SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September 30, 1998
0-16690
(Commission File Number)
ML MEDIA OPPORTUNITY PARTNERS, L.P.
(Exact name of registrant as specified in its governing instruments)
Delaware
(State or other jurisdiction of organization)
13-3429969
(IRS Employer Identification No.)
World Financial Center
South Tower - 14th Floor
New York, New York 10080-6114
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(212) 236-6472
N/A
Former name, former address and former fiscal year if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No .
<PAGE>
ML Media Opportunity Partners, L.P.
Part I - Financial Information.
Item 1. Financial Statements.
TABLE OF CONTENTS.
Consolidated Balance Sheets as of September 30, 1998 (Unaudited)
and December 31, 1997 (Unaudited)
Consolidated Statements of Operations
for the three and nine months ended
September 30, 1998 (Unaudited) and September 30, 1997 (Unaudited)
Consolidated Statements of Cash Flows
for the nine months ended September 30, 1998 (Unaudited)
and September 30, 1997 (Unaudited)
Consolidated Statement of Changes in Partners' Capital
for the nine months ended September 30, 1998 (Unaudited)
Notes to Consolidated Financial Statements
for the nine months ended September 30, 1998 (Unaudited)
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA OPPORTUNITY PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1998 (UNAUDITED)
AND DECEMBER 31, 1997 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------------
September 30, December 31,
Notes 1998 1997
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 13,244,742 $13,324,291
Interest and other receivables
34,721 36,836
----------- ----------
TOTAL ASSETS $ 13,279,463 $13,361,127
=========== ==========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Accounts payable and accrued liabilities
$ 6,269,097 $ 6,396,354
----------- ----------
Total Liabilities 6,269,097 6,396,354
----------- ----------
Commitments and Contingencies
2,3
</TABLE>
(Continued on the following page.)
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA OPPORTUNITY PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1998 (UNAUDITED)
AND DECEMBER 31, 1997 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------------
September 30, December 31,
1998 1997
----------- -----------
<S> <C> <C>
Partners' Capital:
General Partner:
Capital contributions, net of offering expenses
1,019,428 1,019,428
Additional capital contributions
29,119,653 27,759,183
Transfer from General Partner to Limited partners
(29,065,176) (27,718,311)
Cumulative cash distributions (362,496) (362,496)
Cumulative loss (620,813) (607,664)
----------- -----------
90,596 90,140
----------- -----------
Limited partners:
Capital contributions, net of offering expenses
(112,147.1 Units of Limited Partnership Interest)
100,914,316 100,914,316
Transfer from General Partner
to Limited partners 29,065,176 27,718,311
Tax allowance cash distribution (2,040,121) (2,040,121)
Other cumulative cash distributions
(59,559,029) (59,559,029)
Cumulative loss (61,460,572) (60,158,844)
----------- -----------
6,919,770 6,874,633
----------- -----------
Total Partners' Capital 7,010,366 6,964,773
----------- -----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL
$ 13,279,463 $ 13,361,127
=========== ===========
See Notes to Consolidated Financial Statements (Unaudited).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA OPPORTUNITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 1998 (UNAUDITED)
AND SEPTEMBER 30, 1997 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------------------
Three Months Nine Months
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Interest income $ 85,782 $ 107,435 $ 252,319 $ 177,637
Gain on Sale of:
MVT - 481,200 - 481,200
IMP/Intelidata - 159,901 - 159,901
---------- --------- --------- ---------
85,782 748,536 252,319 818,738
---------- --------- --------- ---------
Partnership Operating Expenses:
Professional fees and other
21,311 2,956 206,726 14,018
Services provided by the
General Partner
453,490 455,015 1,360,470 1,423,687
---------- --------- --------- ---------
474,801 457,971 1,567,196 1,437,705
---------- --------- --------- ---------
(Loss)/Income from
Partnership operations
(389,019) 290,565 (1,314,877) (618,967)
</TABLE>
(Continued on the following page.)
