0000912057-01-534556.txt : 20011010
0000912057-01-534556.hdr.sgml : 20011010
ACCESSION NUMBER: 0000912057-01-534556
CONFORMED SUBMISSION TYPE: DEF 14A
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20011105
FILED AS OF DATE: 20011005
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: JONES PROGRAMMING PARTNERS 2-A LTD
CENTRAL INDEX KEY: 0000868610
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [7812]
IRS NUMBER: 841088829
STATE OF INCORPORATION: CO
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: DEF 14A
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-20944
FILM NUMBER: 1752820
BUSINESS ADDRESS:
STREET 1: 9697 E MINERAL AVE
STREET 2: C/O JONES ENTERTAINMENT GROUP LTD
CITY: ENGLEWOOD
STATE: CO
ZIP: 80155-3309
BUSINESS PHONE: 3037923111
MAIL ADDRESS:
STREET 1: P O BOX 3309
STREET 2: 9697 E MINERAL AVE
CITY: ENGLEWOOD
STATE: CO
ZIP: 80155
FORMER COMPANY:
FORMER CONFORMED NAME: JONES PROGRAMMING PARTNERS 2
DATE OF NAME CHANGE: 19600201
DEF 14A
1
a2060461zdef14a.txt
DEF 14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
JONES PROGRAMMING PARTNERS 2-A, LTD.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
--------------------------------------------------------------------------------
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
LIMITED PARTNERSHIP INTERESTS
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
11,229
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): ESTIMATED
VALUE OF ASSETS TO BE SOLD IS BASED UPON THE DISCOUNTED PRESENT VALUE
OF THE FILM RIGHTS OF $446,000.
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction: $446,000
----------------------------------------------------------------------
5) Total fee paid: $89.20
----------------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
Page 1
JONES PROGRAMMING PARTNERS 2-A, LTD.
9697 E. MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
(303) 792-3111
NOTICE OF SPECIAL MEETING OF THE LIMITED PARTNERS
OF JONES PROGRAMMING PARTNERS 2-A, LTD.
To the Limited Partners of Jones Programming Partners 2-A, Ltd.:
As your general partner, Jones Entertainment Group, Ltd. (the "General
Partner") believes that it is time to sell all the assets and to dissolve
your partnership, Jones Programming Partners 2-A, Ltd. (the "Partnership").
Accordingly, a special meeting of the limited partners of your Partnership is
to be held at the corporate offices of the General Partner, 9697 E. Mineral
Avenue, Englewood, Colorado, on Monday, November 5, 2001, at 10:30 a.m.,
Mountain Time, for the purpose of obtaining limited partner approval for the
sale to an unaffiliated and as yet unidentified, third party or parties, of
the assets of the Partnership consisting of various rights to original
programming entitled "Charlton Heston Presents: The Bible" and "The Whipping
Boy" (collectively, the "Film Rights"), followed by the dissolution of the
Partnership.
If the limited partners approve the proposed sale of the Film Rights and
if the Film Rights are sold, the net sale proceeds, if any, will be
distributed by the Partnership to the partners, including the General Partner
which has a one percent interest. Thereafter, your Partnership will be
dissolved. No date for the sale of the Film Rights or the dissolution of the
Partnership has been determined.
The proposal covers the sale of the Film Rights and the ultimate
dissolution of your Partnership (the "Proposal"), and a vote in favor of the
Proposal will constitute a vote in favor of each of these matters. Only
limited partners of record at the close of business on September 28, 2001 will
be entitled to notice of and to vote at the meeting. It is important that all
limited partners participate.
The Proposal will be adopted only if approved by the holders of a
majority of the limited partnership interests. Each limited partnership
interest entitles the holder thereof to one vote on the Proposal. Abstentions
and non-votes will be treated as votes against the Proposal. A properly
executed proxy card returned to the General Partner on which a limited
partner does not mark a vote will be counted as a vote in favor of the
Proposal. Because limited partners do not have dissenters' or appraisal
rights in connection with the proposed sale of the Film Rights, if the
holders of a majority of the limited partnership interests approve the
Proposal, all partners, including the General Partner, will receive a
distribution of the net sale proceeds, if any, in accordance with the
Page 2
procedures proscribed by the limited partnership agreement regardless of how or
whether they vote on the Proposal.
Also included in this package is the most recent financial and other
information prepared regarding your Partnership.
Jones Entertainment Group, Ltd., as General Partner of your Partnership,
urges you to sign and return the enclosed proxy card as promptly as possible
in the enclosed envelope--whether or not you plan to attend the meeting. If
you do attend the meeting, you may withdraw your proxy at that time.
JONES ENTERTAINMENT GROUP, LTD.
General Partner
/s/ Lorri Ellis
-------------------------------------
Lorri Ellis
Secretary
October 4, 2001
Page 3
JONES PROGRAMMING PARTNERS 2-A, LTD.
9697 E. MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
(303) 792-3111
PROXY STATEMENT
SPECIAL MEETING OF THE LIMITED PARTNERS
OF JONES PROGRAMMING PARTNERS 2-A, LTD.
This Proxy Statement and the accompanying Proxy are being furnished for
use at the Special Meeting of the limited partners of Jones Programming Partners
2-A, Ltd., a Colorado limited partnership (the "Partnership"), by Jones
Entertainment Group, Ltd., the General Partner of the Partnership (the "General
Partner"), on behalf of the Partnership, for the purpose of obtaining limited
partner approval of the sale of the Partnership's assets, consisting of various
rights to original programming entitled "Charlton Heston Presents: The Bible"
and "The Whipping Boy" (collectively, the "Film Rights"), followed by
dissolution of the Partnership (collectively, the "Proposal").
THE GENERAL PARTNER HAS APPROVED THE TRANSACTIONS CONTEMPLATED BY THE PROPOSAL
AND RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL.
The Special Meeting will be held on Monday, November 5, 2001, at 10:30
a.m., Mountain Time, at the corporate offices of the General Partner located
at 9697 E. Mineral Avenue, Englewood, Colorado 80112.
Proxies in the form enclosed, properly executed and duly returned, will
be voted in accordance with the instructions thereon. Limited partners are
urged to sign and return the enclosed proxy card as promptly as possible.
