UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended JUNE 30, 2002
or
[ ] Transition Report Pursuance to Section 13 or 15(d) of the Securities
Exchange act of 1934.
For the transition period from __________ to __________
Commission File Number 0-23782
RENAISSANCE ENTERTAINMENT CORPORATION
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(Exact name of registrant as specified in its charter)
COLORADO 84-1094630
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
275 CENTURY CIRCLE, SUITE 102, LOUISVILLE, COLORADO 80027
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(Address of principal executive offices) (Zip Code)
(303) 664-0300
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(Registrant's telephone number, including area code)
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(Former Address)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of August 14, 2002, Registrant had 2,144,889 shares of common stock, $.03 Par
Value, outstanding.
INDEX
Page
Number
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PART I. FINANCIAL INFORMATION
Item I. Financial Statements
Balance Sheets as of June 30, 2002 (Unaudited)
and December 31, 2001 3
Statements of Operations for the Three Months
Ended June 30, 2002 and 2001 (Unaudited) 4
Statements of Operations for the Six Months
Ended June 30, 2002 and 2001 (Unaudited) 5
Statements of Cash Flows for the Six Months
Ended June 30, 2002 and 2001 (Unaudited) 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION 15
This report contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the
Securities Act of 1933, as amended, and is subject to the safe harbors created
by those sections. These forward-looking statements are subject to significant
risks and uncertainties, including those identified in the section of this Form
10-QSB entitled "Factors That May Affect Future Operating Results," which may
cause actual results to differ materially from those discussed in such
forward-looking statements. The forward-looking statements within this Form
10-QSB are identified by words such as "believes," "anticipates," "expects,"
"intends," "may," "will" and other similar expressions. However, these words are
not the exclusive means of identifying such statements. In addition, any
statements which refer to expectations, projections or other characterizations
of future events or circumstances are forward-looking statements. The Company
undertakes no obligation to publicly release the results of any revisions to
these forward-looking statements which may be made to reflect events or
circumstances occurring subsequent to the filing of this Form 10-QSB with the
Securities and Exchange Commission ("SEC"). Readers are urged to carefully
review and consider the various disclosures made by the Company in this report
and in the Company's other reports filed with the SEC that attempt to advise
interested parties of the risks and factors that may affect the Company's
business.
2
RENAISSANCE ENTERTAINMENT CORPORATION
BALANCE SHEETS
June 30, December 31,
2002 2001
------------ ------------
(Unaudited)
ASSETS
Current Assets:
Cash and equivalents $ 623,365 $ 834,257
Accounts receivable (net) 69,782 116,369
Inventory 242,301 155,367
Note receivable, current portion 18,726 17,816
Prepaid expenses and other 1,135,957 365,499
------------ ------------
Total Current Assets 2,090,131 1,489,308
Property and equipment, net of accumulated depreciation 2,897,136 2,709,091
Note receivable, net of current portion 101,266 110,862
Other assets 372,093 458,588
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TOTAL ASSETS $ 5,460,626 $ 4,767,849
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 1,279,061 $ 468,309
Notes payable, current portion 313,578 313,780
Lease obligation payable, current portion 1,331 1,260
Unearned income 443,839 181,177
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Total Current Liabilities 2,037,809 964,526
Lease obligation payable 3,977,517 3,978,802
Notes payable, net of current portion 125,799 37,159
Other 200,836 203,167
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Total Liabilities 6,341,961 5,183,654
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Stockholders' Equity:
Common stock, $.03 par value, 50,000,000 shares
authorized, 2,144,889 shares issued and outstanding
at June 30, 2002 and December 31, 2001, respectively 64,346 64,346
Additional paid-in capital 9,430,827 9,430,827
Accumulated earnings (deficit) (10,376,508) (9,910,978)
------------ ------------
Total Stockholders' Equity (881,335) (415,805)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,460,626 $ 4,767,849
============ ============
The accompanying notes are an integral part of the financial statements.
