As filed with the Securities & Exchange Commission on May 8, 1997
Registration No.__________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RENAISSANCE ENTERTAINMENT CORPORATION
(Exact name of issuer as specified in its charter)
COLORADO 7900 81-1094630
(State or other Primary Standard I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code No.
organization)
4440 ARAPAHOE ROAD, SUITE 200
BOULDER, CO 80303
(303) 444-8273
(Address and telephone number of principal executive offices)
CHARLES S. LEAVELL
RENAISSANCE ENTERTAINMENT CORPORATION.
4440 ARAPAHOE ROAD, SUITE 200
BOULDER, COLORADO 80303
(303) 444-8273
(Name, address and telephone number of agent for service)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box
and list the Securities Act registration statement number of earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box./ /
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Calculation of Registration Fee
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Proposed Proposed
Title of Each Amount to be Maximum Maximum
Class of Registered (1) Offering Price Aggregate Amount of
Securities Per Share Offering Price Registration Fee
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Common Stock, 356,350 Shares $2.125 (2) $757,243.75 (2) $229.47
$.03 par value
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(1) Shares are reserved for issuance pursuant to currently issued and
outstanding Convertible Secured Notes and will be offered for resale
by certain Selling Shareholders.
(2) Estimated solely for purposes of calculating the registration fee. In
accordance with Rule 457(c) of Regulation C, the estimated price is
based on the average of the high and low reported prices on the Nasdaq
National Market on May 5, 1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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Subject to completion, dated May 8, 1997.
356,350 Shares
RENAISSANCE ENTERTAINMENT CORPORATION
Common Stock
The shares offered hereby are up to 350,000 shares of Common Stock,
$.03 par value ("Common Stock"), of Renaissance Entertainment Corporation
(the "Company") subject to issuance upon conversion of certain Convertible
Secured Notes (the "Notes") of the Company owned by certain selling security
holders and 6,350 shares of such stock owned by a selling shareholder
(the "Selling Shareholders"), which may be sold from time to time by the
Selling Shareholders for their own accounts. The 356,350 shares of Common Stock
of the Company are herein referred to as the "Shares." The Company has been
advised that the Selling Shareholders may from time to time sell the Shares
to or through brokers or dealers in one or more transactions, on the Nasdaq
National Market or otherwise, at market prices prevailing at the time of
sale, at prices relating to such prevailing market prices, or at negotiated
prices.
The Company's Common Stock is listed on the Nasdaq National Market under
the symbol FAIR. On May 5, 1997, the last reported sale price of Common Stock,
as reported on the Nasdaq National Market, was $2.125 per share.
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THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE
CONSIDERED ONLY BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION NOR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Since the Common Stock registered hereunder is being offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as
amended (the "Act"), the Company cannot include herein information about the
price to the public of the Common Stock or the proceeds to the Selling
Shareholders. The Company will receive no proceeds from any sales of Common
Stock by the Selling Shareholders, and the Company is obligated to pay the
expenses of this offering, which are estimated at $6,000. The Selling
Shareholders will pay their own expenses in connection with sales of the
Common Stock. The Selling Shareholders and any brokers or dealers executing
selling orders on their behalf may be deemed "underwriters" within the
meaning of the Act, in which event the usual and customary selling commissions
which may be paid to the brokers or dealers may be deemed to be underwriting
commissions under the Act. There can be no assurance that any or all of the
Shares registered hereunder will be sold. See "PLAN OF DISTRIBUTION."
The date of this Prospectus is __________, 1997.
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BYTHE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. POTENTIAL
INVESTORS SHOULD CAREFULLY REVIEW THE INFORMATION UNDER THE HEADING "RISK
FACTORS."
THE COMPANY
Renaissance Entertainment Corporation operates five Renaissance Faires
in the United States. In fiscal 1996, the Company operated the Bristol
Renaissance Faire, Northern California Renaissance Faire, Southern California
Renaissance Faire, New York Renaissance Faire and Virginia Renaissance Faire.
With these five Faires, the Company believes that it is the largest operator
of Renaissance Faires and Renaissance entertainment events in the United
States. The Renaissance entertainment industry consists of over 100 separate
events of varying size with a Renaissance theme and has an estimated
attendance in excess of 4,000,000 visitors annually.
The Renaissance Faire is a recreation 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.
The Company owns and operates the Bristol Renaissance Faire in Kenosha,
Wisconsin, serving the Chicago/Milwaukee metropolitan region; the Northern
California Renaissance Pleasure Faire in Novato, California serving the San
Francisco Bay area; the Southern California Renaissance Pleasure Faire in
Devore, California serving the greater Los Angeles metropolitan area; the New
York Renaissance Faire in Tuxedo, New York, serving the New York City
metropolitan area; and the Virginia Renaissance Faire in Fredericksburg,
Virginia, serving the Washington D.C. and Richmond metropolitan areas. The
Company is currently negotiating for a new permanent location for the
Southern California Renaissance Pleasure Faire, although the change in
location is not expected to take place until 1998, at the earliest. In
addition, it is possible that the Company may not be able to operate a Faire
in 1997, because the lease for the site at which the Faire has been operated
(which expires in the Spring of 1997), may not be renewed, and it is
extremely unlikely that an alternative site could be prepared in time. If the
Company were unable to operate a Faire in Northern California in 1997, it
would have a material adverse effect on the Company's results of operations
in 1997. See "Risk Factors."
In July 1995, the Company acquired approximately 250 acres of land in
Fredericksburg, Virginia in order to construct a Renaissance Faire on that
site. The Virginia Renaissance Faire opened in May 1996.
In February 1996, the Company acquired all of the issued and outstanding
stock of Creative Faires, Ltd., which owns and operates the New York
Renaissance Faire. In connection
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with this acquisition, the Company issued 540,000 (adjusted for a two-for-one
stock split effective October 21, 1996) shares of Common Stock.
The Company's strategic plan is to grow through internal growth and by
developing and acquiring additional Renaissance Faires located throughout the
United States. The Company believes that with a long-term strategy of
internal growth and acquisitions, the Company will strengthen its market
position.
The Company maintains its principal executive offices at 4440 Arapahoe
Road, Suite 200, Boulder, Colorado 80303, where its telephone number is (303)
444-8273.
RISK FACTORS
An investment in the securities offered hereby involves a high degree of
risk. See "Risk Factors."
THE OFFERING
Common Stock offered by the
Selling Shareholders............ Up to 356,350 shares of Common Stock.
See "Description of Securities."
Common Stock outstanding
before offering (1)............. 9,636,262
Common Stock outstanding
after offering (1).............. 9,986,262. Assumes that all of the
Convertible Secured Notes are
converted at a conversion rate of
$1.00 per share. See "Description of
Securities."
Use of proceeds ................ The Company will not receive any of
the proceeds from the sale of Common
Stock by the Selling Shareholders.
Nasdaq Symbols:
Common Stock .................... FAIR
Class A Warrants ................ FAIR W
Class B Warrants ................ FAIR Z
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(1) As of May 7, 1997. Does not include shares reserved for issuance
pursuant to exercise of outstanding options and warrants and the conversion
of the Notes and other convertible securities.
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SUMMARY FINANCIAL DATA
The following summary financial data was derived from the Company's
financial statements included elsewhere herein and should be read in
conjunction with such financial statements and the notes thereto. All
information is in thousands, except per share amounts.
STATEMENTS OF OPERATIONS DATA:
Nine Months Ended
Year Ended March 31, December 31,
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1994 1995 1996 1995 1996
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Revenue................ $1,973 $12,540 $12,811 $10,470 $14,554
Gross Profit........... 1,694 9,327 8,984 7,265 9,741
Net Income (Loss)...... (98) 576 (1,274) 264 (1,852)
Net Income (Loss) to
Common Stockholders.. (98) 533 (1,274) 264 (1,852)
Net Income (Loss) per
Common Share......... (.05) .11 (.16) .03 (.21)
Weighted average
number of shares
outstanding.......... 1,901 4,801 7,824 7,644 8,907
BALANCE SHEET DATA:
December 31, 1996
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Working capital (deficit) ($1,506)
Total assets 9,872
Total liabilities 4,817
Stockholders' equity 5,055
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RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the following risk factors in
evaluating the Company and its business before purchasing the Shares offered
hereby.
RECENT LOSSES. Although the Company was profitable in its fiscal year
ended March 31, 1995, it incurred a net loss of $1,273,671 in the fiscal year
ended March 31, 1996 and a net loss of $1,851,725 for the nine months ended
December 31, 1996. In addition, the Company expects to incur a net loss for
the fiscal year ending December 31, 1997. There is no assurance that the
Company will return to profitability in any subsequent period. Each of the
New York and Virginia Faires operated at a loss during 1996, and the Southern
California Faire has been less profitable than anticipated since it commenced
operation in 1994. Furthermore, it is likely that the Virginia Faire will
continue to operate at a loss in 1997. If the performance of these Faires
does not improve in subsequent periods, the Company's ability to achieve and
sustain profitability in subsequent periods will be adversely affected. In
addition, if the Company were unable to operate a Faire in Northern
California in 1997, it would have a material adverse effect on the Company's
results of operations in 1997. See "POSSIBLE SUSPENSION OF NORTHERN
CALIFORNIA FAIRE FOR 1997."
NEED FOR ADDITIONAL CAPITAL. The Company had a working capital deficit
of $1,506,284 as of December 31, 1996. Subsequent to December 31, 1997, the
Company has obtained $1,100,000 of additional capital through the placement
of short-term convertible loans and has obtained an extension for the payment
of short-term bank lines of credit. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." While the
Company believes that it has adequate working capital to fund anticipated
operations for fiscal 1997, there can be no assurance that the Company will
not need additional funds to sustain current operations prior to or after
that time. In addition, the Company will require additional funding to move
its Southern California Faire to a new location (see "RELOCATION OF SOUTHERN
CALIFORNIA FAIRE"), and to expand its business, and may require additional
funding in order to develop a new site for the Northern California Faire, if
one is required (see "POSSIBLE SUSPENSION OF NORTHERN CALIFORNIA FAIRE FOR
1997"). Additional capital may be sought through borrowings or from
additional equity financing. Future equity financing may occur through the
sale of either unregistered stock in exempt offerings or through the public
offering of registered equity securities. Such additional equity financing
may result in additional dilution to investors. In any case, there can be no
assurance that any additional capital can be satisfactorily obtained if and
when required.
POSSIBLE SUSPENSION OF NORTHERN CALIFORNIA FAIRE FOR 1997. The Company
operates its Northern California Faire during the Fall of each year at a site
in Novato, California. The Company's current lease for that site, which is
on a year-to-year basis, expires in the Spring of 1997. The Company
understands that the owner of the site is seeking to develop the site for
commercial construction purposes, although the owner's efforts to do so are
currently being blocked by pending litigation in which the use of the site
for such purpose is being challenged. The Company believes that its lease
for the site will be renewed for another year unless
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resolution of the litigation allowing the site owner to proceed with
development is imminent at the time the lease renewal is to be determined.
There is no assurance, however, that the lease will be renewed. If the lease
is not renewed, and since it is extremely unlikely that an alternative site
could be prepared in time, it is doubtful that the Company would conduct a
Faire in Northern California in 1997. This would have a material adverse
effect on the Company's results of operations in 1997. The Company is
investigating a new site for the Faire which, if acceptable and available,
will not be available until at least 1998. The Company estimates that it
will be required to spend approximately $300,000 for an environmental impact
study and other site consideration expenses before necessary governmental
approvals can be obtained. There is no assurance that, if the Company incurs
these and other site consideration expenses, it will be successful in
obtaining all necessary approvals for the site to be available for the Faire
in 1998 or any subsequent period. In addition, the Company estimates that it
will be required to spend from $500,000 to $1,000,000 for development of the
site prior to the opening of the Faire at the new site.
RELOCATION OF SOUTHERN CALIFORNIA FAIRE. Since April 1994, the Company
has operated its Southern California Faire in Devore, California. Although
the Company has operated that Faire during the past two years at a small
profit, management believes that it will have to relocate the Faire in order
to improve its profitability in the future. The Company has entered into a
non-binding letter of intent with the owner of a site in Pomano, California
which contemplates that the Company will commence operation of the Southern
California Faire at that site starting in 1998. The letter of intent calls
for the Company to construct a new village for the Faire. The Company
estimates that the cost of such construction would be approximately
$2,000,000. The Company will need additional funds from one or more third
parties to finance such construction. If such funds are not available, the
Company would, in all likelihood, continue to operate the Faire at its
current location in 1998 and possibly beyond.
DEPENDENCE UPON MANAGEMENT. The Company's future success depends in a
large part on the continued service of its key marketing, sales, promotional
and management personnel and on its ability to continue to attract, motivate
and retain highly qualified employees. The loss of the services of key
personnel could have a material adverse effect upon the Company's operations
and development efforts. While the Company has written employment contracts
with several of its key executive officers, there can be no assurance of
their continued service to the Company. The Company does not have key person
life insurance covering its management personnel or other key employees.
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.
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LACK OF TRADEMARK PROTECTION. Because of the large number of existing
Renaissance Faires, it is unlikely that the Company will be 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 own 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 only
experienced 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 are 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.
SEASONALITY. The Company's Renaissance Faires are located in
traditionally seasonal areas which attract the greatest number of visitors
during the warm weather months in the 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
ended 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 six
to nine week period, which 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. 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, food, health and
sanitation and other matters at the Faire sites. Each governmental
jurisdiction has its own regulatory requirements which can impose
unforeseeable delays or impediments in preparing for a Faire production.
While the Company has been able to obtain all
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necessary permit 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. While the Company owns the sites at which the Bristol
Renaissance Faire and the Virginia Faire are operated, the Company's Northern
and Southern California Faire sites have been held pursuant to short-term
leases. The New York Faire is also operated on a leased site. It is expected
that future Faires that may be developed by the Company, if any, will also be
presented on leased sites. The terms and conditions of each lease will vary
from 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. See "POSSIBLE SUSPENSION OF
NORTHERN CALIFORNIA FAIRE FOR 1997."
SHARES ELIGIBLE FOR FUTURE SALE UNDER RULE 144. The Company estimates
that in excess of 3,000,000 shares of the Company's Common Stock currently
outstanding are "restricted securities" which, under certain circumstances,
can be sold publicly in compliance with Rule 144 adopted under the Securities
Act. The possibility that substantial amounts of Common Stock may be sold in
the public market under Rule 144 may adversely effect the prevailing market
price for the Common Stock.
MARKET OVERHANG FROM WARRANTS AND OUTSTANDING OPTIONS. As of March 31,
1997, the Company had outstanding options and warrants to purchase a total of
4,391,654 shares, including Class A and Class B warrants to purchase an
aggregate of 3,761,558 shares issued in a public offering in 1995 ("Public
Warrants"). To the extent that such stock options or warrants are exercised,
dilution to the interests of the Company's shareholders may occur. Exercise
of these options or warrants or even the potential of their exercise may have
an adverse effect on the trading price and market for the Company's Common
Stock. The holders of the options or warrants are likely to exercise them at
times when the market price of the shares of Common Stock exceeds the
exercise price of the options or warrants. Accordingly, the issuance of
shares of Common Stock upon exercise of the options or warrants may result in
dilution of the equity represented by the then outstanding shares of Common
Stock. Furthermore, holders of the options or warrants can be expected to
exercise them at a time when the Company would, in all likelihood, be able to
obtain any needed capital on terms which are more favorable to the Company
than the exercise terms provided by such options or warrants.
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF PUBLIC WARRANTS. The Public
Warrants may be redeemed by the Company after January 27, 1997, at a price of
$0.01 per Warrant, upon 30 days' notice, mailed within three days after the
closing bid price of the Common Stock has equaled or exceeded 150% of the
then current respective warrant exercise prices (currently $3.00 per share
with respect to the Class A Warrants, and $3.9375 per share with respect to
the Class B Warrants), for a period of 20 or more consecutive trading days.
Warrantholders shall have exercise rights until the close of the business day
preceding the date fixed for redemption.
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Redemption of the Public Warrants could have an adverse effect on the
prevailing market price of the Common Stock.
PROPOSED NEW LISTING STANDARDS FOR NASDAQ NATIONAL MARKET SECURITIES.
The Nasdaq Stock Market recently proposed certain changes to the standards
for issuers with securities listed on Nasdaq. One of the proposed changes
includes increasing the maintenance requirements for continued listing in the
Nasdaq National Market, on which the Company's Common Stock is currently
listed, including the requirement that issuers maintain net tangible assets
of at least $4,000,000. If changes are made to the listing standards and the
Company is unable to comply with such new standards, it is possible that the
Common Stock will be delisted from the Nasdaq National Market. If the Common
Stock is delisted from the National Market, it may qualify for listing on the
Nasdaq SmallCap Market. Nevertheless, delisting from the National Market may
have an adverse effect on the prevailing market price of the Common Stock.
SEC INVESTIGATION OF DUKE & CO., INC. The underwriter of the Company's
1995 public offering, Duke & Co., Inc. ("Duke"), is aware that the Securities
and Exchange Commission is investigating certain of Duke's trading practices
and mark-ups in connection with trading in securities of the Company
following the public offering. Duke is the principal market maker on the
Nasdaq National Market for the Company's Common Stock and Public Warrants.
There can be no assurance that the investigation will not adversely and
materially affect subsequent trading in the Company's securities. Gregg
Thaler, a director of the Company, is President of Duke.
AUTHORIZATION OF PREFERRED STOCK. The Company's Articles of
Incorporation, as amended, authorize the issuance of up to 1,000,000 shares
of preferred stock. The Board of Directors has been granted the authority to
fix and determine the relative rights and preferences of preferred shares, as
well as the authority to issue such shares, without further stockholder
approval. As a result, the Board of Directors could authorize the issuance
of a series of preferred stock which would grant to holders preferred rights
to the assets of the Company upon liquidation, the right to receive dividend
coupons before dividends would be declared to common stockholders, and the
right to the redemption of such shares, together with a premium, prior to the
redemption of Common Stock. Common stockholders have no redemption rights.
In addition, the Board could issue large blocks of voting stock to fend
against unwanted tender offers or hostile takeovers without further
shareholder approval.
