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, 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
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(State or other jurisdiction (I.R.S. Employer I.D. No.)
of incorporation or organization)
8080 North Central Expressway, Dallas, Texas 75206-1857
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(Address of principal executive offices) (Zip Code)
214/891-8294
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(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
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PAGE
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
RENAISSANCE CAPITAL PARTNERS, LTD.
Statements of Assets, Liabilities and
Partners' Equity
<TABLE>
Assets <S> <S>
------ December 31, 1997 September 30, 1998
----------------- ------------------
(Unaudited)
<C> <C>
Cash and cash equivalents $ 652,529 $ 934,743
Investment in Sunrise Media LLC 1,636,745 1,480,780
Investments at market value, cost of
$6,683,825 and $5,658,903
at December 31, 1997 and September
30, 1998 respectively 7,855,372 1,922,670
Interest and fees receivable 35,957 38,774
Other assets 105,474 3,734
----------- ----------
$10,286,077 $4,380,701
=========== ==========
Liabilities and Partners' Equity
-------------------------------- <C> <C>
Accounts payable - trade $ 11,872 $ 736
Accounts payable - related party 60,833 26,280
----------- ----------
Total liabilities 72,705 27,016
----------- ----------
Partners' equity:
General partner 1,185 -0-
Limited partners (128.86 units outstanding
at December 31, 1997; 128.36 units
outstanding at September 30, 1998 10,212,187 4,353,685
----------- ----------
Total partners' equity 10,213,372 4,353,685
----------- ----------
$10,286,077 $4,380,701
=========== ==========
Limited partners' equity per limited
partnership unit $ 79,250 $ 33,918
=========== ==========
See accompanying notes to financial statements.
</TABLE>
PAGE
<PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Statements of Operations
(Unaudited)
<TABLE> <S> <S>
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
1997 1998 1997 1998
Income: -------- -------- -------- --------
<C> <C> <C> <C>
Interest $ 77,857 $ 8,056 $ 167,338 $ 27,925
Dividends 1,833 5,563 4,147 18,593
Other investment income -0- -0- -0- -0-
---------- --------- --------- ---------
Total income 79,690 13,619 171,485 46,518
---------- ---------- ----------- ---------
Expenses:
General and administrative 158,006 48,181 457,964 188,985
Management fees 62,228 21,878 174,966 94,204
--------- ---------- ----------- ---------
Total expenses 220,234 70,059 632,930 283,189
--------- ---------- ----------- ---------
Investment loss net (140,544) (56,440) (461,445) (236,671)
Loss from investment in
Sunrise Media LLC -0- (84,819) (143,084) (192,965)
Net realized gain (loss)
on investments (16,466) -0- 2,768,100 (483,570)
Net unrealized gain (loss)
on investments 1,270,289 (1,408,235) (1,970,811) (4,907,780)
---------- ----------- ----------- ----------
Net income (loss)
resulting from
operations $1,113,279 $(1,549,494) $ 192,760 $(5,820,986)
========== =========== =========== ===========
Net income (loss) per
limited partnership unit $ 8,553 $ (12,071) $ 14,081 $ (45,280)
========== =========== =========== ==========
Weighted average limited
partnership units 128.86 128.36 128.86 128.53
====== ====== ====== ======
See accompanying notes to financial statements.
</TABLE>
PAGE
<PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Statement of Partners' Equity
<TABLE>
<S> <S> <S>
General Limited
Partner Partners Total
------- -------- -----
<C> <C> <C>
Balance, December 31, 1997 $ 1,185 $10,212,187 $10,213,372
Net loss-(Unaudited) (1,185) (5,819,801) (5,820,986)
Liquidation of partners interests-
(Unaudited) -0- (38,701) (38,701)
--------- ----------- -----------
Balance, September 30, 1998-
(Unaudited) $ -0- $ 4,353,685 $ 4,353,685
========= =========== ===========
See accompanying notes to financial statements.
