UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended June 30, 2000
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or
[ ] Transition Report Pursuance to Section 13 or 15(d) of the Securities
Exchange act of 1934.
For the transition period from _______ to _______
Commission File Number 0-23782
---------------------------------
RENAISSANCE ENTERTAINMENT CORPORATION
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(Exact name of registrant as specified in its charter)
Colorado 84-1094630
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
275 Century Circle, Suite 102, Louisville, Colorado 80027
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(Address of principal executive offices) (Zip Code)
(303) 664-0300
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(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former Address)
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.
[ X ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of August 21, 2000, Registrant had 2,144,889 shares of common stock, $.03 Par
Value, outstanding.
INDEX
Page
Number
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PART I. FINANCIAL INFORMATION
Item I. Financial Statements
Review Report of Independent Certified Public Accountant 3
Balance Sheets as of June 30, 2000 (Unaudited)
and December 31, 1999 4
Statements of Operations for the Three Months
Ended June 30, 2000 and 1999
(Unaudited) 5
Statements of Operations for the Six Months
Ended June 30, 2000 and 1999
(Unaudited) 6
Statements of Cash Flows for the Six Months
Ended June 30, 2000 and 1999
(Unaudited) 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION 16
This report contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the
Securities Act of 1933, as amended, and is subject to the safe harbors created
by those sections. These forward-looking statements are subject to significant
risks and uncertainties, including those identified in the section of this Form
10-QSB entitled "Factors That May Affect Future Operating Results," which may
cause actual results to differ materially from those discussed in such
forward-looking statements. The forward-looking statements within this Form
10-QSB are identified by words such as "believes," "anticipates," "expects,"
"intends," "may," "will" and other similar expressions. However, these words are
not the exclusive means of identifying such statements. In addition, any
statements which refer to expectations, projections or other characterizations
of future events or circumstances are forward-looking statements. The Company
undertakes no obligation to publicly release the results of any revisions to
these forward-looking statements which may be made to reflect events or
circumstances occurring subsequent to the filing of this Form 10-QSB with the
Securities and Exchange Commission ("SEC"). Readers are urged to carefully
review and consider the various disclosures made by the Company in this report
and in the Company's other reports filed with the SEC that attempt to advise
interested parties of the risks and factors that may affect the Company's
business.
2
REVIEW REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
The Board of Directors
Renaissance Entertainment Corporation
Louisville, Colorado
We have reviewed the accompanying balance sheet of Renaissance Entertainment
Corporation as of June 30, 2000, and the related statements of operations and
cash flows for the three months and six months then ended, in accordance with
Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants. All information included in
these financial statements is the representation of the management of
Renaissance Entertainment Corporation.
A review of interim financial statements consists principally of inquiries of
Company personnel responsible for financial matters and analytical procedures
applied to financial data. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
As discussed in the notes to the financial statements, certain conditions
indicate that the Company may be unable to continue as a going concern. The
accompanying financial statements do not include any adjustments to the
financial statements that might be necessary should the Company be unable to
continue as a going concern.
Schumacher & Associates, Inc.
Certified Public Accountants
2525 Fifteenth Street, Suite 3H
Denver, Colorado 80211
August 11, 2000
3
RENAISSANCE ENTERTAINMENT CORPORATION
BALANCE SHEETS
ASSETS
June 30, December 31,
2000 1999
------------------ ------------------
(Unaudited)
Current Assets:
Cash and equivalents $ 366,500 $ 1,049,044
Accounts receivable (net) 30,415 4,951
Notes receivable, current portion 12,877 0
Inventory 256,414 201,493
Prepaid expenses and other 1,010,295 259,646
------------------ ------------------
Total Current Assets 1,676,501 1,515,134
Property and equipment, net of accumulated depreciation 4,327,661 4,294,163
Note receivable, net of current portion 137,123 0
Goodwill 443,460 468,798
Other assets 830,679 830,725
------------------- -------------------
TOTAL ASSETS $ 7,415,424 $ 7,108,820
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 1,625,574 $ 1,720,610
Notes payable, current portion 847,455 854,277
Unearned income 407,546 214,789
-------------------- -------------------
Total Current Liabilities 2,880,575 2,789,676
Lease obligation payable 4,049,633 3,987,116
Notes payable, net of current portion 816,964 311,873
Other 293,046 39,675
-------------------- -------------------
Total Liabilities 8,040,218 7,128,340
------------------- -------------------
Stockholders' Equity:
Common stock, $.03 par value, 50,000,000 shares authorized, 2,144,889
and 2,144,889 shares issued and outstanding at June 30, 2000 and
December 31, 1999, respectively 64,346 64,346
Additional paid-in capital 9,430,827 9,430,827
Accumulated earnings (deficit) (10,119,967) (9,514,693)
------------------- -------------------
Total Stockholders' Equity (624,794) (19,520)
-------------------- -------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,415,424 $ 7,108,820
==================== ===================
The accompanying notes are an integral part of the financial statements.
