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, 2000
[ ] 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, 1999 March 31, 2000
----------------- --------------
(Unaudited)
<C> <C>
Cash and cash equivalents $ 377,803 $ 392,774
Accounts receivable-sale of investment 100,000 -0-
Investments at fair value, cost of $6,045,517
and $6,076,531 at December 31, 1999 and
March 31, 2000 respectively 2,113,347 2,455,650
Interest and fees receivable 18,835 16,590
Other assets 22,729 20,666
---------- ----------
$2,632,714 $2,885,680
========== ==========
Liabilities and Partners' Equity
Liabilities:
Accounts payable $ 380 $ 1,083
Accounts payable - affiliate 42,147 20,297
---------- ----------
Total liabilities 42,527 21,380
---------- ----------
Partners' equity:
Limited partners (128.36 units outstanding
at) December 31, 1999; 128.36 units
outstanding at March 31, 2000 2,590,187 2,864,300
---------- ----------
Total partners' equity 2,590,187 2,864,300
---------- ----------
Total liabilities and partners' equity $2,632,714 $2,885,680
========== ==========
Limited partners' equity per limited
partnership unit $ 20,179 $ 22,315
========== ==========
<FN>
See accompanying notes to financial statements. </FN> </TABLE> <PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Statements of Operations
(Unaudited)
<TABLE> <S>
Three Months Ended March 31,
<S> <S>
1999 2000
-------- --------
<C> <C>
Income:
Interest $ 7,430 $ 768
Dividends 4,769 2,940
Other investment income -0- -0-
-------- --------
Total income 12,199 3,708
-------- --------
Expenses:
General and administrative 31,847 27,492
Management fees 19,717 14,393
-------- --------
Total expenses 51,564 41,885
-------- --------
Investment loss net (39,365) (38,177)
Loss from investment in Sunrise Media LLC (74,313) -0-
Net realized gain (loss) on investments -0- -0-
Net unrealized gain (loss) on investments 351,147 312,290
-------- --------
Net income (loss) resulting from operations $237,469 $274,113
======== ========
Net income (loss) per limited partnership unit $ 1,850 $ 2,136
======== ========
Weighted average limited partnership units 128.36 128.36
======== ========
<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, 1999 $ -0- $2,590,187 $2,590,187
Net income (unaudited) -0- 274,113 274,113
----- ---------- ----------
Balance, March 31, 2000-(unaudited) $ -0- $2,864,300 $2,864,300
===== ========== ==========
<FN>
See accompanying notes to financial statements. </FN> </TABLE> <PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Statement of Cash Flows
(Unaudited)
<TABLE> <S>
<S> <S>
Three Months Ended March 31,
1999 2000
------ ------
<C> <C>
Cash flows from operating activities:
Net income (loss) $ 237,469 $ 274,113
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Loss from Sunrise Media LLC 74,313 -0-
Unrealized (gain) loss on investments (351,147) (312,290)
(Increase) decrease in:
Accounts receivable (7,666) 102,245
Other assets 955 2,063
Increase (decrease) in:
Accounts payable (35,080) (21,147)
--------- ---------
Net cash flows from operating activities (81,156) 44,984
--------- ---------
Cash flows from investing activities:
Purchase of investments (200,000) (37,000)
Principal payment-note receivable -0- 6,987
--------- ---------
Net cash used by investing activities (200,000) (30,013)
--------- ---------
Cash flows from financing activities:
Liquidation of partners interests -0- -0-
--------- ---------
Net increase (decrease) in cash (281,156) 14,971
Cash and cash equivalents at beginning of period 924,786 377,803
--------- ---------
Cash and cash equivalents at end of period $ 643,630 $ 392,774
========= =========
<FN>
See accompanying notes to financial statements. </FN> </TABLE> <PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Notes to Financial Statements
March 31, 2000
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 30, 2000, subject to the right of the Independent General
Partners to extend the term for 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 liquidating
investments. Because of the illiquid nature of the Partnership's
investments, there are no assurances that this objective can be accomplished
without a possible detrimental effect upon the value of the Partnership's
investments. The Managing General Partner cannot predict what the outcome of
this uncertainty may be. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
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 $767.54, and was accrued on the Danzer
Corp. debt obligation only. No interest was accrued on the Feminique
Corporation debt obligation of $137,000 due to the financial difficulties
being experienced at the Company. At March 31, 2000, two companies had
debt obligations to the Partnership: Feminique Corp. owed $137,000
pursuant to two 8% Promissory Notes, and Danzer Corporation owed $18,013
pursuant to a 10% Promissory Note. The Partnership is no longer accruing
any interest income on the Feminique debt due to the financial
difficulties being experienced by the Company, and does not expect to
receive any interest income on this debt going forward. The Danzer Note
was amended pursuant to letter agreements dated March 16, 2000 and March
30, 2000, so that the principal and interest will be paid in four
installments of $5,000 each at March 16, March 24, March 31, and April 14
of this year, with a final installment for all remaining principal and
interest due April 21, 2000. At the time of the filing of this 10-Q
Statement, the Partnership had been repaid all of its principal on this
Note.