Proxies cannot be revoked except by delivery of a proxy dated as of a later
date, by voting in person at the Special Meeting, or by giving written or
oral notice of revocation to the Secretary of the General Partner. Officers
and other employees of the General Partner may, on behalf of the Partnership,
solicit proxies by mail, by fax, by telephone or by personal interview. The
General Partner may adjourn the Special Meeting, from time to time, and
continue to solicit proxies if the holders of a majority of the limited
partnership interests have not voted on the Proposal. If the General Partner
adjourns the meeting, the limited partners will be informed by mail of the
reason for the adjournment and when the meeting will be resumed. The cost of
the proxy solicitation will be paid by the Partnership. See "Voting on the
Proposal."
The Partnership has only one class of limited partners and no limited
partner has a right of priority over any other limited partner. The
participation of the limited partners is divided into limited partnership
interests and each limited partner owns one limited partnership interest
Page 4
for each $500 of capital contributed to the Partnership. The General Partner and
its affiliates do not own any limited partnership interests.
THE PROPOSAL IS SUBJECT TO NUMEROUS RISK AND OTHER FACTORS. SEE "RISK
FACTORS" FOR A MORE COMPLETE DISCUSSION OF RISK FACTORS THAT SHOULD BE
CONSIDERED BY LIMITED PARTNERS REGARDING THE PROPOSAL.
THE TRANSACTIONS DESCRIBED HEREIN HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE COMMISSION
PASSED UPON THE FAIRNESS OR THE MERITS OF SUCH TRANSACTIONS NOR UPON THE
ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The approximate date on which this Proxy Statement and Form of Proxy are
being sent to limited partners is October 4, 2001.
Page 5
TABLE OF CONTENTS
SUMMARY......................................................................... 8
The Film Rights............................................................ 8
Potential Value of the Film Rights......................................... 9
Possible Methods of Sale................................................... 10
Dissolution of the Partnership if the Proposal is Approved................. 11
Effect of the Proposal..................................................... 11
Reasons for the Proposal................................................... 11
Consideration of Alternatives.............................................. 12
Federal Income Tax Consequences............................................ 12
The General Partner's Recommendation....................................... 12
Participation of the General Partner....................................... 12
RISK FACTORS ................................................................... 13
The Amount of Sales Proceeds and Distributions to the Limited
Partners is Uncertain................................................. 13
You Will Have No Opportunity to Approve the Specific Terms of Any Sales.... 13
The Status of Certain Film Rights May be Unclear........................... 13
You Might Receive Less Money if the Proposal is Approved................... 13
The Market for the Film Rights is Uncertain and the Sales Prices for the
Partnership's Film Rights may be Low.................................. 13
You Will Have No Appraisal or Dissenter's Rights........................... 14
No Independent Representative Will be Retained for Limited Partners........ 14
Unfavorable Tax Consequences of Sale....................................... 14
THE PROPOSAL.................................................................... 15
General.................................................................... 15
Proxy Solicitation......................................................... 15
Proposal to Sell the Partnership's Film Rights............................. 15
Retention of Sales Agent................................................... 16
Timing of Asset Sales if the Proposal is Approved.......................... 16
Consequences of the Partnership Not Approving the Proposal or if the
Film Rights are Not Sold.............................................. 16
Potential Prices for the Film Rights....................................... 17
Potential Value of the Film Rights......................................... 17
Reasons for the Proposal................................................... 18
Distribution Objectives Met........................................... 18
The Partnership is Over Nine Years Old and is Ready to Cease
Operations and Dissolve.......................................... 18
Avoiding Ongoing Operating Costs of Partnership....................... 19
Lack of Significant Current Revenue................................... 19
Benefits of Selling a Film Library.................................... 19
Taxes................................................................. 19
Page 6
Consideration of Alternatives......................................... 19
Steps to Implement the Proposal....................................... 20
Estimated Selling Costs............................................... 20
THE PARTNERSHIP................................................................. 21
General .................................................................. 21
Principal Assets........................................................... 21
Amounts Invested and Cash Distributions.................................... 24
Cash Distributions......................................................... 24
Transactions Between the General Partner and the Partnership............... 24
No Trading Market.......................................................... 25
List of Limited Partners................................................... 25
Books and Records.......................................................... 25
Legal Proceedings.......................................................... 26
VOTING ON THE PROPOSAL.......................................................... 26
Vote Required; Principal Holders........................................... 26
Proxies; Revocation........................................................ 26
Solicitation............................................................... 27
No Appraisal or Dissenters' Rights Provided................................ 27
Recommendation of the General Partner...................................... 27
FEDERAL INCOME TAX CONSEQUENCES................................................. 27
General.................................................................... 27
Taxable Gain or Loss Upon Sale of Programming Assets....................... 28
Dissolution of the Partnership............................................. 29
Capital Gains Tax.......................................................... 29
Passive Loss Limitations................................................... 29
DOCUMENTS INCLUDED.............................................................. 30
FORWARD-LOOKING STATEMENTS...................................................... 30
OTHER MATTERS................................................................... 31
Incorporation by Reference................................................. 31
FORM OF PROXY................................................................... A-1
Page 7
SUMMARY
This summary highlights selected information from this proxy statement,
but may not contain all of the information that is important to you. This
proxy statement includes specific terms of the Proposal, information about
the Partnership and its financial status. We encourage you to read this proxy
statement, including the "Risk Factors" section, the attachments and the
documents incorporated by reference before making a decision on how to vote
on the Proposal.
THE FILM RIGHTS
The Partnership's Film Rights consist of various interests in the two films
described below. The Partnership does not own all of the various rights in all
of the two films. See "The Partnership, Principal Assets."
o THE BIBLE PROGRAMS. In 1992, the General Partner, on behalf of the
Partnership, entered into an agreement with Agamemnon Films ("Agamemnon")
to produce four one-hour programs for television entitled "Charlton Heston
Presents: The Bible" (the "Bible Programs") for Arts and Entertainment
Network. The production costs of the Bible Programs were approximately
$2,370,000, which included a $240,000 production and overhead fee to the
General Partner. In return for agreeing to fund these production costs, the
Partnership acquired all rights to the Bible Programs in all markets and in
all media in perpetuity. One-half of the Partnership's interest in the
Bible Programs was assigned to GoodTimes Video Corporation ("GoodTimes")
for an investment of $1,000,000. GoodTimes is involved in the specialty
home video and international television distribution business. The
Partnership's total net investment in the Bible Programs is $1,369,764.
