ITEM 1. BUSINESS
Jones Programming
Partners 1-A, Ltd. (the “Partnership”) is a Colorado limited partnership that
was formed in April 1989 pursuant to the public offering of limited partnership
interests in the Jones Programming Partners Limited Partnership Program. Jones Entertainment Group, Ltd. is the
general partner of the Partnership (the “General Partner”). The Partnership was formed to acquire,
develop and own rights to produce and license original programming. All the Partnership’s films are subject to a
variety of license agreements for various markets. Some of these agreements will last beyond the year 2001. The General Partner charges the Partnership
for certain direct costs incurred on the Partnership’s behalf. See further discussion of such costs charged
to the Partnership by the General Partner in Item 8, Financial Statements, Note 5. As of December 31, 2001, the Partnership had
three programming properties: “The Little Kidnappers,” “The Story Lady” and
“Curacao.” The Partnership will not
invest in any additional programming, but instead will focus on the sale of its
existing programming. Following is a
description of the Partnership’s programming.
The Little Kidnappers
In January 1990,
the General Partner, on behalf of the Partnership, entered into an agreement
with Jones Maple Leaf Productions to produce a full-length made-for-television
film entitled “The Little Kidnappers.”
The total cost of the film was approximately $3,200,000. Of this amount, the Partnership invested
approximately $2,794,000, which included a production and overhead fee of
$300,000 paid to the General Partner.
In March 1999, the Partnership fully amortized its net investment in
this film. From inception to
December 31, 2001, the Partnership has recognized approximately $3,036,000
of revenue from this film, which includes the initial license fees of
approximately $1,365,000 from The Disney Channel and the Canadian Broadcasting
Corporation, which were used to help finance the film’s production. As of December 31, 2001, the Partnership has
a $25,125 receivable from this film that is expected to be collected in the
second quarter of 2002. The current
status of this receivable is, however, questionable and there is no guarantee
that the amount will be collected.
In
return for its investment in the film, the Partnership received all
distribution rights, excluding theatrical rights, in perpetuity in all markets
except Canada. The rights in Canada
have since reverted to the Partnership.
Theatrical rights are held by the writer.
The Partnership
has agreements with third parties to distribute the film in various markets.
The following rights will not be available until the expiration of the
agreements. In November 1990,
international home video rights were licensed to a third party for no earlier
than 10 years following completion of delivery, said rights terminated in
December 2000. Such party has licensed
all international pay television and video rights in Brazil until June
2002. Another licensee has the
international television and satellite rights to distribute the film in France,
the United Kingdom, French Belgium, the Benelux countries, Iceland, Sweden,
Norway, Denmark & Finland, Africa & the Middle East and Turkey until
between March 2003 and February 2005.
International television and satellite rights are held in Germany by another
licensee until September 2010. North American home video rights are licensed to
a third party.
The Story Lady
In April 1991, the
General Partner, on behalf of the Partnership, entered into an agreement with
NBC Productions, Inc. (“NBCP”) for the production of a full-length, made-for-television
film entitled “The Story Lady.” The
total cost of the film was approximately $4,300,000. Of this amount, the Partnership invested approximately $1,183,000
in return for all distribution rights to this film, excluding all United States
network distribution rights retained by NBC, after the required airings on the
NBC television network which have occurred.
Included in the total amount invested is a production and overhead fee
of $120,000 paid to the General Partner.
In December 1995, the Partnership fully amortized its net investment in
this film. From inception to
December 31, 2001, the Partnership has recognized approximately $2,299,000
of revenue from this film.
The
Partnership licensed back the international rights to NBCP for an eight year
term (which expired at the end of 1999 and was extended until July 12, 2001,
when it was terminated). NBCP has
entered into distribution agreements with third parties beyond the initial term
provided in the sub-license agreement with the Partnership. These distribution rights are not available until their expiration, including
international video rights in Mexico and the Philippines. International pay television rights are not
available in Argentina. International
free television rights are not available in Argentina, Colombia, Czech
Republic, France, Honduras, Mexico, Romania, Slovakia, South America, Ukraine,
Venezuela, Turkey, Panama, Chile, Nicaragua, Cyprus, Sri Lanka and Africa. These agreements are set to expire at
various times through November 2003.