AUTHORIZATION OF ADDITIONAL SHARES. The Company's Articles of
Incorporation, as amended, authorize the issuance of up to 50,000,000 shares
of Common Stock, of which 9,636,262 shares were outstanding on May 7, 1997.
The Company's Board of Directors has the authority to issue additional shares
of Common Stock and to issue options and warrants to purchase shares of the
Company's Common Stock without shareholder approval. In addition, the Board
could issue large blocks of voting stock to fend off unwanted tender offers
or hostile takeovers without further shareholder approval. In addition, the
Company had outstanding at March 31, 1997 options and warrants to purchase
4,391,654 shares of common stock. Exercise of these options and warrants may
have a further dilutive effect on existing shareholders and warrant holders.
See "MARKET OVERHANG FROM WARRANTS AND OUTSTANDING OPTIONS."
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MARKET FOR THE COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
On September 1, 1995, the Company's Common Stock began trading on the
NASDAQ National Market. From January 27, 1995 to August 31, 1995, it traded
on the NASDAQ Small-Cap Market and on the Boston Stock Exchange, and prior to
that time, the stock was traded over-the-counter on the OTC Electronic
Bulletin Board. Since December 9, 1996, the Company's Common Stock has also
been traded on the Philadelphia Stock Exchange. The following table reflects
the high and low prices of the Company's Common Stock for each quarterly
period of the two most recent calendar years and the subsequent interim
quarter retroactively adjusted for a 2-for-1 stock split in October 1996.
From the fourth quarter of 1995 forward, the prices reflect the high and low
sales prices. For the first, second and third quarters of 1995, the prices
reflect the high and low bid prices as quoted by the National Quotation
Bureau, Inc. The quotations represent prices between broker-dealers and do
not include retail mark-ups and mark-downs or any commission to the
broker-dealer and may not reflect prices in actual transactions.
Calendar Years Ended December 31 High Low
- -------------------------------- ------ ------
1995
First Quarter ended March 31 $4.50 $3.38
Second Quarter ended June 30 4.88 3.63
Third Quarter ended September 30 4.69 3.88
Fourth Quarter ended December 31 6.44 4.00
1996
First Quarter ended March 31 7.19 5.19
Second Quarter ended June 30 6.81 5.63
Third Quarter ended September 30 7.00 5.25
Fourth Quarter ended December 31 7.50 5.00
1997
First Quarter ended March 31 6.88 5.06
As of March 31, 1997, there were approximately 1,529 shareholders of
record.
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USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of Common
Stock by the Selling Shareholders.
CAPITALIZATION
The following table sets forth the current liabilities and
capitalization of the Company as of December 31, 1996.
December 31, 1996
-------------------
Current liabilities $2,437,735
Long-term liabilities $2,379,162
----------
Total liabilities $4,816,897
Stockholders' equity:
Preferred Stock, $1.00 parvalue,
1,000,000 shares authorized, none
issued and outstanding (1) --
Common Stock, $.03 par value,
50,000,000 shares authorized,
9,233,772 issued and outstanding (1) $8,348,647
Accumulated (deficit) ($3,293,195)
------------
Total stockholders' equity $5,055,452
Total liabilities and stockholders'
equity $9,872,349
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(1) Does not include shares issuable upon exercise of outstanding options or
warrants.
DIVIDEND POLICY
The Company has never paid any cash dividends on its common stock and
does anticipate that it will pay cash dividends in the foreseeable future.
Instead, the Company intends to apply any earnings to the development and
expansion of its business.
SELECTED FINANCIAL DATA
The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and related notes included elsewhere
in this Prospectus.
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NINE-MONTHS
YEARS ENDED MARCH 31, ENDED DECEMBER 31,
---------------------- -------------------
1994 1995 1996 1995 1996
---- ---- ---- ---- ----
INCOME STATEMENT DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Revenue $1,973 $12,540 $12,811 $10,470 $14,554
Gross Profit 1,694 9,327 8,984 7,265 9,741
Net Operating Income (Loss) (39) 757 (1,475) 111 (1,753)
Net Income (Loss) before taxes (98) 576 (1,274) 309 (1,852)
Net Income (Loss) to Common Shareholders (98) 533 (1,274) 264 (1,852)
Net Income (Loss) Per Common Share (.05) .11 (.16) .03 (.21)
Weighted Average Common Shares Outstanding 1,901 4,801 7,824 7,644 8,907
MARCH 31, DECEMBER 31,
---------------------- --------------------
BALANCE SHEET DATA 1994 1995 1996 1995 1996
(IN THOUSANDS) ---- ---- ---- ---- ----
Working capital (deficiency) $(524) $3,123 $ 15 $ 768 $(1,506)
Total current assets 167 4,012 2,120 1,308 931
Total assets 1,257 6,853 10,433 8,226 9,872
Total current liabilities 691 889 2,105 539 2,438
Long-term debt (less current maturities) 434 451 2,531 846 2,379
Stockholders' equity 132 5,513 5,797 6,841 5,055
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements, including the footnotes.
PROSPECTIVE INFORMATION
This Prospectus contains certain forward-looking statements and information
relating to the Company that are based on the beliefs and assumptions made by
the Company's management as well as information currently available to
management. When used in this document, the words "anticipate," "believe,"
"estimate," "expect," and similar expressions, are intended to identify
forward-looking statements. Such statements reflect the current views of the
Company with respect to future events and are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as
anticipated, believed, estimated or expected. The Company does not intend to
update these forward-looking statements.
-12-
RESULTS OF OPERATIONS - NINE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO NINE
MONTHS ENDED DECEMBER 31, 1995
On June 21, 1996, the Board of Directors of the Company approved a change in
the Company's fiscal year from April 1 to March 31 to January 1 to December
31. As a result, the fiscal period ended December 31, 1996 is for a
nine-month period, rather than for a full twelve months. In order to make
the comparison of the fiscal period ended December 31, 1996 with the prior
fiscal year more meaningful, the following discussion compares the results of
operations for the fiscal period ended December 31, 1996 to the results of
operations for the nine months ended December 31, 1995, rather than to the
full fiscal year ended March 31, 1996. See "Selected Financial Data," for
information regarding the results of operations for the nine months ended
December 31, 1995, as well as information for the audited fiscal periods
ended March 31, 1995 and 1996 and December 31, 1996.
The results of operations of the Company for the nine-month period ended
December 31, 1996 reflect the nineteen-day run of the Southern California
Faire, the eighteen-day run of the Wisconsin Faire, the fifteen-day run of
the Northern California Faire, the seventeen-day run of the New York Faire
and the fifteen-day run of the Virginia Faire. The comparable period of 1995
included the same number of days for the Southern California, Wisconsin, and
Northern California Faires, but did not include the New York or Virginia
Faires. The New York Faire was acquired on February 5, 1996, and although
accounted for as a pooling of interest and therefore included in the fiscal
year ended March 31, 1996, the entire twelve month results of operations for
the calendar year ended December 31, 1995 were reflected in the operating
results for the January 1, 1996 through March 31, 1996 quarter and not in the
nine month period ended December 31, 1995. The Virginia Renaissance Faire,
which was under construction as of December 31, 1995, did not generate any
revenues during the nine-month period ended December 31, 1995. Thus, these
financial statements include the results of five operating faires for the
period in 1996, but only three faires for the same period in 1995.
Revenue increased from $10,469,824 for the nine-month period ended December
31, 1995 to $14,553,577 for the nine-month period ended December 31, 1996, an
increase of $4,083,753 or 39%. The increase in revenues resulted from the
additional operations of the Virginia and New York Faires for the period
ended December 31, 1996, as compared to the same period of 1995. The
increased revenues from the new faires were partially offset by a decrease in
revenues for the Southern California Faire as compared to the same period of
1995. Unusually inclement weather in Virginia, New York and Southern
California reduced the expected revenues from faire operations. The Virginia
Faire, as is typical of new faires, operated at a loss in 1996, its first
year of operation, and is expected to incur a small operating loss in the
1997 faire season. During the 1996 season the Bristol Renaissance Faire
revenues increased 20%. This was the eighth consecutive year that attendance
increased at this faire.
Faire operating expenses (expenses directly related to faire operations, such
as rent, grounds maintenance, contract services, contract entertainment,
food, beverage and merchandise costs) increased $1,607,464 or 50%, from
$3,205,152 in the 1995 period to $4,812,616 in the 1996 period. This
increase in expenses resulted from the additional operation of the Virginia
and New
-13-
York Faires for the period ended December 31, 1996, as compared to the same
period in 1995, plus higher overall costs related to faire operations. The
gross profit, representing operating income from faire operations before
overhead expenses, increased 34% from $7,264,672 in 1995 to $9,740,961 in
1996. This increase is attributable to the increased revenues from the
Virginia and New York Faires, partially offset by the higher overall costs
related to all faire operations.
Operating expenses (year-round operating costs and corporate overhead)
increased $4,340,783 or 61%, from $7,153,674 in 1995 to $11,494,457 in 1996.
Of these amounts, salaries increased 34% from $3,030,208 in 1995 to
$4,048,603 in 1996, representing the expansion of staffing levels resulting
from the two additional faires. Depreciation and amortization expense
increased 88% from $337,208 in 1995 to $633,819 in 1996. This increase is
primarily the result of depreciation on the substantial investment in
buildings and improvements to the Virginia property, as well as the New York
Faire, both of which were not included in the same period of 1995.
Advertising expenditures increased 142% from $1,036,508 in 1995 to $2,511,973
in 1996, again reflecting the necessary advertising for the two additional
faires as well as moderate increases in advertising and rates for the other
three faires. Additionally, a change in accounting procedures resulted in
certain expenses being charged to advertising this period which were not
charged to advertising expense in the same period of 1995.
The Company wrote down goodwill applicable to the Southern California Faire
by $380,000 in 1996, based on this faire's disappointing performance over the
past two operating seasons. The Company recognized as expense in the
nine-month period ended December 31, 1996, $450,000 of costs to be incurred
in 1997, which costs are the result of changing conditions at the Company's
Northern California Faire, which became apparent to the Company in 1996.
Other operating expenses (all other general and administrative expenses of
the Company) increased $720,808 or 26%, from $2,749,254 in 1995 to $3,470,062
in 1996. This increase is primarily the result of operating expenses
resulting from the two additional faires, and also greater overhead costs at
each faire site plus other corporate activities which support faire
operations and pursue new ventures. As a result of the foregoing, net
operating income (before interest charges and other income) decreased
$1,864,495, from $110,999 in 1995 to a loss of $1,753,496 in 1996.
A 27% decrease in interest income from $94,090 in 1995 to $68,571 in 1996
resulted from the substantially decreased cash position of the Company
throughout the 1996 period as compared to the same period of 1995. A 153%
increase in interest expense from $100,266 in 1995 to $253,740 in 1996
resulted from a large increase in the Company's borrowing levels throughout
the 1996 period as compared to 1995. Combined net interest expense (interest
expense less interest income) reflected an increase of $178,993 for the
period, from $6,176 in 1995 to $185,169 in 1996. Miscellaneous expenses
decreased from $224,612 in 1995 to $86,940 in 1996. Combining net operating
income with other income resulted in a $2,161,159 decrease in net income
before taxes, from income of $309,434 in the 1995 period to a loss of
$1,851,725 in the 1996 period.
Although the Company incurred a net loss for the entire fiscal year ended
March 31, 1996, for the nine-month period ended December 31, 1995, a
provision for income tax in the amount of $45,470
-14-
was recorded. As a result of the Company's loss for the nine-month period
ended December 31, 1996, no income tax expense was recorded.
Net income to common stockholders decreased $2,115,689, from $263,964 net
income for the 1995 period to a loss of $1,851,725 for the 1996 period.
Finally, net income per common share decreased from $0.03 during the 1995
period to a loss of $.21 for the 1996 period, based on 7,643,702 weighted
average shares outstanding during the 1995 period and 8,907,049 weighted
average shares outstanding during the 1996 period.
RESULTS OF OPERATIONS - FISCAL 1996 COMPARED TO FISCAL 1995
Comparisons of the fiscal year ended March 31, 1996 with the fiscal year
ended March 31, 1995 include Creative Faires, Ltd. (owner of the New York
Renaissance Faire) acquired February 5, 1996. The acquisition has been
accounted for as a pooling of interests, which means that the financial
results of Creative Faires, Ltd. have been retroactively merged into those of
the Company. Accordingly, the Company's results of operations for fiscal
1995 and fiscal 1996 include the results of Creative Faires. Because the
Company's fiscal year previously ended on March 31 and Creative Faires'
fiscal year ended on December 31, the income statements of Creative Faires
for the fiscal years ended December 31, 1994 and December 31, 1995 have been
consolidated into the Company's income statements for the fiscal years ended
March 31, 1995 and March 31, 1996, respectively. Results of operations for
Creative Faires, Ltd. includes three crafts shows and a Halloween Forest of
Fear in addition to the New York Renaissance Faire, although the Faire
represents most of its revenue.
The results of operations of the Company for the fiscal year ended March 31,
1996 reflect the nineteen-day run of the Los Angeles Faire, the eighteen-day
run of the Wisconsin Faire, the fifteen-day run of the San Francisco Faire,
and the seventeen-day run of the New York Faire. The comparable period of
fiscal 1995 included the same number of days for Los Angeles, Wisconsin and
New York Faires, but included an additional three days for the San Francisco
Faire. The Virginia Renaissance Faire, under construction as of March 31,
1996, did not generate any revenues during fiscal 1996. Thus, these financial
statements include the results of four operating faires and one faire under
construction during fiscal 1996, as against four operating faires during
fiscal 1995. As a further note, as a result of the acquisition of the Los
Angeles Faire on April 1, 1994, the comparable figures for the 1995 fiscal
year do not reflect advance ticket sales and certain prepaid expenses of the
Los Angeles Faire which were recognized by the prior owner.
Revenue increased modestly from $12,539,653 for the fiscal year ended March
31, 1995 to $12,810,617 for the fiscal year ended March 31, 1996, an increase
of $270,964 or 2%. During fiscal 1995 beverage operations for the Los
Angeles and San Francisco Faires were handled by an outside contractor, and
accordingly only the fee earned from that contractor was reported as revenue,
whereas in fiscal 1996 the Company ran the beverage operation itself and
recorded all revenue.
Faire operating expenses (expenses directly related to faire operations, such
as rent, grounds maintenance, contract services, contract entertainment,
food, beverage and merchandise costs)
-15-
increased $614,377 or 19%, from $3,212,491 in fiscal 1995 to $3,826,868 in
fiscal 1996. This increase is partially due to the inclusion of beverage
costs for the Los Angeles and San Francisco Faires, which were not reported
during the previous period when handled by an outside contractor, plus higher
overall costs related to faire operations. The gross profit, representing
operating income from faire operations before overhead expenses, decreased 4%
from $9,327,162 in fiscal 1995 to $8,983,749 in fiscal 1996. This decrease
is attributable to the shorter run of the San Francisco Faire in fiscal 1996
and growing operating costs which were not offset by increased attendance.
Operating expenses (year-round operating costs and corporate overhead)
increased $1,888,568 or 22%, from $8,570,320 for fiscal 1995 to $10,458,888
for fiscal 1996. Of these amounts, salaries increased 17% from $3,474,799 in
fiscal 1995 to $4,082,271 in fiscal 1996, representing a modest expansion of
staffing levels Company wide. Depreciation and amortization expense
increased 42% from $351,215 in fiscal 1995 to $500,203 in fiscal 1996. This
increase is largely the result of the Company's increased investment in
property and equipment for the expanded Wisconsin Faire, as well as
investment in furniture and equipment for the corporate office, which moved
to new quarters in April 1995. Substantial investment in buildings and
improvements to the Virginia property were not subject to depreciation in
fiscal 1996, because at March 31, 1996 the Virginia Faire had not yet opened.
Under accounting rules those assets (categorized on the balance sheet as
construction-in-progress) were not yet depreciable. Advertising expenditures
increased 28% from $1,211,798 in fiscal 1995 to $1,546,701 in fiscal 1996.
Other operating expenses (all other general and administrative expenses of
the Company) increased $797,205 or 23%, from $3,532,508 for fiscal 1995 to
$4,329,713 for fiscal 1996. This increase is the result of greater overhead
costs at each faire site plus other corporate activities which support faire
operations and pursue new ventures. For example, during the 1996 fiscal
year, approximately $225,000 was spent developing new products and
distribution opportunities. Second, approximately $90,000 in product design
costs, which had been capitalized during the 1995 fiscal year, had to be
expensed when changing circumstances required a different accounting
treatment of that transaction. Third, approximately $160,000 in expenses
were incurred searching for and negotiating for the rights to new sites for
the Los Angeles and San Francisco Faires. Management believes that those
Faires have the potential to be more profitable once they are located on
long-term sites with permanent structures, since the substantial costs of
re-establishing the faires each season will be eliminated and also, the
opportunity for revenue enhancement will improve in conjunction with
additional improvements to the property. Fourth, the Company expensed
approximately $300,000 in overhead costs during construction of the new site
in Virginia, including such costs as salaries, office rent and overhead costs
related to overseeing construction. As a result of the foregoing, net
operating income (before interest charges and other income) decreased
$2,231,981, from $756,842 for fiscal 1995 to a loss of $1,475,139 for fiscal
1996.
A 128% increase in interest income from $48,132 in fiscal 1995 to $109,652 in
fiscal 1996 resulted from the investment of cash proceeds from the January
1995 stock offering. Offsetting this was a 159% increase in interest expense
from $53,223 in fiscal 1995 to $138,036 in fiscal 1996. The increase was due
to a new $1,500,000 mortgage and $250,000 note on the Virginia property, plus
a larger mortgage on the Wisconsin property. Combining interest income with
interest expense resulted in an increase in net interest expense from $5,091
in fiscal 1995 to $28,384 in fiscal 1996.
-16-
Miscellaneous expenses (primarily loss on sale of assets) of $28,327 in
fiscal 1995 changed to $36,049 in miscellaneous income (rental income and
vendor refunds) in fiscal 1996. Combining net operating income with other
income resulted in a $2,190,898 decrease in net income before taxes, from
income of $723,424 for fiscal 1995 to a loss of $1,467,474 in fiscal 1996.
