**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C.  20549**

 

**FORM 10-QSB**

 

**ý****Quarterly Report pursuant toSection 13 or 15(d) of the Securities Exchange Act of 1934.**

 

**For thequarterly period ended June 30, 2003**

 

**or**

 

**o****Transition Report Pursuance toSection 13 or 15(d) of the Securities Exchange act of 1934.**

 

**For thetransition period from          to          **

 

**Commission FileNumber 0-23782**

 

**RENAISSANCE ENTERTAINMENTCORPORATION**

(Exact name of registrant asspecified in its charter)

 

| **Colorado**                                                    |   | **84-1094630**                        |
|-----------------------------------------------------------------|--------|---------------------------------------|
| (State or other jurisdiction  of  incorporation or organization |   | (I.R.S. Employer  Identification No.) |
|                                                            |   |                                  |
| **275 Century  Circle, Suite 102, Louisville, Colorado**        |   | **80027**                             |
| (Address of principal  executive offices)                       |   | (Zip Code)                            |
|                                                            |   |                                  |
| **(303)  664-0300**                                             |
| (Registrant’s telephone  number, including area code)      |
|                                                            |   |                                  |
|                                                            |
| (Former Address)                                                |

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

 

ýYes  o No

 

APPLICABLE ONLY TO CORPORATEISSUERS:

 

As of August 8, 2003, Registrant had2,144,889 shares of common stock, $.03 Par Value, outstanding.

 

 

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INDEX

 
| **Part I.             Financial  Information** |
|------------------------------------------------------------------------------------------------------------|
|                                                                                                       |   |   |
|                                                                                                       | Item I. | Financial Statements |
|                                                                                                       |   |   |
|                                                                                                       |   | Balance  Sheets as of June 30, 2003 (Unaudited)  and December 31, 2002 |
|                                                                                                       |   |   |
|                                                                                                       |   | Statements of Operations for the Three Months  Ended June 30, 2003 and 2002  (Unaudited) |
|                                                                                                       |   |   |
|                                                                                                       |   | Statements  of Operations for the Six Months  Ended June 30, 2003 and 2002  (Unaudited) |
|                                                                                                       |   |   |
|                                                                                                       |   | Statements of Cash Flows for the Six Months  Ended June 30, 2003 and 2002  (Unaudited) |
|                                                                                                       |   |   |
|                                                                                                       |   | Notes to Financial Statements |
|                                                                                                       |   |   |
|                                                                                                       | Item 2. | Management’s Discussion and Analysis of  Financial Condition and Results of Operations |
|                                                                                                       |   |   |
| **Part II.  Other Information**                                                                       |

 

This report containsforward-looking statements within the meaning of Section 21E of the SecuritiesExchange Act of 1934, as amended, and Section 27A of the Securities Act of1933, as amended, and is subject to the safe harbors created by thosesections.  These forward-lookingstatements are subject to significant risks and uncertainties, including thoseidentified in the section of this Form 10-QSB entitled “Factors That May AffectFuture Operating Results,” which may cause actual results to differ materiallyfrom those discussed in such forward-looking statements.  The forward-looking statements within thisForm 10-QSB are identified by words such as “believes,” “anticipates,”“expects,” “intends,” “may,” “will” and other similar expressions.  However, these words are not the exclusivemeans of identifying such statements. In addition, any statements which refer to expectations, projections orother characterizations of future events or circumstances are forward-lookingstatements.  The Company undertakes noobligation to publicly release the results of any revisions to these forward-lookingstatements which may be made to reflect events or circumstances occurringsubsequent to the filing of this Form 10-QSB with the Securities and ExchangeCommission (“SEC”).  Readers are urgedto carefully review and consider the various disclosures made by the Company inthis report and in the Company’s other reports filed with the SEC that attemptto advise interested parties of the risks and factors that may affect theCompany’s business.

 

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RENAISSANCE ENTERTAINMENT CORPORATION