All international distribution rights, other than set forth above, are
available.
The
Partnership controls non-network television distribution (i.e., syndication,
cable, pay cable) in the United States and domestic home video distribution,
which rights are available.
Curacao
In
October 1992, the General Partner, on behalf of the Partnership, entered into
an agreement with Showtime Networks, Inc. (“Showtime”) for the production of a
full-length, made-for-television film entitled “Curacao.” The
Partnership provided financing for the film and received all worldwide
distribution rights, except certain distribution rights granted to a third
party which have now reverted back to the Partnership. Circling Curacao, N.V., a wholly owned
subsidiary of the Partnership which provided certain production services, holds
distribution rights in the Netherland Antilles, Aruba and Surinam, in
perpetuity. Showtime was granted certain
rights, including an exclusive pay television license and exclusive home video
rights in the United States and islands of the Caribbean. Showtime’s pay television and certain other
domestic rights may not expire for a number of years, unless Showtime waives
certain commercial windows. On February
27, 2002, Showtime agreed to consolidate its rights into a single window that
shall commence on May 1, 2002 and continue through, and conclude on, October
31, 2003. The total production cost of
the film incurred by the Partnership was approximately $4,410,000. In addition to the costs of production, the
Partnership paid the General Partner $500,000 as a production and overhead fee
for services rendered in connection with arranging the Showtime presale and supervising
production of this picture. In December
1999, the Partnership fully amortized its net investment in this film. From inception to December 31, 2001,
the Partnership has recognized approximately $4,064,000 of revenue from this
film, which includes the initial license fee and home video advance from
Showtime of $2,650,000, which was used to finance the film’s production.
International
theatrical, free television and home video rights are licensed to a third party
until October 2003. International pay television rights in Australia are licensed
until April 2002. All other
international distribution rights are available.
Current Status of
Sales Efforts
The General
Partner, on behalf of the Partnership, is pursuing the sale of the
Partnership’s assets. The Partnership
has obtained the services of a broker to assist in the sale of the
Partnership’s films. Pursuant to the
services agreement, the broker will receive a 10 percent commission for
arranging the sale, or sales, of the Partnership’s films.
The General
Partner, with the assistance of the broker, has reached tentative agreements to
sell, transfer, or license the Partnership’s programming assets to unaffiliated
parties. Until the agreements are
finalized and the sales are closed, there is no assurance that the transactions
will be completed as described below, or completed at all.
The Partnership
has tentatively agreed to sell all of its rights in “The Little Kidnappers,”
“Curacao” and license certain distribution rights in the “The Story Lady” to a
film distributor. As consideration for
selling such rights, the Partnership would potentially receive approximately
$50,000, $200,000 and $100,000, respectively.
If the sales agreement is finalized, of which there is no assurance, it
is anticipated that the transaction will be completed in the second quarter
2002. It is anticipated 25 percent of
the sales proceeds will be escrowed until the end of November 2002.
The Partnership
has also agreed (in principle) to transfer its remaining distribution rights in
“The Story Lady” to NBCP. As
consideration for transferring such rights, NBCP would release the Partnership
from all past and future claims and obligations (including the Partnership’s
approximately $175,000 accrued liability).
If the agreement between the Partnership and NBCP is finalized, of which
there is no assurance, it is anticipated the transaction will be completed in
the second quarter 2002.
ITEM 2.
ITEM 2. PROPERTIES
See Item 1.
ITEM 3.
ITEM 3. LEGAL
PROCEEDINGS
None.
ITEM 4.