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA OPPORTUNITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 1998 (UNAUDITED)
AND SEPTEMBER 30, 1997 (UNAUDITED)
(continued)
- ----------------------------------------------------------------------------------------------------------------------------------
Three Months Nine Months
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
---------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Discontinued operations:
Income from discontinued
Television and Radio
Station Segment
- - - 3,627,135
--------- ---------- ---------- ----------
Income from discontinued
operations
- - - 3,627,135
--------- ---------- ---------- ----------
NET (LOSS)/INCOME $ (389,019) $ 290,565 $(1,314,877) $ 3,008,168
========= ========== ========== ==========
Per Unit of Limited
Partnership Interest:
(Loss)/Income from
Partnership operations $ (3.43) $ 2.57 $ (11.61) $ (5.46)
Income from discontinued
Television and Radio
Station Segment
- - - 32.02
--------- ---------- --------- ----------
NET (LOSS)/INCOME $ (3.43) $ 2.57 $ (11.61) $ 26.56
========= ========== ========== ==========
Number of Units 112,147.1 112,147.1 112,147.1 112,147.1
========= ========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited).
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA OPPORTUNITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 (UNAUDITED)
AND SEPTEMBER 30, 1997 (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------
September 30, September 30,
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net (loss)/income $(1,314,877) $ 3,008,168
Adjustments to reconcile net (loss)/ income to net cash (used in)/provided by
operating activities:
Services provided by the General
Partner 1,360,470 1,423,687
Income from discontinued
operations - (3,627,135)
Changes in operating assets and liabilities:
Interest and other receivables 2,115 (7,624)
Accounts payable and accrued
liabilities (127,257) (29,801)
---------- ----------
Net cash (used in)/provided by operating activities
(79,549) 767,295
---------- ----------
(Continued on the following page.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA OPPORTUNITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 (UNAUDITED)
AND SEPTEMBER 30, 1997 (UNAUDITED)
(continued)
- -------------------------------------------------------------------------------------------------------------------------
September 30, September 30,
1998 1997
----------- ----------
<S> <C> <C>
Cash flows from investing activities:
Proceeds from disposition of
discontinued operations - 3,627,135
----------- ----------
Net cash provided by investing
activities - 3,627,135
----------- ----------
Cash flows from financing activities:
Additional capital contributions - 23,744,989
Cash distribution - (23,671,989)
----------- ----------
Net cash provided by financing
activities - 73,000
----------- ----------
Net (decrease)/increase in cash and
cash equivalents (79,549) 4,467,430
Cash and cash equivalents at
beginning of year 13,324,291 2,383,444
----------- ---------
Cash and cash equivalents at end
of period $ 13,244,742 $ 6,850,874
=========== ==========
Cash paid for interest by TCS $ - $ 2,290,177
=========== ==========
</TABLE>
Supplemental Disclosure:
On April 2, 1997 the Partnership distributed $23,671,989 or $211.08 per Unit to
limited partners of record as of March 24, 1997.
See Notes to Consolidated Financial Statements (Unaudited).
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA OPPORTUNITY PARTNERS, L.P.
CONSOLIDATED STATEMENT OF CHANGES
IN PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
General Limited
Partner Partners Total
---------- ---------- ----------
<S> <C> <C> <C>
Partners' Capital as of January 1, 1998
$ 90,140 $ 6,874,633 $ 6,964,773
Net loss (13,149) (1,301,728) (1,314,877)
Additional capital contributions
1,360,470 - 1,360,470
Transfer from General Partner to
Limited partners
(1,346,865) 1,346,865 -
---------- ---------- ----------
Partners' Capital as of September 30,
1998
$ 90,596 $ 6,919,770 $ 7,010,366
========== ========== ==========
See Notes to Consolidated Financial Statements (Unaudited).
