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, 1999
[ ] 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.
Statements of Assets, Liabilities and
Partners' Equity
<TABLE> <S> <S>
Assets December 31, 1998 September 30, 1999
(Unaudited)
<C> <C>
Cash and cash equivalents $ 924,786 $ 434,612
Investment in Sunrise Media LLC 1,152,674 1,041,402
Investments at market value, cost of
$5,658,903 and $6,001,434 at December
31, 1998 and September 30, 1999
respectively 1,636,807 1,574,624
Interest and fees receivable 28,093 14,604
Other assets 2,594 22,725
---------- ----------
$3,744,954 $3,087,967
========== ==========
Liabilities and Partners' Equity
Accounts payable - trade $ 9,201 $ 863
Accounts payable - related party 49,473 27,972
---------- ----------
Total liabilities 58,674 28,835
---------- ----------
Partners' equity:
General partner -0- -0-
Limited partners: 128.36 units outstanding 3,686,280 3,059,132
---------- ----------
Total partners' equity 3,686,280 3,059,132
---------- ----------
$3,744,954 $3,087,967
========== ==========
Limited partners' equity per limited
partnership unit $ 28,718 $ 23,832
========== ==========
<FN>
See accompanying notes to financial statements. </FN> </TABLE> <PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Statements of Operations
(Unaudited)
<TABLE> <S> <S>
Three Months Ended September 30, Nine Months Ended September 30,
1998 1999 1998 1999
----------- --------- ----------- ---------
<C> <C> <C> <C>
Income:
Interest $ 8,056 $ (7,924) $ 27,925 $ 4,044
Dividends 5,563 5,136 18,593 14,810
Other invest-
ment income -0- -0- -0- -0-
----------- --------- ----------- ---------
Total income 13,619 (2,788) 46,518 18,854
----------- --------- ----------- ---------
Expenses:
General and
administrative 48,181 18,179 188,985 77,778
Management fees 21,878 15,373 94,204 52,236
----------- --------- ----------- ---------
Total expenses 70,059 33,552 283,189 130,014
----------- --------- ----------- ---------
Investment
loss net (56,440) (36,340) (236,671) (111,160)
Loss from
investment in
Sunrise Media
LLC (84,819) 3,664 (192,965) (111,272)
Net realized
gain (loss)
on invest-
ments -0- -0- (483,570) -0-
Net unrealized
gain (loss)
on invest-
ments (1,408,235) (320,312) (4,907,780) (404,716)
----------- --------- ----------- ---------
Net income
(loss) re-
sulting from
operations $(1,549,494) $(352,988) $(5,820,986) $(627,148)
=========== ========= ============ =========
Net income
(loss) per
limited
partnership
unit $ (12,071) $ (2,750) $ (45,280) $ (4,886)
=========== ========= =========== =========
Weighted
average
limited
partnership
units 128.36 128.36 128.53 128.36
=========== ========= =========== =========
<FN>
See accompanying notes to financial statements. </FN> </TABLE> <PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Statement of Partners' Equity
<TABLE> <S> <S> <S>
General Limited
Partner Partners Total
------- -------- -----
<C> <C> <C>
Balance, December 31, 1998 $ -0- $3,686,280 $3,686,280
Net income (unaudited) -0- (627,148) (627,148)
-------- ---------- ----------
Balance, September 30, 1999
-(unaudited) $ -0- $3,059,132 $3,059,132
======== ========== ==========
<FN>
See accompanying notes to financial statements. </FN> </TABLE> <PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Statement of Cash Flows
(Unaudited)
<TABLE> <S>
Nine Months Ended September 30,
1998 1999
----------- ---------
<C> <C>
Cash flows from operating activities:
Net income (loss) $(5,820,986) $(627,148)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Loss from Sunrise Media LLC 192,965 111,272
Unrealized (gain) loss on investments 4,907,780 404,716
Realized loss on investments 483,570 -0-
(Increase) decrease in:
Accounts receivable (2,817) 13,488
Other assets 101,740 (20,131)
Increase (decrease) in:
Accounts payable (45,689) (29,839)
----------- ---------
Net cash flows from operating activities (183,437) (147,642)
----------- ---------
Cash flows from investing activities:
Purchase of investments (116,000) (342,532)
Proceeds from sale of securities 620,352 -0-
----------- ---------
Net cash used by investing activities 504,352 (342,532)
----------- ---------
Cash flows from financing activities:
Liquidation of partners interests (38,701) -0-
----------- ---------
Net increase (decrease) in cash 282,214 (490,174)
Cash and cash equivalents at beginning of
period 652,529 924,786
----------- ---------
Cash and cash equivalents at end of period $934,743 $434,612
<FN>
See accompanying notes to financial statements. </FN> </TABLE> <PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Notes to Financial Statements
September 30, 1999
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, 2000, subject to the right of the Independent General
Partners to extend the term for up to one additional one-year period if they
determine that such extension is in the best interest of the Partnership.