ITEM 4. SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS
On December 21,
2001, the Partnership held a Special Meeting of limited partners. A single proposal was presented to the
limited partners for their approval and was passed.
The limited
partners approved the sale of the Partnership’s assets, followed by dissolution
of the Partnership.
The voting results
were as follows:
PART II.
ITEM 5.
ITEM 5. MARKET FOR
THE REGISTRANT’S COMMON STOCK
AND RELATED
SECURITY HOLDER MATTERS
While the
Partnership is publicly held, there is no public market for the limited
partnership interests and it is not expected that such a market will develop in
the future. As of March 20, 2002, the
number of equity security holders in the Partnership was 846.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7.
ITEM 7. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following
discussion of the Partnership’s financial condition and results of operations
contains, in addition to historical information, forward-looking statements that
are based upon certain assumptions and are subject to a number of risks and
uncertainties. The Partnership’s actual
results may differ significantly from the results predicted in such
forward-looking statements.
Results of
Operations
2001 Compared to
For the year ended
December 31, 2001, revenues from “Curacao,” “The Little Kidnappers” and “The
Story Lady” were $1,482, $33,587 and $0, respectively. Revenues of the Partnership increased
$7,796, from $27,273 in 2000 to $35,069 in 2001. This increase was primarily
the result of an increase in international distribution revenue recognized for
“The Little Kidnappers,” partially offset by a decrease in revenue from
“Curacao.”
Distribution fees
and expenses decreased $6,609, from $15,463 in 2000 to $8,854 in 2001. This decrease was primarily due to a
substantial decrease in distribution expenses related to “The Story Lady,”
partially offset by an increase in expenses for “The Little Kidnappers” related
to the films redistribution in parts of Europe. These distribution fees and expenses generally relate to the
compensation due and costs incurred by distributors in selling the
Partnership’s programming in the domestic and international markets. The timing and amount of distribution fees
and expenses vary depending upon the individual market in which programming is
distributed.
Operating,
general and administrative expenses increased $55,202, from $43,239 in 2000 to
$98,441 in 2001. This increase was
primarily the result of a significant increase in legal and other professional
service expenses related to efforts to sell the Partnership’s programming
assets and the preparation and processing of proxy materials.
Interest
income decreased $3,848, from $5,803 in 2000 to $1,955 in 2001. This decrease in interest income was the
result of lower levels of invested cash and lower interest rates during 2001
compared to 2000.
Limited
Partners’ net loss per partnership unit increased $(3.47), from $(1.99) in 2000
to $(5.46) in 2001. This change was due
to the results of operations as discussed above.
2000 Compared to
Revenues
of the Partnership increased $18,196, from $9,077 in 1999 to $27,273 in
2000. This increase was primarily the
result of revenue collection efforts made by the General Partner with respect
to “Curacao.” Revenue from “Curacao”
was $3,703 in 1999 as compared to $26,807 in 2000. International and domestic sales of “The Little Kidnappers” and
“The Story Lady” decreased, resulting in Partnership revenue of $4,455 and
$919, respectively, in 1999 compared to $469 and $0, respectively, in
2000. “The Story Lady” was actively
being distributed in 2000, however, due to the unrecouped position of NBCP, the
Partnership was not entitled to any of the revenue generated by the film.
Filmed
entertainment costs decreased $6,027, from $6,027 in 1999 to $0 in 2000. This decrease was the result of the full
amortization of the capitalized production costs relating to “The Little
Kidnappers” in March 1999 and to “Curacao” in December 1999. Filmed entertainment costs are amortized
over the life of the film in the ratio that current gross revenues bear to
anticipated gross revenues.
Distribution
fees and expenses decreased $103,641, from $119,104 in 1999 to $15,463 in
2000. This decrease was due primarily
to the Partnership recording $119,081 in royalties owed NBCP for the “Story
Lady” in 1999 compared to $15,000 in 2000.