4
RENAISSANCE ENTERTAINMENT CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
June 30
---------------------------------------------------
2000 1999
---------------------- ------------------------
REVENUE:
Sales $ 3,851,416 $ 5,328,091
Faire operating costs 1,219,334 1,862,105
---------------------- ------------------------
Gross Profit 2,632,082 3,465,986
---------------------- ------------------------
OPERATING EXPENSES:
Salaries 975,816 1,447,214
Depreciation and amortization 87,581 129,923
Advertising 392,333 662,910
Other operating expenses 582,590 814,823
---------------------- ------------------------
Total Operating Expenses 2,038,320 3,054,870
---------------------- ------------------------
Net Operating (Loss) Income 593,762 411,116
---------------------- ------------------------
Other Income (Expenses):
Interest income 14,204 13,524
Interest (expense) (165,766) (171,934)
Other income (expense) (152,103) 24,198
---------------------- ------------------------
Total Other Income (Expenses) (303,665) (134,212)
---------------------- ------------------------
Net Income (Loss) before (Provision)
Credit for Income Taxes 290,097 276,904
(Provision) Credit for Income Taxes -- --
---------------------- ------------------------
Net Income (Loss) to Common Stockholders $ 290,097 $ 276,904
====================== ========================
Net Income (Loss) per Common Share $ .14 $ .13
====================== ========================
Weighted Average Number of Common Shares Outstanding 2,144,889 2,144,895
====================== ========================
The accompanying notes are an integral part of the financial statements.
5
RENAISSANCE ENTERTAINMENT CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended
June 30
---------------------------------------------------
2000 1999
---------------------- ------------------------
REVENUE:
Sales $3,854,560 $5,332,412
Faire operating costs 1,219,334 1,863,365
---------------------- ------------------------
Gross Profit 2,635,226 3,469,047
---------------------- ------------------------
OPERATING EXPENSES:
Salaries 1,314,060 2,015,434
Depreciation and amortization 174,785 259,641
Advertising 392,333 662,910
Other operating expenses 959,432 1,293,933
---------------------- ------------------------
Total Operating Expenses 2,840,610 4,231,918
---------------------- ------------------------
Net Operating (Loss) Income (205,384) (762,871)
---------------------- ------------------------
Other Income (Expenses):
Interest income 31,443 22,344
Interest (expense) (297,545) (317,001)
Other income (expense) (133,788) 32,653
---------------------- ------------------------
Total Other Income (Expenses) (399,890) (262,004)
---------------------- ------------------------
Net Income (Loss) before (Provision)
Credit for Income Taxes (605,274) (1,024,875)
(Provision) Credit for Income Taxes -- --
---------------------- ------------------------
Net Income (Loss) to Common Stockholders' $ (605,274) $(1,024,875)
====================== ========================
Net Income (Loss) per Common Share $ (.28) $ (.48)
====================== ========================
Weighted Average Number of Common Shares Outstanding 2,144,889 2,143,542
====================== ========================
The accompanying notes are an integral part of the financial statements
6
RENAISSANCE ENTERTAINMENT CORPORATION
STATEMENTS OF CASH FLOWS (Unaudited)
Six Months ended
June 30
---------------------------------------
2000 1999
----------- ------------
Cash Flows from Operating Activities:
Net income (Loss) $ (605,274) $(1,024,875)
----------- ------------
Adjustments to reconcile net income (Loss)
to net cash provided by operating
activities:
Depreciation and amortization 174,785 259,641
Gain (loss) on disposal of assets 0 2,141
(Increase) decrease in:
Accounts Receivable (25,464) (8,262)
Notes Receivable (150,000) 0
Inventory (54,921) (156,203)
Prepaid expenses and other (753,250) (637,266)
Increase (decrease) in:
Accounts payable and accrued expenses (95,034) 1,021,086
Unearned revenue and other 446,128 411,244