Since the Company incurred a net loss for the 1996 fiscal year, it applied
that loss against taxable income during the previous fiscal year, resulting
in a credit of $193,803 in taxes previously booked. The excess in operating
losses above what has been applied against the previous year (approximately
$1,400,000) was carried forward to reduce taxable income in future periods.
During the 1995 fiscal year, a year of net income, income tax expense of
$147,000 was incurred.
Net income to common stockholders decreased $1,806,980, from $533,309 in
fiscal 1995 to a loss of $1,273,671 for fiscal 1996. Net income to common
stockholders for fiscal 1995 is net of $43,115 paid in dividends on preferred
stock. The Company's preferred stock was fully redeemed on January 27, 1995
in conjunction with the public offering, and there has been no preferred
stock outstanding since that date. Finally, net income per common share
decreased from $0.11 during fiscal 1995 to a loss of $0.16 during fiscal
1996, based on 4,801,044 weighted average shares outstanding during fiscal
1995 and 7,824,182 weighted average shares outstanding during fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
The most significant events of the past year were the purchase of Creative
Faires, Ltd. (owner of the New York Renaissance Faire), the completion of
construction of the Virginia Renaissance Faire and the first year of
operations of those two faires under the Company's ownership and management.
As a result of significant cost overruns in the construction of the Virginia
Faire due to extremely inclement weather during the construction period,
overall disappointing results from faire operations in 1996 and certain
corporate overhead expenses, the Company's working capital decreased from
$768,213 at December 31, 1995 to a working capital deficit of ($1,406,284) at
December 31, 1996. In order to reduce the Company's working capital
requirements, management has implemented a number of cost reductions which it
estimates will reduce operating expenses by approximately $1,300,000 during
the fiscal year ending December 31, 1997.
The Company's working capital requirements are greatest during the period
from January 1 to April 30, when it is incurring start-up expenses for its
first faires of the faire season, the Southern California and Virginia
faires. The Company has historically relied upon various revolving credit
facilities to meet its working capital requirements during this period. At
December 31, 1996, the Company had outstanding $1,000,000 in short-term line
of credit borrowings which was the maximum amount available under the lines
and did not, therefore, have any unused credit available for the 1997 faire
season. Subsequent to year end, the Company has entered into a loan workout
agreement with respect to the lines of credit which will permit the Company
to pay these lines from 1997 operations. Since December 31, 1996, the
Company has also raised $750,000 of working capital through issuance of
convertible debt to an officer of the Company
-17-
and a related party and obtained an additional $350,000 of working capital
from the sale of convertible notes to a number of private investors. The
notes are secured by a mortgage on the Company's Kenosha, Wisconsin faire
site and are convertible into shares of Common Stock of the Company at the
lesser of $1.75 per share or 50% of the market value for the Company's Common
Stock at the time the notes are converted. Management believes that the
Company needs to raise an additional $250,000 to fund the opening of the 1997
faire season. In addition, management believes that the Company should raise
additional working capital in order to more adequately fund its operations.
The Company is pursuing various funding alternatives. However, there can be
no assurance that such funds will be available to the Company or, if
available, available on terms acceptable to the Company.
Although inflation can potentially have an effect on financial results,
during 1996 it caused no material affect on the Company's operations, since
the change in prices charged by the Company and by Company's vendors has not
been significant.
Reviewing the change in financial position over the previous year, current
assets, largely comprised of cash and prepaid expenses, decreased from
$1,307,541 at December 31, 1995 to $931,451 at December 31, 1996, a decrease
of $376,090 or 42%. Of those amounts, cash and cash equivalents decreased
from $745,021 at December 31, 1995 to $374,289 at December 31, 1996, due to
cash outflow from operations during the year, plus the use of cash for
construction of the Virginia Faire. Accounts receivable decreased from
$228,967 at December 31, 1995 to $133,749 at December 31, 1996. Inventory,
comprised of merchandise sold at the faires and various food and beverage
supplies, increased from $96,034 at December 31, 1995 to $184,695 at December
31, 1996, largely reflecting merchandise remaining from the previous season
and the purchase of new products for upcoming faires. Prepaid expenses
decreased from $237,519 at December 31, 1995 to $139,167 at December 31,
1996. These costs represent expenses incurred on behalf of the Southern
California and Virginia Faires, which are expensed once those faires are
operating.
Current liabilities increased from $539,328 at December 31, 1995 to
$2,437,735 at December 31, 1996, an increase of $1,898,407 or 352%. This
increase is largely due to construction spending on the Virginia Faire and
operation of the two additional faires. Accounts payable and accrued
expenses increased from $279,244 at December 31, 1995 to $1,068,028 at
December 31, 1996, an increase of $788,784 or 282%. The current portion of
notes payable increased from $140,064 at December 31, 1995 to $1,209,119 at
December 31, 1996. Of the $1,069,055 increase, $1,000,000 was due to
short-term borrowings on two lines of credit in 1996. Unearned income, which
consists of the sale of admission tickets to upcoming faires and deposits
received from craft vendors for future faires, increased from $120,020 at
December 31, 1995 to $160,588 at December 31, 1996.
Total assets increased from $8,226,264 at December 31, 1995 to $9,872,349 at
December 31, 1996, an increase of $1,646,085 or 20%. Of those amounts,
property and equipment (net of depreciation) increased 49% from $4,819,198 at
December 31, 1995 to $7,176,755 at December 31, 1996. Most of this increase
was the result of the purchase of the New York Faire and the completion of
the construction of the Virginia Faire. Goodwill, which arose from the
purchase of the two California Faires and is being amortized over 15 years,
decreased from $1,066,405 at December 31, 1995 to $620,826 at December 31,
1996. This was primarily due to the Company writing down this
-18-
account by an additional $380,000 as the result of two consecutive years of
disappointing performance for the Southern California Faire. Other
miscellaneous assets (organizational costs and vendor deposits) increased
from $186,702 at December 31, 1995 to $253,201 at December 31, 1996.
Total liabilities increased from $1,385,208 at December 31, 1995 to
$4,816,897 at December 31, 1996, an increase of $3,431,689 or 248%. This
increase is primarily due to costs incurred in connection with the purchase
and construction of the Virginia Faire site and increased borrowings required
to fund the Company's losses. Total liabilities at December 31, 1996 include
$2,437,735 in current liabilities (discussed above), plus $2,341,987 from the
long-term portion of the following bank loans: an $800,000 mortgage on the
Bristol Faire property, a $1,500,000 mortgage on the Virginia Faire property,
and a $250,000 loan for construction of vendor booths in Virginia.
Stockholders' Equity decreased from $6,841,056 at December 31, 1995 to
$5,055,452 at December 31, 1996, a decrease of $1,785,604 or 26%. This
decrease resulted from the net loss of $1,851,725, partially offset by
additional contributed capital received as the result of the exercise of
125,328 Class A Warrants at $2.00 per share; the exercise of 34,000 Class
B Warrants at $2.625 per share; the exercise of 324,998 employee stock
options at prices ranging from $1.125 to $3.50 per share; the repurchase of
20,626 shares by the Company at $4.00 per share. As of December 31, 1996,
the Company had outstanding 9,233,772 shares of common stock, 1,813,856 Class
A Warrants representing the right to purchase common stock at $2.00 per
share, and 2,049,966 Class B Warrants representing the right to purchase
common stock at $2.625 per share. The book value of a share of common stock
(stockholders' equity divided by number of shares outstanding) as of that
date was $0.55.
The Company has no significant commitment for capital expenses during the
fiscal year ending December 31, 1997. See "Business - Northern California
Renaissance Pleasure Faire and Southern California Renaissance Pleasure
Faire" for a discussion of the Company's efforts to find new sites for its
Northern and Southern California faires.
-19-
BUSINESS
OVERVIEW
Renaissance Entertainment Corporation ("the Company") operates five
Renaissance Faires in the United States, and is engaged in a strategy to
develop and acquire additional Renaissance Faires nationwide. The newest
Faire opened on May 4, 1996 in Fredericksburg, Virginia, a project which was
designed and constructed by the Company. On February 5, 1996, the Company
acquired Creative Faires, Ltd., the owner and operator of the New York
Renaissance Faire. With its five Faires currently drawing close to 750,000
visitors annually, the Company believes that it is the largest operator of
Renaissance Faires and Renaissance entertainment events in the United States.
The Renaissance entertainment industry consists of over 100 separate events
of varying size with a Renaissance theme and has an estimated attendance in
excess of 4,000,000 visitors annually.
The Renaissance Faire is a recreation 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.
STRATEGIC PLAN
The Company's long-term strategic plan is to grow internally as well as
through the acquisition of additional Renaissance Faires located throughout
the United States. At this time, the Company has no agreements or
commitments to acquire additional Renaissance Faires or faire sites.
The Company estimates that there are currently 20 major Renaissance Faires
produced in various locations throughout the country each year which are
owned by approximately 13 different owner/entities. These Faires are
predominantly in major metropolitan areas and in many cases have a history of
decades of profitable operation. Because of the fragmented nature of the
industry, the Company believes that it has an opportunity to acquire existing
major Faire productions as well as develop productions in areas which are not
currently serviced.
EXISTING RENAISSANCE FAIRES AND SITES
The Company presently owns and produces five Renaissance Faires: the Bristol
Renaissance Faire in Kenosha, Wisconsin, serving the Chicago/Milwaukee
metropolitan region; the Northern California Renaissance Pleasure Faire in
Novato, California, serving the San Francisco Bay area; the Southern
California Renaissance Pleasure Faire in Devore, California serving the
greater Los Angeles metropolitan area; the New York Renaissance Faire serving
the New York City metropolitan area; and the Virginia Renaissance Faire in
Fredericksburg, Virginia, serving the Washington, D.C. and Richmond
metropolitan areas.
BRISTOL RENAISSANCE FAIRE. The Bristol Renaissance Faire is conducted at the
Kenosha, Wisconsin site owned by the Company. It has been in existence for
10 years. The Bristol Renaissance Faire is presented annually for nine
weekends beginning the last weekend in June and ending the third
-20-
weekend in August. The Bristol Renaissance Faire attracts approximately
190,000 patrons each year.
The Bristol Renaissance Faire was originally located on 80 acres. In May
1995, the Company purchased an adjacent 80 acres of real estate which in the
past it had used under lease, for a purchase price of $850,000. During the
first quarter of fiscal 1996, the Company refinanced both 80 acre parcels
with one loan. The new loan, in the original principal amount of $l million,
bears interest at the rate of 9 1/2% per annum, and calls for annual
principal reduction payments of $100,000 each September through 1997, and,
assuming the Company is current in its obligations to the bank, principal
reduction payments of $50,000 per quarter beginning in March 1998, with the
remaining principal balance of $550,000, together with interest due in
December 1998. The loan balance at December 31, 1996 was $800,000.
As the site of the Bristol Renaissance Faire is owned, the structures and
improvements which have been constructed on the site, including the vendor
booths, are permanent. Craft shops and vendor booths are built by the
individual craft vendors at their cost. In many cases, vendors invest
substantial sums of money in the construction of these shops, which represent
permanent improvements and value added to the Company's real estate.
While the Company believes that the property is amenable to some
income-producing off-season activity, historically, the Company has only
utilized the site for the Renaissance Faire, and the property has been vacant
during the off-season. The Company is considering year-round uses which
could include campgrounds, a micro-brewery, an Octoberfest and music
festivals. To date, however, there exist no agreements, arrangements or
other understandings with respect to alternate year-round uses, and there can
he no assurance that the Company will be successful in developing any
income-producing, off-season activities.
NORTHERN CALIFORNIA RENAISSANCE PLEASURE FAIRE. The Northern Renaissance
Pleasure Faire has been held in the San Francisco Bay area for the past 30
years. This Faire is conducted annually for six to seven weekends, typically
beginning Labor Day weekend and running through the first or second weekend
of October. The Faire typically attracts 200,000 patrons.
The Northern California Faire is located on leased property in Novato,
California. The lease is currently on a year-by-year basis, and the Company
is in the final stages of negotiations of the lease to cover the 1997 Faire.
The rent was $350,000 in 1996 and is expected to be approximately $300,000
for the 1997 Faire. While the Company believes that its lease for the site
will be renewed for another year, there is no assurance that the lease will
be renewed. If the lease is not renewed, and since it is extremely unlikely
that an alternative site could be prepared in time, it is doubtful that the
Company would conduct a Faire in Northern California in 1997. This would
have a material adverse effect on the Company's results of operations in
1997. The Company is investigating a new site for the Faire which, if
acceptable and available, will not be available until at least 1998. The
Company estimates that it will be required to spend approximately $300,000
for an environmental impact study and other site consideration expenses
before necessary governmental approvals can be obtained. There is no
assurance that, if the Company incurs these and other site consideration
expenses, it will be successful in obtaining all necessary
-21-
approvals for the site to be available for the Faire in 1998 or any
subsequent period. In addition, the Company estimates that it will be
required to spend from $500,000 to $1,000,000 for development of the site
prior to the opening of the Faire at the new site.
In contrast to the permanent structures constructed at the Bristol
Renaissance Faire, all structures, including the gates, stages, booths, shops
and arenas utilized in the California Renaissance Pleasure Faires are mobile.
These props are loaded into the Company's semi-tractor/trailers and
transported between the Northern and Southern California Renaissance Faires
and, during the off-season, are stored at the Northern Renaissance Faire
site. The booths and craft shops utilized by vendors are owned by the
individual vendors and moved onto the site for the Faire and then removed by
them. The Faire is constructed and removed much in the same way as a circus
or traveling carnival.
SOUTHERN CALIFORNIA RENAISSANCE PLEASURE FAIRE. The Southern California
Renaissance Pleasure Faire has been conducted for the past 34 years in the
Los Angeles metropolitan area. This Faire typically attracts 200,000 patrons
and is held annually for eight weekends beginning the last week of April and
ending Mid-June.
The Southern Renaissance Pleasure Faire is held in Glenn Helen Regional Park
located near Devore, California. The site is leased from the San Bernardino
County Parks and Recreation Department, under a one year lease for the 1997
Faire. Rental under the lease is equal to 3.5% of gross revenues. The
Company has the option of leasing the San Bernardino site in the future, but
is currently investigating new sites for the Southern Renaissance Pleasure
Faire.
The Southern Renaissance Pleasure Faire site is only occupied during the
Faire season and must be vacated following completion of the Faire.
Accordingly, all structures are mobile and transported to the Northern
Renaissance Faire site for storage during the off-season.
Although the Company has operated that Faire during the past two years at a
small profit, management believes that it will have to relocate the Faire in
order to improve its profitability in the future. The Company has recently
entered into a non-binding letter of intent with the owner of a site in
Pomona, California which contemplates that the Company will commence
operation of the Southern California Faire at that site starting in 1998.
The letter of intent calls for the Company to construct a new village for the
Faire. The Company estimates that the cost of such construction would be
approximately $2,000,000. The Company will need additional funds from one or
more third parties to finance such construction. If such funds are not
available, the Company would, in all likelihood, continue to operate the
Faire at its current location in 1998 and possibly beyond.
NEW YORK RENAISSANCE FAIRE. The Company acquired Creative Faires, Ltd., the
owner and operator of the New York Renaissance Faire in February of 1996.
The New York Renaissance Faire opened in July 1978 and recreates a 16th
century English country Faire on 65 leased acres in Sterling Forest, Tuxedo,
New York. Creative Faires, Ltd. also produces Sterling Forest's Forest of
Fear as well as other arts and crafts shows in the New York tri-state area.
The Company issued 540,000 shares of the Company's Common Stock in
consideration for all of the outstanding shares of Creative Faires, Ltd.
-22-
VIRGINIA RENAISSANCE FAIRE. The Company's newest Faire is located in
Fredericksburg, Virginia on 250 acres of land purchased by the Company in
July of 1995 for $925,000. Like the Bristol Faire, this is a permanent
facility, which opened for business on May 4, 1996 and operated for seven
weekends. All buildings on the property, including performance stages,
restaurants, ale stands and craft shops, were designed in a unified style
appropriate to the Renaissance period and were constructed by the Company
during the year prior to opening. This is the first time the Company has
developed a Faire on its own, since all other Faires owned by the Company
represented acquisitions of existing businesses. The Virginia Fair, as is
typical of new faires, operated at a loss in 1996, its first year of
operation, and is expected to incur a small operating loss in the 1997 faire
season.
The construction of the Faire was financed with a $1.5 million mortgage,
repayable over 15 years at an initial interest rate of 8.65% annually, plus
the use of corporate funds. The Company also borrowed $250,000 to finance
the construction of buildings for crafts vendors, with repayment over five
years at an interest rate of 9.5% annually. Some vendors have paid for their
buildings outright, others have utilized the financing provided by the
Company, while others rent space with an option to purchase. The Company
arranged for vendor financing in order to attract desirable vendors to the
new Faire, and to develop a permanent contingent of Faire participants.
Some of the management of the Virginia Faire is handled by employees of the
Bristol Faire, including such areas as entertainment and public relations.
Although there are currently no other activities scheduled on the property
for 1997 other than the Virginia Renaissance Faire, the Company expects to
develop other income-producing activities, which may include a Halloween
forest of fright, music festivals, Christmas activities and other special
events. To date, however, there exist no agreements, arrangements or other
understandings with respect to alternate year-round uses.
VENDORS
Approximately 13% of the revenues realized from presenting the Company's
Renaissance Faires are generated from the Company's relationships with
vendors and craftsmen who sell food and crafts, and offer games and rides.
At the Bristol Renaissance Faire site, the vendors and craftsmen are required
to construct their shops and booths at their own cost and then occupy the
structures on a year-to-year basis for an annual fee of $900. Since the
structures are permanent, once built they become the property of the Company
and substantially increase the value of the Company's asset at that location.
At the Virginia Renaissance Faire site, shops and booths are constructed by
the vendors. All buildings so constructed become a permanent part of the
Faire and are the property of the Company. All vendors at the Virginia
Renaissance Faire pay the Company a fee of 6% to 15% of gross revenues.
