UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended September 30, 1997
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or
[ ] Transition Report Pursuance to Section 13 or 15(d) of the Securities
Exchange act of 1934.
For the transition period from to
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Commission File Number 0-23782
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RENAISSANCE ENTERTAINMENT CORPORATION
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(Exact name of registrant as specified in its charter)
Colorado 84-1094630
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
4410 Arapahoe Avenue, Suite 200, Boulder, Colorado 80303
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(Address of principal executive offices) (Zip Code)
(303) 444-8273
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[ X ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of November 12, 1997, Registrant had 10,263,247 shares of common stock, $.03
Par Value, outstanding.
INDEX
Page
Number
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Part I. Financial Information
Item I. Financial Statements
Balance Sheets as of September 30, 1997 (Unaudited)
and December 31, 1996 3
Statements of Operations for the Three Months
Ended September 30, 1997 and 1996
(Unaudited) 4
Statements of Operations for the Nine Months
Ended September 30, 1997 and 1996
(Unaudited) 5
Statements of Cash Flows for the Nine Months
Ended September 30, 1997 and 1996
(Unaudited) 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II. Other Information 14
RENAISSANCE ENTERTAINMENT CORPORATION AND CONSOLIDATED SUBSIDIARY
BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
1997 1996
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Current Assets:
Cash and equivalents $375,222 $374,289
Stock subscription receivable 133,749
Accounts receivable (net) 765,154 99,551
Inventory 171,529 184,695
Prepaid expenses and other 100,010 139,167
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Total Current Assets 1,411,915 931,451
Property and equipment, net of accumulated depreciation 7,045,710 7,176,755
Covenant not to compete 29,999 45,000
Goodwill 582,819 620,826
Restricted cash 310,107 890,116
Other assets 255,715 208,201
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TOTAL ASSETS $9,636,265 $9,872,349
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 774,279 $1,068,028
Notes payable, current portion 1,112,684 1,209,119
Unearned income 85,350 160,588
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Total Current Liabilities 1,972,313 2,437,735
Notes payable, net of current portion, unrelated parties 1,748,365 2,341,987
Notes Payable, related parties 250,000
Other 51,322 37,175
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Total Liabilities 4,022,000 4,816,897
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Stockholders' Equity:
Common stock, $.03 par value, 50,000,000
shares authorized, 9,636,262 shares
issued and outstanding at September 30, 1997 289,088 277,013
Additional paid-in capital 9,038,098 8,071,634
Accumulated earnings (deficit) (3,712,921) (3,293,195)
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Total Stockholders' Equity 5,614,265 5,055,452
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TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $9,636,265 $9,872,349
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The accompanying notes are an integral part of the financial statements.
RENAISSANCE ENTERTAINMENT CORPORATION AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
September 30,
-------------------------
1997 1996
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REVENUE:
Sales $ 8,208,373 $ 7,935,799
Faire operating costs 2,437,836 2,271,185
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Gross Profit 5,770,537 5,664,614
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OPERATING EXPENSES:
Salaries 1,888,412 1,533,507
Depreciation and amortization 186,162 213,629
Advertising 1,296,333 1,558,351
Other operating expenses 1,426,498 1,033,326
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Total Operating Expenses 4,797,405 4,338,813
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Net Operating (Loss) Income 973,132 1,325,801
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Other Income (Expenses):
Interest income 13,548 28,416
Interest (expense) (99,108) (69,177)
Other income (expense) (53,699) (2,567)
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Total Other Income (Expenses) (139,259) (43,328)
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Net Income (Loss) before (Provision)
Credit for Income Taxes 833,873 1,282,473
(Provision) Credit for Income Taxes - -
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Net Income (Loss) to Common Stockholders $ 833,873 $ 1,282,473
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Net Income (Loss) per Common Share $.09 $.14
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Weighted Average Number of Common
Shares Outstanding 9,636,262 8,886,403
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The accompanying notes are an integral part of the financial statements.