</TABLE>
<PAGE>
ML MEDIA OPPORTUNITY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
ML Media Opportunity Partners, L.P. (the "Partnership") was formed and the
Certificate of Limited Partnership was filed under the Delaware Revised Uniform
Limited Partnership Act on June 23, 1987. Operations commenced on March 23, 1988
with the first closing of the sale of units of limited partnership interest
("Unit"). Subscriptions for an aggregate of 112,147.1 Units were accepted and
are now outstanding.
Media Opportunity Management Partners (the "General Partner") is a joint
venture, organized as a general partnership under the laws of the State of New
York, between RP Opportunity Management, L.P. ("RPOM"), a limited partnership
under Delaware law, and ML Opportunity Management Inc. ("MLOM"), a Delaware
corporation and an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc.
The General Partner was formed for the purpose of acting as general partner of
the Partnership. The General Partner's total initial capital contribution
amounted to $1,132,800 which represents 1% of the total Partnership capital
contributions.
Pursuant to the terms of the Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement"), the General Partner is liable for all
general obligations of the Partnership to the extent not paid by the
Partnership. The limited partners are not liable for the obligations of the
Partnership in excess of the amount of their contributed capital.
The Partnership was formed to acquire, finance, hold, develop, improve,
maintain, operate, lease, sell, exchange, dispose of and otherwise invest in and
deal with media businesses and direct and indirect interests therein. As of
September 22, 1997, with the closing of the sale of MV Technology Limited, the
Partnership disposed of its last Media Business (as defined in the Partnership
Agreement). As a result, as of September 22, 1998 (one year following the
disposition of its last Media Business), pursuant to the Partnership Agreement,
the Partnership is in dissolution and its only remaining activity is to wind up
its affairs, which includes providing for or resolving its remaining obligations
and contingencies (See Note 3), and making a final cash distribution, if any, to
partners.
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information.
They do not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of the
General Partner, the financial statements include all adjustments necessary to
reflect fairly the financial position of the Partnership as of September 30,
1998 and the results of operations, cash flows and partners' capital of the
Partnership for the interim periods presented. All adjustments are of a normal
recurring nature. The results of operations for the nine months ended September
30, 1998 are not necessarily indicative of the results of operations for the
entire year.
Additional information, including the audited year end 1997 Financial Statements
and the Summary of Significant Accounting Policies, is included in the
Partnership's filing on Form 10-K for the year ended December 31, 1997 on file
with the Securities and Exchange Commission.
2. LIQUIDITY AND SUMMARY OF INVESTMENT STATUS
The General Partner continues to work to resolve the Partnership's obligations
and other contingencies relating to its former investments in International
Media Publishing, L.P. ("IMPLP"), International Media Publishing Inc.,
Intelidata Limited ("Intelidata"), Paradigm Entertainment, L.P., the Windsor
Systems and TCS Television Partners, L.P., which in the aggregate equals
approximately $5.8 million as of September 30, 1998. This amount is recorded as
a liability in the financial statements of the Partnership. The Partnership
currently anticipates that these obligations and contingencies will be resolved
as soon as practicable.
The General Partner currently anticipates that the pendency of certain
litigation, as described below, related claims against the Partnership for
indemnification, other costs and expenses related to such litigation, and the
involvement of management, will adversely affect (a) the timing of the
termination of the Partnership, (b) the amount of proceeds which may be
available for distribution, and (c) the timing of the distribution to limited
partners of any net proceeds that remain after resolving such obligations and
contingencies.
On March 27, 1997, the Partnership received a voluntary cash payment of
$23,671,989 (the "Cash Payment") from Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"), an affiliate of the General Partner, for
distribution solely to limited partners. On April 2, 1997, the Partnership
distributed all the proceeds of the Cash Payment, or $211.08 per Unit, to
limited partners of record as of March 24, 1997. The Cash Payment was treated in
the financial statements as a capital contribution by the General Partner and a
simultaneous transfer to limited partners' capital.