These distribution fees and expenses relate to the compensation due and
costs incurred by distributors in selling the Partnership’s programming in the
domestic and international markets. The
timing and amount of distribution fees and expenses vary depending upon the
individual market in which programming is distributed.
The
Partnership did not have a loss on write-down of film production in 2000. The loss from the write-down of film
production of $58,946 in 1999, was the result of a full write-down of the
Partnership’s net investment in “Curacao,” as of December 31, 1999. As of December 31, 1999, the Partnership had
expensed all costs related to the production of each of its three films.
Operating, general
and administrative expenses decreased $18,571, from $61,810 in 1999 to $43,239
in 2000. This decrease was due
primarily to the Partnership writing off an outstanding receivable of $26,129
in 1999. A similar write off did not occur in 2000. This decrease was partially offset by an increase in legal
expenses related to the potential sale of the Partnership’s assets.
Interest income
increased $2,466, from $3,337 in 1999 to $5,803 in 2000. This increase in interest income was the
result of higher interest rates and higher levels of invested cash balances
during 2000 compared to 1999.
Limited Partners’ net
loss per partnership unit decreased $16.43, from $(18.42) in 1999 to $(1.99) in
2000. This change was due to the
results of operations as discussed above.
Financial
Condition
Liquidity and
Capital Resources
The Partnership’s
principal sources of liquidity are cash on hand and amounts received from the
domestic and international distribution of the Partnership’s programming. The Partnership has approximately $9,000 in
cash as of December 31, 2001. As of December 31, 2001, the Partnership
has an approximately $25,000 receivable from “The Little Kidnappers” that is
expected to be collected in the second quarter of 2002. While the General Partner believes it is
likely that the amount will be collected in full, the current status of the
receivable is questionable and there is no guarantee that the amount will be
collected. Cash used in operations for
the year ended December 31, 2001 was approximately $64,000. In addition to the cash used in operations, the
General Partner paid approximately $44,000 of expenses on behalf of the Partnership. This brought the accounts payable to
affiliates balance to approximately $46,000 as of December 31, 2001. The
Partnership will not invest in any additional programming projects, but instead
will focus on the sale of its three existing films.
It
is anticipated that future distributions, if any, will only be made from
proceeds received from the sale of the Partnership’s assets. There is no assurance regarding the timing
or amount of future distributions. The
General Partner will be reimbursed for all amounts advanced to the Partnership
before any distribution is made to the limited partners. As of December 31, 2001, such advances
totaled approximately $46,000.
The
sale of the Partnership’s assets was approved by a vote of the limited partners
on December 21, 2001. Any direct costs
incurred by the General Partner on behalf of the Partnership in soliciting and
arranging for the sale,
or
sales, of the Partnership’s assets will be charged to the Partnership. The General Partner believes that the
distribution of the proceeds from the sales of the Partnership’s assets, if
any, together with all prior distributions paid to the limited partners, will
return to the limited partners less than 75 percent of their initial capital
contributions to the Partnership. The
Partnership has retained the services of a broker to assist in the sale of the
Partnership’s films. To date, the
broker has been paid $6,643 for film evaluation services and expenses. Pursuant to the services agreement, the
broker will also receive a 10 percent commission for arranging the sale, or
sales, of the Partnership’s films.
Revenues
currently being generated by the Partnership’s films are insufficient to fund
the Partnership’s operations. The
Partnership will have to rely on the General Partner to fund its
operations. However, the General
Partner is under no obligation to fund the operations of the Partnership, and
on a quarterly basis, will evaluate whether to provide funding to the
Partnership. The General Partner does
not anticipate cash flow from the films to increase significantly.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES
ABOUT MARKET RISK.