BALANCE SHEETS

 
|                                                                                                   |   | **June 30,  2003** |      | **December 31,  2002** |   |
|--------------------------------------------------------------------------------------------------------|--------|--------------------|-----------|------------------------|--------|
|                                                                                                   |   | **(Unaudited)**    |      |                   |   |
|                                                                                                   |   |               |      |                   |   |
| ASSETS                                                                                                 |   |               |      |                   |   |
| Current Assets:                                                                                        |   |               |      |                   |   |
| Cash and  equivalents                                                                                  |   | $                  | 385,109   |                   | $      | 642,061 |   |
| Accounts  receivable (net)                                                                             |   | 10,441             |      | 23,530                 |   |
| Inventory                                                                                              |   | 249,726            |      | 160,500                |   |
| Note receivable,  current portion                                                                      |   | 76,266             |      | 90,862                 |   |
| Prepaid  expenses and other                                                                            |   | 1,244,255          |      | 275,520                |   |
| Total Current  Assets                                                                                  |   | 1,965,797          |      | 1,192,473              |   |
|                                                                                                   |   |               |      |                   |   |
| Property and  equipment, net of accumulated depreciation                                               |   | 2,867,176          |      | 2,874,954              |   |
| Investments                                                                                            |   | 21,992             |      | 0                      |   |
| Other assets                                                                                           |   | 385,093            |      | 382,617                |   |
| TOTAL ASSETS                                                                                           |   | $                  | 5,240,058 |                   | $      | 4,450,044 |   |
|                                                                                                   |   |               |      |                   |   |
| LIABILITIES AND STOCKHOLDERS’ (DEFICIT)                                                           |   |               |      |                   |   |
|                                                                                                   |   |               |      |                   |   |
| Current  Liabilities:                                                                                  |   |               |      |                   |   |
| Accounts  payable and accrued expenses                                                                 |   | $                  | 1,074,983 |                   | $      | 369,466 |   |
| Notes payable,  current portion                                                                        |   | 509,325            |      | 414,738                |   |
| Lease  obligation payable, current portion                                                             |   | 32,382             |      | 9,220                  |   |
| Unearned income                                                                                        |   | 467,611            |      | 447,746                |   |
| Total Current  Liabilities                                                                             |   | 2,084,301          |      | 1,241,170              |   |
|                                                                                                   |   |               |      |                   |   |
| Lease  obligation payable                                                                              |   | 3,945,135          |      | 3,969,582              |   |
| Notes payable,  net of current portion                                                                 |   | 6,075              |      | 13,055                 |   |
| Other                                                                                                  |   | 210,935            |      | 166,844                |   |
| Total  Liabilities                                                                                     |   | 6,246,446          |      | 5,390,651              |   |
|                                                                                                   |   |               |      |                   |   |
| Stockholders’  (Deficit):                                                                         |   |               |      |                   |   |
| Preferred stock, $1.00 par value, 1,000,000  shares authorized, none issued and outstanding            |   |               |      |                   |   |
| Common stock,  $.03 par value, 50,000,000 shares authorized, 2,144,889 shares issued and  outstanding. |   | 64,346             |      | 64,346                 |   |
| Additional  paid-in capital                                                                            |   | 9,435,827          |      | 9,435,827              |   |
| Accumulated  (deficit)                                                                                 |   | (10,506,561        | )         | (10,440,780            | )      |
| Total  Stockholders’ (Deficit)                                                                    |   | (1,006,388         | )         | (940,607               | )      |
|                                                                                                   |   |               |      |                   |   |
| TOTAL  LIABILITIES AND STOCKHOLDERS’ (DEFICIT)                                                    |   | $                  | 5,240,058 |                   | $      | 4,450,044 |   |

 

The accompanying notes are an integral partof the financial statements.

 

3

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RENAISSANCE ENTERTAINMENTCORPORATION

STATEMENTS OF OPERATIONS

(Unaudited)

 
|                                                          |   | **Three Months Ended  June 30** |      |
|---------------------------------------------------------------|--------|---------------------------------|-----------|
|                                                          |   | **2003**                        |      | **2002** |   |
| REVENUE:                                                      |   |                            |      |   |   |
| Sales                                                         |   | $                               | 3,560,648 |   | $ | 3,779,489 |   |
| Faire operating costs                                         |   | 885,190                         |      | 878,638 |   |
| Gross Profit                                                  |   | 2,675,458                       |      | 2,900,851 |   |
|                                                          |   |                            |      |   |   |
| OPERATING EXPENSES:                                           |   |                            |      |   |   |
| Salaries                                                      |   | 973,636                         |      | 977,314 |   |
| Depreciation and amortization                                 |   | 90,066                          |      | 82,351 |   |
| Advertising                                                   |   | 424,570                         |      | 472,592 |   |
| Other operating expenses                                      |   | 741,125                         |      | 811,101 |   |
| Total Operating Expenses                                      |   | 2,229,397                       |      | 2,343,358 |   |
|                                                          |   |                            |      |   |   |
| Net Operating (Loss) Income                                   |   | 446,061                         |      | 557,493 |   |
|                                                          |   |                            |      |   |   |
| Other Income (Expenses):                                      |   |                            |      |   |   |
| Interest income                                               |   | 7,617                           |      | 8,913 |   |
| Interest (expense)                                            |   | (138,530                        | )         | (136,453 | ) |
| Other income (expense)                                        |   | 42,120                          |      | 30,219 |   |
| Total Other Income (Expenses)                                 |   | (88,793                         | )         | (97,321 | ) |
|                                                          |   |                            |      |   |   |
| Net Income (Loss) before  (Provision) Credit for Income Taxes |   | 357,268                         |      | 460,172 |   |
|                                                          |   |                            |      |   |   |
| (Provision) Credit for Income  Taxes                          |   | —                          |      | — |   |
|                                                          |   |                            |      |   |   |
| Net Income (Loss) to Common  Stockholders                     |   | $                               | 357,268   |   | $ | 460,172 |   |
|                                                          |   |                            |      |   |   |
| Net Income (Loss) per Common  Share                           |   | $                               | 0.17      |   | $ | 0.21 |   |
|                                                          |   |                            |      |   |   |
| Weighted Average Number of  Common Shares Outstanding         |   | 2,144,889                       |      | 2,144,889 |   |

 

Theaccompanying notes are an integral part of the financial statements.

 

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RENAISSANCE ENTERTAINMENTCORPORATION