Pursuant to an amendment to the Partnership Agreement dated March 24, 1997 (the
"Amendment") the Partnership's obligation to pay a Partnership Management Fee
and a Property Management Fee for 1996 and subsequent periods has been
terminated. Therefore, although the General Partner continues to provide
services on behalf of the Partnership, the Partnership did not pay for these
services and will not pay for such services in the future. However, in
accordance with generally accepted accounting principles, for financial
reporting purposes, amounts equal to these services for the three and nine
months ended September 30, 1998 of $453,490 and $1,360,470, respectively, and
for the three and nine months ended September 30, 1997 of $455,015 and
$1,423,687, respectively, have been treated in the accompanying statements of
operations as an expense with a corresponding increase in General Partner's
capital due to the capital contribution for services provided by the General
Partner. In conjunction with the General Partner's capital increase, a transfer
was made to the limited partners' capital of the limited partners' share (99%)
of the capital contribution of such services. The foregoing expense and capital
transfer have no effect on the capital of the limited partners or the General
Partner.
On April 15, 1997, TCS Television Partners, L.P. ("TCS") and TCS Television Inc.
("TCS Inc.") (jointly, the "Sellers"), completed the sale to Nexstar
Broadcasting Group, L.L.C., ("Nexstar") of all of the outstanding capital stock
of Fabri Development Corporation ("Fabri"). Fabri, a 100% owned corporate
subsidiary of TCS Inc., owned two television stations, WTWO-TV in Terre Haute,
Indiana and KQTV in St. Joseph, Missouri. Before the consummation of the sale,
Nexstar assigned its rights under the Stock Purchase Agreement (the "Stock
Purchase Agreement") to Nexstar Broadcasting of the Midwest Inc. The base
purchase price for the outstanding shares of Fabri was $31,323,922 after a
working capital adjustment. Pursuant to the terms of the Stock Purchase
Agreement and the Sub-Debt Proceeds Sharing Agreement, after application of the
proceeds generated by the sale to the payment of transaction expenses resulting
from the sale and to the establishment of two separate escrow accounts totaling
$1,750,000, the remaining proceeds received from the sale were applied as
follows: $23,757,072 to repay certain amounts to TCS's lenders; $1,022,534 to
repay outstanding principal and accrued interest on a loan made to TCS by the
Partnership; and $2,604,601 and $1,736,400 to pay the Partnership and
Commonwealth Capital Partners, L.P., respectively, their share of certain
accrued and unpaid consulting fees. During 1997 and early 1998, $1,750,000 (the
entire escrowed amount) plus accrued interest of approximately $63,000 was
returned to TCS from escrows related to the sale of Fabri. The Partnership
recorded income of $3,627,135 during the nine months ended September 30, 1997
related to the sale of TCS.
On August 27, 1997, the Partnership received and recognized a gain for financial
reporting purposes of approximately $160,000 representing the final deferred
sale payment arising from the July 1, 1993 sale of its interest in IMPLP and
Intelidata. These funds represented the contractual royalty fee for sales
generated by Intelidata since the 1993 sale.
On September 22, 1997, the Partnership, pursuant to the option exercised by
European Media Partners, Ltd., completed the sale of its remaining investment, a
restructured 13.8% ownership interest in MV Technology Limited for approximately
$481,000.
3. CONTINGENCIES
On August 29, 1997, a purported class action was commenced in New York Supreme
Court, New York County, on behalf of the limited partners of the Partnership,
against the Partnership, the General Partner, the General Partner's two
partners, MLOM and RPOM, Merrill Lynch & Co., Inc. and Merrill Lynch. The action
concerns the Partnership's payment of certain management fees and expenses to
the General Partner and the payment of certain purported fees to an affiliate of
RPOM.
Specifically, the plaintiffs allege breach of the Partnership Agreement, breach
of fiduciary duties and unjust enrichment by the General Partner in that the
General Partner allegedly: (1) improperly failed to return to plaintiffs and the
alleged class members certain uninvested capital contributions in the amount of
$18.5 million (less certain reserves), (2) improperly paid itself management
fees in the amount of $18.3 million, and (3) improperly paid MultiVision Cable
TV Corp., an affiliate of RPOM, supposedly duplicative management fees in an
amount in excess of $6 million. In addition, plaintiffs assert a claim for
quantum meruit, supposedly seeking credit for, and counsel fees based on, the
benefit received by the limited partners as a result of a voluntary payment made
by Merrill Lynch to the Partnership in March 1997, in the amount of
approximately $23 million, representing management fees, certain expenses, and
interest paid by the Partnership to the General Partner since 1990.