The Partnership
does not hold any financial instruments which present significant interest or
market risk.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS
JONES PROGRAMMING PARTNERS 1-A, LTD.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2000 AND 2001
INDEX
Report of
Independent Public Accountants
Statements of
Financial Position
Statements
of Operations
Statements of Partners’
Deficit
Statements
of Cash Flows
Notes to Financial Statements
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Jones Programming
Partners 1-A, Ltd.:
We have audited
the accompanying statements of financial position of Jones Programming Partners
1-A, Ltd. (a Colorado limited partnership) as of December 31, 2000
and 2001, and the related statements of operations, partners’ deficit and cash
flows for the three years ended December 31, 2001. These financial statements are the responsibility of the General
Partner’s management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our
audits in accordance with auditing standards generally accepted in the United
States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management as well
as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion,
the financial statements referred to above present fairly, in all material
respects, the financial position of Jones Programming Partners 1-A, Ltd. as of
December 31, 2000 and 2001, and the results of its operations and its cash
flows for the three years ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raise substantial doubt about its ability
to continue as a going concern. Management’s plans in regard to these matters
are also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 20, 2002.
JONES PROGRAMMING PARTNERS 1-A, LTD.
(A Limited Partnership)
STATEMENTS
OF FINANCIAL POSITION
The accompanying
notes are an integral part of these financial statements.
JONES PROGRAMMING PARTNERS 1-A, LTD.
(A Limited Partnership)
STATEMENTS
OF OPERATIONS
The accompanying
notes are an integral part of these financial statements.
JONES PROGRAMMING PARTNERS 1-A, LTD.
(A Limited Partnership)
STATEMENTS
OF PARTNERS’ DEFICIT
The accompanying
notes are an integral part of these financial statements.
JONES PROGRAMMING PARTNERS 1-A, LTD.
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
The accompanying
notes are an integral part of these financial statements.
JONES PROGRAMMING PARTNERS 1-A, LTD.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION
AND BUSINESS
Organized in April 1989, Jones Programming Partners
1-A, Ltd. (the “Partnership”) is a limited partnership formed pursuant to the
laws of the State of Colorado to engage in the development, production,
acquisition, licensing and distribution of original entertainment
programming. Jones Entertainment Group,
Ltd. is the “General Partner” of the Partnership.
(2) LIQUIDITY
The
Partnership has experienced recurring losses from operations and is currently
in a deficit capital position. Revenues
currently being generated by the Partnership’s films are insufficient to fund
the Partnership’s ongoing operations.
The Partnership will have to rely on the General Partner to fund its
operations. However, the General
Partner is under no obligation to fund the operations of the Partnership, and
on a quarterly basis, will evaluate whether to provide funding to the
Partnership. The General Partner does
not anticipate cash flow from the films to increase significantly.
The
Limited Partners have approved the sale of the Partnership’s assets and
subsequent dissolution of the Partnership.
The General Partner has reached tentative agreements to sell or transfer
the Partnership’s programming assets.
It is anticipated that as a result of these transactions, the
Partnership will be able to pay or discharge all of its obligations, including
discharging the accrued liability owed to NBCP, and fund its operations until
the Partnership is dissolved. However,
there is no assurance that the sales transactions will be completed or that the
Partnership will have the necessary funds to operate during 2002.
Upon the sale of the Partnership's assets, the General
Partner believes that a final distribution upon dissolution of the Partnership,
together with all prior distributions paid to the limited partners, will return
to the limited partners less than 75 percent of their initial capital
contributions to the Partnership.
(3)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents - The
Partnership considers all highly-liquid investments with a maturity when
purchased of three months or less to be cash equivalents.
Film Revenue Recognition - The
Partnership recognizes revenue in accordance with the provisions of Statement
of Financial Accounting Standards No. 139, “Rescission of FASB Statement No. 53
and Amendments to FASB Statements No. 63, 89, and 121” (“SFAS No. 139”) and
AICPA Statement of Position No. 00-2, “Accounting by Producers or Distributors
of Films” (“SOP 00-2”). Pursuant to
SFAS No. 139 and SOP 00-2, revenues from domestic and international licensing
agreements for programming are recognized when such amounts are known and the
film is available for exhibition or telecast, and when certain other criteria
set forth in SFAS No. 139 and SOP 00-2 are met. Advances received for licensing or other purposes prior to
exhibition or telecast are deferred and recognized as revenue when the above
conditions are met. The adoption of
SFAS No. 139 and SOP 00-2 in 2000 did not materially effect the manner in which
the Partnership recognized revenue.