3
RENAISSANCE ENTERTAINMENT CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
June 30
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2002 2001
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REVENUE:
Sales $ 3,779,489 $ 3,675,040
Faire operating costs 878,638 994,408
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Gross Profit 2,900,851 2,680,632
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OPERATING EXPENSES:
Salaries 977,314 967,497
Depreciation and amortization 82,351 94,318
Advertising 472,592 416,648
Other operating expenses 811,101 745,698
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Total Operating Expenses 2,343,358 2,224,161
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Net Operating (Loss) Income 557,493 456,471
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Other Income (Expenses):
Interest income 30,219 13,904
Interest (expense) (136,453) (134,136)
Other income (expense) 8,913 (12,276)
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Total Other Income (Expenses) (97,321) (132,508)
----------- -----------
Net Income (Loss) before (Provision)
Credit for Income Taxes 460,172 323,963
(Provision) Credit for Income Taxes -- --
----------- -----------
Net Income (Loss) to Common Stockholders $ 460,172 $ 323,963
=========== ===========
Net Income (Loss) per Common Share $ 0.21 $ 0.15
=========== ===========
Weighted Average Number of Common Shares Outstanding 2,144,889 2,144,889
=========== ===========
The accompanying notes are an integral part of the financial statements.
4
RENAISSANCE ENTERTAINMENT CORPORATION
STATEMENTS OF OPERATIONS
Six Months Ended
June 30
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2002 2001
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REVENUE:
Sales 3,787,797 $ 3,677,847
Faire operating costs 881,279 994,557
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Gross Profit 2,906,518 2,683,290
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OPERATING EXPENSES:
Salaries 1,341,760 1,341,747
Depreciation and amortization 144,722 182,161
Advertising 472,592 416,649
Other operating expenses 1,209,370 1,094,261
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Total Operating Expenses 3,168,444 3,034,818
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Net Operating (Loss) Income (261,926) (351,528)
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Other Income (Expenses):
Interest income 40,298 34,779
Interest (expense) (262,619) (274,474)
Other income (expense) 18,717 (890)
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Total Other Income (Expenses) (203,604) (240,585)
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Net Income (Loss) before (Provision)
Credit for Income Taxes (465,530) (592,113)
(Provision) Credit for Income Taxes -- --
----------- -----------
Net Income (Loss) to Common Stockholders $ (465,530) $ (592,113)
Net Income (Loss) per Common Share $ (0.22) $ (0.28)
=========== ===========
Weighted Average Number of Common Shares Outstanding 2,144,889 2,144,889
=========== ===========
The accompanying notes are an integral part of the financial statements
5
RENAISSANCE ENTERTAINMENT CORPORATION
STATEMENTS OF CASH FLOWS (Unaudited)
Six Months ended
June 30
-----------------------------
2002 2001
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Cash Flows from Operating Activities:
Net income (Loss) $ (465,530) $ (592,113)
----------- -----------
Adjustments to reconcile net income (Loss)
to net cash provided by operating
activities:
Depreciation and amortization 144,722 182,161
Gain (loss) on disposal of assets 0 0
(Increase) decrease in:
Accounts Receivable 46,587 (167,007)
Notes Receivable 8,686 9,136
Inventory (86,934) (96,251)
Prepaid expenses and other (683,963) (721,442)
Increase (decrease) in:
Accounts payable and accrued expenses 810,752 622,068
Unearned revenue and other 260,331 207,544
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Total adjustments 500,181 36,209
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Net Cash Provided by (Used in) Operating Activities 34,651 (555,904)
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Cash Flows from Investing Activities:
Acquisition of property and equipment (332,768) (250,812)
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Net Cash (Used in) Investing Activities (332,768) (250,812)
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Cash Flows from Financing Activities:
Common stock issued and additional
paid-in capital 0 0
Proceeds from notes payable 101,250 27,837
Principal payments on notes payable (14,025) (43,780)
----------- -----------
Net Cash Provided by (Used in) Financing Activities 87,225 (15,943)
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Net (Decrease) in Cash (210,892) (822,659)
Cash, beginning of period 834,257 1,002,804
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Cash, end of period $ 623,365 $ 180,145
=========== ===========
Interest paid $ 262,619 $ 274,474
=========== ===========
The accompanying notes are an integral part of the financial statements.