</TABLE>
PAGE
<PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Statement of Cash Flows
(Unaudited)
<TABLE> <S>
Nine Months Ended
Sept. 30,
1997 1998
--------- ---------
<C> <C>
Cash flows from operating
activities:
Net income (loss) $ 192,760 $(5,820,986)
Adjustments to reconcile
net income (loss) to net
cash used in operating
activities:
Loss from Sunrise Media LLC 143,084 192,965
Unrealized (gain) loss
on investments 1,970,811 4,907,780
Realized (gain) loss
on investments (2,768,100) 483,570
(Increase) decrease in:
Accounts receivable (133,602) (2,817)
Other assets -0- 101,740
Increase (decrease) in:
Accounts payable (716,350) (45,689)
----------- -----------
Net cash used in
operating activities (1,311,397) (183,437)
----------- ------------
Cash flows from investing
activities:
Purchase of investments (636,697) (116,000)
Proceeds from sale of
securities 3,126,850 620,352
----------- ------------
Net cash provided by
investing activities 2,490,153 504,352
---------- ------------
Cash flows from financing
activities:
Liquidation of partners
interests -0- (38,701)
----------- -----------
Net increase (decrease) in cash 1,178,756 282,214
Cash and cash equivalents
at beginning of period 56,723 652,529
----------- -----------
Cash and cash equivalents
at end of period $1,235,479 $ 934,743
========== ===========
See accompanying notes to financial statements.
</TABLE>
PAGE
<PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Notes to Financial Statements
September 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 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. The Independent General Partners have
elected one such extension period. The Partnership has begun
liquidation of its investments.
2. Summary of Significant Accounting Policies
A. Contributed Capital - Proceeds from the sale of the
limited partnership interests, net of related selling
commissions and syndication costs, are recorded as
contributed capital.
B. 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.
C. 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.
D. 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.
E. 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
PAGE
<PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Notes to Financial Statements (Continued)
September 30, 1998
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 $8,056, and
none was determined to be uncollectible and charged
against the income.
F. 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 information 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.
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 generally 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. 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.
5. 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
PAGE
<PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Notes to Financial Statements (Continued)
September 30, 1998
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.
The financial statements include investments valued at
$7,855,372 (76% of total assets) and $1,922,670 (44% of total
assets) as of December 31, 1997 and September 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.
PAGE
<PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Notes to Financial Statements (Continued)
September 30, 1998
<TABLE>
<S> <S> <S>
CONVERSION
or
COST FACE VALUE FAIR VALUE
<C> <C> <C>
Biopharmaceutics, Inc.
Common Stock $1,488,657 $ 519,852 $ 514,652
Danzer Corporation
Common Stock 2,510,948 1,205,255 1,082,940
Note 150,000 150,000 150,000
Lion's Gate Entertainment
Corp.
Common Stock 733,313 176,846 175,078
Next Generation Media Corp.
Preferred Stock 775,485 775,485 -0-
Warrants 500 500 -0-
---------- ---------- ----------
Subtotal 5,658,903 2,827,938 1,922,670
OTHER INVESTMENTS
Sunrise Media, LLC
Equity Investment 1,480,780 1,480,780 1,480,780
---------- ---------- -----------
$7,139,683 $4,308,718 $3,403,450
========== ========== ==========
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.
</TABLE>
<PAGE>
<PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
GENERAL
- -------
(1) Material Changes in Financial Condition
During the quarter ended September 30, 1998, the
Partnership's net loss from operations was $1,549,494 and the
total Partners' Equity account decreased by a like amount. This
loss resulted from a net investment loss of $56,440, a loss from
investment in Sunrise Media LLC of $84,819 and an unrealized loss
on investments of $1,408,235. The decrease in the total Partners'
Equity account is primarily attributable to a decrease in the
market value of the common stock of Biopharmaceutics, Inc., Danzer
Corporation, and Lion's Gate Entertainment Corporation, together
with a reserve placed on the Partnership's entire investment in
Next Generation Media Corporation.