Investment in and
Advances for Film Production - Investment in and advances for
film production consist of advances to production entities for story rights,
production, and film completion costs, and are stated at the lower of cost or
estimated net realizable value. In
addition, film production and overhead fees payable to the General Partner have
been capitalized and included as investment in film production. Film production costs are amortized based
upon the individual-film-forecast method.
Estimated losses, if any, will be provided for in full when determined
by the General Partner (see Note 6.)
Distribution Costs - Distribution
fees and expenses incurred in connection with domestic and international film
distribution are recorded at the time that the related licensing fees are
recognized as revenue by the
Partnership.
Similarly, the Partnership expenses film advertising costs related to
distribution when the advertising takes place.
Use of Estimates - The preparation
of financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could
differ from those estimates.
Reclassifications - Certain
reclassifications have been made to the 1999 and 2000 financial statements to
conform to the 2001 presentation.
(4) PARTNERS’
DEFICIT
The capitalization of the Partnership is set forth in
the accompanying Statements of Partners’ Deficit. No limited partner is or will
be obligated to make any additional contributions to the Partnership. The General Partner purchased its interest
in the Partnership by contributing $1,000 to Partnership capital.
Profits, losses and distributions of the Partnership
are allocated 99 percent to the limited partners and 1 percent to the General
Partner until the limited partners have received distributions equal to 100
percent of their capital contributions plus an annual return thereon of 12
percent, cumulative and non-compounded. Thereafter, profits/losses and
distributions will generally be allocated 80 percent to the limited partners
and 20 percent to the General Partner.
Interest income earned prior to the start of the Partnership’s first
production was allocated 100 percent to the limited partners. The General
Partner believes that the distribution of the proceeds from the sales of the
Partnership’s programming, if any, together with all prior distributions paid
to the limited partners, will return to the limited partners less than 75
percent of their initial capital contributions to the Partnership.
(5) TRANSACTIONS
WITH AFFILIATES
The General Partner is entitled to reimbursement from
the Partnership for its direct and indirect expenses allocable to the
operations of the Partnership, which shall include, but not be limited to,
rent, supplies, telephone, travel, legal expenses, accounting expenses,
preparation and distribution of reports to investors and salaries of any full
or part-time employees. Because the
indirect expenses incurred by the General Partner on behalf of the Partnership
are immaterial, the General Partner generally does not charge indirect expenses
to the Partnership. The General Partner
charged $10,856, $9,680 and $24,742 to the Partnership for direct expenses for
the years ended December 31, 1999, 2000, and 2001, respectively.
(6) INVESTMENT
IN AND ADVANCES FOR FILM PRODUCTION
“The Little Kidnappers”
In January 1990, the General Partner, on behalf of the
Partnership, entered into an agreement with Jones Maple Leaf Productions to
produce a full-length feature film for television entitled “The Little
Kidnappers.” The total film cost was
approximately $3,200,000. Of this amount, the Partnership invested
approximately $2,794,000, which included a production and overhead fee of
$300,000 paid to the General Partner.
From inception to December 31, 2001, the Partnership has recognized
approximately $3,036,000 of revenue from this film, which includes the initial
license fees of approximately $1,365,000 from The Disney Channel and the
Canadian Broadcasting Corporation, which were used to finance the film’s
production. As of December 31, 2001, the Partnership has a $25,125 receivable
from the distribution of this film that is expected to be collected during the
second quarter of 2002.
In March 1999, the Partnership fully amortized its net
investment in this film. However, the
Partnership continues to distribute this film.