----------- ------------
Total adjustments (457,756) 892,381
----------- ------------
Net Cash Provided by Operating
Activities (1,063,030) (132,494)
----------- ------------
Cash Flows from Investing Activities:
Acquisition of property and equipment (180,302) (297,862)
----------- ------------
Net Cash (Used in) Investing Activities (180,302) (297,862)
----------- ------------
Cash Flows from Financing Activities:
Common stock issued and additional
paid-in capital 0 2,500
Proceeds from notes payable 597,832 1,015,571
Principal payments on notes payable (37,044) (62,189)
----------- ------------
Net Cash Provided by Financing Activities 560,788 955,882
----------- ------------
Net Increase (Decrease) in Cash (682,544) 525,526
Cash, beginning of period 1,049,044 379,336
----------- ------------
Cash, end of period $ 366,500 $ 904,862
=========== ============
Interest paid $ 297,545 $ 317,001
=========== ============
The accompanying notes are an integral part of the financial statements.
7
RENAISSANCE ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
1. UNAUDITED STATEMENTS
The balance sheet as of June 30, 2000, the statements of operations for
the three month and six month periods ended June 30, 2000 and 1999 and
the statements of cash flows for the six month periods end June 30,
2000 and 1999, have been prepared by the Company without audit. In the
opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial
position, results of operations and changes in financial position at
June 30, 2000 and for all periods presented, have been made.
These statements should be read in conjunction with the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1999,
filed with the Securities and Exchange Commission.
2. CALCULATION OF EARNINGS (LOSS) PER SHARE
The earnings (loss) per share is calculated by dividing the net income
(loss) to common stockholders by the weighted average number of common
shares outstanding.
3. SHORT-TERM NOTES; SUBSEQUENT EVENT
During the first six months of fiscal 2000, the Company raised capital
in the amount of $575,000 through the issuance of 12% subordinated
promissory notes. The funds were provided by Charles S. Leavell
($250,000), Chairman of the Board of Directors, J. Stanley Gilbert
($225,000), Member of the Board of Directors, and one other investor.
The notes were issued in units, each unit consisting of two promissory
notes of equal principal amounts, identical in nature except that one
note is convertible to common stock at a price of $0.30 per share.
Interest is due and payable quarterly and the notes mature August 31,
2001.
4. BASIS OF PRESENTATION - GOING CONCERN
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplates
continuation of the Company as a going concern. However, the Company
has sustained operating losses and has a net capital deficiency.
In view of these matters, realization of certain assets in the
accompanying balance sheet is dependent upon continued operations of
the Company, which in turn is dependent upon the Company's ability to
meet its financial requirements, raise additional capital, and the
success of its future operations.
Management is in the process of attempting to raise additional capital
and reduce operating expenses. Management believes that its ability to
raise additional capital and reduce operating expenses provide an
opportunity for the Company to continue as a going concern.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion should be read in conjunction with the Company's
Financial Statements, including the footnotes for the fiscal period ended
December 31, 1999.
The Company presently owns and produces four Renaissance Faires: the Bristol
Renaissance Faire in Kenosha, Wisconsin, serving the Chicago/Milwaukee
metropolitan region; the Northern California Renaissance Pleasure Faire, serving
the San Francisco Bay and Sacramento metropolitan areas; the Southern California
Renaissance Pleasure Faire in Devore, California serving the greater Los Angeles
metropolitan area; and the New York Renaissance Faire serving the New York City
metropolitan area.
