.S. Employer I.D. No.)
of incorporation or organization)
8080 North Central Expressway, Dallas, Texas 75206-1857
__________________________________________________________________________
(Address of principal executive offices) (Zip Code)
214/891-8294
___________________________________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
<PAGE>
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RENAISSANCE CAPITAL PARTNERS, LTD.
STATEMENT OF ASSETS, LIABILITIES AND
PARTNERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
Dec 31, 1996 Sept 30, 1997
<S> <C> <C>
Cash and cash equivalents $ 56,723 $ 1,235,479
Investments at market value, cost
of $8,960,241 and $9,239,571
respectively 12,981,367 11,289,885
Interest and fees receivable 37,125 26,261
Other assets 1,065 1,065
$13,076,280 $12,552,690
LIABILITIES AND PARTNERS' EQUITY
Accounts payable - trade 51,627 22,652
Accounts payable - related party 834,071 146,696
Total liabilities $ 885,698 $ 169,348
Partners' equity:
General partner 48,638 50,566
Limited partners (128.86 units) 12,141,944 12,332,776
Total Partners' Equity 12,190,582 12,383,342
$13,076,280 $12,552,690
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<PAGE> 3
RENAISSANCE CAPITAL PARTNERS, LTD.
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
1996 1997 1996 1997
<S> <C> <C> <C> <C>
Income:
Interest $ 101,741 $ 77,857 $ 108,467 $ 167,338
Dividends -0- 1,833 -0- 4,147
Other investment income -0- -0- -0- -0-
Total income 101,741 79,690 108,467 171,485
Expenses:
General and administrative 167,398 158,006 291,702 457,964
Management fees 46,771 62,228 130,836 174,966
Total expenses 214,169 220,234 422,538 632,930
Investment income(loss) net (112,428) (140,544) (314,071) (461,445)
Loss from investment in
Sunrise Media LLC -0- -0- -0- (143,084)
Net realized and unrealized
gain (loss) on investments 1,192,385 1,253,823 (304,339) 797,289
Net increase (decrease) in net assets
resulting from operations $1,079,957 $1,113,279 $(618,410) $192,760
Income (loss) per limited
partnership unit $ 8,381 $ 8,553 $ (4,799) $ 1,481
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<PAGE> 4
RENAISSANCE CAPITAL PARTNERS, LTD.
STATEMENT OF PARTNERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
<S> <C> <C> <C>
Balance, December 31, 1996 $48,638 $12,141,944 $12,190,582
Net income(loss) 1,928 190,832 192,760
Balance, September 30, 1997 $50,566 $12,332,776 $12,383,342
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<PAGE> 5
RENAISSANCE CAPITAL PARTNERS, LTD.
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
1996 1997 1996 1997
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net increase (decrease) in net assets
resulting from operations $1,079,957 $ 1,113,279 $ (618,410) $ 192,760
Adjustments to reconcile net decrease to
cash flows from operating activities:
Loss from Sunrise Media LLC -0- -0- -0- 143,084
Unrealized (gain) loss on investments (985,856) (1,270,288) 821,559 1,970,811
Realized (gain) loss on investments (206,529) -0- (517,219) (2,768,100)
(Increase) decrease in:
Accounts receivable 84,137 (46,229) 72,038 (133,602)
Increase (decrease) in:
Accounts payable 50,456 47,481 153,884 (716,350)
Total adjustments (1,057,792) (1,269,036) 530,262 (1,504,157)
Net cash flows from operating activities 22,165 (155,757) (88,148) (1,311,397)
Cash flows from investing activities:
Purchase of investments (319,970) -0- (442,470) (636,697)
Proceeds from sale of securities 243,954 -0- 639,218 3,126,850
Net cash flows from investing activities (76,016) -0- 196,748 2,490,153
Cash flows from financing activities:
Distributions to limited partners -0- -0- -0- -0-
Net increase (decrease) in cash (53,851) (155,757) 108,600 1,178,756
Cash & cash equivalents at beginning
of period 165,274 1,391,236 2,823 56,723
Cash and cash equivalents at end of period $ 111,423 $1,235,479 $ 111,423 $1,235,479
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<PAGE> 6
RENAISSANCE CAPITAL PARTNERS, LTD.