RENAISSANCE ENTERTAINMENT CORPORATION AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended
September 30,
-------------------------------
1997 1996
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REVENUE:
Sales $ 13,093,969 $ 13,241,878
Faire operating costs 4,268,379 4,391,103
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Gross Profit 8,825,590 8,850,775
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OPERATING EXPENSES:
Salaries 3,907,931 3,722,829
Depreciation and amortization 529,732 479,862
Goodwill Writedown - 380,000
Advertising 1,990,324 2,450,985
Other operating expenses 2,825,251 3,249,490
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Total Operating Expenses 9,253,238 10,283,166
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Net Operating (Loss) Income (427,648) (1,432,391)
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Other Income (Expenses):
Interest income 44,263 58,871
Interest (expense) (295,275 (187,972)
Other income (expense) 258,935 (199,951)
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Total Other Income (Expenses) 7,923 (329,052)
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Net Income (Loss) before (Provision)
Credit for Income Taxes (419,725) (1,761,443)
(Provision) Credit for Income Taxes - 239,273
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Net Income (Loss) to Common Stockholders $ (419,725) $ (1,522,170)
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Net Income (Loss) per Common Share $ (.04) $ (.17)
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Weighted Average Number of Common
Shares Outstanding 9,574,197 8,813,137
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The accompanying notes are an integral part of the financial statements.
RENAISSANCE ENTERTAINMENT CORPORATION AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF CASH FLOWS
Nine Months ended
September 30,
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1997 1996
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Cash Flows from Operating Activities:
Net income (Loss) $ (419,725) $(1,522,170)
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Adjustments to reconcile net income (Loss)
to net cash provided by operating
activities:
Depreciation and amortization 529,732 859,862
Gain (loss) on disposal of assets 1,363 25,981
(Increase) decrease in:
Stock subscription receivable 133,749
Inventory 13,166 (91,783)
Receivables (665,603) (277,136)
Prepaid expenses and other (15,036) 89,095
Increase (decrease) in:
Accounts payable and accrued expenses (293,749) 1,143,478
Unearned revenue and other (61,091) 53,352
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Total adjustments (357,469) 1,802,849
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Net Cash Provided by Operating
Activities (777,193) 280,679
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Cash Flows from Investing Activities:
Investment in restricted cash 580,009 (26,182)
Acquisition of property and equipment (340,363) (2,678,888)
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Net Cash (Used in) Investing Activities 239,646 (2,705,070)
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Cash Flows from Financing Activities:
Common stock issued and additional
paid-in capital 978,539 957,661
Proceeds from notes payable 1,350,000 3,092,628
Principal payments on notes payable (1,790,059) (751,541)
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Net Cash Provided by Financing Activities 538,480 3,298,748
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Net Increase (Decrease) in Cash 933 874,357
Cash, beginning of period 374,289 732,553
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Cash, end of period $ 375,222 $ 1,606,910
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Interest paid $ 295,275 $ 187,972
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Income tax paid $ 374 $ (239,273)
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The accompanying notes are an integral part of the financial statements.
RENAISSANCE ENTERTAINMENT CORPORATION AND
CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
September 30, 1997 (Unaudited)
1. Unaudited Statements
The balance sheet as of September 30, 1997, the statements of operations
and the statements of cash flows for the three month and nine month periods
ended September 30, 1997 and 1996, have been prepared by the Registrant without
audit. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and changes in financial position at September 30, 1997
and for all periods presented, have been made.
These statements should be read in conjunction with the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 filed with the
Securities and Exchange Commission.
2. Calculation of Earnings (Loss) Per Share
The earnings (loss) per share is calculated by dividing the net income
(loss) to common stockholders by the weighted average number of common shares
outstanding.
3. Change in Accounting Estimate
The Company standardized the depreciable lives used for buildings from a
range of between 7 to 30 years in 1996 to 15 years for temporary buildings
and 30 years for permanent buildings in 1997. The effect of this change on
net income of the current period (nine months ended September 30, 1997) was
an increase of approximately $292,950 over the amount that would have been
reported. The effect of this change on earnings per share of the current
period (nine months ended September 30, 1997) was a reduction in the loss per
share of approximately $.03 per share from the amount that would have been
reported.
4. Subsequent Events
During November 1997, the Company completed a sale and leaseback of its real
property in Wisconsin. See the following discussion in Management's Discussion
and Analysis of Financial Condition and Results of Operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements, including the footnotes for the fiscal
period ended December 31, 1996. On June 21, 1996, the Company changed its
fiscal year end from March 31 to December 31.
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 Company's 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 Faire
is a re-creation of a Renaissance village, a fantasy experience transporting
the visitor back into sixteenth century England.