The Partnership and GoodTimes funded Jones Documentary Film Corporation
("JDFC"), which in turn, contracted with Agamemnon for the production of
the Bible Programs. JDFC was formed to insulate the Partnership and
GoodTimes from certain risks and potential liabilities associated with the
production of programming in foreign countries.
The Partnership and JDFC granted the General Partner the exclusive rights
to distribute the Bible Programs. To accomplish this, in June 1992,
GoodTimes and the General Partner, on its own behalf, formed J/G
Distribution Company, a Colorado joint venture ("J/G Distribution"), to
distribute the Bible Programs. J/G Distribution has the sole and exclusive
right to exhibit and distribute, and to license others to exhibit and
distribute, the Bible Programs in all markets, all languages, and all media
in perpetuity. J/G Distribution holds the copyright for the benefit of the
Partnership (50% interest) and GoodTimes (50% interest). Prior to the
second quarter of 2000, the Partnership was entitled to 50% of the net
revenues received by J/G Distribution, defined as gross revenue net of
distribution costs and fees, and administrative personnel reimbursements
paid to GoodTimes and the General Partner. During such quarter, the
Partnership and the General Partner fully recouped their respective costs
under the agreement with Agamemnon. This caused a shift in future revenue
sharing and Agamemnon has started
Page 8
to share in the revenues. The Partnership's share is determined pursuant to
the income pooling arrangement described under "The Partnership: Principal
Assets: THE BIBLE PROGRAMS." From inception to June 30, 2001, the
Partnership has recognized $2,052,787 of revenue from this film. As of June
1998, the Partnership has amortized its net investment in this film.
Revenues to the Partnership from The Bible for the year 2000 and the six
months ended June 30, 2001 were $27,286 and $15,976, respectively.
o THE WHIPPING BOY. This film was co-developed by the Partnership and The
Disney Channel ("Disney"), and produced by the General Partner and German
(Gemini Films) and French co-production partners. The Partnership was
responsible for approximately one-half of the $4,100,000 in production
costs, with the balance of the production budget funded by Gemini Films,
other co-production partners and/or territorial advances from the film's
international distributors. The amount contributed to the production budget
by the Partnership was partially reimbursed by the license advances
totaling $2,100,000 received from Disney. Pursuant to the co-production
agreement, Gemini Films has, in perpetuity, the copyright and all
exploitation rights to the film in German language territories (defined as
Germany, Austria, German-speaking Switzerland and German-speaking
Luxembourg). The Partnership owns the worldwide copyright, excluding German
language territories, and has all exploitation rights in all media in North
America (the United States and Canada). All French language rights,
excluding North America, were granted to a third party in all media for a
period of ten years expiring June 30, 2004.
The completed film was delivered to Disney in the second quarter of 1994
and premiered in the North American television market in July 1994. The
Partnership has invested $2,661,487 in the film, which includes a $468,000
production and overhead fee to the General Partner. From inception to June
30, 2001, the Partnership has recognized approximately $2,277,930 of gross
revenue from this film, which includes the licensing fee received from
Disney. As of December 2000, the Partnership has amortized its net
investment in this film. Revenues to the Partnership from The Whipping Boy
for the year 2000 and the six months ended June 30, 2001 were $1,162 and
$386, respectively.
POTENTIAL VALUE OF THE FILM RIGHTS
To obtain assistance in determining the potential value of the Film
Rights, the Partnership has retained the services of Tulip Media Ltd.
("Tulip"), Los Angeles, California, which conducted the valuation in consort
with Marrinan Multimedia Group Inc. ("MMG"). As compensation for such
valuation services, the Partnership has paid or is obligated to pay Tulip
$5,500 plus reimbursement of certain expenses. The principals of Tulip and
MMG have years of worldwide film and production experience. Neither Tulip nor
MMG has any prior relationship with the Partnership, the General Partner or
any of the Films. Tulip has also been retained as the Partnership's exclusive
agent to sell the Film Rights. Tulip was selected based on a recommendation
from the General Partner's outside counsel regarding film matters and after
negotiation of the terms of the engagement of Tulip.
The Partnership instructed Tulip to undertake an arm's-length,
independent valuation of the present value of the worldwide revenue
opportunities to be derived from the Films during the balance of each Film's
copyright, its useful life. The sole limitation imposed was the understanding
that, based on Tulip's time estimate, that Tulip not expend in excess of
fifteen hours, at its negotiated hourly rate, in undertaking the valuation.
Tulip later informed the Partnership that it was not able to complete its
review of rights status, historical performance or subjective quality of
individual Films within such time frame. The Partnership and Tulip negotiated
an additional fee in order for Tulip to complete its review.
In arriving at its estimate of the fair market value of the Film Rights,
Tulip reviewed the potential sales opportunity for each Film on a worldwide,
media-by-media, territory-by-territory basis. In each case, sales estimates for
each media and each territory were made with "low," "mid-value" and "high"
cases. Tulip has categorized each of the Films as follows: The Bible
Programs-"high-value" (documentary) and The Whipping Boy-"low-value" ("value"
refers to Tulip's general subjective expectation regarding the revenue
generating capacity of the
Page 9
Films). Tulip prepared hypothetical sales results of the Film Rights over a
ten-year period beginning July 2001. Sales were projected with an initial re-run
value (assuming all Films have been previously licensed in all major
territories) and a residual value for additional sales income during the balance
of the ten-year period. In its estimated valuation, Tulip also made the
following assumptions:
o all sales results are subject to a hypothetical distribution fee of 35% of
gross revenues and a hypothetical distribution/marketing expense recoupment
of 5% of gross revenues. Such fees and expenses would be paid to third
party distributors and vendors as part of the distribution processes in
various media and reflect typical industry arrangements (and costs
thereof) which potential buyers will likely take into account in
determining whether there will be an adequate return on investment.
o residual value after ten years was at 10% of all re-run values.
o Union/guild residual payments are estimated to be 11% of sales revenue for
all Films.
