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 June 30, 1998
[ ] 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>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RENAISSANCE CAPITAL PARTNERS, LTD.
Statement of Assets, Liabilities and
Partners' Equity
Assets December 31, 1997 June 30, 1998
(unaudited)
Cash and cash equivalents $ 652,529 $ 1,041,229
Investment in Sunrise Media LLC 1,636,745 1,538,599
Investments at market value, cost
of $6,683,825 and $5,658,903 at
December 31, 1997 and June 30, 1998
respectively 7,855,372 3,330,905
Interest and fees receivable 35,957 32,642
Other assets 105,474 533
---------- --------
$10,286,077 $5,943,908
========== ========
Liabilities and Partners' Equity
Accounts payable - trade $ 11,872 $ -0-
Accounts payable - related party 60,833 40,728
--------- ---------
Total liabilities 72,705 40,728
--------- ---------
Partners' equity:
General partner 1,185 -0-
Limited partners (128.86 units;
128.36 units outstanding) 10,212,187 5,903,180
---------- ---------
Total partners' equity 10,213,372 5,903,180
---------- ---------
$10,286,077 $5,943,908
========== =========
Limited partners' equity per
limited partnership unit $ 80,135 $ 46,307
========== =========
See accompanying notes to financial statements.
<PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1997 1998 1997 1998
<S> <C> <C> <C> <C>
Income:
Interest $ 49,002 $ 7,397 $ 89,481 $ 19,869
Dividends 1,430 5,943 2,314 13,030
Other investment income 15,129 -0- 16,467 -0-
--------- ---------- ---------- --------
Total income 65,561 13,340 108,262 32,899
--------- ---------- ---------- --------
Expenses:
General and administrative 204,010 70,052 299,958 140,804
Management fees 56,637 29,664 112,738 72,326
------- ---------- --------- --------
Total expenses 260,647 99,716 412,696 213,130
------- ---------- ---------- --------
Investment loss net (195,086) (86,376) (304,434) (180,231)
Loss from investment in
Sunrise Media LLC (86,040) (58,593) (143,084) (108,146)
Net realized gain(loss)
on investments -0- (483,571) 2,768,100 (483,570)
Net unrealized gain(loss)
on investments 111,192 (1,957,934) (3,241,001) (3,499,544)
--------- ---------- ---------- ---------
Loss resulting from operations $ (169,934) $(2,586,474) $ (920,519) $(4,271,491)
========= =========== ========= ===========
Loss per limited partnership unit $ (1,306) $ (20,150) $ (7,072) $ (33,213)
========= ========== ========= ===========
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Statement of Partners' Equity
General Limited
Partner Partners Total
Balance, December 31, 1996 $ 48,638 $12,141,944 $12,190,582
Net loss (9,205) (911,314) (920,519)
Liquidation of partners' interests -0- -0- -0-
-------- --------- ---------
Balance, June 30, 1997 $ 39,433 $11,230,630 $11,270,063
======== ========== ==========
Balance, December 31, 1997 $ 1,185 $10,212,187 $10,213,372
Net loss (unaudited) (1,185) (4,270,306) (4,271,491)
Liquidation of partners'
interests (unaudited) -0- (38,701) (38,701)
---------- ---------- ---------
Balance, June 30, 1998 (unaudited) $ -0- $ 5,903,180 $ 5,903,180
========== ========== ===========
See accompanying notes to financial statements.
<PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1997 1998 1997 1998
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss resulting from operations $(169,934) $(2,586,474) $ (920,519) $(4,271,491)
Adjustments to reconcile net loss to net
cash flows used in operating activities:
Loss from Sunrise Media LLC 86,040 58,593 143,084 108,146
Unrealized (gain) loss on investments (111,194) 1,957,934 3,241,099 3,499,544
Realized (gain) loss on investments -0- 483,571 (2,768,100) 483,570
(Increase) decrease in:
Accounts receivable (47,052) 16,024 (87,373) 3,315
Other assets -0- 533 -0- 104,941
Increase (decrease) in:
Accounts payable 14,211 (108,759) (763,831) (31,977)
-------- -------- --------- --------
Net cash used in operating activities (227,929) (178,578) (1,155,640) (103,952)
-------- --------- --------- ---------
Cash flows from investing activities:
Purchase of investments (200,000) (10,000) (636,697) (89,000)
Proceeds from sale of securities -0- 620,350 3,126,850 620,353
-------- --------- --------- -------
Net cash provided by investing activities (200,000) 610,350 2,490,153 531,353
--------- --------- --------- -------
Cash flows from financing activities:
Liquidation of partners interests -0- -0- -0- (38,701)
--------- --------- --------- --------
Net increase (decrease) in cash (427,929) 431,772 1,334,513 388,700
Cash and cash equivalents at beginning of period 1,819,165 609,457 56,723 652,529
---------- -------- --------- -------
Cash and cash equivalents at end of period $1,391,236 $1,041,229 $1,391,236 $1,041,229
========= ========= ========= =========
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Notes to Financial Statements
June 30, 1998
1. Organization and Business Purpose
Renaissance Capital Partners, Ltd. (the "Partnership"), a Texas limited
partnership, was formed on July 31, 1989. The Partnership seeks to
achieve current income and long-term capital appreciation by making in-
vestments 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 invest-
ments, but no later than June 14, 1998, subject to the right of the In-
dependent 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. The Independent General Partners have elected one such ex-
tension period. The Partnership has begun liquidation of its investments.
2. Summary of Significant Accounting Policies
A. Organizational Costs - Costs of organizing the Partnership were capital-
ized 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.
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 $7,397, and none was determined to be
uncollectible and charged against the income.
G. Financial Instruments - In accordance with the reporting requirements of
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," the Company calculates the fair
value of its financial instruments and includes this additional informa-
tion in the notes to the financial statements when the fair value is
different than the carrying value of those financial instruments. When
the fair value reasonably approximates the carrying value, no additional
disclosure is made.
<PAGE>
3. Basis of Presentation
The accompanying financial statements have been prepared without audit, in
accordance with the rules and regulations of the Securities and Exchange
Commission and do not include all disclosures normally required by gen-
erally accepted accounting principles or those normally made in annual
reports on Form 10-K. All material adjustments, consisting only of those
of a normal recurring nature, which, in the opinion of management, were
necessary for a fair presentation of the results for the interim periods
have been made.
4. Management
Renaissance Capital Group, Inc. (Renaissance), the Managing General Partner,
serves as the investment adviser for the Partnership. Renaissance is regis-
tered as an investment advisor under the Investment Advisors Act of 1940.
Pursuant to the management agreement, Renaissance will perform certain serv-
ices, 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 capi-
tal 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 June 30, 1998, were $29,664.
Renaissance is reimbursed by the Partnership for administrative expenses
paid by Renaissance on behalf of the Partnership. For the three months ended
June 30, 1998, the Partnership incurred reimbursable expenses of $11,328 and
reimbursed Renaissance $125,885 to be applied to the management fees and reim-
bursable expenses.
In addition, the Partnership is served by two independent, individual general
partners (the "Independent General Partners"). The Independent General Part-
ners receive a quarterly fee of $6,000 each, payable in advance.
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 deter-
mined 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 avail-
able, 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 val-
uation, 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>
RENAISSANCE CAPITAL PARTNERS, LTD.
Notes to Financial Statements (Continued)
June 30, 1998
6. Investments (continued)
The financial statements include investments valued at $7,855,372 (77% of
total assets) and $3,330,905 (56% of total assets) as of December 31, 1997
and June 30, 1998, respectively, whose values have been estimated by the
Investment Advisor in the absence of readily ascertainable market values.
Because of the inherent uncertainty of valuation, those estimated values
may differ significantly from the values that would have been used had a
ready market for the investments existed, and the differences could be
material.
CONVERSION
or
COST FACE VALUE FAIR VALUE
Biopharmaceutics, Inc.
Common Stock $1,488,657 $1,504,835 $1,489,786
Danzer Corporation
Common Stock 2,510,948 1,568,840 1,424,710
Note 150,000 150,000 150,000
Lion's Gate Entertainment Corp.
