SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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
March 31, 1999
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 1 - Financial Information.
Item 1. Financial Statements.
TABLE OF CONTENTS
Consolidated Balance Sheets as of March 31, 1999 (Unaudited) and December
31, 1998 (Unaudited)
Consolidated Statements of Operations for the three months ended March 31,
1999 (Unaudited) and March 31, 1998 (Unaudited)
Consolidated Statements of Cash Flows for the three months ended March 31,
1999 (Unaudited) and March 31, 1998 (Unaudited)
Consolidated Statements of Changes in Partners' Capital for the three
months ended March 31, 1999 (Unaudited)
Notes to Consolidated Financial Statements for the three months ended March
31, 1999 (Unaudited)
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA OPPORTUNITY PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1999 (UNAUDITED)
AND DECEMBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
March 31, December 31,
Notes 1999 1998
----- ------------- ------------
ASSETS:
Cash and cash equivalents $ 10,260,761 $ 10,152,858
Interest and other receivables 33,311 37,403
Other assets - 89,191
------------- -------------
TOTAL ASSETS $ 10,294,072 $ 10,279,452
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Accounts payable and accrued liabilities $ 2,101,589 $ 2,071,911
------------- -------------
Total Liabilities 2,101,589 2,071,911
------------- -------------
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 MARCH 31, 1999 (UNAUDITED)
AND DECEMBER 31, 1998 (UNAUDITED)
(continued)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
March 31, December 31,
Notes 1999 1998
----- ------------ -------------
Partners' Capital:
General Partner:
Capital contributions, net of
offering expenses 1,019,428 1,019,428
Additional capital contributions 30,034,342 29,573,143
Transfer from General Partner
to Limited partners (29,970,718) (29,514,131)
Cumulative cash distributions (362,496) (362,496)
Cumulative loss (618,139) (613,376)
------------ ------------
102,417 102,568
------------ ------------
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 29,970,718 29,514,131
Tax allowance cash distribution (2,040,121) (2,040,121)
Other cumulative cash distributions (59,559,029) (59,559,029)
Cumulative loss (61,195,818) (60,724,324)
------------ ------------
8,090,066 8,104,973
------------ ------------
Total Partners' Capital 8,192,483 8,207,541
------------ ------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 10,294,072 $ 10,279,452
============ ============
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited).
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA OPPORTUNITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
MARCH 31, 1999 (UNAUDITED)
AND MARCH 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
1999 1998
----------- -----------
Interest income $ 109,219 $ 82,681
Partnership Operating Expenses:
Professional fees and other 124,277 56,128
Services provided by the General
Partner 461,199 453,490
----------- -----------
585,476 509,618
----------- -----------
NET LOSS $ (476,257) $ (426,937)
=========== ===========
Per Unit of Limited Partnership Interest:
NET LOSS $ (4.20) $ (3.77)
=========== ===========
Number of Units 112,147.1 112,147.1
=========== ===========
See Notes to Consolidated Financial Statements (Unaudited).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA OPPORTUNITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
AND MARCH 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
1999 1998
----------- -----------
Cash flows from operating activities:
Net loss $ (476,257) $ (426,937)
Adjustments to reconcile net loss
to net cash provided by/(used in)
operating activities:
Services provided by the General Partner 461,199 453,490
Changes in operating assets and liabilities:
Interest and other receivables 4,092 18,379
Other assets 89,191 -
Accounts payable and accrued liabilities 29,678 (78,253)
------------ -----------
Net cash provided by/(used in)
operating activities 107,903 (33,321)
------------ -----------
Net increase/(decrease) in cash and
cash equivalents 107,903 (33,321)
Cash and cash equivalents at
beginning of year
10,152,858 13,324,291
------------ ------------
Cash and cash equivalents at end
of period $ 10,260,761 $ 13,290,970
============ ============
</TABLE>
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 THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
General Limited
Partner Partners Total
------------ ------------ -------------
Partners' Capital as of January 1, 1999
$ 102,568 $ 8,104,973 $ 8,207,541
Net loss (4,763) (471,494) (476,257)
Additional capital contributions 461,199 - 461,199
Transfer from General Partner to
Limited partners (456,587) 456,587 -
------------ ------------ -------------
Partners' Capital as of March 31, 1998 $ 102,417 $ 8,090,066 $ 8,192,483
============ ============ =============
See Notes to Consolidated Financial Statements (Unaudited).