Based on the above approach, Tulip concluded that the fair market value of
the Film Rights, discounted at various interest rates to arrive at net present
values rounded to the nearest thousand ("NPV"), is as follows:
DISCOUNT INTEREST NET PRESENT VALUE OF NPV OF THE BIBLE NPV OF THE WHIPPING
RATE ALL FILM RIGHTS PROGRAMS RIGHTS BOY RIGHTS
----------------- -------------------- ---------------- -------------------
8% $446,000 $289,000 $157,000
10% 415,000 271,000 144,000
12% 388,000 255,000 132,000
15% 353,000 235,000 118,000
Tulip's use of a range of discount rates reflects what Tulip believes
the capital markets would use and what potential purchasers are likely to use
in their own evaluations. As with any valuation exercise, the results
suggested are hypothetical and are the reflection of reasonable reliance upon
historical performance as well as current market-place factors, including
whether the Film is in the English language, the age of the Film, the time
periods for the distribution rights, and the trends in the various possible
film markets. Such factors are subject to constant variation on a
media-by-media and territory-by-territory basis. Further, factors unique to
any specific Film, such as cast and genre, can result in significant
variations in marketplace performance. Tulip considered, to the extent
relevant, all of such factors in reaching its evaluation that the
Partnership's Film Rights were as follows: The Bible Programs - "high-value"
(documentary) and The Whipping Boy - "low-value." Accounts receivable of the
Films were not deemed to have a material effect on the amount available for
distribution. Rights availabilities by media and territory were assumed by
Tulip, based on information provided by the Partnership. There is no
assurance that the Partnership will be able to sell the Film Rights for the
values described above or at any specific prices.
POSSIBLE METHODS OF SALE
Currently there are no buyers for the Film Rights and the actual prices
at which the Film Rights may be sold have not yet been determined. The Film
Rights may be sold as one package, or separately in a number of transactions
or may be sold in various combinations. Neither the General Partner nor its
affiliates will bid on or purchase any of the Partnership's Film Rights.
Buyers may be sought in the following ways:
o NEGOTIATED SALES -- The Partnership has entered into an agreement with
Tulip, an unaffiliated broker, to sell the Partnership's Film Rights on an
exclusive basis through December 31, 2001. The brokerage fee is ten percent
(10%) of the sale proceeds. Tulip will seek to sell the Film Rights through
direct contact with unaffiliated potential purchasers and negotiating sales
prices and terms with them. Often the owner of some of the rights
associated with a film is a potential purchaser.
The General Partner is also the general partner of Jones Programming
Partners 1-A, Ltd., a publicly held limited partnership which owns certain
rights in three films. That
Page 10
partnership is also seeking to sell its film rights and to dissolve. The
General Partner may combine the films of such partnership with those of the
Partnership in an effort to attract buyers with a larger, more diversified
offering. In such an instance, the sale proceeds would be divided either
according to actual, separate sales prices (if determinable) or by
appraisal, or by such method that the General Partner believes to be the
most accurate method. The General Partner does not have a greater
percentage interest in one or the other selling partnership. It would not
receive any relatively greater amount from one or the other depending on
which entity happens to receive more proceeds.
o BID - A possible method of sale will be through a bid procedure. Bids may
be solicited from unaffiliated third parties for the sale of the Films as
one package, but bids may be considered for less than all of the Films or
for a portion of the Rights associated with each Film. If a bid process is
used, the General Partner will determine if a minimum bid price will be
established; however, the highest bid price from an unaffiliated third
party, if any, may not necessarily be accepted, if, in the judgement of the
General Partner, the bid does not reflect the value of the Film Rights
involved. The bid process will likely be used only in conjunction with the
broker the Partnership has retained.
DISSOLUTION OF THE PARTNERSHIP IF THE PROPOSAL IS APPROVED
If the limited partners approve the Proposal, the Partnership will seek
to sell all of its assets, wind up its business and dissolve. The Partnership
will receive only cash for the Film Rights, although some deferred payment
arrangements could be made for some or all of the Film Rights, if that is in
the best interests of the Partnership. Limited partners will receive cash
distributions, if any, in amounts according to their respective percentage
ownership interests in the Partnership. See "The Proposal--Effect of the
Proposal."
EFFECT OF THE PROPOSAL
The event of future sales proceeds is not known in the absence of any
actual buyers. After payment of (and reserve for) Partnership obligations,
any remaining sales proceeds will be used to make distributions to the
partners in the Partnership and the Partnership will be dissolved.
Partnership obligations will include expenses of sale (including the 10%
sales commission and legal expenses) and amounts owed to the General Partner
and to third parties. The total amount of such obligations is not
determinable in part because actual sales proceeds are not known. All of such
obligations will be paid or reserved for prior to distributions being made to
the limited partners. Any such distribution(s) will result in the
acceleration of the distribution to limited partners of the remaining value
of the Partnership's assets. However, the limited partners in any event are
not expected to receive a return of the amount of their initial investments.
Interests in the Partnership were offered at $500 per interest, with a
minimum purchase of 10 interests. As of June 30, 2001, limited partners had
received aggregate distributions of $312.50 per $500 interest. Because of
uncertainties concerning the value of the Film Rights, no assurance is given
that there will be any cash to be distributed to the limited partners from
the sale of the Film Rights.
As of June 30, 2001, the General Partner had a deficit in its capital
account of approximately $47,000, which will change depending largely in the
sales price for the Partnership's Film Rights and the tax allocation
provisions of the partnership agreement of the Partnership. Under the
partnership agreement, the General Partner is required on dissolution to
account to the Partnership for the lesser of (i) the deficit in its capital
account or (ii) 1.01% of the amount of capital contribution of the limited
partners, less the capital contribution of the General Partner. The latter of
the two amounts is approximately $56,000.
REASONS FOR THE PROPOSAL
The General Partner believes that the continuation of the Partnership's
operations is no longer justified and that it is in the best interests of
limited partners to dissolve the Partnership at this time because:
Page 11
o The original expected life of the Partnership (6 to 8 years) has been
exceeded. The Partnership was formed in 1992.
o Our distribution objectives have been met. The films have been through at
least one distribution cycle already. The last phase of operations is to
dispose of our library of film rights.
o The Partnership has very little current cash flow.
o Our fixed administrative costs continue while revenues have greatly
decreased.
o No capital is available to develop additional programming.
o Approving the sale of the Partnership's assets at this time will accelerate
your receipt of any remaining net cash value of the Partnership's assets.
o Upon the sale of the Film Rights, in addition to realizing long-term
capital gain, there may be unrealized passive losses which the limited
partners could claim in the year in which the Partnership completes the
sale of all the Film Rights. Through December 31, 2000, the amount of
such losses was approximately $112 per each interest.
o The Partnership may have an opportunity to sell one or more Film Rights as
part of a package where the same Film Rights would be more difficult to
sell individually because of the lack of interest in that specific film
(i.e., a popular film may be bundled with less popular ones as a way to
sell the latter).