Common Stock 733,313 269,100 266,409
Next Generation Media Corp.
Preferred Stock 775,485 775,485 -0-
Warrants 500 500 -0-
-------- --------- ---------
Subtotal: 5,658,903 4,268,760 3,330,905
OTHER INVESTMENTS
Sunrise Media, LLC
Formerly CEL 1,538,599 1,538,599 1,538,599
$7,197,502 $5,807,359 $4,869,504
========= ========= =========
The Partnership advanced $10,000 to Sunrise Media, LLC under terms of a note
during the current quarter.
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, 1998.
<PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Notes to Financial Statements (Continued)
June 30, 1998
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(1) Material Changes in Financial Condition
During the quarter ended June 30, 1998, the Partnership's net assets
resulting from operations decreased $2,586,474, and the total Partners' Equity
account decreased by a like amount. The decrease in the total Partners' Equity
account is primarily attributable to a decrease in the market value of the com-
mon stock of Biopharmaceutics, Inc., together with a reserve placed on the
Partnership's investment in Next Generation Media Corporation.
The following Portfolio transactions are noted for the quarter ended June
30, 1998 (portfolio companies are herein referred to as the "Company"):
Lion's Gate Entertainment Corp. (formerly International Movie Group).
According to the Plan of Reorganization for International Movie Group ("IMG"),
the Partnership agreed to convert its entire position in IMG into 398,875
shares ofIMG common stock. In June 1998, the Company effected a 10,000 for 1
reverse split, reducing the Partnership's position to 39.8875 shares of IMG
common stock. Effective June 30, 1998, IMG merged with Lion's Gate Entertain-
ment Corp. Pursuant to the Agreement of Merger, the Partnership received 3,750
shares of Lion's Gate common stock for each whole share of IMG common stock,
giving the Partnership 146,250 shares of Lion's Gate common. For its fractional
interest, the Partnership received $8,254, which represents $.93 per share on a
pre-reverse split basis.
According to the Notice of Reverse Stock Split, Merger and Appraisal
Rights and Information Circular provided by the Company, the reverse split
and merger are "reorganizations" under the Internal Revenue Code, thereby
allowing them to qualify as tax-free events. The Partnership's receipt of
cash in lieu of fractional shares, however, is a taxable event requiring the
Partnership to recognize its loss on that portion of the transaction.
Next Generation Media Corporation. Effective May 1, 1998, the Partnership
sold its entire position in Unico, Inc., consisting of a 9.25% $50,000 Note
Receivable, $224,000 of 10% Notes Receivable, and Series C Preferred Stock
having a cost basis of $1,589,220, to Next Generation Media Corporation
("NEXGEN") in exchange for $62,039 in cash, 155,097 shares of NEXGEN Series A
Preferred Stock having a liquidation preference of $5.00 per share, and 103,398
warrants to purchase NEXGEN common stock for $.16 per share. The Series A
Preferred is redeemable at $5.00 per share for the first six months following
the closing and then increases to $6.00 per share thereafter. In addition, the
Series A Preferred, at the option of the holder, must be redeemed by NEXGEN for
no less than 50% of all funds raised in any offering made by the Company after
the initial closing, until all Series A Preferred shares are redeemed. Accord-
ing to the Partnership's auditors, the NEXGEN transaction represents a taxable
event.
<PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Notes to Financial Statements (Continued)
June 30, 1998
Contrary to the Partnership's 10-Q filing of March 31, 1998, NEXGEN has
not closed on its purchase of United Marketing Solutions, Inc. from Unico, Inc.
A definitive agreement has been signed, and a closing is anticipated sometime
in 1998. In the second quarter of 1998, the Partnership reserved its entire
investment in NEXGEN.
SanTi Group, Inc. (formerly Microlytics, Inc.). In the second quarter of
1998, SanTi Group, Inc. was merged into Microlytics, Inc. (a former portfolio
holding of the Partnership which was written off in the fourth quarter of 1996),
and the Company name was officially changed to SanTi Group, Inc. The merger
allowed the Company to complete its Plan of Reorganization and formally emerge
from bankruptcy. As part of the Plan of Reorganization, the Partnership agreed
to convert its entire investment in Microlytics into 46,655 shares of SanTi
common stock, and 23,328 warrants to purchase shares of SanTi common stock.