-23-
At the Northern and Southern California Renaissance Pleasure Faires, craft
shops and booths are owned by the vendors and transported onto the site for
the duration of the Faire and then removed. In lieu of a flat fee to
participate, vendors at the California Faires pay the Company a fee equal to
15% of their gross revenues.
Vendors occupy their booths and shops pursuant to written lease agreements
with the Company which have a term of one year, and require renewal by both
the vendor and the Company each year. Under these agreements, each vendor
agrees to indemnify and hold harmless the Company from any liability which
may arise by virtue of the vendors' activities at the Faire. Nevertheless,
the Company maintains general public liability insurance which also provides
coverage for such risks.
REVENUE SOURCES
A Renaissance Faire generates revenues from numerous sources, including gate
admissions, beverage sales, parking fees, food sales, craft fees, game fees,
camping fees, souvenir sales and sponsorship fees.
GATE ADMISSIONS. Gate admissions are set from $14.00 to $17.50 for adults,
$5.95 to $6.95 for children, with children under the age of five admitted
free. Discounts for senior's and military personnel are $1.00 to $2.00. Off
premises discount ticket sales are available at Cub Foods, K-Mart, Sentry
Foods, Shoprite and Kits Camera. Discount coupons are available at retail
outlets operated by the Company's sponsors, including McDonalds, Subway,
White Castle, Vons super markets and Amoco Stations. The Company has a large
group sale and advance sale program that provides discounted tickets.
Admission provides the guest with all-day continuous entertainment on
multiple stages. Major entertainment acts include full contact jousting,
falconry, variety acts, sword duels, Shakespearean vignettes and authentic
belly-dancing. Gate admissions represent approximately 49% of the Faires'
total revenues.
BEVERAGE INCOME. The Company sells beer, wine and soft drinks at each Faire.
Beverage sales represent approximately 20% of Faire revenues.
PARKING INCOME. The California Faires charge $6.00 per car for regular
parking and $10 for preferred close-in parking. The Bristol and New York
Faires have preferred parking for $2.00 and $5.00. The Virginia Faire
charges $2 for regular parking. Parking revenue represents approximately 7%
of Faire revenues.
FOOD REVENUE. At the California and New York Faires, all food concessions
are run by independent vendors. These vendors pay the Company a commission
equal to approximately 15% of their gross revenues. At the Bristol Faire,
the Company owns certain high volume food items such as turkey legs, pizza,
roast beef and brats (sausages). These items comprise approximately 40% of
the total food sales. Additional food items are sold by independent food
vendors who pay the Company approximately 15% of their gross revenues. At
the Virginia Faire, the Company currently owns all of the food concessions.
In the aggregate, food revenues represent approximately 9% of total Faire
income.
-24-
CRAFT FEES. Each Faire has over 150 independent craft vendors who sell their
goods to Faire patrons. Most of the craft items are handmade by the artists
who often demonstrate the making of their wares at the Faire. The
glassblowers and lace-makers are generally very popular. The craft vendors in
California pay the Company a fee of approximately 15% of their gross revenue.
At the Bristol, New York and Virginia Faires, craft vendors are required to
build their own booth or shop, and either pay a flat annual fee or a
percentage of their gross income. Craft fees represent approximately 9% of
total Faire revenues.
GAME FEES. Many games and rides are operated by independent contractors.
The Company receives 15% of the gross revenues from these games and rides,
which represents, in the aggregate, approximately 1% of total Faire revenues.
SOUVENIR REVENUE. The sale of souvenir tee-shirts, sweatshirts, beer mugs,
books and other high quality merchandise appropriate to the Renaissance era
is believed by the Company to represent an area of excellent future
opportunity. It is intended that the Company's products will also be sold
through other outlets, such as catalogues, department stores, and on-line via
the Company's Internet Web site. There can, however, be no assurance that
the Company will be successful in marketing its products and memorabilia
through alternative means in the future. Souvenir sales to date represent
approximately 4% of Faire income.
SPONSORSHIP FEES. The Company solicits sponsorship arrangements with major
sponsors including Coca-Cola Company, Anheuser-Busch, Inc., Miller Brewing
Company, Amoco Oil Company, Eastman Kodak Company, Pepsi Cola Company and
Guinness Import Co. The sponsors also participate in joint advertising
campaigns. In the past, sponsorship fees have represented approximately 1%
of Faire revenues.
CAMPING FEES. The Company allows employees and independent vendors limited
camping at the Faire sites during the Faire season. The Company provides
portable rest room facilities, showers and security for campers. The campers
are charged and pay a fee for these services.
MARKETING
The Company markets its Faires as entertainment events for the whole family,
which also include shopping and food. Marketing is accomplished through local
television and radio stations which, from time-to-time, and, often in
conjunction with other advertisers, conduct live broadcasts from the Faires.
Supplementing this television and radio advertising, newspapers and
billboards provide essential information to the general public regarding the
cost of admission, location and times of operation. Artistic brochures and
fliers are directed toward groups for advanced sales campaigns.
The Company has also undertaken a "Sponsorship" campaign. Major sponsors
have included Eastman Kodak Company, Hyatt Hotels & Resorts, Inc., Coca-Cola
Company, Miller Brewing Company, Amoco Production Company and Sentry Foods,
Inc. Agreements with such sponsors have included joint advertising,
sponsorship fees, and product giveaways.
-25-
SEASONALITY AND WEATHER
The Company generates its revenue primarily from the production of
Renaissance Faires. Since, at this point, they are exclusively outdoor
events, each Faire is scheduled for the time of year most likely to minimize
the risks and hazards of inclement weather. With a total of five Faires in
various U.S. locations, the Company has been able to extend the period of
revenue generation from late April (the start of the Southern California and
Virginia Faires) through early October (the end of the Northern California
Faire), with the Bristol Renaissance Faire being held during July and August,
and the New York Faire during August and September. The spread of Faires
over a six-month period, and the geographic spread across the West coast, the
East coast and the mid-West, helps to assure that inclement weather in one
particular geographic area at any particular time does not adversely threaten
the Company's entire source of revenue. It is normal, however, for adverse
weather to harm the financial results during certain weekends of any
particular Faire.
During the period from the middle of October through the third week of April,
the Company currently has no material income-generating activity and must
meet its working capital requirements from cash flow earned during the Faire
season augmented by short-term debt. Creative Faires, Ltd. operates craft
shows and the Forest of Fear on the New York site during the fall and spring.
The Company plans to continue those events and also to develop fall events
at certain of the Company's other Faire sites.
Each Faire is scheduled for a finite period which is determined substantially
in advance in order to facilitate advertising and other promotional efforts.
Since attendance at each Faire is dependent upon the weather, poor weather
conditions can result in substantial declines in attendance and loss of
revenues. The Company is also vulnerable to severe climatic events which are
similarly beyond its control but nevertheless could have a direct and
material impact upon the Company's relative success or failure.
COMPETITION
As a promoter and operator of family entertainment events, the Company faces
competition from other more traditional entertainment alternatives, including
amusement parks, theme parks, local and county fairs, and specialty festivals.
While there are more than 100 annual entertainment events produced in the
country with a Renaissance theme, there are only 20 major Renaissance Faire
productions operated in major metropolitan areas throughout the country. As
families typically do not travel to distant metropolitan areas in order to
attend a Renaissance Faire, the Company does not experience direct
competition with those other major productions. More significant competition
comes from other entertainment alternatives and smaller fair events.
Further, by the very nature of Renaissance Faires and the lack of protection
afforded by trademark, service mark and unfair competition laws, there exist
few barriers to entry into the industry, and there can be no assurance that
other companies with substantially greater resources will not develop
competing Faires in the metropolitan areas where the Company has established
productions.
-26-
INTELLECTUAL PROPERTY
Because of the number of existing Faire productions with Renaissance themes,
it is unlikely that the Company will be able to rely upon trademark or
service mark protection for the name "Renaissance Faire" in connection with
its business. However, the Company did obtain in connection with its
acquisition of Living History Center assets an assignment of a California
registration of the mark "Renaissance Pleasure Faire" which applies only to
the state of California. The Company also has a Virginia service mark for
the "Virginia Renaissance Faire." Further, it is possible that the Company
could apply for and obtain trademark or service mark registrations on a state
level for its other individual Faires, such as "Bristol Renaissance Faire"
and other name-specific marks associated with the "Renaissance Faire"
description as those names are acquired or developed. While the Company may
be able to protect a site-specific name for its productions, the Company does
not consider this protection a significant deterrent to the entry of
competitors into existing markets, given the limited barriers to such entry.
PUBLIC LIABILITY AND INSURANCE
As a producer of public entertainment events, the Company naturally has
exposure for claims of personal injury and property damages suffered by
visitors to the Company's Renaissance Faires. To date, however, the Company
has only experienced minimum claims which have been resolved quickly without
litigation. The Company maintains comprehensive public liability insurance
which it considers to be adequate against this exposure.
Independent vendors operating food concessions, games and rides are required
to obtain liability insurance protection, and to provide the Company with
proof of such coverage. Alternatively, an independent vendor can be added as
an additional insured under the Company's liability insurance policy for an
additional fee.
GOVERNMENT REGULATION
Since food and alcoholic beverages are sold at the various Faire sites, the
Company, its vendors and/or subsidiaries must comply with all applicable
rules, regulations and/or ordinances pertaining to the handling and sale of
such items. Any material violation of these regulations would subject the
Company, its vendors and/or its subsidiaries to the possibility of having
necessary food service permits and liquor licenses revoked. Material
violations may also result in penalties and fines being assessed against the
Company. The Company must also comply with all state and federal labor laws
and regulations, including all minimum wage and overtime provisions.
The Company believes that it is in compliance with all such laws, and does
not anticipate that any existing law will have a material adverse impact upon
the proposed business and operations of the Company. Although future
compliance cannot be assured in the event of future changes in such laws or
the addition of regulations governing the proposed business and operations of
the Company, the Company will, at all times, endeavor to take all feasible
and required actions necessary to maintain compliance with such laws.
-27-
EMPLOYEES
The Company presently has 16 full-time employees working for its Colorado
headquarters. Each Faire has its own full-time staff as well as seasonal and
part-time employees who are engaged during the Faire presentation. The
Bristol Faire has 6 full-time employees, the California Faires have 12
full-time employees, the New York Faire has 6 full-time employees and the
Virginia Faire has 6 full-time employees.
During Faire presentations, there are over 100 street actors interacting with
Faire patrons at any given time, with over 1,000 seasonal employees and
volunteers. The Company trains its professional street actors, who perform
under contract with the Company for a fixed fee. In addition, the Company
invites numerous apprentice actors and actresses to its training programs to
perform during the Faire on a volunteer basis. Only after an actor or
actress has gained a particular proficiency are they invited to become a
fully-paid contract actor for the Company.
The Company has plans for acquisition and growth using the current staff and
management systems of the Faire as a management infrastructure. The creation
of a year-round staff has increased expenses, but will, in management's
opinion, achieve economies of scale as the Company acquires and produces
additional Faire operations. The Company believes that it currently has
full-time management sufficient to operate nine annual Faires.
PROPERTY
The Company's corporate headquarters are located at 4410 Arapahoe Avenue,
Suite 200, in Boulder, Colorado. This property measures 3,868 square feet
and is currently leased at $7,854 per month, with increases of 5% per annum
each November 1, expiring October 31, 2001. The Company considers these
offices to be suitable for its needs for the duration of the lease term. The
Company has an option to renew the lease for an additional five year period.
The Company owns approximately 160 acres in Kenosha County, Wisconsin, which
is home to the Bristol Renaissance Faire. The land is subject to mortgages in
the original aggregate principal amount of $1.95 million. On April 11, 1997,
the outstanding balance was $1.7 million.
The Company has leased the property where the Northern California Renaissance
Pleasure Faire is held, located at 1410 Highway 37, Novato, California 94945.
Office quarters for all California personnel is included in the overall
lease covering the Faire site, which expired April 30, 1997. See
"Business--Existing Renaissance Faires and Sites--Northern California
Renaissance Faire."
The New York Faire is operated on 65 acres of leased land in Tuxedo, New
York. This lease expires December 31, 2000. The Company also leases offices
in New York City.
On July 27, 1995, the Company acquired approximately 250 acres of land in
Stafford County, Virginia, for a purchase price of $925,000. This property
houses the Virginia Renaissance Faire.
-28-
The construction of the Faire was financed with a $1.5 million mortgage,
repayable over 15 years at an initial interest rate of 8.65% annually, plus
the use of corporate funds. The Company also borrowed $250,000 to finance
the construction of buildings for crafts vendors, with repayment over five
years at an interest rate of 9.5% annually.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Name, position with the Company, age of each Director or officer, and the
period during which each Director has served are as follows:
DIRECTOR
NAME AGE POSITION SINCE
- ---- --- -------- --------
Charles S. Leavell 55 Chairman of the 1993
Board of Directors &
Chief Executive Officer
Sanford L. Schwartz 47 Director 1993
Robert M. Geller 44 Director 1994
Gregg Adam Thaler 31 Director 1996
Dean Petkanas 33 Director 1996
J. Stanley Gilbert 59 President and Chief --
Operating Officer
James R. McDonald 51 Chief Financial Officer --
Howard Hamburg 60 Vice President --
Kevin Patterson 36 Vice President --
Gloria Constantin 46 Secretary --
Sue Brophy 41 Controller --
CHARLES S. LEAVELL was elected Chief Executive Officer effective
June 20, 1996. From April 1993 to March 31, 1995, he was Chief Executive
Officer, and from April 1, 1995 to present he has served as Chairman of the
Board of the Company. From 1988 to present, Mr. Leavell has
-29-
served as President and Chairman of the Board of Leavell Management Group,
Inc. and Ellora Corporation. In that capacity, he has acquired, developed,
and managed numerous ventures, including the Bristol Renaissance Faire; the
4UR Guest Ranch in Creede, Colorado, a 3,000 acre luxury ranch; and South
Meadow, an exclusive 96 unit single family development in Boulder, Colorado.
Prior to his affiliation with Leavell Management Group and Ellora
Corporation, Mr. Leavell worked with Columbia Pictures in Los Angeles,
California, where he was producer of the feature film, "The Quick and the
Dead," about Grand Prix automobile racing, and was the executive producer of
another film, "Evil Ways," about street gangs in East Los Angeles. Mr.
Leavell also produced a rock musical for the stage entitled "Goosebumps."
Mr. Leavell currently sits on the Board of Directors of The Leavell Company
and CK Properties, L.C., of El Paso, Texas, both of which are real estate
development and management corporations with extensive holdings in apartments
and office buildings. Mr. Leavell's former affiliations include Board of
Directors of the Denver International Film Festival, Denver, Colorado, and
Vice-Chair of Colorado Venture Capital Corporation, a regional investment
firm. Mr. Leavell graduated from Stanford University in 1965 with a Bachelor
of Arts degree in history.
SANFORD L. SCHWARTZ has been a Director of the Company since April,
1993. Mr. Schwartz has been a founder, senior executive or director of nine
publicly-traded companies over the last nineteen years. From 1992 to
present, Mr. Schwartz has been the Chairman of Creative Business Strategies,
Inc. ("CBSI"). Prior to starting CBSI Mr. Schwartz was, from 1989 to 1991,
Chief Executive Officer of HealthWatch, Inc., a publicly-traded medical
equipment manufacturer. Mr. Schwartz serves on the Board of Directors of
HealthWatch, Inc.
ROBERT M. GELLER has been a Director of the Company since April 1, 1994.
He served as Chief Financial Officer of Online System Services, Inc., a
provider of internet services, from March 1995 to October 1996. Mr. Geller
has also served as the President of The Growth Strategies Group, a consulting
firm specializing in executive/board services for emerging growth companies
since August 1991. From April, 1990 to July, 1991, he was Executive
Vice-President for HealthWatch, Inc., a publicly-traded medical equipment
manufacturer. Mr. Geller is currently a director of Armanino Foods of
Distinction, Inc. and Online System Services, Inc., publicly-held
corporations, and Integral Peripherals, Inc., Requisite, Inc., and Chernow
Communications, Inc., all privately-held corporations. Mr. Geller graduated
from the University of Colorado Business School, summa cum laude, with a
Bachelor of Science degree in finance and organizational behavior in 1976.
GREGG ADAM THALER was elected a director of the Company in 1996. He has
been president of Duke & Company, Inc., a New York investment banking firm
since 1993. In 1993 he was a sales manager for Corporate Securities of Los
Angeles, California, and from 1992 - 1993, he was a sales manager for HJ
Meyers & Company, also of Los Angeles. From 1989 to 1992, Mr. Thaler was a
broker and analyst with Stratton Oakmont of Lake Success, New York, a
broker/dealer. Mr. Thaler graduated with honors from the University of
Michigan in 1987, with a Bachelor of Arts degree in Political Science.
DEAN PETKANAS was elected a director of the Company in 1996. He has
been President of Briarwood Investment Counsel, a broker/dealer registered
with the National Association of
-30-
Securities Dealers since 1981. From 1992 to 1994, Mr. Petkanas was Director
of Corporate Finance for Kensington Wells, Inc. of New York. From 1989 to
1992, he served as a Vice President of Corporate Finance and Assistant
Director of Research for Stratton Oakmont of Lake Success, New York, a
broker/dealer.
J. STANLEY GILBERT became President and Chief Operating Officer in
January, 1997. In 1996 Mr. Gilbert was a Vice President of the Company and
he managed the Bristol Renaissance Faire from 1988 until 1996. Prior to that
he worked in the commercial banking field in senior management. Prior to
that, he was senior vice president of Cinema America, a film and video
production company. Mr. Gilbert is the president of Just in Jest, Inc., an
art studio featuring Renaissance and fantasy handmade sculptures, whose works
have been displayed in galleries and museums, including the Delaware Museum
of Fine Art. Mr. Gilbert has served as a board member of the Kenosha Area
Convention and Business Bureau. He holds a degree in Business Administration.