STATEMENTS OF OPERATIONS

 
|                                                          |   | **Six Months Ended  June 30** |    |
|---------------------------------------------------------------|--------|-------------------------------|---------|
|                                                          |   | **2003**                      |    | **2002** |   |
| REVENUE:                                                      |   |                          |    |   |   |
| Sales                                                         |   | 4,686,225                     |    | 3,787,797 |   |
| Faire operating costs                                         |   | 932,215                       |    | 881,279 |   |
| Gross Profit                                                  |   | 3,754,010                     |    | 2,906,518 |   |
|                                                          |   |                          |    |   |   |
| OPERATING EXPENSES:                                           |   |                          |    |   |   |
| Salaries                                                      |   | 1,654,783                     |    | 1,341,760 |   |
| Depreciation and amortization                                 |   | 172,427                       |    | 144,722 |   |
| Advertising                                                   |   | 450,729                       |    | 472,592 |   |
| Other operating expenses                                      |   | 1,354,852                     |    | 1,209,370 |   |
| Total Operating Expenses                                      |   | 3,632,791                     |    | 3,168,444 |   |
|                                                          |   |                          |    |   |   |
| Net Operating (Loss) Income                                   |   | 121,219                       |    | (261,926 | ) |
|                                                          |   |                          |    |   |   |
| Other Income (Expenses):                                      |   |                          |    |   |   |
| Interest income                                               |   | 16,164                        |    | 18,717 |   |
| Interest (expense)                                            |   | (265,162                      | )       | (262,619 | ) |
| Other income (expense)                                        |   | 61,995                        |    | 40,298 |   |
| Total Other Income (Expenses)                                 |   | (187,003                      | )       | (203,604 | ) |
|                                                          |   |                          |    |   |   |
| Net Income (Loss) before  (Provision) Credit for Income Taxes |   | $                             | (65,784 | ) | (465,530 | ) |
|                                                          |   |                          |    |   |   |
| (Provision) Credit for Income  Taxes                          |   | —                        |    | — |   |
|                                                          |   |                          |    |   |   |
| Net Income (Loss) to Common  Stockholders                     |   | $                             | (65,784 | ) | $ | (465,530 | ) |
|                                                          |   |                          |    |   |   |
| Net Income (Loss) per Common  Share                           |   | $                             | (0.03   | ) | $ | (0.22 | ) |
|                                                          |   |                          |    |   |   |
| Weighted Average Number of  Common Shares Outstanding         |   | 2,144,889                     |    | 2,144,889 |   |

 

The accompanying notes are an integral partof the financial statements

 

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RENAISSANCE ENTERTAINMENTCORPORATION

STATEMENTS OF CASH FLOWS (Unaudited)

 
|                                                                                      |   | **Six Months ended  June 30** |    |
|-------------------------------------------------------------------------------------------|--------|-------------------------------|---------|
|                                                                                      |   | **2003**                      |    | **2002** |   |
| Cash Flows from  Operating Activities:                                                    |   |                          |    |   |   |
| Net income  (Loss)                                                                        |   | $                             | (65,784 | ) | $ | (465,530 | ) |
| Adjustments to  reconcile net income (Loss) to net cash provided by operating activities: |   |                          |    |   |   |
| Depreciation  and amortization                                                            |   | 172,427                       |    | 144,722 |   |
| Gain (loss) on  disposal of assets                                                        |   | (366                          | )       | 0 |   |
| (Increase)  decrease in:                                                                  |   |                          |    |   |   |
| Accounts  Receivable                                                                      |   | 13,089                        |    | 46,587 |   |
| Notes  Receivable                                                                         |   | 14,596                        |    | 8,686 |   |
| Inventory                                                                                 |   | (89,226                       | )       | (86,934 | ) |
| Prepaid  expenses and other                                                               |   | (971,208                      | )       | (683,963 | ) |
| Increase  (decrease) in:                                                                  |   |                          |    |   |   |
| Accounts  payable and accrued expenses                                                    |   | 705,517                       |    | 810,752 |   |
| Unearned  revenue and other                                                               |   | 63,956                        |    | 260,331 |   |
| Total  adjustments                                                                        |   | (91,215                       | )       | 500,181 |   |
| Net Cash  Provided by (Used in) Operating Activities                                      |   | (156,999                      | )       | 34,651 |   |
|                                                                                      |   |                          |    |   |   |
| Cash Flows from  Investing Activities:                                                    |   |                          |    |   |   |
| (Increase) in  cash value of life insurance                                               |   | (21,992                       | )       |   |   |
| Acquisition of  property and equipment                                                    |   | (164,283                      | )       | (332,768 | ) |
| Net Cash (Used  in) Investing Activities                                                  |   | (186,275                      | )       | (332,768 | ) |
|                                                                                      |   |                          |    |   |   |
| Cash Flows from  Financing Activities:                                                    |   |                          |    |   |   |
| Common stock  issued and additional paid-in capital                                       |   | 0                             |    | 0 |   |
| Proceeds from  notes payable                                                              |   | 220,000                       |    | 101,250 |   |
| Principal  payments on notes payable                                                      |   | (133,678                      | )       | (14,025 | ) |
| Net Cash  Provided by (Used in) Financing Activities                                      |   | 86,322                        |    | 87,225 |   |
|                                                                                      |   |                          |    |   |   |
| Net (Decrease)  in Cash                                                                   |   | (256,952                      | )       | (210,892 | ) |
| Cash, beginning  of period                                                                |   | 642,061                       |    | 834,257 |   |
| Cash, end of  period                                                                      |   | $                             | 385,109 |   | $ | 623,365 |   |
| Interest paid                                                                             |   | $                             | 265,162 |   | $ | 262,619 |   |

 

The accompanying notes are an integral partof the financial statements.

 

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RENAISSANCE ENTERTAINMENTCORPORATION

NOTES TO FINANCIAL STATEMENTS

June 30, 2003 (Unaudited)

 

1.                                       Unaudited Statements

 

The balance sheet as of June 30, 2003, thestatements of operations and the statements of cash flows for the six monthperiods ended June 30, 2003 and 2002, have been prepared by RenaissanceEntertainment Corporation (Company) without audit, pursuant to the rules andregulations of the Securities and Exchange Commission.  Certain information and footnotedisclosures, normally included in the financial statements prepared inaccordance with accounting principles generally accepted in the United Statesof America, have been condensed or omitted as allowed by such rules andregulations, and the Company believes that the disclosures are adequate to makethe information presented not misleading. In the opinion of management, all adjustments (which include only normalrecurring adjustments) necessary to fairly present the financial position,results of operations and changes in financial position at June 30, 2003 andfor all periods presented, have been made.