6
RENAISSANCE ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 2002 (Unaudited)
1. UNAUDITED STATEMENTS
The balance sheet as of June 30, 2002, the statements of operations and the
statements of cash flows for the six month periods ended June 30, 2002 and
2001, have been prepared by the Renaissance Entertainment Corp. (Company)
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures, normally
included in the financial statements prepared in accordance with accounting
principles generally accepted in the United States of America, have been
condensed or omitted as allowed by such rules and regulations, and the
Company believes that the disclosures are adequate to make the information
presented not misleading. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present
fairly the financial position, results of operations and changes in
financial position at June 30, 2002 and for all periods presented, have
been made.
It is suggested that these statements be read in conjunction with the
December 31, 2001 audited financial statements and the accompanying notes
included in the Company's Annual Report on Form 10-KSB, 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. BASIS OF PRESENTATION - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation
of the Company as a going concern. However, the Company has suffered
recurring losses from operations, has a negative stockholders' equity and
minimal working capital that raise substantial doubts about its ability to
continue as a going concern. Management is attempting to raise additional
capital.
In view of these matters, realization of certain assets in the accompanying
balance sheet is dependent upon continued operations of the Company, which
in turn is dependent upon the Company's ability to meet its financial
requirements, raise additional capital as needed, and the success of its
future operations.
Management believes that its ability to raise additional capital provide an
opportunity for the Company to continue as a going concern.
4. COMMITMENTS
Effective April 2002, the Company entered into a 20-year lease agreement
with a related party for its New York Faire site. Lease payments are
$425,000 for years 1 through 5, $435,000 for years 6 through 15, and
$450,000 for years 16 through 20. The leased property includes a ski
center, which is not expected to generate significant income until 2003.
The Company estimates that expenses of approximately $500,000 will be
incurred in 2002 in connection with this ski center. At the option of the
lessor, the ski center could be sold and lease payments reduced.
7
Effective May 2002, the Company entered into a lease agreement for its
Northern California Faire site. Lease payments in the first year include
$1.00 per patron with a $150,000 minimum increasing each year thereafter.
The lease is for 20 years, 5-years with a 15-year extension.
The Company's lease for its Southern California Faire site requires the
Company to complete certain capital projects over the term of the lease.
The Company estimates that the cost of the capital projects for 2002 will
be approximately $250,000.
On May 3, 2002, the Company signed a long-term lease for the Northern
California Faire. The new site for the Northern Faire is located at Casa de
Fruta, near Gilroy, California. The lease is for 20 years, 5-years with a
15-year extension. Lease payments in the first year include $1.00 per
patron with a $150,000 minimum increasing each year thereafter.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements, including the footnotes for the fiscal period
ended December 31, 2001.
The Company presently owns and produces four Renaissance Faires: the Bristol
Renaissance Faire in Kenosha, Wisconsin, serving the Chicago/Milwaukee
metropolitan region; the Northern California Renaissance Pleasure Faire, serving
the San Francisco Bay and San Jose metropolitan areas; the Southern California
Renaissance Pleasure Faire in Devore, California serving the greater Los Angeles
metropolitan area; and the New York Renaissance Faire serving the New York City
metropolitan area.
The Renaissance Faire is a re-creation of a Renaissance village, a fantasy
experience transporting the visitor back into sixteenth century England. This
fantasy experience is created through authentic craft shops, food vendors and
continuous live entertainment throughout the day, both on the street and stage,
including actors, jugglers, jousters, magicians, dancers and musicians.
On June 27, 2000, the Company signed a twenty-year lease with San Bernardino
County Parks and Recreation Department, securing a long-term home for the
Southern California Renaissance Faire. The Company's long-term lease for the
Bristol Faire site expires in 2017.