JAMES R.. MCDONALD became Chief Financial Officer of the Company in
November of 1996. From August of 1996 until October of 1996, he served as
Chief Financial Officer of Mountain Solutions, a personal communications
services company. From January of 1994 until August of 1996, Mr. McDonald
was Controller of Omnipoint Corporation, another personal communications
services company. Mr. McDonald also was a principal of James R. McDonald,
CPA, from August of 1991 until December 1993. Mr. McDonald received a
Bachelor of Science degree in Accounting from California State University at
Fullerton in 1978, and a Masters of Business Administration in Finance from
Loyola University of Chicago in 1980.
HOWARD HAMBURG was Chief Operating Officer of the Company from April 1,
1994 to June 20, 1996, at which time he was elected a Vice President of the
Company. From 1989 to March 31, 1994, Mr. Hamburg served as Treasurer and
Planning Director of the Living History Centre, Inc., a California
non-profit, public benefit corporation and producer of the California
Renaissance Pleasure Faires. In addition to his work with LHC, Mr. Hamburg
served, from 1990 to 1993, as Vice-President of the Patent Protection
Institute, Inc., an intellectual property licensing and royalty recovery
corporation. Mr. Hamburg graduated from New York City Community College in
1957 with an AA degree in Engineering. In 1969 Mr. Hamburg received a
Bachelor of Arts degree in social science from California State University at
Sonoma.
KEVIN PATTERSON, General Manager of RPFI since April 1, 1994, has 18
years experience in the administration and production of Renaissance Faires.
From 1993 to 1994 he served as Vice President & Assistant General Manager of
the Living History Center, a non-profit public benefit corporation which
previously produced the California Renaissance Pleasure Faires. Mr.
Patterson served as Production Manager of The Living History Centre in 1992,
as Community Outreach Director during 1989 to 1992, and in other positions
with the organization continuously since 1977. Mr. Patterson holds a B.A.
degree in Economics from Moorpark College and attended the B.S.M. program at
Pepperdine University. He is a founding Board Member of the Historic Oaks
Foundation and the St. Andrew's Society of San Francisco.
-31-
GLORIA CONSTANTIN has been Secretary of the Company since 1993. She has
also been in-house Investor Relations since 1993. From 1991 to 1993, she
was employed by Leavell Management Group, Inc. Ms. Constantin holds degrees
in English and Theatre, and is an honors graduate of the Denver Paralegal
Institute.
SUE BROPHY has been Controller of the Company since August, 1995. From
1994 until 1995, Ms. Brophy was employed by Clifton, Gunderson & Co., a
public accounting firm in accounting services. From 1990 to 1993, she was
self-employed. From 1991 to 1992, she was an accountant with Rigden, Inc., a
software development company.
Each Director is elected to serve for a term of one year until the next
Annual Meeting of Shareholders or until a successor is duly elected and
qualified.
EXECUTIVE COMPENSATION
The following table sets forth certain information for the Company's fiscal
periods ended December 31, 1996 (D1996), March 31, 1996 (M1996) and 1995
(M1995) regarding compensation earned by or awarded to the Company's chief
executive officer and the other executive officers whose total annual salary
and bonus exceeded $100,000 (the "Named Executive Officers").
-32-
TABLE I
SUMMARY COMPENSATION TABLE
Long Term Compensation
-----------------------------
Annual Compensation Awards Payouts
---------------------------------------------------------
Other All
Annual Restricted Other
Name and Compen- Stock LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($)(1) ($) SARs ($) ($)
- --------------------------------------------------------------------------------------
Charles S.
Leavell
Chairman, D1996 -0- -0- -0- -0- -0- -0- -0-
CEO and M1996 -0- -0- $48,000(1) -0- -0- -0- -0-
President M1995 $92,000 $23,894 -0- -0- -0- -0- -0-
Miles
Silverman,
CEO D1996 $95,147 -0- -0- -0- -0- -0- -0-
President M1996 $131,442 -0- -0- -0- -0- -0- -0-
M1995 $80,000 $23,894 -0- -0- 80,000 -0- -0-
Howard
Hamburg,
COO,VP D1996 $78,182 -0- -0- -0- -0- -0- -0-
M1996 $114,391 -0- -0- -0- -0- -0- -0-
M1995 $84,359 -0- -0- -0- 30,000 -0- -0-
(1) Includes $48,000 received under Consulting Agreement that terminated
March 31, 1996.
(2) All executive officers of the Company participate in the Company's group
health insurance plan. However, no Named Executive Officer received
perquisites and other personal benefits which, in the aggregate, exceeded
the lesser of either $50,000 or 10% of the total of annual salary and
bonus paid during the respective years.
OPTIONS GRANTED DURING FISCAL 1996
During the Company's fiscal period ended December 31, 1996, no options were
granted to Named Executive Officers
-33-
AGGREGATED OPTION EXERCISES DURING FISCAL 1996 AND FISCAL YEAR-END OPTION
VALUES
The following table provides information related to the number and value of
options held by the Named Executive Officers as of December 31, 1996. The
Company does not have any outstanding stock appreciation rights.
Value of Number of Unexercised
Unexercised In-the-Money
Options/SARs at Option/SARs
FY-End(#) at FY-End($)(1)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise(#) ($) Unexercisable Unexercisable
- --------------------------------------------------------------------------------------------
Charles S. Leavell -0- $-0- 0/0 $0/$0
Miles Silverman -0- $-0- 0/0 $0/$0
Howard Hamburg -0- $-0- 84,266/30,000 $296,502/$67,500
(1) The value of unexercised options is determined by calculating the
difference between the fair market value of the securities underlying the
options at fiscal period end and the exercise price of the options.
EMPLOYMENT AGREEMENTS
The Company has Employment Agreements with several of its executive
officers and key employees, the material provisions of which are summarized
as follows:
HOWARD HAMBURG. Effective April 1, 1994, the Company entered into an
Employment Agreement with Mr. Hamburg as Treasurer of Renaissance Pleasure
Faires, Inc. Effective April 28, 1995, Mr. Hamburg was also appointed the
Company's COO. Effective June 20, 1996, Mr. Hamburg resigned as COO and was
appointed a Vice President. The current Employment Agreement, which
supersedes the agreement dated April 1, 1994, has a term of one year from
the date of termination notice from the Company. His current annual salary
is $110,250.
KEVIN PATTERSON. Effective April 1, 1994, the Company entered into an
Employment Agreement with Mr. Patterson as Chief Executive Officer of
Renaissance Pleasure Faires, Inc. Effective August 29, 1994, Mr. Patterson
was also appointed a Vice President of the Company. The current Agreement,
which supersedes the agreement dated April 1, 1994, has a term of one year
from the date of termination notice from the Company. His current base
salary is $78,750.
BARBARA HOPE. On February 5, 1996, the Company entered into an
Employment Agreement with Ms. Hope in connection with the acquisition of
Creative Faires, Ltd. The Agreement has a term of two years and provides for
a base salary of $100,000.
DONALD C. GAITI. On February 5, 1996, the Company entered into an
Employment Agreement with Mr. Gaiti in connection with the acquisition of
Creative Faires, Ltd. The Agreement has a term of two years and provides for
a base salary of $100,000.
-34-
DIRECTOR COMPENSATION
During the fiscal period ended December 31, 1996, outside Directors, other
than Mr. Geller and Mr. Leavell, received no cash compensation for their
services as such, however they were reimbursed for their expenses associated
with attendance at meetings or otherwise incurred in connection with the
discharge of their duties as Directors of the Company. Directors who are
also executive officers of the Company receive no additional compensation for
their services as Directors.
GELLER AGREEMENT
Effective April 1, 1994, the Company appointed Robert M. Geller to serve as a
director of the Company and entered into an Agreement with him pursuant to
which the Company agreed to include his name on the slate of nominees to be
elected to serve as directors of the Company, and Mr. Geller consented to the
inclusion of his name as a nominee through the 1996 annual meeting of
shareholders. Pursuant to the terms of the agreement, Mr. Geller was granted
non-qualified options exercisable to acquire up to 83,333 shares of the
Company's Common Stock at an exercise price of $2.25 per share. Further, the
Company has agreed to pay him $300 for each Board of Directors meeting he
attends and to reimburse him for out-of-pocket expenses incurred in
connection with attending those meetings. The Company has also agreed to
reimburse Mr. Geller for his out-of-pocket expenses incurred in connection
with his services rendered as a consultant to the Company for which he also
receives $75 an hour. Under this agreement, Mr. Geller received $30,137 in
the 1996 fiscal year and $9,421 in the nine-month period ended December 31,
1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Geller, Schwartz and Leavell.
Mr. Leavell, who is Chief Executive Officer and a director of the Company,
participates in all discussions and decisions regarding salaries, benefits
and incentive compensation for all employees of the Company, except
discussions and decisions relating to his own salary, benefits and incentive
compensation.
CERTAIN TRANSACTIONS
CBSI CONSULTATION AGREEMENT
Sanford L. Schwartz was elected to serve as a member of the Company's Board
of Directors in April, 1993. Mr. Schwartz is President, Director and a
principal stockholder of Creative Business Strategies, Inc., ("CBSI"). The
Company had a Consultation Agreement with CBSI which expired December 31,
1996 pursuant to which it performed financial and public relations services.
In consideration of those services, the Company agreed to pay CBSI a fee of
$4,500 per month and $200 per hour for services rendered in excess of 20 days
per month. A total of $36,000 was paid to CBSI during the nine months ended
December 31, 1996, pursuant this agreement.
-35-
CREATIVE FAIRES, LTD. AGREEMENT
On February 5, 1996, the Company, its newly-created and wholly-owned
subsidiary Cfaires Acquisition Corp., Creative Faires, Ltd., and Barbara Hope
and Donald C. Gaiti, the sole shareholders of Creative Faires, Ltd., entered
into an Agreement and Plan of Merger pursuant to which Cfaires Acquisition
Corp. was merged with and into Creative Faires, Ltd. In connection with the
merger, Ms. Hope and Mr. Gaiti received 540,000 shares of the Company's
Common Stock, and the Company became the sole shareholder of Creative Faires,
Ltd. The Company also agreed to employ Mr. Gaiti and Ms. Hope for two-year
periods.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock, as of May 7, 1997, by:
(i) each of the directors of the Company, (ii) all officers and directors of
the Company as a group, and (iii) holders of 5% or more of the Company's
Common Stock. Each person has sole voting and investment power with respect
to the shares shown, except as noted.
Name and Address Percent of
of Beneficial Owner Number of Shares Class (1)
- ------------------- ---------------- ----------
Charles S. Leavell 1,259,374 (2) 13.1%
1881 Ninth Street, Suite 319
Boulder, Colorado 80302
Robert M. Geller 226,666 (3) 2.3%
1402 Kalmia
Boulder, Colorado 80304
Sanford L. Schwartz 6,350 (4) *
5353 Manhattan Circle, #201
Boulder, Colorado 80303
Gregg Adam Thaler
909 Third Avenue; 7th Floor
New York, NY 10022
Dean Petkanas 0 *
100 Store Hill Road
Old Westbury, NY 11568
All Directors & 2,920,130 (5) 29.6%
Officers as a Group
(Nine [9] Persons)
* Less than one percent
-36-
(1) Shares not outstanding but deemed beneficially owned by virtue of
the individual's right to acquire them as of May 7, 1997, or within 60 days
of such date, are treated as outstanding when determining the percent of the
class owned by such individual and when determining the percent owned by the
group.
(2) Includes 880,000 shares of Common Stock held of record by Leavell
Management Group, Inc., a controlled corporation of Mr. Leavell who would be
deemed to exercise the voting and investment power with respect to the
securities held by LMG. 133,334 shares of Common Stock held of record by LMG
are subject to an option granted in favor of Mr. Leavell, exercisable at a
price of $.937 per share. Mr. Leavell disclaims beneficial ownership of the
securities held by LMG for purposes of Section 16 under the Exchange Act.
(3) Includes non-qualified options to purchase 166,666 shares of Common
Stock at an exercise price of $1.125 per share and non-qualified options to
purchase 60,000 shares of Common Stock at an exercise price of $3.50 per
share.
(4) Includes 6,350 shares owned by Creative Business Strategies, Inc., a
corporation of which Mr. Schwartz is an officer, director and shareholder.
(5) Includes 226,666 shares issuable upon exercise of stock options
exercisable within 60 days of May 7, 1997.
DESCRIPTION OF SECURITIES
GENERAL
The Company is authorized to issue 51,000,000 shares of capital stock,
including 50,000,000 shares of Common Stock, $.03 par value, and 1,000,000
shares of Preferred Stock, $1.00 par value. As of May 7, 1997, there were
9,636,262 shares of Common Stock outstanding and no shares of Preferred Stock
outstanding.
COMMON STOCK
No share of Common Stock is entitled to preference over any other share
of Common Stock, and each share of Common Stock is equal to every other share
of Common Stock in all respects. Holders are entitled to one vote for each
share of Common Stock held of record at each meeting of the shareholders, and
to receive dividends when and as declared by the Board of Directors. To
date, the Company has not paid cash dividends. There is no cumulative voting
for the election of directors. Accordingly, the owners of a majority of the
shares of Common Stock outstanding may elect all of the directors to be
elected by the holders of the Common Stock, if they choose to do so, and the
owners of the balance of such shares would not be able to elect any
directors. The holders of Common Stock do not have preemptive rights. The
shares of Common Stock offered hereby will be, upon issuance, fully paid and
non-assessable.
-37-
PREFERRED STOCK
The Board of Directors is authorized to issue up to 1,000,000 shares of
Preferred Stock, in any one or more classes or series, to fix the dividend,
redemption, liquidation, retirement, conversion, voting and other preference
rights for such shares, and to issue options and warrants for the purchase of
such shares, on such terms and for such consideration as the Board may deem
appropriate without further shareholder action. Such additional shares may
have disproportionately higher voting rights or class voting rights, may be
convertible into shares of Common Stock, and may rank prior to the Common
Stock as to payment of dividends or the distribution of assets upon
liquidation or dissolution. The Board of Directors, without shareholder
approval can issue shares of Preferred Stock with voting and conversion
rights which could adversely affect the voting power of the holders of Common
Stock. Currently, no shares of Preferred Stock are outstanding and the
Company does not have plans to issue any Preferred Stock.
CONVERTIBLE SECURED NOTES
During April 1997, the Company issued $350,000 principal amount of its
10% Convertible Secured Notes due October 31, 1997 (the "Notes"). The Notes
are secured by a mortgage on the Company's faire site in Kenosha, Wisconsin
and are convertible into shares of the Company's Common Stock at the lesser
of $1.75 per share or 50% of the market value of the Company's Common Stock
at the time of conversion.
TRANSFER AGENT AND REGISTRAR
Corporate Stock Transfer, Denver, Colorado, has been appointed as the
Transfer Agent and Registrar for the Common Stock and the A and B Warrants.
SELLING SHAREHOLDERS
The following table sets forth the number of shares of the Company's
Common Stock to be offered by the Selling Shareholder named herein, and, as
of May 7, 1997, the number and percentage of shares beneficially owned prior
to and following completion of the offering made hereby.
-38-
Shares Offered
Prior to Offering Pursuant to this After Offering
Name ----------------- Prospectus(1) --------------
---- Number (1) Percentage ---------------- Number Percentage
--------------------- ---------------------
Legacy Fund, LLC 225,000 2.3% 225,000 -0- -0-
Davstar II Managed
Investments Corp. NV 75,000 * 75,000 -0- -0-
Grand Avenue Partners 50,000 * 50,000 -0- -0-
Creative Business
Strategies, Inc. (2) 6,350 * 6,350 -0- -0-
____________
* Less than one percent
(1) For Legacy Fund, LLC, Davstar II Managed Investment Corp. NV and
Grand Avenue Partners, the number of shares included in the table represent
the number of shares it is estimated would be issued upon conversion of the
Company's 10% Convertible Secured Notes owned by such persons. The Notes are
convertible into shares of the Company's Common Stock at the lesser of $1.75
per share or 50% of the market value for the Company's Common Stock at the
time that the Notes are converted. The information included in the table is
based upon an assumed conversion price of $1.00.
(2) Sanford L. Schwartz, a director of the Company, is an officer,
director and major shareholder of Creative Business Strategies, Inc.
PLAN OF DISTRIBUTION
The Shares offered by the Selling Shareholders may be sold from time to
time by the Selling Shareholders, or by pledgees, donees, transferees or
other successors in interest of the Selling Shareholders, at their sole
discretion. Such sales may be made on the NASDAQ National Market or
otherwise at prices and on terms then prevailing or at prices related to the
then current market price, or in negotiated transactions. The Shares offered
by the Selling Shareholders are not being underwritten.
In general, the Shares may be sold by one or more of the following
means: (a) a block trade in which the broker or dealer so engaged will
attempt to sell the securities as agent but may position and resell a portion
of the block as principal to facilitate the transaction; (b) purchases by a
broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) an exchange distribution in
accordance with the rules of such exchange (if the securities are then listed
on an exchange); (d) ordinary brokerage transactions and transactions in
which the broker solicits purchasers; or (e) other securities transactions.
In effecting sales,
-39-
brokers or dealers engaged by the Selling Shareholders may arrange for other
brokers or dealers to participate. Brokers or dealers will receive
commissions or discounts from the Selling Shareholders in amounts to be
negotiated immediately prior to the sale. No commissions or other fees shall
be payable by the Company to any broker or dealer in connection with this
offering. Such brokers or dealers and any other participating brokers or
dealers may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended, in connection with such sales. The
Company will pay the expenses of this offering, estimated at $6,000.
LEGAL MATTERS
The legality of the Common Stock will be passed upon for the Company by
the firm of Gray, Plant, Mooty, Mooty & Bennett, P.A.
EXPERTS
The audited financial statements of the Company for the fiscal periods
ended December 31, 1996 and March 31, 1996, which are incorporated by
reference herein have been examined and reported on by Schumacher and
Associates, Inc., as indicated in their reports with respect thereto, and are
incorporated by reference, in reliance upon the authority of said firm as
experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Reports,
proxy statements and other information filed by the Company with the
Commission may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street
N.W., Washington, D.C. 20549, and inspected at the Commission's regional
offices at Suite 1400, 500 West Madison Street, Chicago, Illinois 60661.