 

It is suggested that these statements be readin conjunction with the December 31, 2002 audited financial statements and theaccompanying 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 calculatedby dividing the net income (loss) to common stockholders by the weightedaverage number of common shares outstanding.

 

3.                                       Basis of Presentation – Going Concern

 

Theaccompanying financial statements have been prepared in conformity withgenerally accepted accounting principles, which contemplates continuation ofthe Company as a going concern.  Since1998, the Company’s financial statements have contained a going concernclause.  TheCompany has suffered recurring losses from operations, has a negativestockholders’ equity and a working capital deficit that raise substantialdoubts about its ability to continue as a going concern.  Management is attempting to raise additionalcapital.

 

In view of these matters, realization of certain assets in theaccompanying balance sheet is dependent upon continued operations of theCompany which, in turn, is dependent upon the Company’s ability to meet itsfinancial requirements, raise additional capital as needed, and the success ofits future operations.

 

Management believes that its ability to raise additional capitalprovides an opportunity for the Company to continue as a going concern.

 

4.                                       Subsequent Event

 

In July, 2003, Charles S. Leavell, CEO and Chairman of the Board ofDirectors extended the Company a line of credit in the amount of $100,000.  As of this filing, the terms and conditionsof this loan have not been set.

 

5.                                       Commitment

 

The Company’s lease for its Northern California Faire sites require theCompany to complete certain capital projects over the term of the lease.  The Company estimates that the cost of thesecapital projects for 2003 will be approximately $50,000.

 

7

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6.                                       Notes Payable

 

During the first four months of fiscal 2003, the Company raisedshort-term capital in the amount of $220,000 through the issuance of 12% unsubordinated promissory notes. The fundswere provided by Charles S. Leavell ($70,000), Chairman of the Board ofDirectors, J. Stanley Gilbert ($100,000), Officer and Board Director, andanother Board Director ($50,000).  Ofthe total outstanding, $120,000 was retired in June and $100,000 in July of2003.

 

**MANAGEMENT’S DISCUSSION AND ANALYSIS OF**

**FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

**General**

 

The following discussion shouldbe read in conjunction with the Company’s Consolidated Financial Statements,including the footnotes for the fiscal year ended December 31, 2002.

 

The Company presently owns andproduces four Renaissance Faires: the Bristol Renaissance Faire in Kenosha,Wisconsin, serving the Chicago/Milwaukee metropolitan region; the NorthernCalifornia Renaissance Pleasure Faire, serving the San Francisco Bay and SanJose metropolitan areas; the Southern California Renaissance Pleasure Faire inDevore, California serving the greater Los Angeles metropolitan area; and theNew York Renaissance Faire serving the New York City metropolitan area.

 

The Renaissance Faire is are-creation of a Renaissance village, a fantasy experience transporting thevisitor back into sixteenth century England. This fantasy experience is created through authentic craft shops, foodvendors and continuous live entertainment throughout the day, both on the streetand the stage, including actors, jugglers, jousters, magicians, dancers andmusicians.

 

On April 1, 2002, FairePartners, Ltd., the Company’s landlord for the Wisconsin site, purchasedproperty in New York from Sterling Forest Corporation.  The property has long been the home of theNew York Renaissance Faire.  In April2002, Faire Partners Ltd. leased the property to the Company for a twenty-yearterm with rent payments of $425,000 in years 1 through 5, $435,000 for years 6through 15 and $450,000 for lease years 16 through 20.  The lease allows Faire Partners to sell partof the leased property.  Should FairePartners sell any property, the lease provides that the Company’s rent paymentsand the buyout provision would be decreased in an amount proportional to theselling price of the property.

 

The leased property in New Yorkincludes a site for a Ski Center that the Company chose to operate in2002.  The Company began operation ofthe Ski Center in April, 2002, incurring nine months operating expense duringthe 2002 fiscal year.  The Ski Centeropened its season in December, 2002, generating revenue into the month ofMarch, 2003.  The Company’s three-monthincome statement results are on a comparable basis for the 2002 to 2003operating seasons.  However, thesix-month income statement results are not comparable because the Company didnot take over operation of the Ski Center until April, 2002.  An explanation of the differences created bythe partial operating season of the Ski Center in 2002 will be disclosed in theaccompanying section titled “*Six Months Ended June 30, 2003Compared to Six Months Ended June 30, 2002”.*

 

On May 3, 2002, the Companysigned a long-term lease for the Northern California Faire.  The new site for the Northern Faire islocated at Casa de Fruta, near Gilroy, California.  The lease is for 20

 

8

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years, 5-years with a 15-yearextension.  Lease payments in the firstyear include $1.00 per patron, with a $150,000 minimum and increasing each yearthereafter.

 

The Company had a workingcapital deficit of ($118,504) as of June 30, 2003.  While the Company believes that it has adequate capital to fundanticipated operations for 2003, it believes it may need additional capital forfuture fiscal periods.   See “*Liquidityand Capital Resources*.”

 

**ThreeMonths Ended June 30, 2003, Compared to Three Months Ended June 30, 2002**

 

Revenues decreased  $218,841 or 6% from $3,779,489 in 2002 to$3,560,648 in 2003.  This decrease islargely the result of a one day closure in May 2003 of the Company’s SouthernCalifornia Faire due to rain.  As aresult of this closure, revenue and attendance for this event was down 8% ascompared to the 2002 operating season.