On April 1, 2002, Faire Partners, Ltd., the Company's landlord for the Wisconsin
site, purchased property in New York from Sterling Forest Corporation. The
property has long been the home of the New York Renaissance Faire. In April,
2002, Faire Partners Ltd. leased the property to the Company on a twenty-year
term with rent payments of $425,000 in years 1 through 5, $435,000 years 6
through 15 and $450,000 for lease years 16 through 20. The leased property
includes the Sterling Forest Ski Center, which the Company anticipates opening
for the 2002/2003 ski season. The lease allows Faire Partners to sell the
property on which the ski area operates. Should Faire Partners sell the
property, the lease provides that the Company's rent payments and the buyout
provision would be decreased in an amount proportional to the selling price of
the property. Although the Ski Center will not generate significant revenue
until 2003, the Company will incur ongoing expenses throughout 2002. The Ski
Center generated approximately $150,000 in expense during the second quarter of
2002. The Company estimates expense for the third and fourth quarter will total
approximately $400,000.
On May 3, 2002, the Company signed a long-term lease for the Northern California
Faire. The new site for the Northern Faire is located at Casa de Fruta, near
Gilroy, California. The lease is for 20 years, 5-years with a 15-year extension.
Lease payments in the first year include $1.00 per patron with a $150,000
minimum increasing each year thereafter.
The Company had a working capital surplus of $52,322 as of June 30, 2002. While
the Company believes that it has adequate capital to fund anticipated operations
for 2002, it believes it may need additional capital for future fiscal periods.
See "LIQUIDITY AND CAPITAL RESOURCES."
9
THREE MONTHS ENDED JUNE 30, 2002, COMPARED TO THREE MONTHS ENDED JUNE 30, 2001
Revenues increased $104,449 or 3% from $3,675,040 in 2001 to $3,779,489 in 2002.
In June 2001, the Company's Wisconsin Faire operated one day. In 2002, the
Company's Wisconsin Faire operated two days in June. This creates a temporary
difference in revenue for the month of June of approximately $132,000.
Cost of sales decreased $115,770 or 12% from $994,408 in 2001 to $878,638 in
2002. Approximately $127,000 was associated with cost savings at the Southern
Faire that relate to the long-term lease for this site which provides various
expense savings, many relating to the Faire structures remaining in place
year-round.
Total operating expenses (year-round operating costs and corporate overhead)
increased $119,197 or 5%, from $2,224,161 in 2001 to $2,343,358 in 2002. Of the
operating expenses, salaries increased 1%, from $967,497 in 2001 to 977,314 in
2002 reflecting a $9,817 increase for the 2002 period as compared to the 2001
period. Advertising expense showed an increase of $55,944 or 13%, from $416,648
in 2001 to $472,592 in 2002. Depreciation and amortization decreased 13%, from
$94,318 in 2001 to $82,351 in 2002. Other operating expenses (all other general
and administrative expenses of the Company) increased $65,403 or 9%, from
$745,698 in 2001 to $811,101 in 2002. Of this operating expense increase,
$136,000 is attributable to the Sterling Forest Ski Center which was not part of
the Company's operations in 2001.
As a result of the foregoing, net operating income (before interest charges and
other income) increased 22% from $456,471 for the 2001 period to $557,493 for
the 2002 period
Interest expense increased $2,317 or 2%, from $134,136 in 2001 to $136,453 in
2002. Other income and expense decreased $21,189, from expense of $12,276 in
2001 to income of $8,913 in 2002. As a result of the 1999 closure of the
Company's Virginia Renaissance Faire, an allowance of $32,000 for discontinued
operations was recorded in the second quarter of 2001, to cover anticipated
operations through the selling date of the property in August, 2001. Such an
entry was not required in 2002.
Combining net operating income with other income/expense resulted in a $136,209
increase in net income before taxes, from income of $323,963 for the 2001 period
to income of $460,172 for the 2002 period.
Net income to common stockholders also increased $136,209, from $323,963 for the
2001 period to $460,172 for the 2002 period. Finally, net income per common
share increased from $.15 for the 2001 period to $.21 for the 2002 period, based
on 2,144,889 weighted average shares outstanding in both years.
SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO SIX MONTHS ENDED JUNE 30, 2001
Revenues increased $109,950 or 3% from $3,677,847 in 2001 to $3,787,797 in 2002.