The Independent General Partners have already elected to exercise two of
three extension periods available to them. 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 and
preferred stock 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 be collected, the income for that quarter is
reduced to reflect the net interest earned during the period. The
Partnership accrued $6,578 in interest income in the current quarter, and
determined that $14,502 in accrued and unpaid interest obligations of
Sunrise Media, LLC were uncollectible and should be written off, resulting
in net interest income of ($7,924) for the three months ended September
30, 1999. At September 30, 1999, three companies had debt obligations to
the Partnership: Feminique, Inc. owed the Partnership $100,000 pursuant to
an 8% Convertible Promissory Note, Danzer Corporation owed $25,000
pursuant to a 13% Promissory Note, and Sunrise Media LLC owed $237,000 to
the Partnership pursuant to three separate Promissory Notes. Feminique
and Danzer were current on their interest obligations and Sunrise was in
default on all of its debt obligations to the Partnership at the quarter
end. Due to the problems present at Sunrise, the Partnership may not
accrue any further interest income on the Sunrise debt obligations.
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.
<PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Notes to Financial Statements (Continued)
September 30, 1999
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. To the
extent that allocation of losses create a negative capital balance in either
the Managing General Partner's or the Limited Partners' capital accounts,
losses shall be allocated as described herein until such capital account is
$0. The remaining loss is allocated to the capital account with a positive
capital balance.
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 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 $2,789,481 (74% of
total assets) and $2,616,026 (84% of total assets) as of December 31, 1998
and September 30, 1999, respectively, which 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>
RENAISSANCE CAPITAL PARTNERS, LTD.
Notes to Financial Statements (Continued)
September 30, 1999
<TABLE> <S> <S> <S>
CONVERSION
or
COST FACE VALUE FAIR VALUE
<C> <C> <C>
Feminique Corporation
Convertible Promissory Note $ 100,000 $ 100,000 $ 100,000
Common Stock 1,688,657 500,132 437,908
Danzer Corporation
Note 25,000 25,000 25,000
Common Stock 2,678,479 937,528 871,453
Lion's Gate Entertainment Corp.
Common Stock 733,313 141,680 140,263
Next Generation Media Corp.
Preferred Stock 775,485 775,485 -0-
Warrants 500 500 -0-
---------- ---------- ----------
Subtotal: 6,001,434 2,480,325 1,574,624
OTHER INVESTMENTS
Sunrise Media, LLC
Equity Investment 1,212,038 1,212,038 904,402
Promissory Notes 237,000 237,000 137,000
---------- ---------- ----------
Total $7,450,472 $3,929,363 $2,616,026
========== ========== ==========
<FN>
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.</FN> </TABLE> <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, 1999, the Partnership's net loss
from operations was $352,988, and the total Partners' Equity account
decreased by a like amount. This loss resulted from an unrealized loss on
investments of $320,312 and the Partnership's net investment loss of
$36,340, as well as the Partnership's $3,664 decrease in the loss from its
investment in Sunrise Media LLC.
The following portfolio transactions are noted for the quarter ended
September 30, 1999 (portfolio companies are herein referred to as the
"Company"):
Feminique Corporation (FEMQ) In the quarter ended September 30, 1999, the
Partnership invested $100,000 in a Convertible Promissory Note of the
Company. The Note bears interest at 8% per annum with interest payments
coming due October 31, 1999, March 31, 2000 and June 1, 2000. The maturity
date of the Note is June 1, 2000, and it is convertible into shares of
Feminique common stock at the rate of $0.15 per share. The Note carries
anti-dilution provisions which are contained in our standard convertible
debenture agreements, and also gives the Partnership demand and piggyback
registration rights. In addition, the Note is secured by all the assets of
the parent as well as the common stock of the parent's single operating
subsidiary, Quality Health Products, Inc.