The following Portfolio transactions are noted for the
quarter ended September 30, 1998 (portfolio companies are herein
referred to as the "Company"):
Sunrise Media LLC: . On July 1, 1998, the Partnership
advanced an additional $27,000 to the Company so that it could
complete a promotional 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 marketing 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 September 30, 1998, the Partnership
experienced a net loss of $1,549,494. This loss resulted from a
net investment loss of $56,440, a loss from investment in Sunrise
Media LLC of $84,819 and an unrealized loss on investments of
$1,408,235. Interest income has decreased $69,801 for the three
months ended September 30, 1998 when compared to the same period
last year. General and administrative expenses decreased to
$48,181 for the three month period ended September 30, 1998,
primarily because of the decrease in legal fees.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
In addition to the proceeds raised in the Partnership's
initial private placement, the Partnership's other sources of
available capital for investment typically have been interest
income and transactional fees charged by the Partnership with
respect to the Portfolio Investments, director fees paid by
PAGE
<PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Portfolio Companies to the Partnership's director designees, and
gains from capital transactions. Another possible source of
available capital is debt. However, the Registrant does not
presently intend to make leveraged investments. Yet another
source of available capital is additional equity resulting from an
additional offering of Limited Partnership Interests. The
Registrant has no present plans to offer additional interests.
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. In
addition, the Partnership is not actively considering additional
Portfolio Investments. Therefore, no significant further income
from closing and commitment fees is anticipated.
At September 30, 1998, the only debt securities held by the
Partnership are the notes held in Danzer Corporation and Sunrise
Media, LLC. Both Danzer and Sunrise Media are in arrears on these
debts. The Preferred Stock in Next Generation Media Corporation
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. The Managing General Partner is uncertain
whether any of these positions will provide the Partnership with
any interest or dividend income going forward.
Because of the decrease in income and the additional follow-
on investments in portfolio companies, the Partnership's liquidity
has been substantially impaired. Accordingly, the Partnership has
reduced its rate of distributions and has deferred payment of
management fees owed to the Managing General Partner. Until such
time as liquidity is improved from either sale of investments or
loan repayments, it is anticipated that distributions to Limited
partners will be reduced or even curtailed. The Partnership's
ability to improve liquidity and make regular distributions will
depend upon the Partnership's success in realizing a return of
investment cost and the realization of capital gains from sales of
equity securities.
YEAR 2000
- ---------
Many computer software systems in use today cannot process
date-related information from and after January 1, 2000. The
Partnership's Managing General Partner has taken steps to review
and modify their computer systems as necessary and are prepared
for the Year 2000. In addition, the Partnership has inquired of
its major service providers as well as its portfolio companies to
determine if they are in the process of reviewing their systems
PAGE
<PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
with the same goals. The majority of all providers and portfolio
companies have represented that they are either taking the
necessary steps to be prepared or are currently prepared for the
Year 2000. Should any of the computer systems employed by the
major service providers, or companies in which the Partnership has
an investment, fail to process this type of information properly,
that could have a negative impact on the Partnership's operations
and the services provided to the Limited Partners. It is
anticipated that the Partnership will incur no material expenses
related to the Year 2000 issues.
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
November 18, 1998 By \S\ Russell Cleveland
----------------------------------------
Russell Cleveland, President
November 18, 1998 By \S\ Barbe Butschek
----------------------------------------
Barbe Butschek, Chief Financial Officer
PAGE
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 7,139,683
<INVESTMENTS-AT-VALUE> 3,403,450
<RECEIVABLES> 38,774
<ASSETS-OTHER> 3,734
<OTHER-ITEMS-ASSETS> 934,743
<TOTAL-ASSETS> 4,380,701
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 27,016
<TOTAL-LIABILITIES> 27,016
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,002,169
<SHARES-COMMON-STOCK> 128
<SHARES-COMMON-PRIOR> 129
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1,845,641
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2,066,612
<ACCUM-APPREC-OR-DEPREC> (3,736,231)
<NET-ASSETS> 4,353,685
<DIVIDEND-INCOME> 18,593
<INTEREST-INCOME> 27,925
<OTHER-INCOME> 0
<EXPENSES-NET> 476,154
<NET-INVESTMENT-INCOME> (429,636)
<REALIZED-GAINS-CURRENT> (483,571)
<APPREC-INCREASE-CURRENT> (4,907,779)
<NET-CHANGE-FROM-OPS> (5,820,986)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 38,701
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 1
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (5,859,687)
<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> 94,204
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 476,154
<AVERAGE-NET-ASSETS> 7,283,529
<PER-SHARE-NAV-BEGIN> 80,135
<PER-SHARE-NII> (3,347)
<PER-SHARE-GAIN-APPREC> (42,812)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 58
<PER-SHARE-NAV-END> 33,918
<EXPENSE-RATIO> 0.065
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