 

Cost of sales increased $6,552or 1% from $878,638 in 2002 to $885,190 in 2003.  Total operating expenses (year-round operating costs andcorporate overhead) decreased $113,961 or 5%, from $2,343,358 in 2002 to$2,229,397 in 2003.  Of the operatingexpenses, salaries decreased less than 1%, from $977,314 in 2002 to 973,636 in2003 reflecting a $3,678 decrease for the 2003 period as compared to the 2002period.  Advertising expense showed adecrease of $48,022 or 10%, from $472,592 in 2002 to $424,570 in 2003.  This cost savings is, in large part, due tosecuring a new consulting firm used in the Company’s media program.  Depreciation and amortization increased 9%,from $82,351 in 2002 to $90,066 in 2003. Other operating expenses (all other general and administrative expensesof the Company) decreased $69,976 or 9%, from $811,101 in 2002 to $741,125 in2003.

 

As a result of the foregoing,net operating income (before interest charges and other income) decreased$111,432 or 20%, from $557,493 for the 2002 period to $446,061 for the 2003period.

 

Interest expense increased$2,077 or 2%, from  $136,453 in 2002 to$138,530 in 2003.  Other incomeincreased $11,901, from $30,219 in 2002 to $42,120 in 2003.  Interest income decreased $1,296, from$8,913 in 2002 to $7,617 in 2003.

 

Combining net operating incomewith other income/expense resulted in a $102,904 decrease in net income beforetaxes, from income of $460,172 for the 2002 period to income of $357,268 forthe 2003 period.

 

Net income to commonstockholders also decreased $102,904, from $460,172 for the 2002 period to$357,268 for the 2003 period.  Finally,net income per common share decreased from $0.21 for the 2002 period to $0.17for the 2003 period, based on 2,144,889 weighted average shares outstanding inboth years.

 

**SixMonths Ended June 30, 2003 Compared to Six Months Ended June 30, 2002**

 

Revenues increased  $898,428 or 24% from $3,787,797 in 2002 to$4,686,225 in 2003. The Ski Center revenue for the first six months of 2003 wasapproximately $1.1 million.  Thisadditional revenue was offset by an approximate 8% decrease in revenue andattendance for the Company’s Southern California Faire as a result of a one-dayclosure in May 2003 due to rain.

 

Cost of sales increased $50,936or 6% from $881,279 in 2002 to $932,215 in 2003.  The Ski Center cost of sales was approximately $80,000 for thistime period.

 

9

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Total operating expenses(year-round operating costs and corporate overhead) increased $464,347 or 15%,from $3,168,444 in 2002 to $3,632,791 in 2003. Of the operating expenses, salary expense increased $313,023 or 23% from$1,341,760 in 2002 to $1,654,783 in 2003. Salary expense for the Ski Center was $301,054 for the first six-monthsof 2003.  Advertising expense showed adecrease of $21,863 or 5%, from $472,592 in 2002 to $450,729 in 2003.  Depreciation increased 19%, from $144,722 in2002 to $172,427 in 2003.  Otheroperating expenses (all other general and administrative expenses of theCompany) increased $145,482 or 12%, from $1,209,370 in 2002 to $1,354,852 in2003. Of the operating expense increase, approximately $200,000 is attributableto the Ski Center.

 

As a result of the foregoing,net operating income (loss) (before interest charges and other income)increased 146% from a loss of ($261,926) for the 2002 period to income of$121,219 for the 2003 period

 

Interest expense increased$2,543 or 1%, from  $262,619 in 2002 to$265,162 in 2003.  Other incomeincreased $21,697, from $40,298 in 2002 to $61,995 in 2003.  Interest income decreased $2,553, from$18,717 in 2002 to $16,164 in 2003.

 

Combining net operating incomewith other income/expense resulted in a $399,746 decrease in net loss beforetaxes, from loss of ($465,530) for the 2002 period to a loss of ($65,784) forthe 2003 period.

 

Net loss to common stockholdersalso decreased $399,746, from ($465,530) for the 2002 period to ($65,784) forthe 2003 period.  Finally, net loss percommon share decreased from ($0.22) for the 2002 period to ($0.03) for the 2003period, based on 2,144,889 weighted average shares outstanding in both years.

 

**Liquidityand Capital Resources**

 

The Company’s working capital deficit widenedduring the six-months ended June 30, 2003, from $48,697 at December 31, 2002 to$118,504 at June 30, 2003. The Company’s working capital requirements aregreatest during the period from January 1 through May 1, when it is incurringstart-up expenses for its first Faire of the season, the Southern CaliforniaFaire.

 

During the first four months of fiscal 2002, the Company raised capitalin the amount of $100,000 through theissuance of 12% subordinated promissory notes. The funds were providedby Charles S. Leavell, Chairman of the Board of Directors ($50,000), and aparty affiliated with the Chairman of the Board.  The notes were issued in units, each unit consisting of twopromissory notes of equal principal, identical in nature except that one noteis convertible to common stock at a price of $0.30 per share.  Interest is due and payable quarterly andthe notes mature August 31, 2003.

 

During the first six months of fiscal 2000, the Company raised capitalin the amount of $575,000 through theissuance of 12% subordinated promissory notes. The funds were providedby Charles S. Leavell, Chairman of the Board of Directors ($250,000), J.Stanley Gilbert, President and Director ($225,000), and one otherinvestor.  The notes were issued inunits, each unit consisting of two promissory notes of equal principal,identical in nature except that one note is convertible to common stock at aprice of $0.30 per share. Interest was due and payable quarterly and the notesmatured August 31, 2001.  On thematurity date, the non-convertible portion of the notes were retired.   The maturity date for the convertibleportion of the notes were extended until November of 2003 under the same termsand conditions as the original offer.