</TABLE>
<PAGE>
ML MEDIA OPPORTUNITY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(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
("Units"). 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
("MVT"), 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, and making a final cash
distribution, if any, to its 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 March 31, 1999 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
three months ended March 31, 1999 are not necessarily indicative of the results
of operations for the entire year.
Additional information, including the audited year end 1998 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, 1998 on
file with the Securities and Exchange Commission.
2. Liquidity and Summary of Investment Status
As of March 31, 1999, the Partnership had $10,260,761 in cash and cash
equivalents.
During the first quarter of 1999, the General Partner continued to work to
resolve the Partnership's obligations and contingencies relating to its former
investments. As of March 31, 1999, these obligations and contingencies amounted
to approximately $1.6 million in the aggregate, and are recorded as a liability
in the financial statements of the Partnership. The General Partner is working
diligently to resolve these obligations and contingencies 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.
Pursuant to an amendment to the Partnership Agreement dated March 24, 1997,
the Partnership's obligation to pay a Partnership Management Fee and a Property
Management Fee for 1996 and subsequent periods was 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 first quarter of 1999 and 1998 of $461,199 and $453,490,
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 contributions 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 for 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.
3. 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 the
Partnership, against the Partnership, the General Partner, the General Partner's
two partners, MLOM and RPOM, Merrill Lynch & Co., Inc. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("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 the 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 believe that they have good and meritorious defenses to the
action, and vigorously deny any wrongdoing with respect to the alleged claims.
Defendants moved to dismiss the complaint and each claim for relief therein. On
March 3, 1999, the New York Supreme Court issued an order granting defendants'
motion and dismissing plaintiffs' complaint in its entirety, principally on the
grounds that the claims are derivative and plaintiffs lack standing to bring
suit because they failed to make a pre-litigation demand on the General Partner.
Plaintiffs have both appealed this order and moved, inter alia, for leave to
amend their complaint in order to re-assert certain of their claims as
derivative claims on behalf of the Partnership. The appeal and the motion for
leave to amend are pending.
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 named therein: the General
Partner, MLOM, RPOM, Merrill Lynch & Co., Inc., and Merrill Lynch. For the three
months ended March 31, 1999 and 1998, the Partnership incurred approximately
$28,000 and $51,000, respectively, for legal costs relating to such
indemnification. Such cumulative costs amount to approximately $395,000 through
March 31, 1999.
4. Recent Accounting Statement Adopted
The Partnership adopted Statement of Financial Accounting Standards
("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities"
during the first quarter of 1999. SFAS No. 133 established accounting and
reporting standards for derivative instruments and for hedging activities,
requiring the recognition of all derivatives as either assets or liabilities and
to measure those instruments at fair value, as well as to identify the
conditions for which a derivative may be specifically designed as a hedge. The
Partnership currently does not have any derivative instruments and is not
engaged in hedging activities.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources.
As of March 31, 1999, Registrant had $10,260,761 in cash and cash
equivalents.
As of September 22, 1997, with the closing of the sale of MV Technology
Limited ("MVT"), Registrant disposed of its last Media Business, as defined in
the Amended and Restated Agreement of Limited Partnership (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 its
partners. During the first quarter of 1999, the General Partner continued to
work to resolve Registrant's obligations and contingencies relating to its
former investments. As of March 31, 1999, these obligations and contingencies
amounted to approximately $1.6 million in the aggregate, and are recorded as a
liability in the financial statements of Registrant. The General Partner is
working diligently to resolve these obligations and contingencies as soon as
practicable.