Copies of such material can also be obtained from the Public Reference
Section of the Commission, 450 Fifth Street N.W., Washington, D.C. 20549, at
prescribed rates.
The Company has filed with the Commission a Registration Statement on
Form S-1 under the Securities Act of 1933, as amended (the "Act"), with
respect to the securities offered hereby. This Prospectus omits certain
information included in such Registration Statement. For further information
about the Company and its securities, reference is made to such Registration
Statement and to the exhibits filed as part thereof or otherwise incorporated
therein. Each summary in this Prospectus of information included in the
Registration Statement or any exhibit thereto is qualified in its entirety by
this reference to such information or exhibit.
-40-
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
with
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Page
Report of Independent Certified Public Accountants F-2
Audited Financial Statements:
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-5
Consolidated Statement of Changes in
Stockholders' Equity F-6
Consolidated Statements of Cash Flows F-8
Notes to Consolidated Financial Statements F-9
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Renaissance Entertainment Corporation
and Consolidated Subsidiary
We have audited the combined balance sheet of Renaissance Entertainment
Corporation and Consolidated Subsidiary as of March 31, 1996 and December 31,
1996 and the related consolidated statements of operations and changes in
stockholders' equity, and cash flows for the nine month period ended December
31, 1996 and for the years ended March 31, 1995 and 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion of these combined financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Renaissance Entertainment
Corporation and Consolidated Subsidiary as of March 31, 1996 and December 31,
1996 and the combined results of operations, changes in stockholders' equity
and cash flows for the nine period ended December 31, 1996 and the years
ended March 31, 1995 and 1996 in conformity with generally accepted
accounting principles.
Schumacher & Associates, Inc.
Certified Public Accountants
12835 E. Arapahoe Road
Tower II, Suite 110
Englewood, CO 80112
March 31, 1997
F-2
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED BALANCE SHEET
ASSETS
March 31, December 31,
1996 1996
--------------- ---------------
Current Assets:
Cash and equivalents $ 631,063 $ 374,289
Income tax refunds receivable (Note 6) 323,380 -
Stock subscription receivable (Note 13) - 133,749
Accounts receivable, net of allowance
for doubtful accounts of $8,341 69,434 99,551
Inventory, at lower of cost or market 116,221 184,695
Prepaid expenses and other current assets 979,769 139,167
----------- -----------
Total Current Assets 2,119,867 931,451
Property and equipment, net of accumulated
depreciation of $1,372,060 and $1,982,765
at March 31, 1996 and December 31, 1996
respectively (Note 7) 5,156,217 7,176,755
Construction in progress 1,080,895 -
Goodwill, net of accumulated amortization
of $160,960 and $206,410 at March 31,
1996 and December 31, 1996
respectively (Note 5) 1,046,285 620,826
Covenant not to compete, net of
accumulated amortization of $40,000
and $55,000 at March 31, 1996 and
December 31, 1996 respectively (Note 5) 60,000 45,000
Restricted cash (Note 11) 848,296 890,116
Other assets 121,909 208,201
----------- -----------
Total Assets $10,433,469 $ 9,872,349
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 1,181,090 $ 1,068,028
Notes payable, current portion (Note 3) 437,956 1,209,119
Unearned income 485,798 160,588
----------- -----------
Total Current Liabilities 2,104,844 2,437,735
Notes payable, net of current
portion (Note 3) 2,531,187 2,341,987
Other - 37,175
----------- -----------
Total Liabilities 4,636,031 4,816,897
----------- -----------
Commitments (Notes 3, 4, 8 and 12) - -
Stockholders' Equity (Notes 2, 8, 10, 12 and 13):
Preferred stock, $1.00 par value, 1,000,000
shares authorized, none issued and
outstanding - -
F-3
Common stock, $.03 par value, 50,000,000
shares authorized, 8,721,706 and
9,233,772 issued and outstanding
at March 31, 1996 and December 31, 1996
respectively 130,826 277,013
Additional paid-in capital 7,108,082 8,071,634
Accumulated (deficit) (1,441,470) (3,293,195)
----------- -----------
Total Stockholders' Equity 5,797,438 5,055,452
----------- -----------
Total Liabilities and Stockholders' Equity $10,433,469 $ 9,872,349
----------- -----------
----------- -----------
The accompanying notes are an integral part of the financial statements.
F-4
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Month
Year Ended Year Ended Period Ended
March 31, March 31, December 31,
1995 1996 1996
--------------- --------------- ---------------
REVENUE:
Sales $ 12,539,653 $ 12,810,617 $ 14,553,577
Faire operating costs 3,212,491 3,826,868 4,812,616
------------ ------------ ------------
Gross Profit 9,327,162 8,983,749 9,740,961
------------ ------------ ------------
OPERATING EXPENSES:
Salaries and wages 3,474,799 4,082,271 4,048,603
Depreciation and amortization 351,215 500,203 633,819
Advertising 1,211,798 1,546,701 2,511,973
Other operating expenses 3,532,508 4,329,713 4,300,062
------------ ------------ ------------
Total Operating Expenses 8,570,320 10,458,888 11,494,457
------------ ------------ ------------
Net Operating Income (Loss) 756,842 (1,475,139) (1,753,496)
------------ ------------ ------------
Other Income (Expenses):
Interest income 48,132 109,652 68,571
Interest (expense) (53,223) (138,036) (253,740)
Other income (expense) (28,327) 36,049 86,940
------------ ------------ ------------
Total Other Income (Expenses) (33,418) 7,665 (98,229)
------------ ------------ ------------
Net Income (Loss) before (Provision)
Credit for Income Taxes 723,424 (1,467,474) (1,851,725)
(Provision) Credit for Income Taxes (147,000) 193,803 -
------------ ------------ ------------
Net Income (Loss) 576,424 (1,273,671) (1,851,725)
------------ ------------ ------------
Dividends on preferred stock (43,115) - -
------------ ------------ ------------
Net Income (Loss) to Common
Stockholders $ 533,309 $ (1,273,671) $ (1,851,725)
------------ ------------ ------------
------------ ------------ ------------
Net Income (Loss) per Common Share $ .11 $ (.16) $ (.21)
------------ ------------ ------------
------------ ------------ ------------
Weighted Average Number of
Shares Outstanding 4,801,044 7,824,182 8,907,049
------------ ------------ ------------
------------ ------------ ------------
The accompanying notes are an integral part of the financial statements.
F-5
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
From March 31, 1994 through December 31, 1996
Additional
Common Stock Paid-in Accumulated
--------------------------
Shares Amount Capital (Deficit) Total
----------- ----------- ----------- ----------- -----------
Balance, March 31, 1994 2,664,356 $ 79,930 $ 795,994 $ (631,226) $ 244,698
Common stock issued, private placements and
acquisition of assets 2,070,050 62,102 835,709 - 897,811
Common stock issued, public offering, net of
offering costs of $646,056 2,070,000 62,100 2,914,344 - 2,976,444
Common stock issued in exchange for preferred
stock issued 583,334 17,500 794,695 - 812,195
Preferred dividends - - - (43,115) (43,115)
Net income for the year ended March 31, 1995,
excluding loss of $48,185 of CFL included in
accumulated deficit below - - - 624,609 624,609
----------- ----------- ----------- ----------- -----------
Balance March 31, 1995 7,387,740 221,632 5,340,742 (49,732) 5,512,642
Treasury stock acquired and retired (20,626) (618) (81,886) - (82,504)
Common stock issued for cash 814,592 24,438 1,547,809 - 1,572,247
Common stock issued for CFL 540,000 16,200 170,591 (118,067) 68,724
Net Loss for the year ended March 31, 1996 - - - (1,273,671) (1,273,671)
----------- ----------- ----------- ----------- -----------
Balance March 31, 1996 8,721,706 261,652 6,977,256 (1,441,470) 5,797,438
F-6
Exercise of Class A warrants at $2.00 per share 125,328 3,760 246,896 - 250,656
Exercise of Class B warrants at $2.63 per share 34,000 1,020 88,230 - 89,250
Exercise of stock options 324,998 9,749 610,224 - 619,973
Issuance of stock for services 27,740 832 151,118 - 151,950
Fees incurred in connection with exercising
warrants - - (2,090) - (2,090)
Net loss for the nine month period ended
December 31, 1996
- - - (1,851,725) (1,851,725)
----------- ----------- ----------- ----------- -----------
Balance December 31, 1996 9,233,772 $ 277,013 $ 8,071,634 $(3,293,195) $ 5,055,452
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
The accompanying notes are an integral part of the financial statements.
F-7
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months
Year Ended Year Ended Year Ended
March 31, March 31, December 31,
1995 1996 1996
---------- ---------- ------------
Cash Flows from Operating Activities:
Net Income (loss) $ 576,424 $(1,273,671) $(1,851,725)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 351,214 500,200 633,819
Impairment of goodwill - - 380,000
(Increase) decrease in:
Income tax refund receivable - (323,380) 323,380
Accounts receivable (50,124) (19,310) (163,866)
Prepaid expenses (570,332) (396,276) 840,602
Inventory (82,900) (33,321) (68,474)
Other assets (47,657) (38,811) (86,292)
Increase (decrease) in:
Income taxes payable 48,175 (48,175) -
Accounts payable and accrued
expenses 274,940 742,368 (113,062)
Unearned revenue and other 322,083 42,681 (294,030)
----------- ---------- -----------
Net Cash Provided by Operating
Activities 821,823 (847,695) (399,648)
----------- ---------- -----------
Cash Flows from Investing Activities:
Investment in restricted cash - (848,296) (41,820)
Repayment of advances 351,150 - -
Construction in progress costs - (1,046,285) 1,080,895
Acquisition of property and
equipment, goodwill and covenant
not to compete (896,551) (3,873,738) (2,587,903)
----------- ---------- -----------
Net Cash (Used in) Investing
Activities (545,401) (5,768,319) (1,548,828)
----------- ---------- -----------
Cash Flows from Financing Activities:
Common stock issued and additional
paid-in capital 3,403,450 1,489,743 1,109,739
Preferred dividends paid (43,115) - -
Advances from officers 60,500 - -
Proceeds from notes payable - 2,518,018 1,000,000
Principal payments on notes
payable (438,793) (59,429) (418,037)
----------- ---------- -----------
Net Cash Provided by (Used in)
Financing Activities 2,982,042 3,948,332 1,691,702
----------- ---------- -----------
Net Increase (Decrease) in Cash 3,258,464 (2,667,682) (256,774)
Cash, beginning of period 40,281 3,298,745 631,063
----------- ---------- -----------
Cash, end of period $ 3,298,745 $ 631,063 $ 374,289
----------- ---------- -----------
----------- ---------- -----------
Interest paid $ 54,506 $ 112,248 $ 268,605
----------- ---------- -----------
----------- ---------- -----------
Income tax paid $ 98,825 $ 237,752 $ -
----------- ---------- -----------
----------- ---------- -----------
Note: The Company issued common and preferred stock for assets totalling
$1,408,000 during the year ended March 31, 1995. During the year ended March
31, 1996 the Company issued 270,000 shares of its common stock to consummate
the business combination with CFL. The accompanying notes are an integral
part of the financial statements.
F-8
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Renaissance
Entertainment Corporation (Company) (REC) is presented to assist in
understanding the Company's financial statements. The financial
statements and notes are representations of the Company's management
who is responsible for their integrity and objectivity. These
accounting policies conform to generally accepted accounting principles
and have been consistently applied in the preparation of the financial
statements.
(a) GENERAL
REC was incorporated under the laws of the State of Colorado on June
24, 1988. On April 6, 1993, REC acquired one hundred percent of the
common stock of Ellora Corporation, a Wisconsin corporation which owns
and operates the Bristol Renaissance Faire located in Kenosha,
Wisconsin. In the acquisition, REC issued a total of 1,784,800 shares
of common stock to the shareholders of Ellora Corporation, representing
ninety-one percent of the total issued and outstanding shares of REC
following the exchange. The acquisition was accounted for as a reverse
acquisition since the controlling shareholders of Ellora became the
controlling shareholders of REC. During the year ended March 31, 1994
REC formed a wholly-owned subsidiary called Heroes and Villains, Ltd.
This entity was formed to provide entertainment services and had
limited activity during the year. During February, 1994 REC formed
Renaissance Pleasure Faires, Inc. (RPFI) for the purpose of acquiring
the assets and the business of two Renaissance Faires in California. In
connection with this acquisition and the formation of RPFI, the Company
issued 1,136,666 shares of its common stock and 875,000 shares of
Series A Convertible Preferred Voting Stock and assumed certain
liabilities and guaranteed certain lease obligations of the seller.
The preferred shares were later exchanged for common stock. Of the
common shares issued, 524,000 common shares were issued to the seller
and 612,666 common shares were issued to shareholders of Western
Renaissance Fair Presentation, Inc. (Western) a newly formed California
corporation, formed for the purpose of providing management services to
operators of renaissance festivals.
Western was owned by certain employees of the seller. Subsequent to its
acquisition,
F-9
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(a) GENERAL
Western was merged into a subsidiary of REC. For accounting purposes,
the acquisition of the California Faires net assets and business and
the acquisition of Western was treated as one combined acquisition with
the excess of cost over fair value of net assets acquired accounted for
as goodwill. The preferred shares had an annual 6% dividend provision
payable monthly in arrears. The preferred shares had equal voting
rights per share as the common shares outstanding (583,334 votes after
giving effect to the reverse common stock splits described in note 10).
The preferred shares had a conversion provision that they could be
converted by the holders at any time during the first two years into
common stock on a one-for-three basis. REC had the right at any time
to redeem these shares at $1.00 per share. During January, 1995 these
preferred shares were converted to 583,334 shares of common stock. The
Company also forgave loans to the seller totalling $62,805 which
reduced additional paid-in capital related to this conversion
transaction. Prior to conversion, the Company paid dividends totalling
$43,115 related to these preferred shares. All documents related to
this closing and all shares issued were signed and dated in March,
1994. The bill of sale related to the transfer of the assets was
effective April 1, 1994. In connection with this transaction, certain
controlling shareholders have entered into a stock pooling and voting
agreement requiring the voting for certain individuals to serve as
directors of the Company. In connection with this acquisition, the
Company incurred approximately $50,000 of legal and professional fees
and issued 233,066 shares of common stock valued at $72,833 for
consulting services related to assistance with negotiations regarding
the acquisition. The business combination as of April 1, 1994 was
accounted for as a purchase by REC. See Note 10 for additional
information related to this business combination.
Effective December 31, 1995 REC acquired 100% ownership of Creative
Faires, Ltd. (CFL) in exchange for the issuance of 540,000 restricted
common shares of REC stock. REC entered into employment agreements
with the two former owners of CFL and one of the two former owners
became a director of REC. The business combination with CFL was
accounted for as a pooling of interests. The Company changed its year
end to December 31. The March 31, 1996 consolidated balance sheet
includes the accounts of
F-10
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(a) GENERAL
CFL as of December 31, 1995 and the consolidated accounts of REC and
subsidiaries as of March 31, 1996. The consolidated statements of
operations and cash flows include the accounts of CFL for the two years
ended December 31, 1995 and the consolidated accounts of REC and
subsidiaries for the two years ended March 31, 1996. The consolidated
statements of operations and cash flows include the accounts of CFL for
the year ended December 31, 1996 and accounts of REC for the nine month
period ended December 31, 1996. During the three month period ended
March 31, 1996, REC loaned $141,179 to CFL which was not eliminated in
the consolidated financial statements because of the different year
ends. The majority of the advances to CFL were used for start-up costs
for the upcoming New York Faire described in note 9. The $141,179 has
been included with prepaid expenses in the March 31, 1996 consolidated
balance sheet.
All subsidiaries of the Company were merged into REC as of March 31,
1996 with the exception of Creative Faires, Ltd.
All references to the "Company" refer to REC and its subsidiaries. All
intercompany transactions and account balances have been eliminated in
the financial statements other than as noted above.
(b) PER SHARE INFORMATION
Per share information is determined using the weighted average number
of shares outstanding during the periods after giving effect to the
common stock splits described in note 10.
(c) PROPERTY AND EQUIPMENT
Property and equipment is carried at cost, net of accumulated
depreciation. Depreciation is computed using principally accelerated
methods over the useful lives of the assets ranging from three to
thirty years.
F-11
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(d) REVENUE AND EXPENSE RECOGNITION AND COST OF SALES
The Company recognizes revenues from the renaissance fairs as earned
during the period when the fairs are in operation.
These revenues consist principally of gate entrance fees, food and
beverage concessions sales, lease revenue and fees charged to craft
vendors. At various dates subsequent to the end of the operation of
the prior years fairs, and prior to the opening of the next years
fairs, the Company receives deposits from the craft vendors and others.
These deposits are carried as unearned revenue until applied to fees
charged and then earned on a pro-rata basis during the operation of the
fair.
Cost of sales as shown in the statement of operations includes all
direct costs associated with the production of the Renaissance Faire,
including cost of food, beverage and merchandise sold, labor costs for
seasonal help and other direct costs of the production. All other
expenses related to operation of the fair are shown as operating
expenses in the statement of operations.
Advertising costs are expensed as incurred. Direct costs related to
the setting up of the fairs are capitalized as prepaid expenses and
expensed during the period of the operation of the applicable fairs.
Also, included in prepaid expenses at March 31, 1996 is $141,179 of
advances from REC to CFL. CFL has a December 31 year end and REC has a
March 31 year end. These advances relate principally to cost related
to setting up the New York Faire but also include operating expenses
which apply to the short period after the CFL year end. See a
description above of the business combination with CFL accounts for a
pooling of interest.
(e) STOCK SPLIT
During the fiscal year ended March 31, 1995, the Company effected a
one-for-three reverse stock split and changed the par value of the
common stock from $.01 to $.03 per share. During the period ended
December 31, 1996, the Company effected a two-for-one stock split. The
financial statements were retroactively adjusted for this split.
