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 March 31, 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>
<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 March 31, 1999
(Unaudited)
<C> <C>
Cash and cash equivalents $ 924,786 $ 643,630
Investment in Sunrise Media LLC 1,152,674 1,078,362
Investments at market value, cost of
$5,658,903 and $5,858,903 at December
31, 1998 and March 31, 1999
respectively 1,636,807 2,187,954
Interest and fees receivable 28,093 35,759
Other assets 2,594 1,639
---------- ----------
$3,744,954 $3,947,344
========== ==========
Liabilities and Partners' Equity
Accounts payable - trade $ 9,201 $ 1,000
Accounts payable - related party 49,473 22,595
---------- ----------
Total liabilities 58,674 23,595
---------- ----------
Partners' equity:
General partner -0- -0-
Limited partners: 128.36 units outstanding 3,686,280 3,923,749
---------- ----------
Total partners' equity 3,686,280 3,923,749
---------- ----------
$3,744,954 $3,947,344
========== ==========
Limited partners' equity per limited
partnership unit $ 28,718 $ 30,568
========== ==========
<FN>
See accompanying notes to financial statements.</FN> </TABLE> <PAGE>
<PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Statements of Operations
(Unaudited)
<TABLE> <S>
Three Months Ended March 31,
1998 1999
Income:
<C> <C>
Interest $ 12,472 $ 7,430
Dividends 7,087 4,769
Other investment income -0- -0-
----------- ---------
Total income 19,559 12,199
----------- ---------
Expenses:
General and administrative 70,752 31,847
Management fees 42,662 19,717
----------- ---------
Total expenses 113,414 51,564
----------- ---------
Investment loss net (93,855) (39,365)
Loss from investment in
Sunrise Media LLC (49,553) (74,313)
Net realized gain (loss)
on investments -0- -0-
Net unrealized gain (loss)
on investments (1,541,609) 351,147
----------- --------
Net income (loss) resulting from
operations $(1,685,017) $237,469
=========== ========
Net income (loss) per limited
partnership unit $ (12,996) $ 1,850
=========== ========
Weighted average limited
partnership units 128.86 128.36
====== ======
<FN>
See accompanying notes to financial statements. </FN> </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, 1998 $ -0- $3,686,280 $3,686,280
Net income (unaudited) -0- 237,469 237,469
----- ---------- ----------
Balance, March 31, 1999-(unaudited) $ -0- $3,923,749 $3,923,749
<FN>
See accompanying notes to financial statements. </FN> </TABLE> <PAGE>
<PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Statement of Cash Flows
(Unaudited)
<TABLE> <S>
Three Months Ended March 31,
1998 1999
<C> <C>
Cash flows from operating activities:
Net income (loss) $(1,685,017) $237,469
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Loss from Sunrise Media LLC 49,553 74,313
Unrealized (gain) loss on investments 1,541,609 (351,147)
(Increase) decrease in:
Accounts receivable (12,709) (7,666)
Other assets 104,408 955
Increase (decrease) in:
Accounts payable 76,782 (35,080)
----------- --------
Net cash flows from operating activities 74,626 (81,156)
----------- --------
Cash flows from investing activities:
Purchase of investments (79,000) (200,000)
Proceeds from sale of securities -0- -0-
----------- --------
Net cash used by investing activities (79,000) (200,000)
----------- --------
Cash flows from financing activities:
Liquidation of partners interests (38,698) -0-
----------- --------
Net increase (decrease) in cash (43,072) (281,156)
Cash and cash equivalents at beginning of
period 652,529 924,786
----------- --------
Cash and cash equivalents at end of period $ 609,457 $643,630
=========== ========
<FN>
See accompanying notes to financial statements. </FN> </TABLE> <PAGE>
<PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Notes to Financial Statements
March 31, 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, 1999, subject to the right of the Independent
General Partners to extend the term for up to two additional one-year periods
if they determine that such extension is in the best interest of the
Partnership. The Independent General Partners have already elected to
exercise one 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. Interest
accrued for the current quarter was $7,430, and none was determined to be
uncollectible and charged against the income. At March 31, 1999, two
companies had debt obligations to the Partnership: Danzer Corporation
owed $150,000 pursuant to a 10% Promissory Note and Sunrise Media LLC owed
$237,000 to the Partnership pursuant to three separate Promissory Notes.
The Danzer note was converted to common stock subsequent to March 31,
1999, and Sunrise was in default on $210,000 of its debt obligations to
the Partnership. Due to the problems present at Sunrise, the Partnership
may not accrue any interest income going forward.
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
<PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Notes to Financial Statements (Continued)
March 31, 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 $3,266,316 (83% of total assets) as of December 31, 1998
and March 31, 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
<PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Notes to Financial Statements (Continued)
March 31, 1999
<TABLE> <S> <S> <S>
CONVERSION
or
COST FACE VALUE FAIR VALUE
<C> <C> <C>
Biopharmaceutics, Inc.
Common Stock $1,688,657 $ 1,000,265 $ 925,817
Danzer Corporation
Common Stock 2,510,948 853,722 845,185
Note 150,000 150,000 150,000
Lion's Gate Entertainment Corp.
Common Stock 733,313 269,648 266,952
Next Generation Media Corp.
Preferred Stock 775,485 775,485 -0-
Warrants 500 500 -0-
---------- ---------- ----------
Subtotal: 5,858,903 3,049,620 2,187,954
OTHER INVESTMENTS
Sunrise Media, LLC
Equity Investment 1,248,997 1,248,997 941,362
Promissory Notes 237,000 237,000 137,000
---------- ---------- ----------
$7,344,900 $4,535,617 $3,266,316
========== ========== ==========
<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
<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 March 31, 1999, the Partnership's net income from
operations was $237,469, and the total Partners' Equity account increased by a
like amount. This gain resulted from an unrealized gain on investments of
$351,147 which exceeded the Partnership's net investment loss of $39,365, as
well as the Partnership's $74,313 loss from its investment in Sunrise Media LLC.