In June 2001, the Company's Wisconsin Faire operated one day. In 2002, the
Company's Wisconsin Faire operated two days in June. This creates a temporary
difference in revenue for the month of June of approximately $132,000.
Cost of sales decreased $113,278 or 11% from $994,557 in 2001 to $881,279 in
2002. Approximately $127,000 was associated with cost savings at the Southern
Faire that relate to the
10
long-term lease for this site which provides various expense savings, many
relating to the Faire structures remaining in place year-round.
Total operating expenses (year-round operating costs and corporate overhead)
increased $133,626 or 4%, from $3,034,818 in 2001 to $3,168,444 in 2002. Of the
operating expenses, salary expense remained flat, with a less than 1% increase,
from $1,341,747 in 2001 to 1,341,760 in 2002. Advertising expense showed an
increase of $55,943 or 13%, from $416,649 in 2001 to $472,592 in 2002.
Depreciation and amortization decreased 20%, from $182,161 in 2001 to $144,722
in 2002. Other operating expenses (all other general and administrative expenses
of the Company) increased $115,109 or 11%, from $1,094,261 in 2001 to $1,209,370
in 2002. Of this operating expense increase, $136,000 is attributable to the
Sterling Forest Ski Center which was not part of the Company's operations in
2001.
As a result of the foregoing, net operating loss (before interest charges and
other income) decreased 25% from $351,528 for the 2001 period to $261,926 for
the 2002 period
Interest expense decreased $11,855 or 4%, from $274,474 in 2001 to $262,619 in
2002. Other income and expense decreased $19,607, from expense of $890 in 2001
to income of $18,717 in 2002. As a result of the 1999 closure of the Company's
Virginia Renaissance Faire, an allowance of $32,000 for discontinued operations
was recorded in the second quarter of 2001, to cover anticipated operations
through the selling date of the property in August, 2001. Such an entry was not
required in 2002.
Combining net operating income with other income/expense resulted in a $126,583
decrease in net loss before taxes, from loss of $592,113 for the 2001 period to
a loss of $465,530 for the 2002 period.
Net loss to common stockholders also decreased $126,583, from $592,113 for the
2001 period to $465,530 for the 2002 period. Finally, net loss per common share
decreased from $.28 for the 2001 period to $.22 for the 2002 period, based on
2,144,889 weighted average shares outstanding in both years.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital surplus decreased during the six months ended June
30, 2002, from $524,782 at December 31, 2001 to $52,322 at June 30, 2002. The
Company's working capital requirements are greatest during the period from
January 1 through May 1, when it is incurring start-up expenses for its first
Faire of the season, the Southern California Faire.
During the first four months of fiscal 2002, the Company raised capital in the
amount of $100,000 through the issuance of 12% subordinated promissory notes.
The funds were provided by Charles S. Leavell, Chairman of the Board of
Directors ($50,000), and a party affiliated with the Chairman of the Board. The
notes were issued in units, each unit consisting of two promissory notes of
equal principal, identical in nature except that one note is convertible to
common stock at a price of $0.30 per share. Interest is due and payable
quarterly and the notes mature August 31, 2003.
During the first six months of fiscal 2000, the Company raised capital in the
amount of $575,000 through the issuance of 12% subordinated promissory notes.
The funds were provided by Charles S. Leavell, Chairman of the Board of
Directors ($250,000), J. Stanley Gilbert, President and Director ($225,000), and
one other investor. The notes were issued in units, each unit consisting of two
promissory notes of equal principal, identical in nature except that one note is
convertible to
11
common stock at a price of $0.30 per share. Interest was due and payable
quarterly and the notes matured August 31, 2001. On the maturity date, the
non-convertible portion of the notes were retired. The maturity date for the
convertible portion of the notes were extended until August 31, 2002 under the
same terms and conditions as the original offer.
While the Company believes it has adequate capital to fund anticipated
operations for fiscal 2002, it believes it may need to obtain additional working
capital for future periods.