In June 1998, the Partnership sold all of its common stock for $12 per share,
resulting in a gain of $559,860, and all of its warrants for $1 each, resulting
in a gain to the Partnership of $23,328.
Sunrise Media, LLC. On April 16, 1998, the Partnership advanced the Com-
pany $10,000 to fund corporate capital needs pursuant to a 7% secured Promis-
sory Note with all principal and interest payable in full on or before April
16, 1999. Subsequent to the quarter ended June 30, 1998, the Partnership ad-
vanced an additional $27,000 to the Company so that it could complete a promo-
tional video for the sale of the Video Encyclopedia of the Twentieth Century
("VETC") to the television marketplace, and to pay for an expansion of its mar-
keting effort of the VETC. The $27,000 advance was made pursuant to a 7%
secured Promissory Note with all principal and interest payable in full on or
before July 1, 1999.
(2) Material Changes in Operations
During the quarter ended June 30, 1998, the Partnership experienced a net
loss of $2,586,474. Interest income has decreased $41,605 for the three
months ended June 30, 1998, when compared to the same period last year. General
and administrative expenses decreased to $70,052 for the three-month period
ended June 30, 1998, primarily because of a decrease in legal fees.
In the past, income received was primarily from interest income on Port-
folio 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 secur-
ities 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. In addition, the Partnership is not actively consider-
ing additional Portfolio Investments. Therefore, no significant further income
from closing and commitment fees is anticipated.
At June 30, 1998, the only debt securities held by the Partnership are the
Notes held in Danzer Corporation and Sunrise Media, LLC. The Preferred Stock
in NEXGEN has a dividend right, but might not generate consistent dividend
income, as it is unclear at this time whether the Company has enough free cash
flow to satisfy the dividend obligation on a continuing basis. Moreover,
Danzer and Sunrise are currently in arrears on their debts to the Partnership.
Accordingly, the Managing General Partner is uncertain whether any of these
positions will provide the Partnership with any significant interest or divi-
dend income going forward.
<PAGE>
PART II - OTHER INFORMATION
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.
By RENAISSANCE CAPITAL GROUP, INC.
Managing General Partner
August 20, 1998 By /s/ Russell Cleveland
--------------------------------
Russell Cleveland, President
August 20, 1998 By /s/ Barbe Butschek
--------------------------------
Barbe Butschek, Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 7,197,502
<INVESTMENTS-AT-VALUE> 4,869,504
<RECEIVABLES> 32,642
<ASSETS-OTHER> 533
<OTHER-ITEMS-ASSETS> 1,041,229
<TOTAL-ASSETS> 5,943,908
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 40,728
<TOTAL-LIABILITIES> 40,728
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,002,169
<SHARES-COMMON-STOCK> 128
<SHARES-COMMON-PRIOR> 128
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1,704,381
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2,066,612
<ACCUM-APPREC-OR-DEPREC> (2,327,996)
<NET-ASSETS> 5,903,180
<DIVIDEND-INCOME> 13,030
<INTEREST-INCOME> 19,869
<OTHER-INCOME> (108,146)
<EXPENSES-NET> 213,130
<NET-INVESTMENT-INCOME> (288,377)
<REALIZED-GAINS-CURRENT> (483,570)
<APPREC-INCREASE-CURRENT> (3,499,544)
<NET-CHANGE-FROM-OPS> (4,271,491)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 38,701
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (4,310,192)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 833,043
<OVERDISTRIB-NII-PRIOR> 2,022,918
<OVERDIST-NET-GAINS-PRIOR> 1,809,168
<GROSS-ADVISORY-FEES> 72,326
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 213,130
<AVERAGE-NET-ASSETS> 8,058,276
<PER-SHARE-NAV-BEGIN> 79,259
<PER-SHARE-NII> (2,242)
<PER-SHARE-GAIN-APPREC> (30,970)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> (58)
<PER-SHARE-NAV-END> 45,989
<EXPENSE-RATIO> 0.026
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