CONSIDERATION OF ALTERNATIVES
The General Partner has given consideration to alternatives before
submitting the Proposal to you for approval. The General Partner believes
that the only real alternative to the sale of the Film Rights is the
continued operation of the Partnership. See "The Proposal--Consideration of
Alternatives."
FEDERAL INCOME TAX CONSEQUENCES
Limited partners that are subject to federal income tax are expected to
realize and recognize taxable gain or loss, or a combination of both gain and
loss, on the sale of Film Rights and the dissolution of the Partnership. For
a more complete discussion of the federal income tax consequences of a sale
of assets and partnership dissolution, see "Federal Income Tax Consequences."
THE GENERAL PARTNER'S RECOMMENDATION
Jones Entertainment Group, Ltd., in its capacity as General Partner of the
Partnership, recommends that limited partners of the Partnership vote "FOR" the
Proposal. The General Partner believes the terms of the Proposal are fair to
limited partners. See "Risk Factors."
PARTICIPATION OF THE GENERAL PARTNER
The General Partner will share in any net proceeds of the sale of the Film
Rights through the General Partner's one percent (1%) interest in the
profits/losses and distributions of the Partnership. It will receive no
compensation from the sale of the Film Rights.
Page 12
RISK FACTORS
In addition to the other information contained in this proxy statement,
the following factors should be considered carefully in evaluating how to
vote on the Proposal.
THE AMOUNT OF SALES PROCEEDS AND DISTRIBUTIONS TO THE LIMITED PARTNERS IS
UNCERTAIN
The General Partner has not determined at what price or prices it expects
to sell the Film Rights, nor is there a minimum price set for any of them. The
General Partner has obtained an independent valuation of the Film Rights from
Tulip. Appraisals are only estimates of value and there is no assurance that the
Film Rights will be sold for the appraised price or at all. Tulip has experience
in selling film rights, including films which have been through cycles of
distribution and are not producing large revenue amounts.
The Partnership's two Films are not presently generating any significant
revenues and it is uncertain at what prices they can be sold.
YOU WILL HAVE NO OPPORTUNITY TO APPROVE THE SPECIFIC TERMS OF ANY SALES
Because the Film Rights will not be sold until limited partners approve the
Proposal, no purchasers or purchase prices have yet been determined. In voting
for the Proposal, limited partners do not have the opportunity to approve or
reject the specific terms of any particular sale of any Film Rights to third
parties, including the sales prices.
THE STATUS OF CERTAIN FILM RIGHTS MAY BE UNCLEAR
The Film Rights consist of a variety of rights granted or provided by a
number of parties and which concern different media and territories. The General
Partner believes that the Partnership possesses the necessary ownership of these
rights to satisfy potential buyers of the Film Rights. However, there may be
lack of certainty in some cases regarding such matters as termination rights,
the provision of reports, renewal rights, rights of first negotiation, and other
matters. In such instances, the Partnership may be required to obtain third
party consents, waivers or other clarification, and may be required to provide
compensation to such parties. There is no assurance that the Partnership will be
successful in such efforts. In addition, the failure to fully document all of
the Partnership's Film Rights could affect the timing of the sale and the price
obtained for such rights.
YOU MIGHT RECEIVE LESS MONEY IF THE PROPOSAL IS APPROVED
Although you might receive the value of your interest in the Partnership
sooner and in one lump sum payment if the Partnership's assets are sold now,
you might receive a smaller amount upon dissolution than if the Partnership's
operations continue and if cash distributions are made in the future.
However, it is unlikely that the Partnership will make any future
distributions from regular operations.
THE MARKET FOR THE FILM RIGHTS IS UNCERTAIN AND THE SALES PRICES FOR THE
PARTNERSHIP'S FILM RIGHTS MAY BE LOW
Page 13
The General Partner believes that there is no ready or established market
for films like the ones represented by the Film Rights. Instead, sellers rely on
contacts within the industry to assist in finding buyers and negotiating deals.
The Partnership will therefor encounter some difficulty in finding potential
buyers for the Film Rights. Because the Films are several years old and because
they have been through at least one distribution cycle (i.e. licensing and
re-licensing the Films in the various media and in various geographic areas),
they are not expected to attract a large number of buyers. All those factors may
result in low prices being offered by buyers, or no offers at all. Also,
general economic conditions and current world events may negatively affect
sales prices.
YOU WILL HAVE NO APPRAISAL OR DISSENTER'S RIGHTS
If the Proposal is approved, limited partners have no right to ask for
appraisal or dissenters' rights relating to the sale and dissolution described
herein. This may result in a lower amount received than if such rights were
available, as they are for corporate shareholders.
NO INDEPENDENT REPRESENTATIVE WILL BE RETAINED FOR LIMITED PARTNERS
The General Partner will not retain an independent representative to act on
behalf of the limited partners in the Partnership in structuring and negotiating
the terms and conditions for implementation of the Proposal. No limited partners
were empowered to negotiate the terms and conditions of the Proposal or to
determine what procedures should be in place to safeguard the rights and
interests of the limited partners. In addition, no investment banker, attorney,
financial consultant or expert was engaged to represent the interests of the
limited partners. On the contrary, the General Partner has been responsible for
structuring all the terms and conditions of the Proposal.
UNFAVORABLE TAX CONSEQUENCES OF SALE
For tax purposes, the costs of the Film Rights have been written off,
with the exception of the estimated salvage value for each film. Thus, any
amounts received on the sale of the Film Rights in excess of the salvage
value will be a taxable gain. To the extent the gains do not exceed the
original cost of the Film Rights, they will be taxed as ordinary income due
to the depreciation recapture provisions of IRC Section 1245. It is
anticipated that all gains or losses will be treated as ordinary. There may
be unrecognized passive losses which the limited partners can deduct in the
year in which the Partnership completes the sale of all the Film Rights. Such
passive losses could be as high as approximately $112 per limited partner
interest, if such losses have not been previously deducted. See "Federal
Income Tax Consequences."