With respect to Merrill Lynch & Co., Inc., Merrill Lynch, MLOM and RPOM,
plaintiffs claim that these defendants aided and abetted the General Partner in
the alleged breach of the Partnership Agreement and in the alleged breach of the
General Partner's fiduciary duties. Plaintiffs seek, among other things, an
injunction barring defendants from paying themselves management fees or expenses
not expressly authorized by the Partnership Agreement, an accounting,
disgorgement of the alleged improperly paid fees and expenses, return of
uninvested capital contributions, counsel fees, and compensatory and punitive
damages. Defendants have moved to dismiss the complaint and each claim for
relief therein; the court has not yet ruled on the motion. Defendants believe
that they have good and meritorious defenses to the action, and vigorously deny
any wrongdoing with respect to the alleged claims.
The Partnership Agreement provides for indemnification, to the fullest extent
provided by law, for any person or entity named as a party to any threatened,
pending or completed lawsuit by reason of any alleged act or omission arising
out of such person's activities as a General Partner or as an officer, director
or affiliate of either RPOM, MLOM or the General Partner, subject to specified
conditions. In connection with the purported class action noted above, the
Partnership has received notices of requests for indemnification from the
following defendants: the General Partner, MLOM, RPOM, Merrill Lynch & Co.,
Inc., and Merrill Lynch. For the three and nine months ended September 30, 1998,
the Partnership incurred approximately $18,000 and $183,000, respectively, for
legal costs relating to such indemnification. Such cumulative costs amount to
approximately $343,000 through September 30, 1998.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Liquidity and Summary of Investment Status
As of September 30, 1998 Registrant had $13,244,742 in cash and cash
equivalents.
As of September 22, 1997, with the closing of the sale of MV Technology Limited,
Registrant disposed of its last Media Business (as defined in the Partnership
Agreement). As a result, as of September 22, 1998 (one year following the
disposition of its last Media Business), pursuant to the Partnership Agreement,
Registrant is in dissolution and its only remaining activity is to wind up its
affairs, which includes providing for or resolving its remaining obligations and
contingencies (See below), and making a final cash distribution, if any, to
partners.
The General Partner continues to work to resolve Registrant's obligations and
other contingencies relating to its former investments in International Media
Publishing, L.P., International Media Publishing Inc., Intelidata Limited,
Paradigm Entertainment, L.P., the Windsor Systems and TCS Television Partners,
L.P., which in the aggregate equals approximately $5.8 million as of September
30, 1998. This amount is recorded as a liability in the financial statements of
Registrant. Registrant currently anticipates that these obligations and
contingencies will be resolved as soon as practicable.
Registrant's ongoing cash needs will be to fund its existing obligations and
costs in connection with the liquidation of the Partnership as well as providing
for costs and expenses related to the purported class action lawsuit described
below.
The General Partner currently anticipates that the pendency of certain
litigation, as described below, related claims against Registrant for
indemnification, other costs and expenses related to such litigation, and the
involvement of management, will adversely affect (a) the timing of the
termination of Registrant, (b) the amount of proceeds which may be available for
distribution, and (c) the timing of the distribution to limited partners of any
net proceeds that remain after resolving such obligations and contingencies.
Pursuant to an amendment to the Partnership Agreement dated March 24, 1997 (the
"Amendment") Registrant's obligation to pay a Partnership Management Fee and a
Property Management Fee for 1996 and subsequent periods has been terminated.