 

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During the first four months of fiscal 2003, the Company raisedshort-term capital in the amount of $220,000 through the issuance of 12% unsubordinated promissory notes. The fundswere provided by Charles S. Leavell ($70,000), Chairman of the Board ofDirectors, J. Stanley Gilbert ($100,000), Officer and Board Director, andanother Board Director ($50,000).  Ofthe total outstanding, $120,000 was retired in June and $100,000 in July of2003.

 

While the Company believes it has adequate capital to fund anticipatedoperations for fiscal 2003, it believes it may need to obtain additionalworking capital for future periods.

 

Reviewing the change in financial position overthe six months, current assets, largely comprised of cash and prepaid expenses,increased from $1,192,473 at December 31, 2002 to $1,965,797 at June 30, 2003,an increase of $773,324 or 65%.  Ofthese amounts, cash and cash equivalents decreased from $642,061 at December31, 2002 to $385,109 at June 30, 2003. Accounts receivable decreased from $23,530 at December 31, 2002 to$10,441 at June 30, 2003.  Inventoryincreased from $160,500 at December 31, 2002 to $249,726 at June 30, 2003.  Prepaid expenses (expenses incurred onbehalf of the Faires) increased from $275,520 at December 31, 2002 to$1,244,255 at June 30, 2003.  Thesecosts are expensed once the Faires are operating.

 

Current liabilities increased from $1,241,170at December 31, 2002, to $2,084,301 at June 30, 2003, an increase of $843,131or 68%. During the quarter, accounts payable and accrued expenses increased$705,517 or 191% from $369,466 at December 31, 2002 to $1,074,983 at June 30,2003.  Unearned income, which consistsof the sale of admission tickets to upcoming Faires, passes for the SterlingForest Ski Center and deposits received from craft vendors for future Faires,increased from $447,746 at December 31, 2002 to $467,611 at June 30, 2003.  This revenue is recognized once the Fairesand the Ski Center are operating.  TheCompany’s notes payable accounts for $509,325 of the total current liabilitiesat June 30, 2003.  This amount islargely attributable to the aforementioned subordinated promissory notes thatmature in August and November, 2003.

 

Stockholders’ Deficit increased from($940,607) at December 31, 2002 to ($1,006,388) at June 30, 2003, an increaseof $65,781.  This increase is due to thenet loss incurred during the first six-months of 2003.

 

The lease for the Northern California Fairerequires the Company to complete certain capital projects.  The Company estimates the cost of thesecapital improvements at approximately $50,000 for 2003.  The Company has no additional significantcommitments for capital expenses during the fiscal year ending December 31,2003.  See “Factors That May AffectFuture Operating Results-Need for Additional Capital” regarding the Company’sfinancing requirements.

 

**FACTORS THAT MAY AFFECT FUTURE OPERATINGRESULTS**

 

In addition to the otherinformation contained in this report, prospective investors should carefullyconsider the following factors in evaluating the Company and its business.

 

*Recent Losses. *The Company has incurred operatinglosses in all fiscal periods since 1995 except fiscal 2000. For the six monthsended June 30, 2003, the Company reported a net loss of ($65,784).  There is no assurance that the Company willbe profitable in any subsequent period.

 

*Need for Additional Capital. *TheCompany had a working capital deficit of $118,504 as of June 30, 2003.  See “*Management’s Discussion and Analysis of FinancialCondition and Results of Operations.”* Based on the Company’s plannedoperations for 2003, the Company believes it has

 

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adequate capital to fundoperations, repay debt and fund required capital expenditures during the 2003fiscal year. To the extent that operations do not provide the necessary workingcapital during 2003, the Company may need toobtain additional capital for 2003 and future fiscal periods.  Additional capital may be soughtthrough borrowings or from additional equity financing.  Such additional equity financing may resultin additional dilution to investors.  Inany case, there can be no assurance that additional capital can besatisfactorily obtained, if and when required.

 

*Competition. *The Company faces significant competition fromnumerous organizations throughout the country which offer Renaissance Fairesand other entertainment events, including amusement parks, theme parks, localand county fairs and festivals, some of which possess significantly greaterresources than the Company, and in many cases, greater expertise and industrycontacts.  The Company estimates that thereare currently 20 major Renaissance Faires produced each year.  In addition, the Company estimates thatthere are 100 minor Renaissance Faire events held throughout the United Stateseach year, ranging in duration from one day to two weekends.

 

*Lack of Trademark Protection. *Because of the largenumber of existing Renaissance Faires, the Company is not able to rely upontrademark or service mark protection for the name “Renaissance Faire.”  As a result, there is no protection againstothers using the name “Renaissance Faire” for the production of entertainmentevents similar to those produced by the Company.  The Company’s own Faires could be negatively impacted byassociation with substandard productions.

 

*Public Liability and Insurance. *As a producer of apublic entertainment event, the Company has exposure for claims of personalinjury and property damage suffered by visitors to the Faires.  To date, the Company has experienced onlyminimal claims, which it has been able to resolve without litigation.  The Company maintains comprehensive liabilityinsurance which it considers to be adequate against this risk; however, therecan be no assurance that a catastrophic event or claim which could result indamage or liability in excess of this coverage will not occur.

 

*Dependence Upon Vendors. *A substantialportion of the Company’s revenues generated at each Faire is derived fromarrangements that the Company has with vendors who construct elaborate boothsat the Faires and sell a variety of food, crafts and souvenirs.  This arrangement consists of either a fixedrental or a percent of revenues paid by the vendors to the Company.  In either case, the success of a Faire isdependent upon the Company’s ability to attract responsible vendors who sellhigh quality goods.