The Renaissance Faire is a re-creation of a Renaissance village, a fantasy
experience transporting the visitor back into sixteenth century England. This
fantasy experience is created through authentic craft shops, food vendors and
continuous live entertainment throughout the day, both on the street and the
stage, including actors, jugglers, jousters, magicians, dancers and musicians.
On January 28, 2000, the Company announced the closure of the Virginia
Renaissance Faire located in Fredericksburg, Virginia. The Virginia Renaissance
Faire has had a negative impact on the Company's cash flow and net income since
its opening. Efforts are underway to sell the 250 acres of land on which the
Faire is located.
On April 6, 2000 the Company entered into an Asset Purchase Agreement with
Willows Fare, LLC which conveyed it's interest in certain assets previously used
by the Bristol Faire in its food operation. As part of this agreement, Willows
Fare, LLC was granted a seven year concession agreement with the Bristol Faire
to operate as a food vendor. The purchase price of the assets was $300,000, half
of which was paid upon execution of the agreement. The Company holds a 10%
promissory note for the balance of $150,000. Payments of principal and interest
begin August 1, 2000 based on a 7-year amortization with a balloon payment on
October 31, 2003.
The Company has a lease for the 2000 and 2001 Faire seasons to operate the New
York Faire in Sterling Forest. The Company has a one-year lease for the 2000
Faire season to operate the Northern California Faire at the same location used
in 1999, near Vacaville. On June 27, 2000, the Company signed a twenty-year
lease with San Bernardino County Parks and Recreation Department, securing a
long-term home for the Southern California Renaissance Faire. The Company has a
long-term lease expiring in 2017 for the Bristol Faire site. It is critical to
the financial condition of the Company, that it obtain long-term leases for its
Northern California and New York Faires.
The Company had a working capital deficit of ($1,204,074) as of June 30, 2000.
During the first six months of fiscal 2000, the Company raised capital in the
amount of $575,000 through the issuance of 12% subordinated promissory notes.
The funds were provided by Charles S. Leavell ($250,000), Chairman of the Board
of Directors, J. Stanley Gilbert ($225,000), Member of the Board of Directors,
and one other investor. The notes were issued in units, each unit consisting of
two
9
promissory notes of equal principal amounts, identical in nature except that one
note is convertible to common stock at a price of $0.30 per share. Interest is
due and payable quarterly and the notes mature August 31, 2001. See "LIQUIDITY
AND CAPITAL RESOURCES."
RESULTS OF OPERATIONS
On June 30, 2000, the Company's Southern California Renaissance Faire had
completed it's 2000 season and the Bristol Renaissance Faire had completed one
weekend of operation. At June 30, 1999 the Company's Southern California and
Virginia Renaissance Faire had completed their 1999 seasons and the Bristol
Renaissance Faire had completed one weekend of operation. The effect of the
closure of the Virginia Faire will be disclosed as each line item on the income
statement is discussed.
THREE MONTHS ENDED JUNE 30, 2000, COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
Revenues decreased $1,476,675 or 28% from $5,328,091 in 1999 to $3,851,416 in
2000. This decrease is largely attributable to the closure of the Company's
Virginia Faire, which contributed revenue in the amount of $1,082,596 in the
second quarter of 1999. The balance of the decrease, approximately $400,000, is
largely associated with the Company's Southern California Faire, which
experienced a decrease in gross attendance for the 2000 operating season of 17%.
It is believed, the decreased attendance for this Faire is the result of
extremely hot weather through the eight week run of the event.
Operating expenses (year-round operating costs and corporate overhead) decreased
$1,016,550 or 33%, from $3,054,870 in 1999 to $2,038,320 in 2000. Of the
decrease, approximately $550,000 is attributable to the closure of the Company's
Virginia Faire. The balance of the decrease is associated with expense
reductions throughout the Company's operations.
Of the operating expenses, salaries decreased 33%, from $1,447,214 in 1999 to
975,816 in 2000 reflecting a $471,398 decrease for the 2000 period as compared
to the 1999 period. Of this decrease, $268,076 is associated with the closure of
the Company's Virginia Faire. The balance of the change is the result of
decreased personnel expense for the Company.