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.
<PAGE>
RENAISSANCE CAPITAL PARTNERS, LTD.
Notes to Financial Statements
March 31, 2000
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. 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, securities will be valued at their face value. However, if the
position 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 $2,113,347 (80% of
total assets) and $2,455,650 (85% of total assets) as of December 31, 1999
and March 31, 2000, 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)
March 31, 2000
<TABLE> <S> <S> <S>
CONVERSION
or
COST FACE VALUE FAIR VALUE
<C> <C> <C>
Feminique Corporation
Debentures $ 137,000 $ 105,033 $ 102,750
Common Stock 1,733,740 614,925 61,493
Danzer Corporation
Note 18,013 18,013 18,013
Common Stock 2,678,480 2,197,333 2,015,491
Lion's Gate Entertainment Corp.
Common Stock 733,313 260,508 257,903
Next Generation Media Corp.
Preferred Stock 775,485 775,485 -0-
Warrants 500 500 -0-
---------- ---------- ----------
Total $6,076,531 $3,971,797 $2,455,650
========== ========== ==========
<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
The following portfolio transactions are noted for the quarter ended March
31, 2000 (portfolio companies are herein referred to as the "Company"):
Feminique Corp. (FEMQ) In January 2000, the Partnership advanced an
additional $37,000 to the Company pursuant to an 8% Convertible Promissory Note
bearing the same terms and conditions as the $100,000 Note executed in the third
quarter of 1999. The Notes come due June 1, 2000, are convertible into shares
of the Company's common stock at a rate of $0.15 per share, contain
anti-dilution provisions which are contained in our standard Convertible
Debenture Agreements, and also give the Partnership demand and piggyback
registration rights. In addition, the Notes are secured by the common stock of
the parent's single operating subsidiary, Quality Health Products, Inc.
Effective February 18, 2000, Jonathan Rosen, the Company's President and
CEO, resigned his management position. Mr. Rosen maintained his position as a
member of the Company's Board of Directors. In March 2000, Russell Cleveland,
Chairman, President, and Director of the Managing General Partner, resigned his
position as Chairman and Director of the Company and two additional Board
members, Mr. James Murphy and Mr. Barry Weisberg, resigned their Board
positions as well.
The Company is having severe financial and operational difficulties.
Accordingly, the Managing General Partner has placed reserves on all of the
Partnership's investments in the Company. We are continuing to monitor the
situation and will reassess the valuation as events warrant.
Danzer Corporation (aka Global Environmental Corp.) (DNZR) In the first
quarter of 2000, the Company successfully completed a refinance of its working
capital facility and real estate term note. In order to facilitate this
closing, the Partnership executed a Limited Waiver of its default remedy through
February 29, 2000. Effective March 2000, the Company and the Partnership
agreed, by way of two letter agreements, to restructure the timing of repayment
obligations owed pursuant to the Note. This restructuring now provides that the
Company is to pay principal and interest in four installments of $5,000 each at
March 16, March 24, March 31, and April 14 of this year, with a final
installment for all remaining principal and interest due April 21, 2000.
At March 31, 2000, the Company was in compliance with this amended repayment
schedule and the note's principal balance had been reduced to $18,013.
Next Generation Media Corporation (NGMC) Subsequent to March 31, 2000, the
Partnership, pursuant to a transaction between Next Generation Media Corporation
and the BigHub.com, a Company trading on the Over-The-Counter Bulletin Board
under the symbol "BHUB," sold its entire investment in the Company to BigHub.com
in exchange for 161,218 shares of BHUB common stock. The stock is not
registered and is restricted from transfer pursuant to Rule 144 of the
Securities Act of 1933. BigHub.com is a network of affiliate Internet sites
designed to leverage the traffic and capabilities of the iSleuth meta-search
engine, and also has a private label business in which it is an application
service provider enabling retail operations to build an Internet presence for
selling products and services. At March 31, 2000, the Company had a market
capitalization approaching $50 million, and its common stock ended trading on
that day at $3.00 per share.