 

*Seasonality. *The Company’s Renaissance Faires are located intraditionally seasonal areas that attract the greatest number of visitorsduring the warm weather months in the spring, summer, and early fall.  With the operation of the Sterling ForestSki Center in New York, the counter-seasonal revenue may help smooth theseasonality of the Company’s revenue stream from the Renaissance Faires.  Unless the Company acquires or developsadditional Faire sites or other events in areas that are counter-seasonal tothe present sites located in temperate climates, the Company’s revenues andincome will be highly concentrated from April through October 31st of eachyear.

 

*Dependence Upon Weather. *Each RenaissanceFaire operated by the Company is scheduled for a finite period, typicallyconsecutive weekends during a seven to nine-week period, which are determinedsubstantially in advance in order to facilitate advertising and otherpromotional efforts.  The success ofeach Faire is directly dependent upon public attendance, which is directlyaffected by weather conditions.  Whileeach of the Company’s Faires are normally open, rain or shine, poor weather, oreven the forecast of poor weather can result in substantial declines inattendance and, as a result, loss of revenues. Further, as the Renaissance Faires are outdoor events, they arevulnerable to severe weather conditions that can cause damage to the Faire’sinfrastructure and buildings, as

 

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well as injuries to patrons andemployees.  Risks associated with theweather are beyond anyone’s control, but have a direct and material impact uponthe relative success or failure of a given Faire.

 

*Licensing and Other GovernmentalRegulation. *Foreach Faire operated by the Company, it is necessary to apply for and obtainpermits and other licenses from local governmental authorities regulatingservice of alcoholic beverages, service of food, health, sanitation, and othermatters at the Faire sites.  Eachgovernmental jurisdiction has it’s own regulatory requirements that can imposeunforeseeable delays or impediments in preparing for a Faire production.  While the Company has been able to obtainall necessary permits and licenses in the past, there can be no assurance thatfuture changes in governmental regulation or the adoption of more stringentrequirements may not have a material adverse impact upon the Company’s futureoperations.

 

*Faire Sites. *The Company has long-term leases for all fourof its Renaissance Faires.  The termsand conditions of each lease vary by location, and to a large extent, arebeyond the control of the Company.  TheCompany’s dependence upon leasing Faire sites creates a certain risk offluctuation in the Company’s operations from year to year.

 

PART II. OTHER INFORMATION

 

PART II.OTHER INFORMATION

 

Item 1.                                                          Legal Proceedings

 

In 2002, acomplaint was filed against the Company with the Supreme Court in Orange CountyNew York.  The case contains a demandfor $35,000,000 and is in excess of the $5,000,000 limit contained in the insurancepolicies.  The Company has been advisedby the insurance provider that, based on its initial review of this claim, theloss in this matter will not exceed the limit of the insurance policies.  A liability has not been accrued at thistime because the outcome of this claim lacks certainty.  The Company will continue to monitor theprogress of this complaint.

 

Item 2.                                                          Changes in Securities

 

During the first four months of fiscal 2002, the Company raised$100,000 through the sale of 12% subordinated promissory notes.  The notes were issued in units, each unitconsisting of two promissory notes of equal principal, with one note beingconvertible into shares of the Company’s common stock at a conversion price of$.30 per share.  The notes were soldwithout registration under the Securities Act of 1933 in reliance upon theexemption provided by Regulation D promulgated by the Securities and ExchangeCommission.  No brokers were involved inthe sale of the notes and no sales commissions were paid with respect to suchsales.  See *Part I “Financial Condition and Resultsof Operations—Liquidity and Capital Resources.”*

 

Item 3.                                                          Defaults upon Senior Securities

 

None.

 

Item 4.                                                          Submission of Matters to a Vote of SecurityHolders

 

None.

 

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Item 5.                                                          OtherInformation

 

None.

 

Item 6.                                                          Exhibits and Reports on Form 8-K

 

(A)            **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     |      | Renaissance  Entertainment Corporation 1993 Stock Incentive Plan. (1) |
| *              | 10.1    |      | Specimen  Vendor and Exhibitor Agreement for the Bristol Renaissance Faire. |
| *              | 10.2    |      | Specimen  Vendor and Exhibitor Agreement for the Northern and Southern Renaissance  Pleasure Faires. |
| *              | 10.3    |      | Specimen  Bristol Renaissance Faire Concession Agreement. |
| *              | 10.4    |      | Specimen  Bristol Renaissance Faire Games Concession Agreement. |
|           | 10.9    |      | Purchase  Agreement dated November 12, 1997 between Faire Partners, LLC and Renaissance  Entertainment Corporation, including Lease Agreement and Warrant to Purchase  Common Stock as exhibits thereto, incorporated by reference from Registrant’s  Registration Statement on Form S-1 (No. 333-43503). |
|           | 10.10   |      | Lease dated  January 21, 1998 by and between Attache Publishing Services, Inc. and the  Company, incorporated by reference from the Registrants Quarterly Report on  Form 10-Q for the quarter ended March 31, 1998. |
|           | 10.11   |      | Employment  Agreement dated December 11, 1998 with Charles S. Leavell, incorporated by  reference from Registrant’s Annual Report on Form 10-KSB for the year ended  December 31, 1998. |
|           | 10.12   |      | Employment  Agreement dated December 11, 1998 with J. Stanley Gilbert, incorporated by  reference from Registrant’s Annual Report on Form 10-KSB for the year ended  December 31, 1998. |
|           | 10.15   |      | Warrant  Agreement dated December 17, 1999, incorporated by reference from  Registrant’s Annual Report on Form 10-KSB for the year ended December 31,  1999. |
|           | 10.17   |      | Asset  Purchase Agreement between Jim and Marta Selway and the Company dated April  6, 2000, incorporated by reference from Registrant’s Annual Report on Form  10-KSB for the year ended December 31, 1999. |
|           |    |      | Form of  Subordinated Subscription and Purchase Agreement for 2000, including A Note  and Convertible B Note incorporated by reference from Registrant’s Quarterly  Report on Form 10-QSB for the period ended March 31, 2000. |
|           | 10.20   |      | Lease dated  June 27, 2000 by and between San Bernardino County Community and Cultural  Resources Department and the Company incorporated by reference from  Registrant’s Annual Report on Form 10-KSB for the year ended December 31,  2000. |