Advertising expense showed a decrease of $270,577 or 41%, from $662,910 in 1999
to $392,333 in 2000. Of the decrease, $169,474 is associated with the closure of
the Company's Virginia Faire. The balance of the decrease is the result of the
Company's utilization of alternative, less expensive forms of marketing.
Depreciation and amortization decreased 33%, from $129,923 in 1999 to $87,581 in
2000. This decrease is primarily the result of the Company's closure of the
Virginia Faire and the associated write-down of these assets in 1999. As a
result, the Company's fixed asset base decreased and overall depreciation
expense has decreased.
Other operating expenses (all other general and administrative expenses of the
Company) decreased $232,233 or 29%, from $814,823 in 1999 to $582,590 in 2000.
Of the decrease, $70,059 is associated with the closure of the Virginia Faire.
The balance of the decrease is associated with expense reductions throughout the
Company's operations.
10
As a result of the foregoing, net operating income (before interest charges and
other income) increased 44% from $411,116 for the 1999 period to $593,762 for
the 2000 period. The closure of the Virginia Faire does not have a significant
impact on the comparability of net operating income for the three months ended
June 30, 1999 and 2000. The Virginia Faire's net operating income for the
three-month period in 1999 was $33,564.
A 4% decrease in interest expense from $171,934 in 1999 to $165,766 in 2000
resulted from the Company's ability to raise less expensive capital.
Other expense increased $176,301, from income of $24,198 in 1999 to expense of
($152,103) in 2000. In 1999, as a result of the closure of the Virginia Faire,
the Company recorded an allowance for discontinued operations during the fourth
quarter. This allowance was an estimate, representing the anticipated cost of
administering the Virginia site for the year 2000. In the second quarter of
2000, this estimate was re-evaluated and determined to be inadequate to cover
expenses through the year. As a result an additional allowance in the amount of
$184,416 was recorded to other expense.
Combining net operating income with other income/expense resulted in a $13,193
increase in net income before taxes, from income of $276,904 for the 1999 period
to an income of $290,097 for the 2000 period.
Net income to common stockholders also increased $13,193, from $276,904 for the
1999 period to $290,097 for the 2000 period. Finally, net income per common
share increased from $.13 for the 1999 period to $.14 for the 2000 period, based
on 2,144,895 weighted average shares outstanding during the 1999 period and
2,144,889 weighted average shares outstanding during the 2000 period.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
Revenues decreased $1,477,852 or 28% from $5,332,412 in 1999 to $3,854,560 in
2000. This decrease is largely attributable to the closure of the Company's
Virginia Faire, which contributed revenue in the amount of $1,124,174 in the
first two quarters of 1999. The balance of the decrease, approximately $350,000,
is largely associated with the Company's Southern California Faire, which
experienced a decrease in gross attendance for the 2000 operating season of 17%.
It is believed, that the decreased attendance for this Faire is the result of
extremely hot weather through the eight week run of the event.
Operating expenses (year-round operating costs and corporate overhead) decreased
$1,391,308 or 33%, from $4,231,918 in 1999 to $2,840,610 in 2000. Of the
decrease, approximately $781,105 is attributable to the closure of the Company's
Virginia Faire. The balance of the decrease is associated with expense
reductions throughout the Company's operations.
Of the operating expenses, salaries decreased 35%, from $2,015,434 in 1999 to
1,314,060 in 2000 reflecting a $701,374 decrease for the 2000 period as compared
to the 1999 period. Of this decrease, $363,604 is associated with the closure of
the Company's Virginia Faire. The balance of the change is the result of
decreased personnel expense for the Company.
Advertising expense showed a decrease of $270,577 or 41%, from $662,910 in 1999
to $392,333 in 2000. Of the decrease, $208,647 is associated with the closure of
the Company's Virginia Faire. The balance of the decrease is the result of the
Company's utilization of alternative, less expensive forms of marketing.
11
Depreciation and amortization decreased 33%, from $259,641 in 1999 to $174,785
in 2000. This decrease is primarily the result of the Company's closure of the
Virginia Faire and the associated write-down of these assets in 1999. As a
result, the Company's fixed asset base decreased and overall depreciation
expense has decreased.