Notes to Financial Statements
September 30, 1997
1. Organization and Business Purpose
Renaissance Capital Partners, Ltd. (the "Partnership"), a Texas limited
partnership, was formed on July 31, 1989. Limited Partnership
contributions of $12,886,000 were secured upon final closing of the
Partnership on June 14, 1990. The Partnership seeks to achieve current
income and long-term capital appreciation by making investments primarily
in private placement convertible debt securities of smaller public
companies. The Partnership has elected to be treated as a business
development company under the Investment Company Act of 1940, as amended.
The Partnership will terminate upon liquidation of all its investments, but
no later than June 14, 1998, subject to the right of the Independent
General Partners to extend the term for up to three additional one-year
periods if they determine that such extension is in the best interest of
the Partnership.
2. Summary of Significant Accounting Policies
A. Organizational Costs - Costs of organizing the Partnership were
capitalized and amortized on a straight-line basis over five years.
These costs were completely amortized during the quarter ended June 30,
1995.
B. Contributed Capital - Proceeds from the sale of the limited partnership
interests, net of related selling commissions and syndication costs, are
recorded as contributed capital.
C. Statement of Cash Flows - The Partnership considers all highly liquid
debt instruments with original maturities of three months or less to be
cash equivalents. No interest or income taxes were paid during the
periods.
D. Valuation of Investments - The valuation of investments in debentures
which are convertible into unregistered securities is based upon the bid
price of the underlying securities obtained through normal market
systems less a discount for selling and registration costs. For those
investments not having an established market, the valuation is at the
Partnership's costs for the first six months after closing and will be
redetermined by the General Partners subsequent to that time period.
E. Management Estimates - The financial statements have been prepared in
conformity with generally accepted accounting principles. The
preparation of the accompanying financial statements requires estimates
and assumptions made by management of the Partnership that affect the
reported amounts of assets and liabilities as of the date of the
statements of assets, liabilities and partners' equity and income and
expenses for the period. Actual results could differ significantly from
those estimates.
<PAGE>
<PAGE> 7
RENAISSANCE CAPITAL PARTNERS, LTD.
Notes to Financial Statements (Continued)
September 30, 1997
F. Interest Income - Interest income is accrued on all debt securities
owned by the partnership on a quarterly basis. When it is determined
that the interest accrued will not be collected, the income for that
quarter is reduced to reflect the net interest earned during the period.
Interest accrued for the current quarter was $123,227, and the amount
determined to be uncollectible and charged against the income was
$45,370.
3. Management
Renaissance Capital Group, Inc. (Renaissance), the Managing General
Partner, serves as the investment adviser for the Partnership. Renaissance
is registered as an investment advisor under the Investment Advisors Act of
1940. Pursuant to the management agreement, Renaissance will perform
certain services, including certain management, investment, and
administrative services, necessary for the operation of the Partnership.
Renaissance is entitled to quarterly fees equal to 0.5% of the Partnership
assets at the end of each quarter. On April 21, 1994, at the Annual
Meeting of Limited Partners, a proposal to amend the Advisory Agreement was
ratified by the Limited Partners. The agreement now dictates that to the
extent any portion of such fee is based on an increase in Net Assets Value
attributable to non-realized appreciation of securities or other assets
that exceed capital contributions, such portion of the fee shall be
deferred and not earned or payable until such time as appreciation or any
portion thereof is in fact realized and then such deferred fees shall be
earned and paid in proportion to the gains in fact realized. Fees due to
Renaissance for the three months ended September 30, 1997, were $62,228.