Registrant's ongoing cash needs will be to fund its existing obligations
and costs in connection with the liquidation of Registrant, as well as providing
for costs and expenses related to the purported class action lawsuit described
below. Media Opportunity Management Partners (the "General Partner") currently
anticipates that the pendency of such 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 the
limited partners of any net proceeds that remain after resolving such
obligations and contingencies.
Pursuant to an amendment to the Partnership Agreement (the "Amendment")
dated March 24, 1997, Registrant's obligation to pay a Partnership Management
Fee and a Property Management Fee for 1996 and subsequent periods was
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, an
amount equal to these services for the first quarter of 1999 of $461,199 has
been treated in the accompanying statement of operations as an expense with a
corresponding increase in General Partner's capital due to the capital
contributions 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 for 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, 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, Pierce, Fenner & Smith
Incorporated ("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 the 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 believe that they have good and meritorious defenses to the
action, and vigorously deny any wrongdoing with respect to the alleged claims.
Defendants moved to dismiss the complaint and each claim for relief therein. On
March 3, 1999, the New York Supreme Court issued an order granting defendants'
motion and dismissing plaintiffs' complaint in its entirety, principally on the
grounds that the claims are derivative and plaintiffs lack standing to bring
suit because they failed to make a pre-litigation demand on the General Partner.
Plaintiffs have both appealed this order and moved, inter alia, for leave to
amend their complaint in order to re-assert certain of their claims as
derivative claims on behalf of the Partnership. The appeal and the motion for
leave to amend are pending.
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 named therein: the General Partner, MLOM, RPOM,
Merrill Lynch & Co., Inc., and Merrill Lynch. For the first quarter ended March
31, 1999, Registrant incurred approximately $28,000 for legal costs relating to
such indemnification. Such cumulative costs amount to approximately $395,000
through March 31, 1999.
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. Registrant undertakes no
responsibility to update publicly or revise any forward-looking statements.
Year 2000 Compliance Initiative
The year 2000 ("Y2K") problem is the result of a widespread programming
technique that causes computer systems to identify a date based on the last two
numbers of a year, with the assumption that the first two numbers of the year
are "19". As a result, the year 2000 would be stored as "00", causing computers
to incorrectly interpret the year as 1900. Left uncorrected, the Y2K problem may
cause information technology systems (e.g., computer databases) and
non-information technology systems (e.g., elevators) to produce incorrect data
or cease operating completely.
Overall, Registrant believes that it has identified and evaluated its
internal Y2K problem and that it is devoting sufficient resources to renovating
technology systems that are not already Y2K compliant. Registrant has been
working with third-party software vendors to ensure that computer programs
utilized by Registrant are Y2K compliant. In addition, Registrant has contacted
third parties to ascertain whether these entities are addressing the Y2K issue
within their own operation.
The General Partner, through MLOM, is responsible for providing
administrative and accounting services necessary to support Registrant's
operations, including maintenance of the books and records, maintenance of the
partner database, issuance of financial reports and tax information to partners
and processing distribution payments to partners. In 1995, Merrill Lynch & Co.,
Inc. established the Year 2000 Compliance Initiative, which is an enterprisewide
effort (of which MLOM is a part) to address the risks associated with the Y2K
problem, both internal and external. The integration testing phase, which will
occur throughout 1999, validates that a system can successfully interface with
both internal and external systems. Merrill Lynch & Co., Inc. continues to
survey and communicate with third parties whose Year 2000 readiness is important
to the company. Based on the nature of the response and the importance of the
product or service involved, Merrill Lynch & Co., Inc. determines if additional
testing is needed.
Merrill Lynch & Co., Inc. participated in further industrywide testing in
March and April 1999 sponsored by the Securities Industry Association. These
tests involved an expanded number of firms, transactions, and conditions
compared with those previously conducted.
Although Registrant has not finally determined the cost associated with its
Year 2000 readiness efforts, Registrant does not anticipate the cost of the Y2K
problem to be material to its business, financial condition or results of
operations in any given year. However, there can be no guarantee that the
systems of other companies on which Registrant's systems rely will be timely
converted, or that a failure to convert by another company or a conversion that
is incompatible with Registrant's systems would not have a material adverse
effect on Registrant's business, financial condition or results of operations.