“The Story Lady”
The
total cost of “The Story Lady” was approximately $4,300,000. Of this amount,
the Partnership invested approximately $1,183,000 in return for worldwide
distribution rights to this film, excluding United States and Canadian
broadcast television rights. Included
in the total amount invested is a production and overhead fee of $120,000 paid
to the General Partner. From inception
to December 31, 2001, the Partnership has recognized approximately
$2,299,000 of revenue from this film.
In December 1995, the Partnership fully amortized its net investment in
this film. However, the Partnership
continues to distribute this film.
The
Partnership licensed back the international rights to NBC Productions, Inc.
(“NBCP”) for an eight year term (which expired at the end of 1999 and was
extended until July 12, 2001, when it was terminated to end the agreement) and
the Partnership retained domestic distribution rights, principally home video,
non-network free television, pay television and non-theatrical.
The
Partnership and NBCP revenues are pooled and are to be paid to the parties
until each recoups its original investment plus interest. The Partnership has fully recouped, while
NBCP has not fully recouped. From the
time of the Partnership recoupment through December 31, 2001, the Partnership
has received approximately $175,000 from distributors which has not been
applied to NBCP's unrecouped amount. As
of December 31, 2001, the Partnership has reported this amount as an accrued
liability, but believes there is a basis to deny some or all of such liability.
In
September 1999, NBCP first claimed that it had mistakenly not taken the full
amount of its distribution fees, and was entitled to an additional amount of
approximately $192,500. The Partnership
does not believe that NBCP is entitled to the distribution fees that it claims.
Litigation
could result because of the disputes with NBCP. Such litigation would be costly and time consuming. There is no assurance regarding the
favorable resolution of this matter.
The Partnership does not have the funds to make any such payments to
NBCP, nor is it likely that the Partnership could borrow the necessary funds.
“Curacao”
In October 1992, the General Partner, on behalf of the
Partnership, entered into an agreement with Showtime Networks, Inc.
(“Showtime”) for the production of a full-length, made-for-television film
entitled “Curacao.” The total
production cost of the film was approximately $4,410,000. In addition to the costs of production, the
Partnership paid the General Partner $500,000 as a production and overhead fee
for services rendered in connection with arranging the Showtime pre-sale and
supervising production of this picture. From inception to December 31, 2001,
the Partnership has recognized approximately $4,064,000 of revenue from this
film, which includes the initial license fee and home video advance from
Showtime of $2,650,000 which was used to finance the film’s production.
The Partnership
fully amortized its net investment in this film December 1999, after
consideration of approximately $3,450,000 in amortization and approximately
$960,000 in write-downs. However, the Partnership continues to distribute this
film.
(7) INCOME
TAXES
Income tax provision (benefit) resulting from the Partnership’s
operations are not reflected in the accompanying financial statements as such
amounts accrue directly to the partners.
The Federal and state income tax returns of the Partnership are prepared
and filed by the General Partner.
The Partnership’s tax returns, the qualification of
the Partnership as a limited partnership for tax purposes, and the amount of
distributable Partnership income or loss are subject to examination by Federal
and state taxing authorities. If such
examinations result in changes with respect to the Partnership’s tax status or
to the Partnership’s recorded income or loss, the tax liability of the general
and limited partners would be adjusted accordingly.
The Partnership’s
significant book-tax differences between the financial reporting and tax bases
of the Partnership’s assets and liabilities are associated with: 1) the
difference between the amount of film
production cost
amortization and loss from write-down of film production cost recognized under
accounting principles generally accepted in the United States and the amount of
expense allowed for tax purposes; and 2) the allowance for doubtful accounts
which is not yet deductible for tax purposes.
Expenses recognized under accounting principles generally accepted in
the United States was less than the amount of expense recognized for tax
purposes by approximately $472,400, $0 and $250,000 for the years ended
December 31, 1999, 2000 and 2001, respectively.