Therefore, although the General Partner continues to provide services on behalf
of Registrant, Registrant did not pay for these services and will not pay for
such services in the future. However, in accordance with generally accepted
accounting principles, for financial reporting purposes, amounts equal to these
services for the three and nine months ended September 30, 1998 of $453,490 and
$1,360,470, respectively, have been treated in the accompanying statements of
operations as an expense with a corresponding increase in General Partner's
capital due to the capital contribution for services provided by the General
Partner. In conjunction with the General Partner's capital increase, a transfer
was made to the limited partners' capital of the limited partners' share (99%)
of the capital contribution of such services. The foregoing expense and capital
transfer have no effect on the capital of the limited partners or the General
Partner.
On August 29, 1997, a purported class action was commenced in New York Supreme
Court, New York County, on behalf of the limited partners of Registrant, against
Registrant, Registrant's general partner, Media Opportunity Management Partners
(the "General Partner"), the General Partner's two partners, ML Opportunity
Management Inc. ("MLOM") and RP Opportunity Management, L.P. ("RPOM"), Merrill
Lynch & Co., Inc. and Merrill Lynch. The action concerns Registrant's payment of
certain management fees and expenses to the General Partner and the payment of
certain purported fees to an affiliate of RPOM.
Specifically, the plaintiffs allege breach of the Partnership Agreement, breach
of fiduciary duties and unjust enrichment by the General Partner in that the
General Partner allegedly: (1) improperly failed to return to plaintiffs and the
alleged class members certain uninvested capital contributions in the amount of
$18.5 million (less certain reserves), (2) improperly paid itself management
fees in the amount of $18.3 million, and (3) improperly paid MultiVision Cable
TV Corp., an affiliate of RPOM, supposedly duplicative management fees in an
amount in excess of $6 million. In addition, plaintiffs assert a claim for
quantum meruit, supposedly seeking credit for, and counsel fees based on, the
benefit received by the limited partners as a result of a voluntary payment made
by Merrill Lynch to Registrant in March 1997, in the amount of approximately $23
million, representing management fees, certain expenses, and interest paid by
Registrant to the General Partner since 1990.
With respect to Merrill Lynch & Co., Inc., Merrill Lynch, MLOM and RPOM,
plaintiffs claim that these defendants aided and abetted the General Partner in
the alleged breach of the Partnership Agreement and in the alleged breach of the
General Partner's fiduciary duties. Plaintiffs seek, among other things, an
injunction barring defendants from paying themselves management fees or expenses
not expressly authorized by the Partnership Agreement, an accounting,
disgorgement of the alleged improperly paid fees and expenses, return of
uninvested capital contributions, counsel fees, and compensatory and punitive
damages. Defendants have moved to dismiss the complaint and each claim for
relief therein; the court has not yet ruled on the motion. Defendants believe
that they have good and meritorious defenses to the action, and vigorously deny
any wrongdoing with respect to the alleged claims.
The Partnership Agreement provides for indemnification, to the fullest extent
provided by law, for any person or entity named as a party to any threatened,
pending or completed lawsuit by reason of any alleged act or omission arising
out of such person's activities as a General Partner or as an officer, director
or affiliate of either RPOM, MLOM or the General Partner, subject to specified
conditions. In connection with the purported class action noted above,
Registrant has received notices of requests for indemnification from the
following defendants: the General Partner, MLOM, RPOM, Merrill Lynch & Co.,
Inc., and Merrill Lynch. For the three and nine months ended September 30, 1998,
Registrant incurred approximately $18,000 and $183,000, respectively, for legal
costs relating to such indemnification. Such cumulative costs amount to
approximately $343,000 through September 30, 1998.
Forward Looking Information
In addition to historical information contained or incorporated by reference in
this report on Form 10-Q, Registrant may make or publish forward-looking
statements about management expectations, strategic objectives, business
prospects, anticipated financial performance, and other similar matters. In
order to comply with the terms of the safe harbor for such statements provided
by the Private Securities Litigation Reform Act of 1995, Registrant notes that a
variety of factors, many of which are beyond its control, affect its operations,
performance, business strategy, and results and could cause actual results and
experience to differ materially from the expectations expressed in these
statements. These factors include, but are not limited to, the effect of
changing economic and market conditions, trends in business and finance and in
investor sentiment, the level of volatility of interest rates, the impact of
current, pending, and future legislation and regulation both in the United
States and throughout the world, and the other risks and uncertainties detailed
in this Form 10-Q and is more fully detailed in Form 10-K incorporated by
reference herein. Registrant undertakes no responsibility to update publicly or
revise any forward-looking statements.