Results of Operations.
1999 vs. 1998
Registrant generated a net loss of approximately $476,000 in the first
three months of 1999, which was comprised of services provided by the General
Partner of approximately $461,000, professional fees and other expenses of
approximately $124,000, partially offset by interest income of approximately
$109,000.
Registrant generated a net loss of approximately $427,000 in the first
three months of 1998, which was comprised of services provided by the General
Partner of approximately $454,000, professional fees and other expenses of
approximately $56,000, partially offset by interest income of approximately
$83,000.
The increase in net loss of approximately $49,000 from the 1998 period is
primarily attributable to an increase in wind up costs, partially offset by an
increase in interest income due to higher cash balances at the parent level for
the 1999 period.
Pursuant to the Amendment, Registrant's obligation to pay management fees
for 1996 and subsequent periods was 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, 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
(loss)/income, excluding services provided by the General Partner, was
approximately ($15,000) and $26,553 for the first three months of 1999 and 1998,
respectively.
<PAGE>
Item 3. Quantitative and Qualitative Disclosure About Market Risk
As of March 31, 1999, Registrant maintains a portion of its cash
equivalents in financial instruments with original maturities of three months or
less. These financial instruments are subject to interest rate risk, and will
decline in value if interest rates increase. A significant increase or decrease
in interest rates would not have a material effect on Registrant's financial
position.
<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, the General Partner, the General Partner's two partners,
MLOM and 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 the 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 believe that they have good and meritorious defenses to the
action, and vigorously deny any wrongdoing with respect to the alleged claims.
Defendants moved to dismiss the complaint and each claim for relief therein. On
March 3, 1999, the New York Supreme Court issued an order granting defendants'
motion and dismissing plaintiffs' complaint in its entirety, principally on the
grounds that the claims are derivative and plaintiffs lack standing to bring
suit because they failed to make a pre-litigation demand on the General Partner.
Plaintiffs have both appealed this order and moved, inter alia, for leave to
amend their complaint in order to re-assert certain of their claims as
derivative claims on behalf of the Partnership. The appeal and the motion for
leave to amend are pending.
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 named therein: the General Partner, MLOM, RPOM,
Merrill Lynch & Co., Inc., and Merrill Lynch. For the first quarter ended March
31, 1999 Registrant incurred approximately $28,000 for legal costs relating to
such indemnification. Such cumulative costs amount to approximately $395,000
through March 31, 1999.
Registrant is not aware of any other material legal proceedings.
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.
None
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: May 14, 1999 /s/ I. Martin Pompadur
---------------------------------
I. Martin Pompadur
Director and President
(principal executive officer
of the Registrant)
Dated: May 14, 1999 /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: May 14, 1999 /s/ Kevin K. Albert
----------------------------------
Kevin K. Albert
Director and President
Dated: May 14, 1999 /s/ James V. Caruso
-----------------------------------
James V. Caruso
Director and Executive Vice President
Dated: May 14, 1999 /s/ David G. Cohen
------------------------------------
David G. Cohen
Director and Vice President
Dated: May 14, 1999 /s/ Robert J. Remick
-------------------------------------
Robert J. Remick
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
Form 10-Q Consolidated Balance Sheets as of March 31, 1999 and Consolidated
Statements of Operations for the three months ended March 31, 1999, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 10,260
<SECURITIES> 0
<RECEIVABLES> 33
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,294
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,294
<CURRENT-LIABILITIES> 2,101
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 8,192
<TOTAL-LIABILITY-AND-EQUITY> 10,294
<SALES> 0
<TOTAL-REVENUES> 109
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 585
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (476)
<INCOME-TAX> 0
<INCOME-CONTINUING> (476)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (476)
<EPS-PRIMARY> (4.20)
<EPS-DILUTED> 0
</TABLE>