Page 14
THE PROPOSAL
GENERAL
This proxy statement is submitted on behalf of the Partnership by Jones
Entertainment Group, Ltd. in its capacity as the General Partner of the
Partnership to ask your approval of a proposal to sell to unaffiliated and as
yet unidentified, third party or parties, all of the Partnership's film
programming assets consisting of various rights to original films entitled
"Charlton Heston Presents: The Bible" and "The Whipping Boy," followed by the
dissolution of the Partnership.
PROXY SOLICITATION
This proxy statement is furnished in connection with the Special Meeting
of the limited partners of the Partnership to be held at 10:30 a.m., Mountain
Time, at the corporate offices of the General Partner, 9697 E. Mineral
Avenue, Englewood, Colorado 80112. Proxies in the form enclosed, properly
executed and duly returned, will be voted in accordance with the instructions
thereon. Limited partners are urged to sign and return the enclosed proxy
card as promptly as possible. Proxies cannot be revoked except by delivery of
a proxy dated as of a later date, by voting in person at the Special Meeting,
or by giving written or oral notice of revocation to the Secretary of the
General Partner. Officers and other employees of the General Partner may, on
behalf of the Partnership, solicit proxies by mail, by fax, by telephone or by
personal interview. The General Partner may adjourn the Special Meeting, from
time to time, and continue to solicit proxies if the holders of a majority of
the limited partnership interests have not voted on the Proposal. If the
General Partner adjourns the meeting, the limited partners will be informed by
mail of the reason for the adjournment and when the meeting will be resumed.
The cost of the proxy solicitation will be paid by the Partnership.
PROPOSAL TO SELL THE PARTNERSHIP'S FILM RIGHTS
Currently there are no buyers for the Film Rights and the actual prices
at which the Film Rights may be sold have not yet been determined. The Film
Rights may be sold as one package, or separately in a number of transactions
or may be sold in various combinations. Neither the General Partner nor its
affiliates will bid on or purchase any of the Partnership's Film Rights.
Buyers may be sought in the following ways:
o NEGOTIATED SALES -- The Partnership has entered into an agreement with
Tulip to sell the Partnership's Film Rights on an exclusive basis through
December 31, 2001. The brokerage fee is ten percent (10%) of the sale
proceeds. Tulip will seek to sell the Film Rights through direct contact
with unaffiliated potential purchasers and negotiating sales prices and
terms with them. Often the owner of some of the rights associated with a
film is a potential purchaser.
The General Partner is also the general partner of Jones Programming
Partners 1-A, Ltd., a publicly held limited partnership which owns certain
rights in three films. That partnership is also seeking to sell its film
rights and to dissolve. The General Partner may combine the films of such
partnership with those of the Partnership in an effort to
Page 15
attract buyers with a larger, more diversified offering. In such an
instance, the sale proceeds would be divided either according to actual,
separate sales prices (if determinable) or by appraisal, or by such method
that the General Partner believes to be the most accurate method. The
General Partner does not have a greater interest in one or the other
selling partnership and would not receive any significantly greater amount
from one or the other depending on which entity happens to receive more
proceeds.
o BID - A possible method of sale will be through a bid procedure. Bids may
be solicited from unaffiliated third parties for the sale of the Films as
one package, but bids may be considered for less than all of the Films or
for a portion of the Rights associated with each Film. If a bid process is
used, the General Partner will determine if a minimum bid price will be
established; however, the highest bid price from an unaffiliated third
party, if any, may not necessarily be accepted, if, in the judgement of the
General Partner, the bid does not reflect the value of the Film Rights
involved. The bid process will likely be used only in conjunction with the
broker the Partnership has retained.
RETENTION OF SALES AGENT
The Partnership has engaged Tulip as its exclusive agent to sell (and not
to license or distribute) all rights in the Films, in all media and worldwide,
for a period commencing February 16, 2001 and continuing through December 31,
2001 (the "Term"), which period may be extended by the parties. Tulip has
experience in selling film rights, including films which have been through
cycles of distribution and are not producing large revenues. The General Partner
has absolute approval over accepting any offers obtained by Tulip; provided that
the General Partner must exercise its good faith in rejecting any offer. Tulip
shall receive a sales agency fee equal to 10% ("Sales Agency Fee") of all
proceeds from the sale of all the Film Rights (or any rights derived therefrom
as approved by the General Partner). Proceeds consist of the cash consideration
received and any accounts payable-type liabilities expressly assumed by the
buyer(s). Tulip shall be entitled to its Sales Agency Fee for any sale of Film
Rights consummated by or agreed to by the General Partner during the Term or for
a period of up to six (6) months thereafter in the event all or some Film Rights
are sold to any entity to whom Tulip contacted during the Term.
TIMING OF ASSET SALES IF THE PROPOSAL IS APPROVED
The General Partner anticipates that the sale of the Film Rights and the
dissolution of the Partnership could be completed by December 31, 2001,
although the precise length of the sales process is unknown, and the sale of
the Film Rights could take longer.
CONSEQUENCES OF THE PARTNERSHIP NOT APPROVING THE PROPOSAL OR IF THE FILM RIGHTS
ARE NOT SOLD
If the limited partners in the Partnership do not approve the Proposal,
the Partnership will continue to operate with no change in its investment
Page 16
objectives, policies or restrictions and in accordance with the terms of its
limited partnership agreement. If the limited partners in the Partnership
approve the Proposal and the Film Rights are not sold, the Partnership will
continue and dissolution will not occur until such time as substantially all
of the Film Rights are sold. In such circumstance, another vote of limited
partners would not be taken.
POTENTIAL PRICES FOR THE FILM RIGHTS
Although the General Partner has not identified any prospective purchaser
for any of the Partnership's Film Rights, nor does it know the prices at which
these rights will actually be sold, given the likely range of possible prices
being paid in the entertainment market for films which have been through at
least one distribution cycle, the General Partner anticipates that the amounts,
if any, distributed to limited partners upon sale of the Partnership's assets,
together with cash distributions made to date, will not return to limited
partners the amount they initially invested in the Partnership. As of June
30, 2001, limited partners had received aggregate distributions of approximately
$312.50 per $500 interest.
POTENTIAL VALUE OF THE FILM RIGHTS
To obtain assistance in determining the potential value of the Film
Rights, the Partnership has retained the services of Tulip, which conducted
the valuation in consort with MMG. As compensation for such valuation
services, the Partnership has paid or is obligated to pay Tulip $5,500 plus
reimbursement of certain expenses. The principals of Tulip and MMG have years
of worldwide film and production experience. Tulip was selected based on a
recommendation from the General Partner's outside counsel regarding film
matters and after negotiation of the terms of the engagement of Tulip.