Other operating expenses (all other general and administrative expenses of the
Company) decreased $334,501 or 26%, from $1,293,933 in 1999 to $959,432 in 2000.
Of the decrease, $118,591 is associated with the closure of the Virginia Faire.
The balance of the decrease is associated with expense reductions throughout the
Company's operations.
As a result of the foregoing, net operating loss (before interest charges and
other income) decreased 73% from ($762,871) for the 1999 period to ($205,384)
for the 2000 period. The Virginia Faire's net operating loss for the six-month
period in 1999 was ($178,963).
A 6% decrease in interest expense from $317,001 in 1999 to $297,545 in 2000
resulted from the Company's ability to raise less expensive capital.
Other expense increased $166,441, from income of $32,653 in 1999 to expense of
($133,788) in 2000. In 1999, as a result of the closure of the Virginia Faire,
the Company recorded an allowance for discontinued operations in the fourth
quarter. This allowance was an estimate, representing the anticipated cost of
administering the Virginia site for the year 2000. In the second quarter of
2000, this estimate was re-evaluated and determined to be inadequate to cover
expenses through the year. As a result an additional allowance in the amount of
$184,416 was recorded to other expense.
Combining net operating loss with other income/expense resulted in a $419,601
decrease in net loss before taxes, from loss of ($1,024,875) for the 1999 period
to an loss of ($605,274) for the 2000 period.
Net loss to common stockholders also decreased $419,601 from ($1,024,875) for
the 1999 period to ($605,274) for the 2000 period. Finally, net loss per common
share decreased from ($.48) for the 1999 period to ($.28) for the 2000 period,
based on 2,143,542 weighted average shares outstanding during the 1999 period
and 2,144,889 weighted average shares outstanding during the 2000 period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital deficit narrowed during the quarter ended June 30,
2000, from ($1,274,542) at December 31, 1999 to ($1,204,074) at June 30, 2000.
The Company's working capital requirements are greatest during the period from
January 1 through May 1, when it is incurring start-up expenses for its first
Faire of the season, the Southern California Faire.
During the first six months of fiscal 2000, the Company raised capital in the
amount of $575,000 through the issuance of 12% subordinated promissory notes.
The funds were provided by Charles S. Leavell ($250,000), Chairman of the Board
of Directors, J. Stanley Gilbert ($225,000), Member of the Board of Directors,
and one other investor. The notes were issued in units, each unit consisting of
two promissory notes of equal principal, identical in nature except that one
note is convertible to common stock at a price of $0.30 per share. Interest is
due and payable quarterly and the notes mature August 31, 2001.
During March of 1999, the Company secured a second mortgage on its Virginia real
estate. The total amount of the loan is $750,000. This loan provides for
interest at 13% per annum. Payments
12
of principal and interest, approximately $11,500 each month, are due January and
July through November 2000. Interest in the amount of $7,262 each month is
payable from February through June 2000. The final payment on the loan is
approximately $627,573 and is due December 31, 2000.
The Company believes it has adequate capital to fund anticipated operations for
fiscal 2000. If the Company's operations, for the balance of fiscal 2000 meet or
exceed plan, it will have sufficient funds to pay the second mortgage on the
Virginia property. However, it will likely need upwards of $500,000 to fund
operations prior to the opening of the 2001 Faire season.
Reviewing the change in financial position over the six months, current assets,
largely comprised of cash and prepaid expenses, increased from $1,515,134 at
December 31, 1999 to $1,676,501 at June 30, 2000, an increase of $161,367 or
11%. Of these amounts, cash and cash equivalents decreased from $1,049,044 at
December 31, 1999 to $366,500 at June 30, 2000. Accounts receivable increased
from $4,951 at December 31, 1999 to $30,415 at June 30, 2000. Prepaid expenses
(expenses incurred on behalf of the Faires) increased from $259,646 at December
31, 1999 to $1,010,295 at June 30, 2000. These costs are expensed once the
Faires are operating.