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 will incur a net operating loss for the
fiscal year ending December 31, 1997. The New York and Virginia Faires
operated at a loss during 1996. In addition, the Virginia Faire, which ran
from April 26, 1997 through June 8, 1997, operated at a loss in 1997. The
Company believes both of these Faire's results were adversely affected in
1996 and the Virginia Faire in 1997 by unusually inclement weather in their
respective areas. It is typical for a new faire such as the Virginia Faire
to operate at a loss for two or more years until it is able to build a
sufficient customer base and awareness of the faire. Due to the fact that the
New York Faire was acquired in 1996, the Company had limited ability to
affect the operations of this Faire during the 1996 faire season. The
Company has hired a new manager for this Faire and introduced several new
entertainment acts and implemented additional promotional efforts for this
faire's 1997 season, which ran from July 26, 1997 through September 14, 1997.
Revenue for the New York Faire increased approximately $200,000 for the 1997
season compared to the 1996 season and the faire is expected to have operated
at close to a break even in 1997.
The owner of the site for the Company's Northern California Faire is seeking
to develop this 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 purposes is being challenged. While the
Company is investigating new sites for the Northern California Faire, there
can be no assurance that the Company will be able to secure a new site for
this Faire for the 1998 or following faire seasons.
The Company is also considering relocation of its Southern California Faire.
On November 4, 1996, the Company entered into a non-binding letter of intent
with the owner of a site in Pomona, California, which contemplated that the
Company would commence operation of the Southern California Faire at that
site starting in 1998. Subsequent to the signing of the letter of intent,
the owner of the current site for the Southern California Faire indicated
that it was willing to enter into a long-term lease for the current site.
The ability to enter into a long-term lease for this site increases its value
to the Company, as the Company could construct permanent structures on the
site and significantly reduce setup costs for the faire. As of the date of
this report, the Company has not decided if it should enter into a long-term
lease for the current site or relocate the Faire to the proposed site in
Pomona. The Company estimates that the cost of the construction and
relocation to the new site would be approximately $2,000,000.
The Company had a working capital deficit ($1,506,284) and ($560,398) as of
December 31, 1996 and September 30, 1997, respectively. During the first
five months of fiscal 1997, the Company obtained $1,350,000 of additional
working capital. While the Company believes that it has adequate working
capital to fund anticipated operations for fiscal 1997, it believes it must
obtain additional working capital for future fiscal periods. See "Liquidity
and Capital Resources."
PROSPECTIVE INFORMATION
This report 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.
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE
MONTHS ENDED SEPTEMBER 30, 1996
Revenues increased $272,574 or 3% from $7,935,799 in 1996 to $8,208,373 in
1997. This increase was primarily the result of an increase in revenues for
the New York Faire of approximately $200,000.
Operating expenses (year-round operating costs and corporate overhead)
increased $458,592 or 11%, from $4,338,813 in 1996 to $4,797,405 in 1997. Of
the operating expenses, salaries increased 23%, from $1,533,507 in 1996 to
$1,888,412 in 1997 due to increased personnel expenses and general salary
increases. Advertising expense decreased $262,018, or 17%, from $1,558,351
in 1996 to $1,296,333 in 1997. This decrease was due to spending more in
1996 for advertising the first year of the Virginia Faire as well as the
utilization of more cost efficient methods of advertising in 1997.
Depreciation and amortization decreased 13%, from $213,629 in 1996 to
$186,162 in 1997. This decrease is primarily the result of the Company
standardizing the depreciable lives used for buildings from a range of
between 7 to 30 years in 1996 to 15 years for temporary buildings and 30
years for permanent buildings in 1997.
Other operating expenses (all other general and administrative expenses of
the Company) increased $393,172 or 38%, from $1,033,326 in 1996 to $1,426,498
in 1997. This increase was primarily the result of the timing of the payment
for the rental of the Northern California Faire. In 1996, the rent of
$349,000 was paid and expensed in the second quarter, whereas the rent of
$375,000 was paid and expensed in the third quarter of 1997.
As a result of the foregoing, net operating income (before interest charges
and other income) decreased $352,669 or 27%, from $1,325,801 for the 1996
period to $973,132 for the 1997 period.
A 43% increase in interest expense from $69,177 in 1996 to $99,108 in 1997
resulted from an increase in the Company's borrowing levels throughout the
1997 period as compared to the 1996 period.