Reviewing the change in financial position over the six months, current assets,
largely comprised of cash and prepaid expenses, increased from $1,489,308 at
December 31, 2001 to $2,090,131 at June 30, 2002, an increase of $600,823 or
40%. Of these amounts, cash and cash equivalents decreased from $834,257 at
December 31, 2001 to $623,365 at June 30, 2002. Accounts receivable decreased
from $116,369 at December 31, 2001 to $69,782 at June 30, 2002. Inventory
increased from $155,367 at December 31, 2001 to $242,301 at June 30, 2002.
Prepaid expenses (expenses incurred on behalf of the Faires) increased from
$365,499 at December 31, 2001 to $1,135,957 at June 30, 2002. These costs are
expensed once the Faires are operating.
Current liabilities increased from $964,526 at December 31, 2001, to $2,037,809
at June 30, 2002, an increase of $1,073,283 or 111%. During the quarter,
accounts payable and accrued expenses increased $810,752 or 173% from $468,309
at December 31, 2001 to $1,279,061 at June 30, 2002. Unearned income, which
consists of the sale of admission tickets to upcoming Faires, passes for the
Sterling Forest Ski Center and deposits received from craft vendors for future
Faires, increased from $181,177 at December 31, 2001 to $443,839 at June 30,
2002. Approximately $62,000 unearned income is associated with the Sterling
Forest Ski Center. This revenue is recognized once the Faires and the Ski Center
are operating. The Company's notes payable accounts for $313,578 of the total
current liabilities at June 30, 2002. This amount is largely attributable to the
aforementioned subordinated promissory notes that mature in August, 2002.
Stockholders' Equity decreased from ($415,805) at December 31, 2001 to
($881,335) at June 30, 2002, a decrease of $465,530. This decrease is due to the
net loss incurred during the first quarter.
Although inflation can potentially have an effect on financial results, during
2001 and the first six months of fiscal 2002 it caused no material affect on the
Company's operations, since the change in prices charged by the Company and by
the Company's vendors has not been significant.
The lease with the County of San Bernardino for the Southern California Faire
requires the Company to complete certain capital projects. These projects
include items such as the construction of a perimeter fence, developing flower
and water gardens, planting grass and trees, installing infrastructure and
constructing buildings for use at the Faire. The Company has completed the
projects outlined for 2002. The Company has no additional significant
commitments for capital expenses during the fiscal year ending December 31,
2002. See "Factors That May Affect Future Operating Results-Need for Additional
Capital" regarding the Company's financing requirements.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
In addition to the other information contained in this report, prospective
investors should carefully consider the following factors in evaluating the
Company and its business.
12
RECENT LOSSES. The Company has incurred operating losses in all fiscal
periods since 1995 except fiscal 2000. For the six months ended June 30, 2002,
the Company reported a net loss of ($465,530). There is no assurance that the
Company will be profitable in any subsequent period.
NEED FOR ADDITIONAL CAPITAL. The Company had a working capital surplus of
$52,322 as of June 30, 2002. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS." Based on the Company's planned
operations for 2002, the Company believes it has adequate capital to fund
operations, repay debt and fund required capital expenditures during the 2002
fiscal year. To the extent that operations do not provide the necessary working
capital during 2002, the Company may need to obtain additional capital for 2002
and future fiscal periods. Additional capital may be sought through borrowings
or from additional equity financing. Such additional equity financing may result
in additional dilution to investors. In any case, there can be no assurance that
additional capital can be satisfactorily obtained, if and when required.
STERLING FOREST SKI CENTER. The property that the Company leases in New
York includes the Sterling Forest Ski Center, which the Company anticipates
opening in December of this year for the 2002/2003 ski season. The Ski Center
will not generate significant revenue until 2003, but the Company will incur
ongoing expenses throughout 2002. The Ski Center generated approximately
$150,000 in expense during the second quarter of 2002. The Company estimates
expense for the third and fourth quarter will total approximately $400,000.
During the year ended December 31, 2002 these expenses will negatively affect
the reported results of operations for the Company because expenses will be
ongoing while very little revenue will be recognized until 2003.