Results of Operations.
Three months ended September 30, 1998 and 1997.
Registrant generated a net loss of approximately $389,000 in the three months
ended September 30, 1998, which was comprised of services provided by the
General Partner of approximately $454,000, and professional fees and other
expenses of approximately $21,000, partially offset by interest income of
approximately $86,000.
Registrant generated net income of approximately $290,000 in the three months
ended September 30, 1997, which was comprised of a one-time gain on the sale of
MV Technology Limited and Intelidata of approximately $481,000 and $160,000,
respectively, and interest income of approximately $107,000, partially offset by
services provided by the General Partner of approximately $455,000, and
professional fees and other expenses of approximately $3,000.
The decrease in net income of approximately $680,000 from the 1997 period is
primarily attributable to the one-time gains recognized in 1997 on the sales of
MVT and Intelidata.
Nine Months ended September 30, 1998 and 1997.
Registrant generated a net loss of approximately $1.3 million in the first nine
months of 1998, which was comprised of services provided by the General Partner
of approximately $1.3 million and professional fees and other expenses of
approximately $207,000, partially offset by interest income of approximately
$252,000.
Registrant generated net income of approximately $3.0 million in the first nine
months of 1997, which was comprised of income from discontinued operations due
to the sale of the TCS television stations of approximately $3.6 million, a
one-time gain on the sale of MVT and Intelidata of approximately $481,000 and
$160,000, respectively, and interest income of approximately $178,000, partially
offset by services provided by the General Partner of approximately $1.4 million
and professional fees and other expenses of approximately $14,000.
The decrease in net income of approximately $4.3 million from the 1997 period is
primarily attributable to income from discontinued operations incurred in 1997,
as well as the one-time gains recognized in 1997 on the sales of MVT and
Intelidata.
Pursuant to the Amendment, Registrant's obligation to pay management fees for
1996 and subsequent periods has been terminated. However, the General Partner
continues to provide services on behalf of Registrant. In accordance with the
Amendment, Registrant did not pay for these services and will not pay for such
services in the future. However, in accordance with generally accepted
accounting principles, for financial reporting purposes, an amount equal to
these services is treated as an expense with a corresponding increase in General
Partner's capital. The foregoing expense and capital transfer have no effect on
the capital of the limited partners or the General Partner. Therefore,
Registrant's net income for the nine months ended September 30 1998 and 1997,
excluding services provided by the General Partner, would have been
approximately $46,000 and $4.4 million, respectively.
<PAGE>
PART II - OTHER INFORMATION.
Item 1. Legal Proceedings.
On August 29, 1997, a purported class action was commenced in
New York Supreme Court, New York County, on behalf of the
limited partners of Registrant, against Registrant,
Registrant's general partner, Media Opportunity Management
Partners (the "General Partner"), the General Partner's two
partners, ML Opportunity Management Inc. ("MLOM") and RP
Opportunity Management, L.P. ("RPOM"), Merrill Lynch & Co.,
Inc. and Merrill Lynch. The action concerns Registrant's
payment of certain management fees and expenses to the General
Partner and the payment of certain purported fees to an
affiliate of RPOM.