Current liabilities increased from $2,789,676 at December 31, 1999, to
$2,880,575 at June 30, 2000, an increase of $90,899 or 3%. During the quarter,
accounts payable and accrued expenses decreased $95,036 or 6%. Unearned income,
which consists of the sale of admission tickets to upcoming Faires, and deposits
received from craft vendors for future Faires, increased from $214,789 at
December 31, 1999 to $407,546 at June 30, 2000. The revenue is recognized once
the Faires are operating. The Company's increased indebtedness during the
quarter is attributable to the aforementioned $575,000 in long-term financing
raised during the first six months of 2000. This debt was incurred to cover the
Company's operating expenses prior to the opening of the 2000 Faire season.
Stockholders' Equity decreased from ($19,520) at December 31, 1999 to ($624,794)
at June 30, 2000, a decrease of $605,274. This decrease is due to the net loss
incurred during the first quarter.
The Company has no significant commitment for capital expenses during the fiscal
year ending December 31, 2000.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
In addition to the other information contained in this report, prospective
investors should carefully consider the following factors in evaluating the
Company and its business.
RECENT LOSSES. The Company has incurred operating losses since
fiscal 1995. In addition, the Company incurred a ($605,274) loss for the
six-months ended June 30, 2000. There is no assurance that the Company will
return to profitability in any subsequent period.
NEED FOR ADDITIONAL CAPITAL. The Company had a working capital deficit
of ($1,204,074) as of June 30, 2000. See "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." While the Company believes
that it has adequate capital to fund anticipated operations for the balance of
fiscal year 2000, it may need additional capital to sustain operations after
that time. Additional capital may be sought through borrowings or from
additional equity financing. Such additional equity financing may result in
additional dilution to investors. In any
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case, there can be no assurance that any additional capital can be
satisfactorily obtained if and when required.
POSSIBLE SUSPENSION OF NORTHERN CALIFORNIA FAIRE. In 1999, the Northern
California Renaissance Pleasure Faire was held on the site of the original Nut
Tree Farm near Vacaville, California under a one-year lease. The Company has
negotiated an additional one-year lease for 2000 to operate the Faire at the
same location, the Nut Tree Farm. The Company is seeking a long-term lease
agreement at a location that would provide expense savings by allowing the Faire
structures to remain in place year-round and provide the opportunity for
additional income-generating events other than the Renaissance Faire. There can
be no assurance that the Company will be successful in obtaining a long-term
lease, or that it will be on terms acceptable to the Company. Should the Company
be unable to operate a Northern Renaissance Faire it could have a material
adverse effect on the Company's business, results of operations and financial
condition.
POSSIBLE RELOCATION OF NEW YORK FAIRE. The Company has a lease for the
2000 and 2001 Faire seasons to operate the New York Faire in Sterling Forest.
The Company is negotiating with the owner of the Sterling Forest property and
investigating other possible locations for the New York Faire. However, there
can be no assurance that the Company will be successful in securing a site for
the New York Faire for the 2002 season, or that such arrangements will be on
terms acceptable to the Company. Should the Company be unable to operate a New
York Renaissance Faire it could have a material adverse effect on the Company's
business, results of operations and financial condition.
COMPETITION. The Company faces significant competition from numerous
organizations throughout the country which offer Renaissance Faires and other
entertainment events, including amusement parks, theme parks, local and county
fairs and festivals, some of which possess significantly greater resources than
the Company, and in many cases, greater expertise and industry contacts. The
Company estimates that there are currently 20 major Renaissance Faires produced
each year. In addition, the Company estimates that there are 100 minor
Renaissance Faire events held throughout the United States each year, ranging in
duration from one day to two weekends.
LACK OF TRADEMARK PROTECTION. Because of the large number of existing
Renaissance Faires, the Company is not able to rely upon trademark or service
mark protection for the name "Renaissance Faire." As a result, there is no
protection against others using the name "Renaissance Faire" for the production
of entertainment events similar to those produced by the Company. The Company's
Faires could be negatively impacted by association with substandard productions.
PUBLIC LIABILITY AND INSURANCE. As a producer of a public entertainment
event, the Company has exposure for claims of personal injury and property
damage suffered by visitors to the Faires. To date, the Company has experienced
only minimal claims, which it has been able to resolve without litigation. The
Company maintains comprehensive liability insurance which it considers to be
adequate against this risk; however, there can be no assurance that a
catastrophic event or claim which could result in damage or liability in excess
of this coverage will not occur.