Renaissance is reimbursed by the Partnership for administrative expenses
paid by Renaissance on behalf of the Partnership. For the three months
ended September 30, 1997, the Partnership incurred reimbursable expenses of
$15,435, which are still outstanding at the end of the quarter.
In addition, the Partnership is served by two independent, individual
general partners (the "Independent General Partners"). The Independent
General Partners receive a quarterly fee of $6,000 each, payable in
advance.
4. Federal Income Taxes
No provision has been made for Federal income taxes as the liability for
such taxes is that of the partners rather than the Partnership.
<PAGE>
<PAGE> 8
RENAISSANCE CAPITAL PARTNERS, LTD.
Notes to Financial Statements (Continued)
September 30, 1997
5. Partnership Agreement
Pursuant to the terms of the partnership agreement, all items of income,
gain, loss and deduction of the Partnership, other than any Capital
Transaction, as defined, will be allocated 1% to Renaissance and 99% to the
Limited Partners. All items of gain of the Partnership resulting from a
Capital Transaction shall be allocated such that the Limited Partners
receive a cumulative simple annual return of 10% on their capital
contributions and any remaining gains shall be allocated 20% to Renaissance
and 80% to the Limited Partners. All items of loss resulting from Capital
Transactions shall be allocated 1% to Renaissance and 99% to the Limited
Partners.
6. Investments
Investments of the Partnership are carried in the statements of assets,
liabilities and partners' equity at quoted market or fair value, as
determined in good faith by the Managing General Partner and approved by
the Independent General Partners.
For securities that are publicly traded and for which quotations are
available, the Partnership will value the investments based on the closing
sale as of the last day of the fiscal quarter, or in the event of an
interim valuation, as of the date of the valuation. If no sale is reported
on such date, the securities will be valued at the average of the closing
bid and asked prices.
Generally, debt securities will be valued at their face value. However, if
the debt is impaired, an appropriate valuation reserve will be established
or the investment discounted to estimated realizable value. Conversely, if
the underlying stock has appreciated in value and the conversion feature
justifies a premium value, such premium will of necessity be recognized.
The Managing General Partner, subject to the approval and supervision of
the Independent General Partners, will be responsible for determining fair
value.
<PAGE>
<PAGE> 9
6. Investments (continued)
INVESTMENT VALUATION SUMMARY
<TABLE>
<CAPTION>
CONVERSION
or
COST FACE VALUE FAIR VALUE
<S> <C> <C> <C>
Biopharmaceutics, Inc.
Common Stock $ 700,000 $ 3,105,200 $ 2,868,888
Common Stock 402,941 1,787,446 1,680,199
Common Stock 241,250 535,093 502,987
Common Stock 144,466 640,850 602,399
Global Environmental Corp.
Common Stock 2,360,948 2,077,634 1,952,976
Common Stock 150,000 132,000 124,080
International Movie Group, Inc.
12% Convertible Subordinated Debenture 1,500,000 1,500,000 750,000
UNICO, Inc.
Preferred Series C Stock 1,589,220 1,589,220 657,610
9.25% Term Note 50,000 50,000 50,000
10% Term Notes 224,000 224,000 224,000
Subtotal: 7,362,825 11,641,443 9,413,139
OTHER INVESTMENTS
Sunrise Media, LLC
Formerly CEL 1,876,746 1,876,746 1,876,746
$9,239,571 $13,518,189 $11,289,885
</TABLE>
The fair value of debt securities convertible into common stock is the sum of
(a) the value of such securities without regard to the conversion feature,
and (b) the value, if any, of the conversion feature. The fair value of debt
securities without regard to conversion features is determined on the basis
of the terms of the debt security, the interest yield and the financial
condition of the issuer. The fair value of the conversion features of a
security, if any, are based on fair values as of this date less an allowance,
as appropriate, for costs of registration, if any, and selling expenses.