Specifically, the plaintiffs allege breach of the Partnership
Agreement, breach of fiduciary duties and unjust enrichment by
the General Partner in that the General Partner allegedly: (1)
improperly failed to return to plaintiffs and the alleged
class members certain uninvested capital contributions in the
amount of $18.5 million (less certain reserves), (2)
improperly paid itself management fees in the amount of $18.3
million, and (3) improperly paid MultiVision Cable TV Corp.,
an affiliate of RPOM, supposedly duplicative management fees
in an amount in excess of $6 million. In addition, plaintiffs
assert a claim for quantum meruit, supposedly seeking credit
for, and counsel fees based on, the benefit received by the
limited partners as a result of a voluntary payment made by
Merrill Lynch to Registrant in March 1997, in the amount of
approximately $23 million, representing management fees,
certain expenses, and interest paid by the Partnership to the
General Partner since 1990.
With respect to Merrill Lynch & Co., Inc., Merrill Lynch, MLOM
and RPOM, plaintiffs claim that these defendants aided and
abetted the General Partner in the alleged breach of the
Partnership Agreement and in the alleged breach of the General
Partner's fiduciary duties. Plaintiffs seek, among other
things, an injunction barring defendants from paying
themselves management fees or expenses not expressly
authorized by the Partnership Agreement, an accounting,
disgorgement of the alleged improperly paid fees and expenses,
return of uninvested capital contributions, counsel fees, and
compensatory and punitive damages. Defendants have moved to
dismiss the complaint and each claim for relief therein; the
court has not yet ruled on the motion. Defendants believe that
they have good and meritorious defenses to the action, and
vigorously deny any wrongdoing with respect to the alleged
claims.
The Partnership Agreement provides for indemnification, to the
fullest extent provided by law, for any person or entity named
as a party to any threatened, pending or completed lawsuit by
reason of any alleged act or omission arising out of such
person's activities as a General Partner or as an officer,
director or affiliate of either RPOM, MLOM or the General
Partner, subject to specified conditions. In connection with
the purported class action noted above, Registrant has
received notices of requests for indemnification from the
following defendants: the General Partner, MLOM, RPOM, Merrill
Lynch & Co., Inc., and Merrill Lynch. For the three and nine
months ended September 30, 1998, Registrant incurred
approximately $18,000 and $183,000, respectively, for legal
costs relating to such indemnification. Such cumulative costs
amount to approximately $343,000 through September 30, 1998.
Item 2. Changes in Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
As of September 22, 1997, with the closing of the sale of MV
Technology Limited, Registrant disposed of its last Media
Business (as defined in the Partnership Agreement).
Accordingly, as of September 22, 1998 (one year following the
disposition of its last Media Business), pursuant to the
Partnership Agreement, Registrant is in dissolution and its
only remaining activity is to wind up its affairs, which
includes providing for or resolving its remaining obligations
and contingencies (See Part II Item 1. Legal Proceedings), and
making a final cash distribution, if any, to partners.
Item 6. Exhibits and Reports on Form 8-K.
A). Exhibits:
Exhibit # Description
27. Financial Data Schedule
B). Reports on Form 8-K
None
<PAGE>
SIGNATURES
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.
ML MEDIA OPPORTUNITY PARTNERS, L.P.
By: Media Opportunity Management Partners
General Partner
By: RP Opportunity Management, L.P.
General Partner
By: IMP Opportunity Management Inc.
Dated: November 9, 1998 /s/ I. Martin Pompadur
----------------------
I. Martin Pompadur
Director and President
(principal executive officer
of the Registrant)
Dated: November 9, 1998 /s/ Elizabeth McNey Yates
-------------------------
Elizabeth McNey Yates
Executive Vice President
<PAGE>
SIGNATURES
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.
ML MEDIA OPPORTUNITY PARTNERS, L.P.
By: Media Opportunity Management Partners
General Partner
By: ML Opportunity Management, Inc.
Dated: November 9, 1998 /s/ Kevin K. Albert
-------------------
Kevin K. Albert
Director and President
Dated: November 9, 1998 /s/ Diane T. Herte
------------------
Diane T. Herte
Treasurer
(principal accounting officer and
principal financial officer of the Registrant)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted
from the quarter ended September 30, 1998 Form 10-Q Consolidated Balance Sheets
and Consolidated Statements of Operations as of September 30, 1998, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
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