F-12
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(f) CONCENTRATIONS OF CREDIT RISKS
Financial instruments that potentially subject the company to
concentrations of credit risk consist principally of temporary cash
investments and cash equivalents and trade accounts receivables. At
March 31, 1996 and December 31, 1996 respectively, the Company had
approximately $1,370,000 and $1,065,000 of its cash and cash
equivalents in financial institutions in excess of amounts insured by
agencies of the U.S. Government. Most of the trade receivables are
from customers in one geographic location, principally California. The
Company does not require collateral for its trade accounts receivables.
(g) CASH EQUIVALENTS
The Company considers all short term investments in securities that
mature in 90 days or less to be cash equivalents.
(h) INVENTORY
The Company's inventory consists principally of merchandise held for
sale. The Company carries its inventory at the lower of cost or
market. Cost is determined on an average cost basis.
(i) ALLOWANCE FOR BAD DEBTS
The Company provides an allowance for bad debts based on prior
collection experience.
(j) USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
F-13
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(k) GEOGRAPHIC AREA OF OPERATIONS AND INTEREST RATES
The Company owns and operates Renaissance Faires principally in five
major metropolitan areas of the U.S.A. The potential for severe
financial impact can result from negative effects of economic
conditions within the markets or geographic areas. Since the Company's
business is principally in five areas, this concentration of operations
results in an associated risk and uncertainty.
(l) CONSTRUCTION IN PROGRESS
As of March 31, 1996 the Company had incurred $1,080,895 of
construction costs related to the Company building a fair site in
Virginia. These construction costs incurred consisted of buildings and
land improvements. The construction was completed subsequent to March
31, 1996.
(m) IMPAIRMENT OF LONG-LIVED ASSETS
The Company determined that the goodwill associated with its
acquisition of the California Faires net assets and its acquisition of
Western was impaired after estimating the expected gross profit from
future revenues as compared to the net book value. The Company wrote
down the intangible assets by $380,000 through a charge to other
operating expenses during the period December 31, 1996.
(2) COMMON AND PREFERRED STOCK
The Articles of Incorporation of the Company authorize issuance of a
maximum of 50,000,000 shares of $.03 par value common stock and
1,000,000 shares of $1.00 par value preferred stock. See note 1 for a
description of the preferred stock issued and then subsequently
converted to common stock.
During January, 1995 the Company sold in a public offering 1,035,000
units of its securities at $3.50 per unit. Each unit consisted of one
share of common stock and one Class A warrant and one Class B warrant.
Each Class A warrant entitles the warrant holder thereof to purchase
one share of common stock at a price of $4.00 per share through January
27, 2000. Each Class B warrant entitles the holder thereof to
F-14
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(2) COMMON AND PREFERRED STOCK, CONTINUED
purchase one share of common stock at a price of $5.25 per share
through January 27, 2000. These warrants were immediately exercisable.
The warrants are redeemable by the Company after 24 months from
January 27, 1995, the date of the prospectus, or sooner with the
consent of the Underwriter, at a price of $.01 per warrant upon 30
days' notice mailed within ten days after the closing bid price of the
Company's common stock has equaled or exceeded 150% of the then current
respective warrant exercise price for a period of 20 consecutive
trading days. The holders of the warrants called for redemption are
granted exercise rights until the close of business on the date
preceding the date fixed for redemption.
The Company incurred $646,056 of costs related to this offering. These
offering costs have been offset against the proceeds of the offering.
(3) NOTES PAYABLE
Notes payable at December 31, 1996 and March 31, 1996 are summarized as
follows:
March 31, December 31,
1996 1996
--------- ------------
Note payable to bank at 8.65%,
interest quarterly until June, 1996
then monthly principal and interest
payment of $5,082 through May, 2011
collateralized by land, improvements
and jumbo CD's. See note 11. $ 1,500,000 $1,475,950
Note payable to bank at 9.5%, 60
equal monthly payments of $5,251
through March, 2001 collateralized
by land, improvements and jumbo
CD's. See note 11. 250,000 219,605
F-15
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(3) NOTES PAYABLE, CONTINUED
Mortgage payable to Bank One Kenosha
at 9.5 % at March 31, 1996 and 9.25%
at 9.25% at December 31, 1996;
interest quarterly, two annual
payments of $100,000 each with a
balloon payment of $700,000 due
January, 1998; collateralized by land
and improvements. 900,000 800,000
Note payable to Bank One Colorado at
the bank reference rate plus 1%, 9.25%
at December 31, 1996, due September 1,
1996; collateralized by inventory,
accounts and equipment. - 746,132
Note payable to Bank One Kenosha at
the bank reference rate plus 2% with a
minimum rate of 10.25%; interest paid
monthly with the balance due September
1996, extended to December 15, 1997;
collateralized by equipment, fixtures
and inventory. 250,000 250,000
Various notes payable to financial
institutions collateralized by certain
vehicles. Payable in monthly
installments of principal and interest;
final payments due in 2000, interest
ranging from 10% to 12%. 69,144 59,419
------ ------
Total 2,969,144 3,551,106
Less current portion 437,957 1,209,119
------- ---------
Long-term portion $2,531,187 $2,341,987
---------- ----------
---------- ----------
In March 1997, the Company entered into a loan workout agreement with
Bank One Colorado and Bank One Kenosha (Bank One Wisconsin). The
agreement provides that
F-16
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(3) NOTES PAYABLE, CONTINUED
the Company make principal payments of $50,000 each to Bank One
Colorado and Bank One Wisconsin. Upon execution of this agreement, the
Company executed a real estate mortgage in favor of Bank One Colorado
subordinated to the Bank One Wisconsin's mortgage. Bank One Colorado
agreed to subordinate its mortgage to a potential new loan from a third
party lender to the Company in the amount of from $750,000 to $1.5
million, so long as the new loan is funded prior to June 1, 1997 and
the Company is not otherwise in default under the loans. As part of
this agreement, Bank One Colorado changed the terms of its loan
agreement to provide the Company interest monthly on its loan starting
April 30, 1997 with principal payments of $150,000 on June 30, 1997,
$200,000 on July 31, 1997, $250,000 on August 31, 1997 and final
principal payment of $90,189 on September 30, 1997. Additionally Bank
One Wisconsin modified the terms of its loan agreement to provide for
monthly interest payments starting April 30, 1997 with four monthly
principal payments of $50,000 starting June 30, 1997. If the Company
complies with all terms of this agreement, Bank One Wisconsin agrees to
renew its real estate mortgage to provide for quarterly principal
payments of $50,000 beginning in March of 1998 with the remaining
balance due and payable in December 1998. The Company agreed, if it
obtains alternative financing in excess of $2.5 million during calendar
year 1997, then the Company will immediately pay off all amounts then
due and owing Bank One Colorado and Bank One Wisconsin, excluding the
Bank One Wisconsin mortgage.
Maturities of notes payable for each of the next five fiscal years
ending December 31 and in the aggregate thereafter, are as follows:
1997 $ 1,210,214
1998 2,188,583
1999 66,108
2000 68,807
2001 17,394
---------
$ 3,551,106
-----------
-----------
(4) Leases
The Company leases a vehicle under a four year lease which commenced
June 8, 1992 with monthly lease payments of $336. Effective April 1,
1995 the Company entered into an operating lease at 4440 Arapahoe in
Boulder, Colorado for office facilities. Initial monthly rental
payments are $3,066 with annual increases of 5% per annum. Commencing
November 1, 1996,
F-17
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(4) LEASES, CONTINUED
the Company leased additional office space at 4410 Arapahoe in Boulder,
Colorado and subleased its original office space at 4440 Arapahoe.
This lease provides initial monthly lease payments of $5,969 increasing
to $7,255 for the five year term of the lease. In addition the Company
will be allocated certain operating expenses. The Company also leases
various other properties in New York with terms expiring through the
year 2001. Annual lease payments on the New York Faire site range from
approximately $270,000 to $312,000 over the next five years.
Future minimum rentals under all operating leases with terms exceeding
twelve months are as follows:
Year Ending
December 31,
1997 436,177
1998 456,623
1999 476,237
2000 468,370
2001 79,807
---------
Total $1,917,214
----------
----------
Effective January 1, 1997, the Company entered into a three year
sublease agreement to sublease its old office space at 4440 Arapahoe.
The sublessee assumes every obligation of the Company under its lease.
The Company remains liable under its lease.
Future minimum sublease rentals are as follows:
Year ending
December 31,
1997 $ 28,979
1998 30,428
1999 31,949
2000 24,849
2001 -
--------
Total $ 116,205
---------
---------
F-18
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
Rent expense for the nine month period ended December 31, 1996 and for
the years ended March 31, 1995 and 1996 totalled approximately
$431,292, $404,495 and $788,375, respectively.
(5) GOODWILL AND COVENANT NOT TO COMPETE
The cost of the acquisition of the California Faire assets and business
as described in Notes 1 and 10 in excess of the fair value of assets
acquired has been recorded as goodwill in the accompanying financial
statements. Goodwill is being amortized on a straight-line basis over
fifteen years. Management reviews the carrying value of goodwill on a
periodic basis, at least annually, to determine if there is any
impairment in value. If management determines that the carrying value
is not recoverable over the remaining amortization term, the excess
balance, if any, will be expensed. During the period ended December
31, 1996, the Company determined that the goodwill was impaired and
wrote off $380,000 as a charge to other operating expenses. As of
March 31, 1996 and December 31, 1996 the Company's net carrying value
for goodwill was $1,046,285 and $620,826 after amortization and write
down of $160,960 and $586,419 respectively.
In addition, the Company allocated $100,000 for certain covenants not
to compete for certain officers and employees of The Living History
Centre related to the asset and business acquisition. These covenants
not to compete are being amortized on a straight-line basis over five
years.
(6) INCOME TAXES
The Company files income tax returns with its subsidiaries. During the
year ended March 31, 1995 the Company utilized loss carryovers to
offset taxable income totalling approximately $386,000 resulting in
realization of tax benefits of approximately $154,000. During the year
ended March 31, 1996 the Company incurred an operating loss resulting
in a carryback to prior years. As of March 31, 1996 the Company had
income tax refunds receivable resulting from the carryback and refunds
receivable from excess estimated payments which together totalled
$323,380.
F-19
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(7) PROPERTY AND EQUIPMENT
Land $3,415,798
Buildings and Improvements 3,018,450
Office Furniture and Equipment 490,975
Costumes, Props and Other Assets 2,180,297
---------
Sub-total 9,105,520
Less Accumulated Depreciation (1,928,765)
----------
Total $7,176,755
----------
----------
(8) WARRANTS ISSUED FOR SERVICES AND STOCK OPTIONS
In January, 1994 the Company issued warrants to purchase an aggregate
of 266,666 shares of the Company's common stock at an exercise price of
$1.87 per share. These warrants were issued pursuant to a Form S-8
registration statement for various consulting services. These warrants
were exercised during the year ended March 31, 1995. These 266,666
warrants were valued at $.15 per warrant and expensed in the total
amount of $40,000 in the financial statements.
Pursuant to the Company's stock option plans, the Company has granted
options to acquire 1,081,318 shares of the Company's common stock. Of
this amount 133,724 options have been exercised and 11,998 have expired
during the year ended March 31, 1996. The options are exercisable at
prices ranging from $1.13 per share to $3.50 per share. During the
period ended December 31, 1996, 105,000 options were granted with a
weighted average price of $5.74, 452,558 options were exercised at a
weighted average price of $1.87 and 161,998 options terminated with a
weighted average price of $4.09. The remaining number of options
outstanding at December 31, 1996 totalled 571,762 with a weighted
average price of $2.60 which are exercisable at various dates through
2001.
(9) BUSINESS COMBINATION, NEW YORK FAIRE
Effective December 31, 1995 the Company issued 540,000 shares of its
restricted common stock for 100% ownership of Creative Faires, Ltd.
(CFL) The transaction was accounted for as a pooling of interests as
described in note 1. CFL principally conducted a New York Faire.
F-20
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(9) BUSINESS COMBINATION, NEW YORK FAIRE, CONTINUED
REC and consolidated subsidiaries previously reported revenue of
$10,459,476 and net income of $624,609 during the year ended March 31,
1996. The revenues and net loss of CFL included in the combined
statement of operations for the year ended March 31, 1995 amounted to
$2,081,177 and $(48,185), respectively. Revenues of $2,308,378 and a
net loss of $(37,756) of CFL, incurred prior to the business
combination have been included in the combined statement of operations
for the year ended March 31, 1996.
(10) BUSINESS COMBINATION, CALIFORNIA FAIRES
Effective April 1, 1994 the Company acquired the assets and certain
liabilities of The Living History Centre, (LHC) a California,
not-for-profit corporation. The Company issued 1,136,666 shares of its
common stock and 875,000 shares of its preferred stock as consideration
for the net assets acquired. The preferred stock was converted into
common stock during January, 1995. In addition to acquiring certain
assets and liabilities of LHC, the Company has acquired the rights to
operate two California Renaissance Faires.
See Note 1 financial statements for additional information related to
the business combination. The transaction was accounted for as a
purchase by REC. The results of operations of the LHC Faire
operations are included in the income statement of REC commencing
April 1, 1994. The cost of this acquisition was approximately
$2,534,000, including assumption of liabilities and issuance of the
common and convertible preferred stock.
The following table shows the allocation of the purchase price assets:
Cash $ 63,000
Prepaid faire costs 318,000
Inventory 56,000
Accounts receivable 87,000
Property and equipment 664,000
Covenant not to compete 100,000
Goodwill 1,207,000
Other assets 39,000
---------
$ 2,534,000
-----------
-----------
F-21
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(10) BUSINESS COMBINATION, CALIFORNIA FAIRES, CONTINUED
Liabilities assumed 640,000
Preferred stock issued 875,000
Common stock issued 533,000
Cash advanced and acquisition
expenses incurred 486,000
----------
$ 2,534,000
-----------
-----------
Assets and liabilities acquired or assumed were recorded at estimated
fair value at April 1, 1994 the date of acquisition.
The amount assigned to the common stock was $532,812 ($.9375 per share)
approximately one half of the market trading price of the Company's
common stock as of April 1, 1994. This value was used due to the large
number of shares and their restrictive nature. LHC, a non-profit
corporation, obtained an appraisal of its business for the purpose of
determining an approximate valuation necessary to obtain regulatory
approval for sale of its assets. Although this appraisal indicated a
valuation in an amount such that the common stock of REC exchanged for
the certain net assets and the business of LHC would have been recorded
at $1.56 per share, management of REC did not believe that such a
valuation was appropriate under the circumstances. The appraiser based
the valuation on projected net income from the California Faires of
$500,000 per year. The California Faires have not been historically
profitable and to assume that the Faires will earn $500,000 per year
is, as explained in the appraisal, inherently highly speculative.
Therefore, management believes that the appraisal is unsuitable for
determining a value of the business acquired. Management gave
consideration to the following transactions and events when it
determined the appropriate valuation of the shares issued in the
acquisition:
a. In the fall of 1993, the Company sold 253,334 shares at a cash
price of $.75 per share. Following this private offering of a
small number of shares, the Company incurred substantial
operating losses and accumulated deficits.
b. For the two years prior to their acquisition, the two California
Renaissance Faires had generated substantial net operating loss
of $(869,953) and $(928,569) in the years 1992 and 1993,
respectively.
c. In August 1994, the Company sold in a private offering 800,000
shares at a price of $.30 per share, principally to raise working
capital to cover the anticipated cost of the public offering.
F-22
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(10) BUSINESS COMBINATION, CALIFORNIA FAIRES, CONTINUED
d. The public market of the Company's common stock was highly
illiquid, with only 300,000 shares in the public float eligible
for trading. Management believes that the price of $1.875 per
share of the publicly-traded shares was not indicative of the
fair market value of substantially larger blocks of restricted
shares.
e. The Company issued 77,688 shares and warrants to purchase an
additional 133,334 shares at an exercise price of $.9375, to an
entity affiliated with a director of the Company. The shares and
the exercise price of the warrants were valued at 100% of the
public trading price due to (i) the transaction having been
between the Company and a related party, and (ii) the fact that
the shares were registered on a Form S-8 which rendered them
free-trading.
f. The Company has granted to executive officers and key employees
incentive stock options at an exercise price of $1.875 per share.
In order to qualify as incentive stock options under Section 422
of the Internal Revenue Code, the options must be priced at 100%
of the public trading market of the Company's common stock.
Management believes that recording the shares issued for the LHC
acquisition at 50% of the publicly traded value is reasonable,
appropriate and normal for this large of a block of restricted
securities. Goodwill is being amortized on a straight-line basis over a
fifteen year period and the covenant not to compete is being amortized
on a straight-line basis over a five year period. The Company believes
that a 15 year estimated life over which goodwill is being amortized is
reasonable due to the fact the California Faires have been in existence
approximately 30 years and the fact that the average life of other
currently successful Renaissance Faires in the United States is over 15
years and there is no reason to believe that those Faires will not be
in existence for another 15 years.
It is the Company's policy that management on a periodic basis, at
least quarterly, will evaluate the Carrying value of goodwill and other
intangibles to determine if there is an impairment of value or the
remaining estimated life is less than the remaining unamortized period.
If the evaluation indicates write-downs or adjustments to the
amortization are necessary, such write-downs or adjustments will be
made immediately.
(11) RESTRICTED CASH
Certificates of Deposit in the amount of $890,116 at December 31, 1996
are collateral to an 8.65% and a 9.5% loan maturing in 2011 and 2001,
respectively, and Certificates of
F-23
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(11) RESTRICTED CASH, CONTINUED
Deposit totalling $275,000 may be released annually beginning March 1,
1997 and each year thereafter provided that projected net operating
income goals are realized in each of the three operating seasons
commencing in 1996. If the Certificates of Deposit have not been
released for any of the previous years but the projected income goal
for the current year is reached, the Certificates of Deposit for the
previous year and the current year shall be released. If projected
goals are not reached by year three, then the certificates shall be
released in any subsequent year that the third year goal amount is
reached.
(12) COMMITMENTS AND SUBSEQUENT EVENTS
Effective December 16, 1994 the Company entered into an agreement with
a consulting firm to provide to the Company certain promotional
services for the Company's fairs. The Company has agreed to pay
commissions to the consulting firm of 17.65% of the actual net billings
by advertisers for media placed pursuant to plans approved by the
Company. The Company has also agreed to pay $7,500 per month for the
five year term of the agreement. The Company has also granted an
option to the consulting firm to allow the firm to acquire a minimum of
66,000 and a maximum of 132,000 shares of the Company's common stock at
$1.625 per share with the increase depending on the results of the
services performed by the consulting firm.