The Partnership instructed Tulip to undertake an arm's-length,
independent valuation of the present value of the worldwide revenue
opportunities to be derived from the Films during the balance of each Film's
copyright, its useful life. The sole limitation imposed was the understanding
that, based on Tulip's time estimate, that Tulip not expend in excess of
fifteen hours, at its negotiated hourly rate, in undertaking the valuation.
Tulip later informed the Partnership that it was not able to complete its
review of rights status, historical performance or subjective quality of
individual Films within such time frame. The Partnership and Tulip negotiated
an additional fee in order for Tulip to complete its review.
In arriving at its estimate of the fair market value of the Film Rights,
Tulip reviewed the potential sales opportunity for each Film on a worldwide,
media-by-media, territory-by-territory basis. In each case, sales estimates
for each media and each territory were made with "low," "mid-value" and
"high" cases. Tulip has categorized each of the Films as follows: The Bible
Programs-"high-value" (documentary) and The Whipping Boy- "low-value"
("value" refers to Tulip's general subjective expectation regarding the
revenue generating capacity of the Films). Tulip prepared hypothetical sales
results of the Film Rights over a ten-year period beginning July 2001. Sales
were projected with an initial re-run value (assuming all Films have been
previously licensed in all major territories) and a residual value for
additional sales income during the balance of the ten-year period. In its
estimated valuation, Tulip also made the following assumptions:
o all sales results are subject to a hypothetical distribution fee of
35% of gross revenues and a hypothetical distribution/marketing
expense recoupment of 5% of gross revenues. Such fees and expenses
would be paid to third party distributors and vendors as part of the
distribution processes in various media and reflect typical industry
arrangements (and costs thereof) which potential buyers will likely
take into account in determining whether there will be an adequate
return on investment.
o residual value after ten years was at 10% of all re-run values.
o Union/guild residual payments are estimated to be 11% of sales revenue
for all Films.
Based on the above approach, Tulip concluded that the fair market value of
the Film Rights, discounted at various interest rates to arrive at net present
values rounded to the nearest thousand ("NPV"), is as follows:
Page 17
DISCOUNT INTEREST NET PRESENT VALUE OF NPV OF THE BIBLE NPV OF THE WHIPPING
RATE ALL FILM RIGHTS PROGRAMS RIGHTS BOY RIGHTS
----------------- -------------------- ---------------- -------------------
8% $446,000 $289,000 $157,000
10% 415,000 271,000 144,000
12% 388,000 255,000 132,000
15% 353,000 235,000 118,000
Tulip's use of a range of discount rates reflects what Tulip believes
the capital markets would use and what potential purchasers are likely to use
in their own evaluations. As with any valuation exercise, the results
suggested are hypothetical and are the reflection of reasonable reliance upon
historical performance as well as current market-place factors, including
whether the Film is in the English language, the age of the Film, the time
periods for the distribution rights, and the trends in the various possible
film markets. Such factors are subject to constant variation on a
media-by-media and territory-by-territory basis. Further, factors unique to
any specific Film, such as cast and genre, can result in significant
variations in marketplace performance. Tulip considered, to the extent
relevant, all of such factors in reaching its evaluation that the
Partnership's Film Rights were as follows: The Bible Programs - "high-value"
(documentary) and The Whipping Boy - "low-value." Accounts receivable of the
Films were not deemed to have a material effect on the amount available for
distribution. Rights availabilities by media and territory were assumed by
Tulip, based on information provided by the Partnership. There is no
assurance that the Partnership will be able to sell the Film Rights for the
values described above or at any specific prices.
Copies of the Tulip report are available to Limited Partners, at no cost,
by contacting Ms. Lorri Ellis, Jones Entertainment Group, Ltd., 9697 E. Mineral
Avenue, Englewood, Colorado 80112, (303) 784-8486.
The principal of Tulip is Todd P. Leavitt and valuation and brokerage
services are being performed by Tulip in consort with MMG and its principal,
James P. Marrinan. Mr. Leavitt has been involved with the entertainment business
since 1977, first as an attorney and for many years as an executive with a
number of large production and distribution companies in this industry. He
founded Tulip in 1998. Mr. Marrinan has been involved in this industry, in a
variety of positions, since 1974. His experience includes marketing, sales,
management and financial, and administration. He founded MMG in 1995.
REASONS FOR THE PROPOSAL
DISTRIBUTION OBJECTIVES MET. The distribution objectives of the
Partnership have been met. The two Films have already been through at least
one distribution cycle. Individual rights to individual films will have to be
negotiated and these rights may not provide any significant resources.
Therefore, the General Partner believes that it is in the best interest of
limited partners for the Partnership to sell its assets at this time, make a
final distribution of proceeds, if any, to its limited partners and dissolve
the Partnership. It is the General Partner's view that this is an appropriate
time in which to seek to sell the Partnership's assets. The continued
operation of the Partnership is no longer practical for a number of reasons,
including those discussed below.
THE PARTNERSHIP IS OVER NINE YEARS OLD AND IS READY TO CEASE OPERATIONS
AND DISSOLVE. The prospectus for the Partnership said that the term of the
Partnership would be for 25 years, but it is likely that sales of programming
assets would begin in the range of 6-8 years, keyed to when the first round
of film distribution was concluded. The Partnership is past that period.
Generally, the films are producing very little revenue and, while expenses
are also small (except film distribution expenses which are generally keyed
to revenues), the General Partner believes that the Partnership may have
realized substantially all it can from routine licensing transactions (as
opposed to sale of all of its Film Rights).
Page 18
AVOIDING ONGOING OPERATING COSTS OF PARTNERSHIP. If the Film Rights can be
sold within a reasonable period, even the generally low cost of operating the
Partnership can be eliminated, possibly providing more funds for the limited
partners, as well as eliminating the need for each limited partner to report the
Partnership's K-1 tax information with the limited partners' tax returns. The
Partnership has fixed administrative costs (such as tax returns, K-1s, annual
audits, SEC filings), while revenues have steadily declined. This will
ultimately deplete any funds available to distribute to limited partners. There
is no capital available to develop additional programming. The Partnership's
small asset base, coupled with decreasing revenues and cash flow no longer
justify the continuation of Partnership operations.