ITEM 9.
ITEM 9. CHANGES IN
AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III.
ITEM 10.
ITEM 10. DIRECTORS
AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership itself has no officers or
directors. Certain information
concerning directors and executive officers of the General Partner of the
Registrant is set forth below. Each of
the directors serves until the next annual meeting of the shareholders of the
General Partner and until their successors shall be elected and qualified.
Mr.
Glenn R. Jones has served as Chairman of the Board of Directors and Chief
Executive Officer of the General Partner since its inception and he has served
as President of the General Partner since April 1994. Mr. Jones is also the Chairman of the Board of Directors and
Chief Executive Officer of the General Partner’s principal shareholder, Jones
21st Century, Inc., a subsidiary of Jones International, Ltd. Mr. Jones is the sole shareholder, Chairman
and Chief Executive Officer of Jones International, Ltd. He is also an officer and director of a
number of subsidiaries for Jones Media Networks, Ltd. (formerly known as Jones
International Networks, Ltd.). For more
than five years, until April 1999, Mr. Jones was Chairman of the Board of Directors
and Chief Executive Officer of Jones Intercable, Inc., a multiple system cable
television operator. In addition, Mr.
Jones is a member of the Board and Education Council of the National Alliance
of Business. In 1994, Mr. Jones was
inducted into Broadcasting and Cable’s Hall of Fame. Mr. Jones received a B.S. in Economics from Allegheny College and
a J.D. from the University of Colorado School of Law.
Mr. Timothy J.
Burke is Vice President and Director of the General Partner. Mr. Burke is a Group Vice President of Jones
International, Ltd. and an officer and/or director of many other Jones
International, Ltd. affiliated companies.
He has over 25 years of financial experience, and has been employed with
Jones for 19 years. Prior to the Jones
companies, Mr. Burke was a Tax Manager with Arthur Andersen & Co. He
received a B.A. in Accounting and a J.D from the University of Iowa.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership
has no employees; however, various personnel are required to operate its
business. Such personnel are employed by
the General Partner or an affiliate of the General Partner and, pursuant to the
terms of the Partnership’s limited partnership agreement, the cost of such
employment can be charged by the General Partner to the Partnership as a
reimbursement item. See Item 13.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
As of March 20,
2002, no person or entity owns more than 5 percent of the limited partnership
interests in the Partnership, except for Herbert Borbe. Mr. Borbe owns 800 of the 12,743 partnership
interests outstanding as of December 31, 2001.
Mr. Borbe’s address is 1709 134th Avenue S.E., Unit 21,
Bellevue, Washington 98005. Mr. Borbe
is not a director, officer or employee of the General Partner or any of its
affiliates.
ITEM 13.
ITEM 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
The General
Partner and its affiliates engage in certain transactions with the Partnership
as contemplated by the limited partnership agreement of the Partnership. The General Partner believes that the terms
of such transactions are generally as favorable as could be obtained by the
Partnership from unaffiliated parties.
This determination has been made by the General Partner in good faith,
but none of the terms were or will be negotiated at arm’s-length and there can
be no assurance that the terms of such transactions have been or will be as
favorable as those that could have been obtained by the Partnership from
unaffiliated parties. During 2001, in
aggregate, transactions of this nature totaled less than $25,000.
PART IV.
ITEM 14.
ITEM 14. EXHIBITS,
FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)
The following documents are filed as part of this
report:
1.
Financial statements
2.
The following exhibits are filed herewith:
(a) 4.1 Limited
Partnership Agreement and Amendment No. 1 to the Limited Partnership
Agreement. (1)
(1) Incorporated by reference from the Registrant’s
Revised Schedule 14A filed on August 24, 2001.
(b) Exhibit
99 Representations from Arthur
Andersen LLP
(b)
Reports on Form 8-K:
None.
SIGNATURES
Pursuant to the
requirements of Section 13 or 15(d) 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.
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.