Effective October 1, 1994 the Company entered into a consulting
agreement with a company owned by a director of Renaissance
Entertainment Corporation. The Company has agreed to pay the
consulting company $4,500 per month for twenty hours per month for
services. Additional hours will be compensated at $200 per hour. The
term of the agreement continues until December 31, 1996. Effective
April 1, 1995 the Company agreed to pay $4,000 per month for consulting
services to a director of the Company which expired effective December
31, 1995. The Company also has a consulting agreement with another
company that is owned by a director of the Company. This agreement is
for $75 per hour plus $300 per Board meeting and can be terminated at
any time.
On August 1, 1996, the Company entered into a one year agreement with a
consultant. The agreement provides that the Company pay the consultant
a fee equal to 5% of any debt or equity infusion to the Company
initiated or introduced to the Company
F-24
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(12) COMMITMENTS AND SUBSEQUENT EVENTS, CONTINUED
by the consultant. Additionally, the Company will pay the consultant a
fee equal to 5% of the total value of the merger or acquisition,
including the value of stock, cash and other assets of the merged
entities.
Subsequent to December 31, 1996 the Company issued 54,738 shares of its
common stock as payment of the Company's liabilities.
During the year ended March 31, 1995 the Company adopted a
non-qualified deferred compensation plan for ten employees of the
Company. Monthly contributions to the plan total approximately $3,500.
Beginning April 1, 1996 monthly contributions are approximately $1,152.
(13) STOCK SUBSCRIPTIONS RECEIVABLE
At December 31, 1996 the Company had stock subscriptions receivable in
the amount of $133,749 which was collected in full in January, 1997.
(14) SUBSEQUENT EVENTS
The Company incurred substantial losses from operations during 1995 and
1996 and incurred significant cost overruns in the construction of its
Virginia faire. As described in note 3, the Company has entered into
loan workout agreements with two banks which will require total bank
principal loan payments of $1,100,000 during 1997.
Subsequent to December 31, 1996, the Company raised $750,000 from an
officer of the Company and a related party through the issuance of
convertible debt and has commitments from investors for $600,000 of
convertible debt and additional equity capital. In order to reduce the
Company's working capital requirements, management has implemented a
number of cost reductions which it estimates will reduce the Company's
operating expenses by approximately $1,300,000 during the fiscal year
ending December 31, 1997.
Management believes that the additional capital raised, plus the
additional capital to be received from investors, in conjunction with
the reductions in operating expenses are sufficient for the Company to
be able to meet its financial commitments in 1997.
F-25
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(14) SUBSEQUENT EVENTS, CONTINUED
The Company's lease for the site of its Northern California faire
expires April 30, 1997. While the Company believes that its lease for
this site will be renewed for the 1997 faire, there can be no assurance
of such renewal. If the lease is not renewed, it is doubtful that the
Company would conduct a faire in Northern California in 1997.
(15) FOURTH QUARTER ADJUSTMENTS
The Company recognized as expense in the nine-month period ended
December 31, 1996, $450,000 of costs to be incurred in 1997, which
costs are the result of changing conditions at the Company's Northern
California Faire which became apparent to the Company in 1996. This
adjustment, which was made in the fourth quarter, was material to
fourth quarter operation.
F-26
- ---------------------------------------- ----------------------------------
- ---------------------------------------- ----------------------------------
No dealer, salesman, Selling
Shareholder or any other person has
been authorized to give any information
or to make any representations other
than those contained in this Prospectus
in connection with the offer made by
this Prospectus and, if given or made,
such information or representations
must not be relied upon as having been
authorized by the Company. This
Prospectus does not constitute an offer 356,350 Shares
to sell or the solicitation of any
offer to buy any security other than
the shares of the Common Stock offered
by this Prospectus, nor does it
constitute an offer to sell or a
solicitation of any offer to buy the
shares of Common Stock by anyone in any
jurisdiction in which such offer or
solicitation is not authorized, or in
which the person making such offer or
solicitation is not qualified to do so,
or to any person to whom it is unlawful
to make such offer or solicitation.
Neither the delivery of this Prospectus
nor any sale made hereunder shall,
under any circumstances, create any
implication that information contained RENAISSANCE
herein is correct as of any time ENTERTAINMENT
subsequent to the date hereof. CORPORATION
_______________
TABLE OF CONTENTS
Page
----
Prospectus Summary..................2
Risk Factors........................5
Market for the Common Equity ______________
and Related Stockholder Matters...10
Use of Proceeds....................11 PROSPECTUS
Capitalization.....................11 ______________
Dividend Policy....................11
Selected Financial Data............11
Management's Discussion and
Analysis of Financial Condition
and Results of Operations.........12
Business...........................20
Management.........................29
Certain Transactions...............35
Principal Shareholders.............36
Description of Securities..........37
Selling Shareholders...............38
Plan of Distribution...............39
Legal Matters......................40
Experts............................40
Additional Information.............40
Index to Financial Statements.....F-1
_______________ May ___, 1997
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
PART II
INFORMATION NOT REQUIRED TO BE IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses of the Company in
connection with the sale and distribution of the Common Stock being
registered. All of the amounts shown are estimates, except for the
Securities and Exchange Commission registration fee.
Securities and Exchange Commission fee $ 230
NASD Fee 576
Printing and Edgar expenses 500
Accounting fees and expenses 400
Legal fees and expenses 4,000
Miscellaneous 294
------
TOTAL $6,000
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article VIII of the Company's Amended and Restated Articles of
Incorporation provides that the Company shall indemnify any director,
officer, employee or agent of the corporation made or threatened to be made a
party to a proceeding, by reason of the former or present official act of the
person, against judgments, penalties, fines, settlements and reasonable
expenses incurred by the person in connection with the proceeding if certain
standards are met.
Article XI of the Company's Amended and Restated Articles of
Incorporation eliminates certain personal liability of the directors of the
Company for monetary damages for certain breaches of director's fiduciary
duties.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
1. For unregistered sales of the Company's securities prior to
February 27, 1996, reference is made to Item 26 of the Company's
Registration Statement on Form SB-2 (No. 33-85538), declared
effective by the Commission on January 27, 1995, and the
post-effective amendments thereto.
2. During April 1997, the Company issued $350,000 principal amount
of its 10% Convertible Secured Notes to three investors. The Notes
were acquired for investment purposes and were issued without
II-1
registration under the Securities Act of 1933, in reliance upon
Section 4(2) thereof for offerings not involving a public offering of
securities. No underwriters were involved in such offering and no
commissions were paid for the solicitation of the investors. The Notes
are convertible into shares of the Company's Common Stock at the
lesser of $1.75 per share or 50% of the market price for such stock at
the time of conversion.
ITEM 16. EXHIBITS
EXHIBIT NO TITLE
3.0(i) Amended and Restated Articles of Incorporation, incorporated by
reference from the Amendment No. 1 to Registrant's Registration
Statement on Form 8-A filed with the Commission on April 12, 1994.
3.0(ii) By-Laws, incorporated by reference from the Amendment No. 1 to
Registrant's Registration Statement on Form 8-A filed with the
Commission on April 12, 1994.
* 3.1 Articles of Amendment to the Articles of Incorporation.
4.1 Specimen Certificate of Common Stock, incorporated by reference
from the Amendment No. 1 to Registrant's Registration Statement on
Form 8-A filed with the Commission on April 12, 1994.
* 4.2 Specimen Class A Warrant Certificate.
* 4.3 Specimen Class B Warrant Certificate.
* 4.4 Warrant Agreement.
* 4.15 Renaissance Entertainment Corporation 1993 Stock Incentive Plan.
5.1 Opinion of Gray, Plant, Mooty, Mooty & Bennett, P.A.--filed
herewith.
10.1 Employment Agreement with Howard Hamburg, incorporated by
reference from the Registrant's Current Report on Form 8-K dated
December 31, 1995.
10.2 Employment Agreement with Kevin Patterson, incorporated by
reference from the Registrant's Current Report on Form 8-K dated
December 31, 1995.
II-2
10.3 Office Lease with Diana Wilkins dated August 15, 1996,
incorporated by reference from the Registrant's Annual Report on
Form 10-K for the nine months ended December 31, 1996.
* 10.4 Consultation Agreement with Creative Business Strategies, Inc.
* 10.4 Letter Agreement with Rob Geller dated July 19, 1994.
* 10.5 Agreement with The Living History Centre dated August 25, 1994.
* 10.6 Specimen Vendor and Exhibitor Agreement for the Bristol
Renaissance Faire.
* 10.7 Specimen Vendor and Exhibitor Agreement for the Northern and
Southern Renaissance Pleasure Faires.
* 10.8 Specimen Bristol Renaissance Faire Concession Agreement.
* 10.9 Specimen Bristol Renaissance Faire Games Concession Agreement.
* 10.10 License Agreement and Lease with San Bernardino County for the
Southern Renaissance Pleasure Faire site.
* 10.11 Investment Banking Agreement with Duke & Co., Inc.
10.12 Lease Agreement between Creative Faires, Ltd. and Sterling Forest
Corporation dated June 12, 1996 incorporated by reference from the
Registrant's Annual Report on Form 10-KSB for the year ended
March 31, 1996.
10.13 Mortgage dated April 7, 1995 with Bank One, Kenosha N.A. with
respect to Bristol Property, incorporated by reference from the
Registrant's Annual Report on Form 10-KSB for the year ended
March 31, 1996.
* 10.14 Employment Agreement dated February 5, 1996 with Barbara Hope.
* 10.15 Employment Agreement dated February 5, 1996 with Donald C. Gaiti.
10.16 Line of credit with Bank One, Wisconsin in the amount of $250,000
dated February 6, 1996, incorporated by reference from the
Registrant's Quarterly Report on Form 10-QSB for the quarter
ended December 31, 1995, filed with the Commission on
February 20, 1996.
10.17 Line of credit with Union Bank & Trust in the amount of $250,000
dated December 29, 1995, incorporated by reference from the
Registrant's
II-3
Quarterly Report on Form 10-QSB for the quarter ended
December 31, 1995, filed with the Commission on February 20, 1996.
10.18 Commitment Letter for a line of credit with Bank One Colorado in
the amount of $750,000 dated January 26, 1996, incorporated by
reference from the Registrant's Quarterly Report on Form 10-QSB
for the quarter ended December 31, 1995, filed with the Commission
on February 20, 1996.
10.19 Mortgage with Union Bank & Trust in the amount of $1,500,000 with
respect to the Virginia property, incorporated by reference from
the Registrant's Annual Report on Form 10-KSB for the year ended
March 31, 1996.
10.20 Loan Workout Agreement by and among Renaissance Entertainment
Corporation, Bank One, Colorado, N.A. and Bank One, Kenosha,
N.A., incorporated herein by reference from the Registrant's
Annual Report on Form 10-K for the nine months ended
December 31, 1996.
10.21 Subscription and Purchase Agreement for 10% Convertible Secured
Notes--filed herewith.
21.0 Subsidiaries, incorporated by reference from the Registrant's
Annual Report on Form 10-KSB for the year ended March 31, 1996.
23.1 Independent Auditor's Consent--filed herewith.
23.2 Consent of Gray, Plant, Mooty, Mooty & Bennett, P.A.--see
Exhibit 5.1.
24.1 Power of Attorney (included on signature page of initial
Registration Statement).
* Incorporated by reference from the Company's Registration Statement on
Form SB-2 (No. 33-85538), declared effective by the Commission on
January 27, 1995, and the Post-Effective amendments thereto.
ITEM 17. UNDERTAKINGS
A. The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement : (i) to
include any prospectus required by Section 19(a)(3) of the Securities Act of
1933; (ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a
II-4
fundamental change in the information set forth in the registration
statement; and (iii) to include any material information with respect to the
plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered that remain unsold at the
termination of the offering.
B. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and
controlling persons of the registrant as discussed above, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer, or
controlling person of the registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boulder, State of Colorado, on May 6, 1997.
RENAISSANCE ENTERTAINMENT CORPORATION.
By /s/ Charles S. Leavell
-------------------------------------
Charles S. Leavell
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Charles S. Leavell and James R.
McDonald, and each of them, his/her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him/her and in
his/her name, place, and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to this Registration
Statement and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full powers and authority to do and perform each and every act and
thing requisite or necessary to be done in and about the premises, as fully
to all intents and purposes as he/she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or their
or his/her substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on the 6th day of May, 1997, by
the following persons in the capacities indicated:
Signature Position
--------- --------
/s/ Charles S. Leavell Director and Chairman of the
- ----------------------------------- Board and Chief Executive
Charles S. Leavell Officer
II-6
/s/ James R. McDonald Chief Financial Officer
- -----------------------------------
James R. McDonald
/s/ Sue Brophy Chief Accounting Officer
- -----------------------------------
Sue Brophy
/s/ Sanford L. Schwartz Director
- -----------------------------------
Sanford L. Schwartz
/s/ Robert M. Geller Director
- -----------------------------------
Robert M. Geller
- ----------------------------------- Director
Gregg Adam Thaler
Director
- -----------------------------------
Dean Petkanas
II-7
RENAISSANCE ENTERTAINMENT CORPORATION
FORM S-1
INDEX TO EXHIBITS
Exhibit No Title
- ---------- -----
3.0(i) Amended and Restated Articles of Incorporation, incorporated by
reference from the Amendment No. 1 to Registrant's Registration
Statement on Form 8-A filed with the Commission on April 12, 1994.
3.0(ii) By-Laws, incorporated by reference from the Amendment No. 1 to
Registrant's Registration Statement on Form 8-A filed with
the Commission on April 12, 1994.
*3.1 Articles of Amendment to the Articles of Incorporation.
4.1 Specimen Certificate of Common Stock, incorporated by reference
from the Amendment No. 1 to Registrant's Registration Statement on
Form 8-A filed with the Commission on April 12, 1994.
*4.2 Specimen Class A Warrant Certificate.
*4.3 Specimen Class B Warrant Certificate.
*4.4 Warrant Agreement.
*4.15 Renaissance Entertainment Corporation 1993 Stock Incentive Plan.(1)
5.1 Opinion of Gray, Plant, Mooty, Mooty & Bennett, P.A.--filed herewith.
10.1 Employment Agreement with Howard Hamburg, incorporated by reference
from the Registrant's Current Report on Form 8-K dated December 31,
1995.(1)
10.2 Employment Agreement with Kevin Patterson, incorporated by reference
from the Registrant's Current Report on Form 8-K dated December 31,
1995.(1)
10.3 Office Lease with Diana Wilkins dated August 15, 1996, incorporated by
reference from the Registrant's Annual Report on Form 10-K for the
nine months ended December 31, 1996.
*10.4 Consultation Agreement with Creative Business Strategies, Inc.(1)
II-8
*10.4 Letter Agreement with Rob Geller dated July 19, 1994.(1)
*10.5 Agreement with The Living History Centre dated August 25, 1994.
*10.6 Specimen Vendor and Exhibitor Agreement for the Bristol Renaissance Faire.
*10.7 Specimen Vendor and Exhibitor Agreement for the Northern and Southern
Renaissance Pleasure Faires.
*10.8 Specimen Bristol Renaissance Faire Concession Agreement.
*10.9 Specimen Bristol Renaissance Faire Games Concession Agreement.
*10.10 License Agreement and Lease with San Bernardino County for the
Southern Renaissance Pleasure Faire site.
*10.11 Investment Banking Agreement with Duke & Co., Inc.
10.12 Lease Agreement between Creative Faires, Ltd. and Sterling Forest
Corporation dated June 12, 1996 incorporated by reference from the
Registrant's Annual Report on Form 10-KSB for the year ended March 31, 1996.
10.13 Mortgage dated April 7, 1995 with Bank One, Kenosha N.A. with respect
to Bristol Property, incorporated by reference from the Registrant's
Annual Report on Form 10-KSB for the year ended March 31, 1996.
*10.14 Employment Agreement dated February 5, 1996 with Barbara Hope.
*10.15 Employment Agreement dated February 5, 1996 with Donald C. Gaiti.
10.16 Line of credit with Bank One, Wisconsin in the amount of $250,000
dated February 6, 1996, incorporated by reference from the
Registrant's Quarterly Report on Form 10-QSB for the quarter ended
December 31, 1995, filed with the Commission on February 20, 1996.
10.17 Line of credit with Union Bank & Trust in the amount of $250,000 dated
December 29, 1995, incorporated by reference from the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended December 31,
1995, filed with the Commission on February 20, 1996.
10.18 Commitment Letter for a line of credit with Bank One Colorado in the
amount of $750,000 dated January 26, 1996, incorporated by reference
from
II-9
the Registrant's Quarterly Report on Form 10-QSB for the quarter
ended December 31, 1995, filed with the Commission on February 20, 1996.
10.19 Mortgage with Union Bank & Trust in the amount of $1,500,000 with respect
to the Virginia property, incorporated by reference from the Registrant's
Annual Report on Form 10-KSB for the year ended March 31, 1996.
10.20 Loan Workout Agreement by and among Renaissance Entertainment
Corporation, Bank One, Colorado, N.A. and Bank One, Kenosha, N.A.,
incorporated herein by reference from the Registrant's Annual Report on
Form 10-K for the nine months ended December 31, 1996.
10.21 Subscription and Purchase Agreement for 10% Convertible Secured Notes--
filed herewith.
21.0 Subsidiaries, incorporated by reference from the Registrant's Annual
Report on Form 10-KSB for the year ended March 31, 1996.
23.1 Independent Auditor's Consent--filed herewith.
23.2 Consent of Gray, Plant, Mooty, Mooty & Bennett, P.A.--see Exhibit 5.1.
24.1 Power of Attorney (included on signature page of initial Registration
Statement).
* Incorporated by reference from the Company's Registration Statement on
Form SB-2, declared effective by the Commission on January 27, 1995,
and the Post-Effective amendments thereto.
II-10