DEPENDENCE UPON VENDORS. A substantial portion of the Company's
revenues generated at each Faire is derived from arrangements that the Company
has with vendors who construct elaborate booths at the Faires and sell a variety
of food, crafts and souvenirs. This arrangement consists of either a fixed
rental paid by the vendors to the Company, or a percent of revenues. In either
case, the success of a Faire is dependent upon the Company's ability to attract
responsible vendors who sell high quality goods.
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SEASONALITY. The Company's Renaissance Faires are located in
traditionally seasonal areas which attract the greatest number of visitors
during the warm weather months of spring, summer and early fall. Unless the
Company acquires or develops additional Faire sites in areas which are
counter-seasonal to the present sites located in temperate climates, the
Company's revenues and income will be highly concentrated in the six months
ending September 30th of each year.
DEPENDENCE UPON WEATHER. Each Renaissance Faire operated by the Company
is scheduled for a finite period, typically consecutive weekends during a seven
to nine-week period and are determined substantially in advance in order to
facilitate advertising and other promotional efforts. The success of each Faire
is directly dependent upon public attendance, which is directly affected by
weather conditions. Each of the Company's Faires are open rain or shine. Poor
weather, or even the forecast of poor weather can result in substantial declines
in attendance and, as a result, loss of revenues. Further, as the Renaissance
Faires are outdoor events, they are vulnerable to severe weather conditions that
can cause damage to the Faire's infrastructure and buildings, as well as
injuries to patrons and employees. Risks associated with the weather are beyond
anyone's control, but have a direct and material impact upon the relative
success or failure of a given Faire.
LICENSING AND OTHER GOVERNMENTAL REGULATION. For each Faire operated by
the Company, it is necessary for the Company to apply for and obtain permits and
other licenses from local governmental authorities controlling the conduct of
the Faire, service of alcoholic beverages, service of food, health, sanitation,
and other matters at the Faire sites. Each governmental jurisdiction has its own
regulatory requirements that can impose unforeseeable delays or impediments in
preparing for a Faire production. While the Company has been able to obtain all
necessary permits and licenses in the past, there can be no assurance that
future changes in governmental regulation or the adoption of more stringent
requirements may not have a material adverse impact upon the Company's future
operations.
FAIRE SITES. The Company currently has long-term leases, for the
Southern California and Bristol Faire sites. The terms and conditions of each
lease will vary by location, and to a large extent, are beyond the control of
the Company. Further, there can be no assurance that the Company will be able to
continue to lease existing Faire sites on terms acceptable to the Company, or be
successful in obtaining other sites on favorable locations. The Company's
dependence upon leasing Faire sites creates a substantial risk of fluctuation in
the Company's operations from year to year.
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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
Item 2. CHANGES IN SECURITIES
See Note 13 of the Notes to the Financial Statements and
Management's Discussion and Analysis of Financial Condition
and Results of Operations for information regarding issuance
of 12% subordinated notes consisting of two promissory notes
of equal principal amounts, identical in nature except that
one note is convertible to common stock. These securities were
issued without registration under the Securities Act of 1933
in reliance upon Section 4(2) of the Act. No investment
banking firms were involved in the issuance of these
securities.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company was not required to file a report on Form 8-K
during the six-months ended June 30, 2000.
Exhibit 10.20 Lease dated June 27, 2000 by and
between San Bernardino County
Community and Cultural Resources
Department and the Company.
Exhibit 10.21 Amendment dated February 15, 2000
to Lease with TKG Nut Tree, LLC.
Exhibit 10.22 Asset Purchase Agreement dated
April 6, 2000 between Willows Fare,
LLC and the Company.
Exhibit 27. Financial Data Schedule
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RENAISSANCE ENTERTAINMENT CORPORATION
Dated: August 21, 2000 /s/ Charles S. Leavell
------------------- ----------------------------------
Chief Financial Officer
/s/ Sue E. Brophy
---------------------------------------
Sue E. Brophy, Chief Accounting Officer
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