Publicly traded securities, or securities that are convertible into publicly
traded securities are valued at the last sale price, or at the average
closing bid and asked price, as of the valuation date. While these
valuations are believed to represent fair value, these values do not
necessarily reflect amounts which may be ultimately realized upon disposition
of such securities.
<PAGE>
<PAGE> 10
RENAISSANCE CAPITAL PARTNERS, LTD.
Notes to Financial Statements (Continued)
September 30, 1997
6. Investments (continued)
The Partnership acquired 288,931 shares of Biopharmaceutics, Inc. common
stock during the current quarter by the cancellation of accrued interest
of $144,466.
7. Related Party Transactions
Certain officers of Renaissance are also limited partners in the
Partnership. There were no distributions for the three months ended June
30, 1997.
8. Litigation
The Partnership has been named as a defendant in a lawsuit involving a
portfolio investment which was fully charged off in prior periods. The
Partnership has denied any and all liability relating to this suit and
intends to vigorously defend this action. See Part II - Other
Information, Item 1 - Legal Proceedings for further information concerning
litigation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(1) Material Changes in Financial Condition
Discuss material changes from end of preceding fiscal year to date of
most recent interim balance sheet provided. If necessary for an
understanding, discuss seasonal fluctuations.
During the quarter ended September 30, 1997, the Partnership s net
assets resulting from operations increased $1,113,279, and the total
partners equity account increased by a like amount. This increase is
primarily attributable to the reduction of the conversion price of
Biopharmaceutics, Inc. to $0.50 per share, and conversion of these Debentures
to common stock, as discussed below. This increase is par-tially mitigated
by the valuation reserve established for Unico, Inc.
<PAGE>
<PAGE> 11
The following portfolio transactions are noted for the quarter ended
September 30, 1997 (portfolio companies are herein referred to as the
Company ):
Biopharmaceutics, Inc. Effective as of September 30, 1997,
Biopharmaceutics, Inc. and the Partnership entered into an agreement to lower
the conversion price of the $700,000 debentures issued in 1992 and the
$402,941 debentures issued in 1996 to $0.50 per share. In addition, the
Company agreed to issue 288,931 shares of its common stock in payment of all
accrued unpaid interest due the Partnership as of September 30, 1997. In
connection with the lowering of the conversion price, the Partnership agreed
to convert all of its debentures into common stock of the Company. This
latest action results in the Partnership s total investment in
Biopharmaceutics being 2,736,063 shares of common stock at a cost of
$1,488,657.
Global Environmental Corp. On July 31, 1997, in accordance with the
provisions of the loan agreement, the Partnership converted the principal of
its $150,000 Note into 600,000 shares of the Company s common stock.
Unico, Inc. As a result of the Company s difficulties in raising
working capital and continuing losses, the Partnership has provided a
valuation reserve of $931,610 against this investment.
(2) Material Changes in Operations
Discuss material changes with respect to the most recent year-to-date
period and corresponding period for prior year, if most recent quarter
included also covers changes for quarterly period.
During the past quarter, the Partnership experienced an investment loss
of $140,544, and an investment loss for the nine months ended September 30,
1997 of $461,455. Interest income has increased $54,871 for the nine months
ended September 30, 1997 when compared to the same period last year. The
Biopharmaceutics, Inc. accrued interest was paid by the issuance of
Biopharmaceutics, Inc. common stock. General and administrative expenses
rose to $457,964 for the nine month period ended September 30, 1997,
primarily because of the increase in legal and other expenses incurred in
monitoring the portfolio.
In the past, income received was primarily from interest income on
portfolio Convertible Debenture investments and upon the sale of common
stock. In prior quarters, as investments were committed or closed, income
from closing fees and commitment fees were also recorded. The Partnership
has converted, or is in the process of converting, its remaining debentures
into equity securities of portfolio companies. Future income will primarily
be dependent upon the sale of these stocks or dividends received, when such
are declared and paid by portfolio companies.