Other expense increased $51,132, from $2,567 in 1996 to $53,699 in 1997. The
primary cause of this increase was expenses incurred in 1997 in connection
with the termination of an employee.
Combining net operating income with other income/expense resulted in a
$448,600 decrease, or 35%, in net income before taxes, from $1,282,473 for
the 1996 period to $833,873 for the 1997 period.
Net income to common stockholders also decreased $448,600, or 35%, from
$1,282,473 for the 1996 period to $833,873 for the 1997 period. Finally, net
income per common share decreased from $.14 for the 1996 period to $.09 for
the 1997 period, based on 8,886,403 weighted average shares outstanding
during the 1996 period and 9,636,262 weighted average shares outstanding
during the 1997 period.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE
MONTHS ENDED SEPTEMBER 30, 1996
Revenues decreased $147,909 or 1% from $13,241,878 in 1996 to $13,093,969 in
1997. This decrease was primarily the result of a decrease in revenues for
the Virginia Faire of approximately $100,000 and a decrease in revenues for
the Southern California Faire of approximately $225,000. The decreased
revenues for the Virginia Faire were due to unusually inclement weather - six
of the seven faire weekends had substantial rain which severely impacted
attendance. The decreased revenues for the Southern California Faire were
due to being open one less weekend in 1997 than in 1996. Although revenues
were down in Virginia, the operating loss was reduced by approximately
$250,000, from a loss of approximately $680,000 for the 1996 period to a loss
of approximately $430,000 for the 1997 period, through expense control.
Operating expenses (year-round operating costs and corporate overhead)
decreased $1,029,928 or 10%, from $10,283,166 in 1996 to $9,253,238 in 1997.
The primary causes of this decrease were the $380,000 of goodwill writedown
and unusual expenses of a one time nature of approximately $400,000
applicable to the initial start-up of the Virginia Faire included in 1996
results.
Of the operating expenses, salaries increased 5%, from $3,722,829 in 1996 to
$3,907,931 in 1997, reflecting normal salary increases.
Advertising expense decreased $460,661, or 19%, from $2,450,985 in 1996 to
$1,990,324 in 1997. This decrease was due to spending more in 1996 for
advertising the first year of the Virginia Faire as well as the utilization
of more cost efficient methods of advertising in 1997.
Depreciation and amortization increased 10%, from $479,862 in 1996 to
$529,732 in 1997. This increase is primarily the result of depreciation on
the approximately $4,000,000 invested in buildings and improvements to the
Virginia property. This increase would have been greater had the Company not
standardized the depreciable lives used for buildings from a range of between
7 to 30 years in 1996 to 15 years for temporary buildings and 30 years for
permanent buildings in 1997.
Other operating expenses (all other general and administrative expenses of
the Company) decreased $424,239 or 13%, from $3,249,490 in 1996 to $2,825,251
in 1997. Included in this decrease is the $400,000 of one-time expenses
discussed above, incurred in 1996 in connection with the initial start-up of
the Virginia Faire. The balance of the decrease is due to management's
implementation of a variety of cost saving measures.
As a result of the foregoing, net operating income (before interest charges
and other income) increased $1,004,743 from a loss of ($1,432,391) for the
1996 period to a loss of ($427,648) for the 1997 period.
A 57% increase in interest expense from $187,972 in 1996 to $295,275 in 1997
resulted from an increase in the Company's borrowing levels throughout the
1997 period as compared to the 1996 period.
Other income/expense increased $458,886, from other expense of ($199,951) in
1996 to other income of $258,935 in 1997. The primary source of the other
income in 1997 was the reversal of $309,694 of expense which had been accrued
in 1996 for expenses expected to have been incurred in 1997 to evaluate a new
site for the Northern California Faire. During the second quarter it became
apparent that this site would not be available and that these costs would not
be incurred. In addition, it is not possible at this time to determine what
expenses may be incurred if the Company is required to find a new site for
this Faire. The primary source of the other expense in 1996 was the reversal
of $200,000 of other income which had been recorded in the quarter ended
December 31, 1995. In late 1995, the State of Virginia paid the Company
$200,000 which upon initial evaluation was considered income. Upon further
review, it was determined that the more appropriate treatment of this amount
was as a reduction of fixed assets. The appropriate adjustment in the last
quarter of the fiscal year ended March 31, 1996 (which is the first quarter
of the calendar year) resulted in the $200,000 charge to expense.