 

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|   | 10.25  |   | Amendment  dated October 30, 2000 to Lease with Faire Partners, LLC incorporated by  reference from Registrant’s Annual Report on Form 10-KSB for the year ended  December 31, 2000.                                                          |
|--------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 10.28  |   | Form of  Subordinated Subscription and Purchase Agreement for 2002, including A Note  and Convertible B Note filed herewith incorporated by reference from  Registrant’s Annual Report on Form 10-KSB for the year ended December 31,  2001.  |
|   |   |   | Amendment  dated August 31, 2001 to Subordinated Subscription and Purchase Agreement for  2000 incorporated by reference from Registrant’s Annual Report on Form 10-KSB  for the year ended December 31, 2001.                                |
|   | 10.30  |   | Lease  agreement dated March 19,2002 by and between Faire Partners, Ltd. and the  Company incorporated by reference from Registrant’s Quarterly Report on Form  10-QSB for the period ended March 31, 2002.                                   |
|   | 10.31  |   | Lease  agreement dated May 3, 2002 by and between Casa De Fruta and the Company  incorporated by reference from Registrant’s Quarterly Report on Form 10-QSB  for the period ended March 31, 2002.                                            |
|   | 10.32  |   | Amendment  dated February 28, 2002 to Faire Partners, Ltd. lease dated November, 1997  incorporated by reference from Registrant’s Quarterly Report on Form 10-QSB  for the period ended March 31, 2002.                                      |
|   | 10.33  |   | Amendment  dated March 18, 2002 to Faire Partners, Ltd. lease dated November, 1997  incorporated by reference from Registrant’s Quarterly Report on Form 10-QSB  for the period ended March 31, 2002.                                         |
|   | 10.34  |   | Amendment  dated January 27, 2003 to lease dated January 21, 1998 by and between Attache  Publishing Service incorporated by reference from Registrant’s Annual Report  on Form 10-KSB for the period ended December 31, 2002.                |
|   | 10.35  |   | School Days  Contractual Agreement dated December 9, 2002 by and between Sheridan Sechter  & Associates and the Company incorporated by reference from Registrant’s  Annual Report on Form 10-KSB for the period ended December 31, 2002. |
|   | 10.36  |   | Contractual  Agreement dated December 9, 2002 by and between Sheridan Sechter &  Associates and the Company incorporated by reference from Registrant’s Annual  Report on Form 10-KSB for the period ended December 31, 2002.             |
|   | 10.37  |   | Agreement to  Terminate Contractal Relationships dated December 12, 2002 between Events  Group Corporation and the Company incorporated by reference from Registrant’s  Annual Report on Form 10-KSB for the period ended December 31, 2002.  |
| **     | 10.38  |   | Amendment  dated January 16, 2002 to. San Bernardino County Community and Cultural  Resources Department lease dated June 27, 2000 filed herewith.                                                                                                 |
| **     | 31.1   |   | Certification  of Chief Executive and Chief Financial Officer pursuant to Rule 13a-14(a)  under the Securities Exchange Act of 1934, as amended.                                                                                                   |
| **     | 32.1   |   | Certification  of Chief Executive and Chief Financial Officer Pursuant to 18 U.S.C. Section  1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                           |

 

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*                      Incorporated by referencefrom the Company’s Registration Statement on Form SB-2, declared effective bythe Commission on January 27, 1995, and the Post-Effective amendments thereto.

**                   Filedherewith.

 

(b)  REPORTS ON FORM 8-K

The Registrant filed no CurrentReports on Form 8-K during the quarter ended June 30, 2003.

 

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SIGNATURES

 

Pursuant to the requirements ofSection 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant hasduly caused this quarterly report to be signed on its behalf by theundersigned, thereunto duly authorized.

 
| RENAISSANCE  ENTERTAINMENT CORPORATION      |
|---------------------------------------------|
|                                        |   |
|                                        |   |
| Date:  August 8, 2003                  | /s/ Charles  S. Leavell |   |   |
| Charles S. Leavell, Chief Executive Officer |

 

Pursuant tothe requirements of the Securities Exchange Act of 1934, this report has beensigned below by the following persons on behalf of the Registrant and in thecapacities and on the dates indicated.

 
| **Signature**           |   | **Title**                                      |                                     | **Date** |
|-------------------------|--------|------------------------------------------------|------------------------------------------|----------|
|                    |   |                                           |                                     |     |
| /s/ Charles  S. Leavell |   |                                           | Chairman of  the Board,                  |     | August 8,  2003 |
| Charles S.  Leavell     |   | Chief  Executive and Chief  Financial Officers |                                     |     |
|                    |   |                                           |                                     |     |
|                    |   |                                           |                                     |     |
| /s/ Sue  Brophy         |   |                                           | Chief  Accounting Officer and Controller |     | August 8,  2003 |
| Sue Brophy              |   |                                           |                                     |     |
|                         |        |                                                |                                          |          |  |  |

 

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