The increase in the total Partners' Equity account is primarily attributable to
an increase in the market value of the common stock of Biopharmaceutics.
The following portfolio transactions are noted for the quarter ended March
31, 1999 (portfolio companies are herein referred to as the "Company"):
Biopharmaceutics, Inc. (BOPM) In February, 1999, the Partnership invested
an additional $200,000 into shares of the Company's common stock at a price of
$0.18 per share. The additional investment was part of a $1,000,000 equity
private placement by the Company, and will be used as working capital to support
the Company's remaining product line in the feminine hygiene area. The stock is
restricted from transfer pursuant to Rule 144 of the Securities Exchange Act of
1934.
Danzer Corporation (aka Global Environmental Corp.) (GLEN) In the first
quarter, the Partnership agreed to convert the entire principal balance of its
$150,000 Promissory Note, together with $17,531.78 in accrued and unpaid
interest owed by the Company pursuant to the note into the Company's common
stock at $0.10 per share, which will give the Partnership a total ownership of
11,719,110 shares. Following the debt conversion, the Partnership will own over
65% of the Company's outstanding common stock.
Subsequent to March 31, 1999, the Partnership agreed to advance up to
$57,966 to the Company on an "as needed" basis. On April 21, 1999, the
Partnership advanced $25,000 pursuant to the agreement, which has been secured
by a $57,966 Promissory Note bearing interest at 13%. Interest payments are due
August 15, 1999 and November 15, 1999, and all principal and unpaid interest is
due in full on or before December 31, 1999. All advances made under the note
have been made in concert with an agreement (the "Mortgage") by the holders of
a Master Note ("Holders") between Duncan-Smith Trustee ("DST") and Danzer
Industries, Inc. , the Company's wholly owned and operating subsidiary ("DII"),
in which Holders and DST agree to defer receipt of the principal portion of
quarterly payment due Holders and DST from DII for the quarters ended February
15, 1999 and May 15, 1999, which receipts in total equal $57,966. Assuming
that the amounts advanced by the Company and DII pursuant to the Partnership's
note equal the deferred principal payments of Holders and DST, then as excess
cash flow is available by the Company and DII to repay the deferred principal
on the Partnership's note, it would be done on an equal basis. In the event the
Company and DII do not utilize all the potential funding from the Partnership,
then Holders and DST would receive 100% of all excess cash flow until the
deferred principal amounts equal advances by the Partnership pursuant to the
Partnership's Note, and thereafter payment would be on an equal basis.
Contrary to statements made in the Partnership's 10-K Filing for the period
ended December 31, 1998, the $57,966 promissory note is not secured by the
assets of the Company.
Sunrise Media, LLC (Private) At March 31, 1999, the Company was in default
on the $200,000 Promissory Note and the $10,000 Promissory Note. All principal
and unpaid interest came due at April 15, 1999 on the $200,000 Note and at April
16, 1999 on the $10,000 Note. To date, the Partnership has not received any
payments pursuant to either obligation.
(2) Material Changes in Operations
During the quarter ended March 31, 1999, the Partnership experienced a net
gain of $237,469. This gain resulted from a net investment loss of $39,365, a
loss from the Partnership's investment in Sunrise Media LLC of $74,313 and an
unrealized gain on investments of $351,147. Interest income has decreased
$5,042 for the three months ended March 31, 1999 when compared to the same
period last year. General and administrative expenses decreased to $51,564
for the three month period <PAGE>
ended March 31, 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
probably not be available, leaving gains from capital transactions and portfolio
turnover as the primary sources of capital.
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 March 31, 1999, the only debt securities held by the Partnership are the
notes held in Danzer Corporation and Sunrise Media, LLC. The Danzer note was
converted to common stock at $0.10 per share subsequent to March 31, 1999, and
Sunrise was in default on $210,000 of its debt obligations. 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.
<PAGE>
<PAGE>
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
May 13, 1999 By /S/
________________________________________________
Russell Cleveland, President
May 13, 1999 By /S/
________________________________________________
Barbe Butschek, Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 7,344,900
<INVESTMENTS-AT-VALUE> 3,266,316
<RECEIVABLES> 35,759
<ASSETS-OTHER> 1,639
<OTHER-ITEMS-ASSETS> 643,630
<TOTAL-ASSETS> 3,947,344
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23,595
<TOTAL-LIABILITIES> 23,595
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,002,169
<SHARES-COMMON-STOCK> 128
<SHARES-COMMON-PRIOR> 128
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1,933,222
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2,066,613
<ACCUM-APPREC-OR-DEPREC> (4,078,585)
<NET-ASSETS> 3,923,749
<DIVIDEND-INCOME> 4,769
<INTEREST-INCOME> 7,430
<OTHER-INCOME> 0
<EXPENSES-NET> 125,877
<NET-INVESTMENT-INCOME> (113,678)
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 351,147
<NET-CHANGE-FROM-OPS> 237,469
<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> 237,469
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 1,819,544
<OVERDIST-NET-GAINS-PRIOR> 2,474,249
<GROSS-ADVISORY-FEES> 19,717
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 125,877
<AVERAGE-NET-ASSETS> 3,805,015
<PER-SHARE-NAV-BEGIN> 28,718
<PER-SHARE-NII> (886)
<PER-SHARE-GAIN-APPREC> 2,736
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 30,568
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