Combining net operating income with other income/expense resulted in a
$1,341,718 increase in net income before taxes, from a loss of ($1,761,443)
for the 1996 period to a loss of ($419,725) for the 1997 period.
As a result of operating losses for the entire fiscal year ended March 31,
1996 (the Company's fiscal year previously ended March 31), a refund of taxes
paid in prior years was available in the 1996 period. This resulted in a
credit to Income Taxes of $239,273 for the nine month period ended September
30, 1996.
Net income to common stockholders increased $1,102,445, from a loss of
($1,522,170) for the 1996 period to a loss of ($419,725) for the 1997 period.
Finally, the net loss per common share improved from a loss of ($.17) for the
1996 period to a loss of ($.04) for the 1997 period, based on 8,813,137
weighted average shares outstanding during the 1996 period and 9,574,197
weighted average shares outstanding during the 1997 period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital deficit was narrowed during the nine months
ended September 30, 1997, from $1,506,284 at December 31, 1996 to $560,398 at
September 30, 1997. This improvement resulted from a number of cost
reductions implemented by management in order to reduce the Company's working
capital requirements and the issuance of $1,000,000 of convertible debentures
during the first five months of the year.
The Company's working capital requirements are greatest during the period
from January 1 through 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 bank
lines 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 entered into an agreement
with the banks which required the Company to pay these lines from 1997
operations. As of September 30, 1997, the entire balance of these lines was
repaid. Since December 31, 1996, the Company has also raised $1,000,000 of
working capital through the issuance of convertible debentures, of which
$250,000 was issued to Charles S. Leavell, Chairman of the Board of Directors
of the Company and the balance to Mr. Leavell's father and an unrelated
party, and also raised
$350,000 of working capital from the sale of convertible notes to a number of
private investors. The debentures are secured by mortgages on the Company's
Wisconsin and Virginia Faire sites, and the notes are secured by a mortgage
on the Company's Wisconsin Faire site. The debentures are convertible into
common stock at the lesser of $4.50 per share or 70% of the fair market value
of the Company's common stock, and the notes are convertible into common
stock at the lesser of $1.75 per share or 50% of the fair market value for
the Company's common stock. The debenture holders were also granted warrants
to purchase an aggregate of 200,000 shares of the Company's common stock at
the lesser of $3.00 per share or 70% of the fair market value of the
Company's common stock.
Management believes that the Company should raise additional working capital
in order to more adequately fund its operations. During July 1997, the
Company entered into a letter of intent for the sale/leaseback of its
Wisconsin and Virginia Faire sites. Subsequently, the parties determined to
limit the transaction to a sale of the Wisconsin faire site for $4,000,000
and to lease this property back to the Company for a period of 20 years with
lease payments of $400,000 per year during each of the first two years, and
increasing to $543,333 per year in years 13 through 20. The sale/leaseback
transaction closed during November 1997. The Company has the right to
reacquire the property during the term of the lease at an aggregate price of
$4,433,333 during the first three years, increasing to $4,900,000 during
years 13 through 20. The sale/leaseback transaction required a security
deposit of $666,667, $333,333 of which is to be released in four years and
the balance released in eight years. The purchasers of the property were
granted a six-year warrant representing the right to acquire an aggregate of
766,667 shares of the Company's Common Stock at an exercise price of $1 per
share. The Company's working capital was increased by approximately
$1,600,000 as the result of this transaction, which the Company believes will
be adequate to fund working capital requirements through at least the fiscal
year ending December 31, 1998. Such funds will not, however, be adequate to
fund the relocation of the Company's Northern or Southern California Faires.
Therefore, additional capital may be sought through borrowings or from
additional equity financing.
Reviewing the change in financial position over the six months, current
assets, largely comprised of cash and prepaid expenses, increased from
$931,451 at December 31, 1996 to $1,411,915 at September 30, 1997, an
increase of $480,464 or 52%. Of these amounts, cash and cash equivalents
increased from $374,289 at December 31, 1996 to $375,222 at September 30,
1997. Accounts receivable increased from $99,551 at December 31, 1996 to
$765,154 at September 30, 1997. This is a normal condition, reflecting
outstanding balances due from vendors for recently completed faires. Prepaid
expenses decreased from $139,167 at December 31, 1996 to $100,010 at
September 30, 1997.