Sunrise Media, LLC (Private) At September 30, 1999, the Company continued
to be in default on the $200,000 Promissory Note, the $10,000 Promissory
Note, and the $27,000 Promissory Note. All principal and unpaid interest
came due at April 15, 1999 on the $200,000 Note, at April 16, 1999 on the
$10,000 Note, and at July 1, 1999 on the $27,000 Note. To date, the
Partnership has not received any payments pursuant to any of its
obligations. At September 30, 1999, the Partnership determined that all
accrued and unpaid interest owed by Sunrise was uncollectible, and
accordingly wrote off that interest income.
(2) Material Changes in Operations
During the quarter ended September 30, 1999, the Partnership experienced a
net loss of $352,988. This loss resulted from a net investment loss of
$36,340, a decrease in the loss from the Partnership's investment in
Sunrise Media LLC of $3,664 and an unrealized loss on investments of
$320,312. Interest income has decreased $15,980 for the three months ended
September 30, 1999 when compared to the same period last year, primarily
due to the charging off of accrued and unpaid interest owed on the debt
obligations of Sunrise Media, LLC. General and administrative expenses
decreased to $18,179 for the three month period ended September 30, 1999,
primarily because of a decrease in legal fees and travel expenses.
LIQUIDITY AND CAPITAL RESOURCES
In addition to the proceeds raised in the Partnership's initial private
placement, the Partnership's historical sources of available capital for
investment have been interest income and transactional fees charged by the
Partnership with respect to the Portfolio Investments, director fees paid
by Portfolio Companies to the Partnership's director designees, and gains
from capital transactions. Because the Partnership is liquidating,
however, historical sources of capital, including transactional and
director fees, will not be available, leaving gains from capital
transactions and portfolio turnover as the primary sources of capital.
<PAGE>
Over the last year or two, income received has primarily come 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, where appropriate, is in the process of
converting, its remaining debt positions 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, 1999, the only debt securities held by the Partnership are
the notes held in Feminique, Inc., Danzer Corporation and Sunrise Media,
LLC. Sunrise is in default on all of its debt obligations and the
Partnership has written off all accrued and unpaid interest obligations of
Sunrise at September 30, 1999. 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 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 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.
RENAISSANCE CAPITAL PARTNERS, LTD.
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, 1999 By /S/
-----------------------------------------
Russell Cleveland, President
November 18, 1999 By /S/
-----------------------------------------
Barbe Butschek, Chief Financial Officer <PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 7,450,472
<INVESTMENTS-AT-VALUE> 2,616,026
<RECEIVABLES> 14,604
<ASSETS-OTHER> 22,725
<OTHER-ITEMS-ASSETS> 434,612
<TOTAL-ASSETS> 3,087,967
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28,835
<TOTAL-LIABILITIES> 28,835
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,002,169
<SHARES-COMMON-STOCK> 128
<SHARES-COMMON-PRIOR> 128
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2,041,976
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2,066,612
<ACCUM-APPREC-OR-DEPREC> (4,834,449)
<NET-ASSETS> 3,059,132
<DIVIDEND-INCOME> 14,810
<INTEREST-INCOME> 4,044
<OTHER-INCOME> (111,272)
<EXPENSES-NET> 130,014
<NET-INVESTMENT-INCOME> (222,432)
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (404,716)
<NET-CHANGE-FROM-OPS> (627,148)
<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> (627,148)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 1,819,544
<OVERDIST-NET-GAINS-PRIOR> 2,474,249
<GROSS-ADVISORY-FEES> 52,236
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 130,014
<AVERAGE-NET-ASSETS> 3,372,706
<PER-SHARE-NAV-BEGIN> 28,718
<PER-SHARE-NII> (1,733)
<PER-SHARE-GAIN-APPREC> (3,153)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 23,832
<EXPENSE-RATIO> 0.04
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