<PAGE>
<PAGE> 12
Portfolio investments still held as Notes require interest payments
generally on either a monthly or quarterly basis. UNICO, Inc. has certain
Term Notes outstanding with the Partnership in which interest is payable
annually. As of September 30, 1997, UNICO, Inc. is in arrears in interest
payments to the Partnership in the aggregate amount of $19,653.65.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On November 9, 1995, John Pembroke commenced an action against
Renaissance Capital Group, Inc. seeking collection of a judgment awarded to
him by default in a suit against AFN, Inc. in the amount of $2,441,320 plus
interest and attorney's fees to seek payment of sums claimed due under an
employment contract with AFN, Inc. The stated basis for the claim was that
Renaissance Capital Group, Inc. became the "alter ego," or successor to, AFN,
Inc. and is therefore liable under the employment contract.
On July 15, 1996, the Partnership commenced an action against Mr.
Pembroke seeking damages for its losses on the investment in AFN, Inc. The
basis for claim is alleged misrepresentations made by Mr. Pembroke regarding
the financial condition of AFN, Inc. at the time of the Partnership's
investment. On July 26, 1996, Mr. Pembroke filed a counter claim against the
partnership based on the same claims and demands alleged in the suit against
Renaissance Capital Group, Inc.
On March 5, 1997, Mr. Pembroke asserted additional claims alleging
slander, tortuous interference, breach of contract, and conspiracy against
Renaissance Capital Group, Inc., the Partnership, and Russell Cleveland, who
is an officer and director and shareholder of Renaissance Capital Group,
Inc., the Managing General Partner for the Partnership. Mr. Pembroke is now
seeking actual damages in the amount of $4,000,000 plus interest, at least
$300,000 in attorney fees and court costs, and unspecified puntative damages.
Renaissance Capital Group, Inc. has denied any and all liability
relating to this suit and intends to vigorously defend this action. The
Partnership may be bound by agreement to indemnify Renaissance Capital Group,
Inc. and its officers and directors from any costs of litigation and any
judgments in favor of Mr. Pembroke.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Partnership has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RENAISSANCE CAPITAL PARTNERS, LTD.
November 11, 1997
___________/s/____________
Renaissance Capital Group, Inc., Managing General Partner
Russell Cleveland, President
November 11, 1997
__________/s/_______________
Renaissance Capital Group, Inc., Managing General Partner
Barbe Butschek, Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 9,239,571
<INVESTMENTS-AT-VALUE> 11,289,885
<RECEIVABLES> 26,261
<ASSETS-OTHER> 1,065
<OTHER-ITEMS-ASSETS> 1,235,479
<TOTAL-ASSETS> 12,552,690
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 169,348
<TOTAL-LIABILITIES> 169,348
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,040,868
<SHARES-COMMON-STOCK> 129
<SHARES-COMMON-PRIOR> 129
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 731,715
<ACCUMULATED-NET-GAINS> 833,043
<OVERDISTRIBUTION-GAINS> 1,809,168
<ACCUM-APPREC-OR-DEPREC> 2,050,314
<NET-ASSETS> 12,383,342
<DIVIDEND-INCOME> 4,147
<INTEREST-INCOME> 167,338
<OTHER-INCOME> 0
<EXPENSES-NET> 632,930
<NET-INVESTMENT-INCOME> (461,445)
<REALIZED-GAINS-CURRENT> 2,625,016
<APPREC-INCREASE-CURRENT> (1,970,811)
<NET-CHANGE-FROM-OPS> 192,760
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (192,760)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 270,271
<OVERDIST-NET-GAINS-PRIOR> 2,120,520
<GROSS-ADVISORY-FEES> 174,966
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 632,930
<AVERAGE-NET-ASSETS> 12,286,962
<PER-SHARE-NAV-BEGIN> 94,226
<PER-SHARE-NII> (3,545)
<PER-SHARE-GAIN-APPREC> 5,026
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 95,707
<EXPENSE-RATIO> .052
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