(2) Material Changes in Operations
During the quarter ended March 31, 2000, the Partnership experienced a net
gain of $274,113. This gain resulted from a net investment loss of $38,177, and
an unrealized gain on investments of $312,290 resulting primarily from an
increase in the price of the common stock of Danzer, and also from a common
stock price increase in the shares of Lion's Gate Entertainment. These
increases overcame unrealized losses sustained as a result of trading reserves
on the Partnership's investments in Feminique Corp. Interest income has
decreased $6,662 for the three months ended March 31, 2000 when compared to the
same period last year due to a decrease in the number of interest bearing
instruments held by the Partnership together with the forbearance of interest
income accruals on the Feminique debt obligations. General and administrative
expenses decreased to $27,492 for the three month period ended March 31, 2000,
primarily because of a decrease in legal fees and travel expenses. <PAGE>
LIQUIDITY AND CAPITAL RESOURCES
For the quarter ended March 31, 2000, the Partnership made a $37,000
follow-on investment in Feminique Corp. by purchasing an 8% Promissory Note
bearing the same terms and conditions as the $100,000 Promissory Note made in
the fourth quarter of 1999, and had $6,987 paid to it on the principal balance
of the Danzer Note.
No cash distributions were made to Limited Partners in the first quarter
and cash provided by operating activities amounted to $44,984, primarily due to
net income of $274,113 being booked for the quarter.
In the past, the Partnership's portfolio investments generally had an
initial fixed term of seven years with payments of interest only for an initial
term of three to five years. Currently, because the Partnership's portfolio
investments are being wound down, no new investments are being made and new loan
obligations to previously existing portfolio companies are taking on new terms.
Typically, the note obligations securing follow-on advances to portfolio
investments do not bind the Partnership for as long a period, nor do they bear
the same beneficial amortization schedule as did the initial portfolio
investments. At March 31, 2000, the Partnership had outstanding debt
obligations from two portfolio companies: the $137,000 in Secured Notes from
Feminique Corporation and the $18,013 Note from Danzer Corp. At March 31, 2000,
Feminique was in arrears on interest payments of $4,193, and also was overdue on
repayment of expenses owed to the Partnership in the amount of $15,218. Danzer
Corporation was not in default on its note obligation to the Partnership, as the
Partnership and Danzer, by way of two letter agreements dated March 16, 2000 and
March 30, 2000, agreed to a revised repayment schedule with which Danzer was
compliant at the quarter end. Although the Danzer note will be repaid with
interest, Feminique is having severe financial and operational difficulties. As
a result, we are no longer accruing interest income on the Feminique debt
positions as payment of that interest is in serious doubt, and we have placed
reserves on all of our investment positions in the Company.
The Partnership has debt as a possible source of available capital.
However, because the registrant does not presently intend to make leveraged
investments and is winding down the Partnership, the Partnership does not
anticipate taking on any debt obligations. Therefore, a lack of liquidity will
generally only affect the ability for the Partnership to make follow-on
investments and distributions to the Partners.
The Partnership's ability to improve liquidity and make distributions will
depend upon the Partnership's success in realizing a return of investment cost
and the realization of any capital gains from selling equity and/or debt.
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 curtailed its distributions. Until
such time as liquidity is improved from either the sale of investments or loan
repayments, it is anticipated that cash distributions to Limited Partners will
remain curtailed.
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. Moreover, at the time of this filing, the Partnership
had not experienced any Year 2000 difficulties with its systems. <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 24, 2000 By /S/
-------------------------------------------
Russell Cleveland, President
May 24, 2000 By /S/
-------------------------------------------
Barbe Butschek, Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<INVESTMENTS-AT-COST> 6,076,531
<INVESTMENTS-AT-VALUE> 2,455,650
<RECEIVABLES> 16,590
<ASSETS-OTHER> 20,666
<OTHER-ITEMS-ASSETS> 392,774
<TOTAL-ASSETS> 2,885,680
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 21,380
<TOTAL-LIABILITIES> 21,380
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,002,169
<SHARES-COMMON-STOCK> 128
<SHARES-COMMON-PRIOR> 128
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 3,450,376
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2,066,612
<ACCUM-APPREC-OR-DEPREC> (3,620,881)
<NET-ASSETS> 2,864,300
<DIVIDEND-INCOME> 2,940
<INTEREST-INCOME> 768
<OTHER-INCOME> 0
<EXPENSES-NET> 41,885
<NET-INVESTMENT-INCOME> (38,177)
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 312,290
<NET-CHANGE-FROM-OPS> 274,113
<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> 274,113
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 3,412,199
<OVERDIST-NET-GAINS-PRIOR> 2,066,612
<GROSS-ADVISORY-FEES> 14,393
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 41,885
<AVERAGE-NET-ASSETS> 2,727,244
<PER-SHARE-NAV-BEGIN> 20,179
<PER-SHARE-NII> (297)
<PER-SHARE-GAIN-APPREC> 2,433
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 22,315
<EXPENSE-RATIO> 0.00
</TABLE>