COMPETITION. The Company faces significant competition from numerous
organizations throughout the country which offer Renaissance Faires and other
entertainment events, including amusement parks, theme parks, local and county
fairs and festivals, some of which possess significantly greater resources than
the Company, and in many cases, greater expertise and industry contacts. The
Company estimates that there are currently 20 major Renaissance Faires produced
each year. In addition, the Company estimates that there are 100 minor
Renaissance Faire events held throughout the United States each year, ranging in
duration from one day to two weekends.
LACK OF TRADEMARK PROTECTION. Because of the large number of existing
Renaissance Faires, the Company is not able to rely upon trademark or service
mark protection for the name "Renaissance Faire." As a result, there is no
protection against others using the name "Renaissance Faire" for the production
of entertainment events similar to those produced by the Company. The Company's
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 experienced
only minimal claims, which it has been able to resolve without litigation. The
Company maintains comprehensive liability insurance which it considers to be
adequate against this risk; however, there can be no assurance that a
catastrophic event or claim which could result in damage or liability in excess
of this coverage will not occur.
DEPENDENCE UPON VENDORS. A substantial portion of the Company's revenues
generated at each Faire is derived from arrangements that the Company has with
vendors who construct elaborate booths at the Faires and sell a variety of food,
crafts and souvenirs. This arrangement consists of either a fixed rental or a
percent of revenues paid by the vendors to the Company. In either case, the
success of a Faire is dependent upon the Company's ability to attract
responsible vendors who sell high quality goods.
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SEASONALITY. The Company's Renaissance Faires are located in traditionally
seasonal areas that attract the greatest number of visitors during the warm
weather months in the spring, summer, and early fall. With the anticipated
operation of the Sterling Forest Ski Center in New York, the potential for
counter-seasonal revenue may help smooth the seasonality of the Company's
revenue stream from the Renaissance Faires. Unless the Company acquires or
develops additional Faire sites or other events in areas that are
counter-seasonal to the present sites located in temperate climates, the
Company's revenues and income will be highly concentrated from April through
October 31st of each year.
DEPENDENCE UPON WEATHER. Each Renaissance Faire operated by the Company is
scheduled for a finite period, typically consecutive weekends during a seven to
nine-week period, 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. While each of the Company's Faires are open, rain or shine,
poor weather, or even the forecast of poor weather can result in substantial
declines in attendance and, as a result, loss of revenues. Further, as the
Renaissance Faires are outdoor events, they are vulnerable to severe weather
conditions that can cause damage to the Faire's infrastructure and buildings, as
well as injuries to patrons and employees. Risks associated with the weather are
beyond anyone's control, but have a direct and material impact upon the relative
success or failure of a given Faire.
LICENSING AND OTHER GOVERNMENTAL REGULATION. For each Faire operated by the
Company, it is necessary to apply for and obtain permits and other licenses from
local governmental authorities regulating service of alcoholic beverages,
service of food, health, sanitation, and other matters at the Faire sites. Each
governmental jurisdiction has it's own regulatory requirements that can impose
unforeseeable delays or impediments in preparing for a Faire production. While
the Company has been able to obtain all necessary permits and licenses in the
past, there can be no assurance that future changes in governmental regulation
or the adoption of more stringent requirements may not have a material adverse
impact upon the Company's future operations.
FAIRE SITES. The Company has long-term leases for all four of its
Renaissance Faires. The terms and conditions of each lease vary by location, and
to a large extent, are beyond the control of the Company. The Company's
dependence upon leasing Faire sites creates a certain risk of fluctuation in the
Company's operations from year to year.
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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
Item 2. CHANGES IN SECURITIES
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
(a) Exhibits
99.1 Certification Pursuant to 18 U.S.C. Section 1350.
(b) Reports of Form 8-K
The Company was not required to file a report on Form 8-K during
the quarter ended June 30, 2002.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RENAISSANCE ENTERTAINMENT CORPORATION
Dated: August 16, 2002 /s/ Charles S. Leavell
--------------- ----------------------------------------
Charles S. Leavell, Chief Executive and
Chief Financial Officer
/s/ Sue E. Brophy
----------------------------------------
Sue E. Brophy, Chief Accounting Officer
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