Current liabilities decreased from $2,437,735 at December 31, 1996 to
$1,972,313 at September 30, 1997, a decrease of $465,422 or 19%. This
decrease is due to the pay off in the first nine months of the $1,000,000 in
bank lines of credit borrowing discussed above. The current portion of notes
payable decreased from $1,209,119 at December 31, 1996 to $1,112,684 at
September 30, 1997. Of this amount, $1,000,000 was repaid during November
1997 from the proceeds of the sale/leaseback transaction discussed above.
Unearned income, which consists of the sale of admission tickets to upcoming
faires and deposits received from craft vendors for future faires, decreased
from $160,588 at December 31, 1996 to $85,350 at September 30, 1997.
Total assets decreased from $9,872,349 at December 31, 1996 to $9,636,265 at
September 30, 1997, a decrease of $236,084 or 2%. Of this amount, the
increase in current assets of $480,464 was more than offset by moderate
decreases in the other non-current asset categories. Property, plant and
equipment (net of depreciation) decreased by $131,045 or 2% from $7,176,755
at December 31, 1996 to $7,045,710 at September 30, 1997 as a result of
depreciation of assets for the period. Goodwill, which arose from the
purchase of the two California Faires and is being amortized over 15 years,
decreased from $620,826 at December 31, 1996 to $582,819 at September 30,
1997 as the result of normal amortization. Other
miscellaneous assets (organizational costs and vendor deposits) increased
from $253,201 at December 31, 1996 to $285,714 at September 30, 1997.
Total liabilities decreased from $4,816,897 at December 31, 1996 to
$4,022,000 at September 30, 1997, a decrease of $794,897 or 17%. Total
liabilities at September 30, 1997 include $1,972,313 in current liabilities
(discussed above), plus $2,049,687 from the long-term portion of the
following bank loans: a $700,000 mortgage on the Bristol Faire property and a
$1,000,000 mortgage on the Virginia Faire property. The $700,000 mortgage on
the Bristol Faire property was repaid during November 1997 from the proceeds
of the sale/leaseback transaction discussed above. In August 1997, the
Company had approximately $615,000 of certificates of deposit mature which
were previously held as additional collateral by the lending bank of the two
Virginia loans. The Company elected to apply this amount to the two loans,
thereby paying off the $250,000 loan for construction of vendor booths in
Virginia, and applying the balance to reduce the mortgage on the Virginia
property.
Stockholders' Equity increased from $5,055,452 at December 31, 1996 to
$5,614,265 at September 30, 1997, an increase of $558,813 or 11%. This
increase resulted from the net loss of ($419,725), more than offset by
additional contributed capital received as the result of the exercise of
140,292 Class A Warrants at $2.00 per share, the exercise of 68,000 Class B
Warrants at $2.625 per share, and the exercise of 111,716 employee stock
options at prices ranging from $1.125 to $3.50 per share. As of September
30, 1997, the Company had outstanding 9,636,262 shares of common stock,
1,673,564 Class A Warrants representing the right to purchase common stock at
$2.00 per share, and 1,981,966 Class B warrants representing the right to
purchase common stock at $2.625 per share.
The Company has no significant commitment for capital expenses during the
fiscal year ending December 31, 1997.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company is a party to legal proceedings
arising in the ordinary course of business. On June 5, 1997,
Carl Jablonski, a former employee of the Company, commenced an
action against the Company, Charles S. Leavell, Chairman of
the Board of Directors of the Company, Howard C. Hamburg, a
Vice President of the Company, and Duke & Co., Inc. in
Superior Court of the State of California in and for the
County of Marin alleging breach of implied contract of
employment, breach of the covenant of good faith and fair
dealing, promissory estoppel, negligent misrepresentation,
unlawful discrimination based on age and intentional and
negligent infliction of emotional distress. The complaint
seeks damages, including punitive damages, in an unspecified
amount.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
The Company was not required to file report on Form 8-K during
the quarter ended September 30, 1997.
Exhibit 27. Financial Data Schedule
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RENAISSANCE ENTERTAINMENT CORPORATION
Dated: 11/14/97 /s/ James R. McDonald
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James R. McDonald, Chief Financial Officer