LACK OF SIGNIFICANT CURRENT REVENUE. For approximately the last 18
months, the Partnership's Film Rights have seen a significant decline in
revenues. For the year ended December 31, 2000 and the six months ended June
30, 2001, total revenues recognized by the Partnership for its Film Rights
were $28,447 and $16,362, respectively.
BENEFITS OF SELLING A FILM LIBRARY. A possible advantage to the Partnership
in attempting to group the sale of all of its Film Rights will be that the
Partnership may have an opportunity to sell one or more film rights as part of a
package where the same film rights would be more difficult to sell on an
individual basis because of the lack of interest in that specific film right,
i.e. one good film may be bundled with less popular ones as a way to sell the
latter. The Film Rights of the Partnership may be conducive to this principally
because all these films were made initially for television. However, the General
Partner will attempt to get the best price it can for each of the Film Rights,
whether that be by grouping the Film Rights or selling them individually. There
is no assurance that the General Partner will be successful in these efforts. In
the discretion of the General Partner, the Partnership's Film Rights could be
grouped with those held by Jones Programming Partners 1-A, Ltd. in an effort to
provide a potentially more attractive package to buyers.
TAXES. For tax purposes, the costs of the Film Rights have been written
off, with the exception of the estimated salvage value for each film. Thus,
any amounts received on the sale of the Film Rights in excess of the salvage
value will be a taxable gain. To the extent the gains do not exceed the
original cost of the Film Rights, they will be taxed as ordinary income due
to the depreciation recapture provisions of IRC Section 1245. It is
anticipated that all gains or losses will be treated as ordinary. There may
be unrecognized passive losses which the limited partners can deduct in the
year in which the Partnership completes the sale of all the Film Rights. Such
passive losses could be as high as approximately $112 per limited partner
interest, if such losses have not been previously deducted. See "Federal
Income Tax Consequences."
CONSIDERATION OF ALTERNATIVES
PARTNERSHIP CONTINUATION. The General Partner has given consideration to
some alternatives for the Partnership before submitting the Proposal to you for
approval. The only viable alternative would be the continued operation of the
Partnership.
BORROWING. The General Partner has not sought to borrow any funds for the
development of any additional film projects, nor does the General Partner
believe that any borrowed funds would be available, if sought.
Page 19
ASSESSING THE LIMITED PARTNERS. The Partnership has no funds with which to
pursue other film projects, nor is borrowing for such purpose a realistic
possibility. In addition, the limited partnership agreement does not provide for
any form of voluntary or mandatory assessment for further capital contributions
by limited partners in the Partnership. Given the purpose of the Partnership
when it was formed, and the explicit partnership provisions and disclosures that
no assessments would be made, the General Partner does not consider it
appropriate to suggest amending the Partnership agreement to allow assessments.
Because there is no ability to obtain financing, the only realistic options to
the Partnership are to sell its assets or to continue operations. As set forth
in the Proxy Statement, the General Partner favors the sale of the Partnership's
assets, followed by the dissolution of the Partnership.
STEPS TO IMPLEMENT THE PROPOSAL
Assuming the approval of the Proposal by the limited partners, of which
there is no assurance, the General Partner intends to take the following steps
to implement the Proposal:
i. Sell all of the Partnership's programming assets through one or more
of the methods discussed in this proxy statement, probably in multiple
transactions;
ii. Receive the sales proceeds for the programming assets and execute
assignments and other instruments to accomplish such sale;
iii. Pay or provide for payment of (and reserves for) the Partnership's
liabilities and obligations to creditors, if any, using the
Partnership's cash on hand and net sales proceeds;
iv. Conduct a final accounting in accordance with the limited partnership
agreement and make final cash distributions;
v. Cause the Partnership's final tax returns to be prepared and filed
with the Internal Revenue Service and appropriate state taxing
authorities;
vi. Distribute to the limited partners final Form K-1 tax information; and
vii. File a Cancellation of Domestic Certificate of Limited Partnership on
behalf of the Partnership with the Secretary of State of the State of
Colorado.
ESTIMATED SELLING COSTS
The expenses associated with the sale of the Film Rights are expected to
be approximately 15-25% of the sales proceeds of the Partnership's
programming assets, primarily comprised of third party costs incurred,
including the fees and costs of Tulip, legal counsel, auditors, printing and
mailing costs and related out-of-pocket expenses. The general and
administrative costs of the General Partner anticipated to be incurred in
connection with the Proposal and related transactions will be met through the
normal ongoing procedure set out in the limited partnership agreement. Such
expenses are not anticipated to be material in relation to the proceeds from
the sale of the Partnership's assets. These expenses would be prior in right
to any distributions to the partners.
Page 20
THE PARTNERSHIP
GENERAL
The Partnership was formed to acquire, develop and own rights to produce
and license original programming. The primary objectives of the Partnership
have been to own a group of programming assets and to license the rights to
the programming on television and in other media throughout the world, and to
generate a positive cash flow to permit cash returns in the form of
distributions to the limited partners. It was contemplated from the outset of
the Partnership's existence that after the programming had been initially
exploited in all applicable markets, the General Partner would begin to
liquidate its library of programming assets, which was expected to begin in
approximately six to eight years. The decision when to dissolve the
Partnership is to be made by the General Partner in its sole discretion. The
General Partner believes that enough additional revenues have been generated
to justify keeping the Partnership in existence until now. However, revenues
have diminished significantly and the General Partner believes no material
purpose would be served to continue the Partnership's existence.
The Partnership was formed on March 10, 1992 when subscriptions for the
minimum offering amount were received. Sales of interests closed on March 15,
1993 with subscriptions totaling $5,614,500, of which $4,842,506 was available
for investment after payment of sales commissions and other organizational and
offering costs.
PRINCIPAL ASSETS
The Partnership's Film Rights are in the following two films:
o THE BIBLE PROGRAMS. In 1992, the General Partner, on behalf of the
Partnership, entered into an agreement with Agamemnon to produce four
one-hour programs for television entitled "Charlton Heston Presents:
The Bible" (the "Bible Programs") for Arts and Entertainment Network
("A&E"). The production costs of the Bible Programs were approximately
$2,370,000, which included a $240,000 production and overhead fee to
the General Partner. In return for agreeing to fund these production
costs, the Partnership acquired all rights to the Bible Programs in
all markets and in all media in perpetuity. One-half of the
Partnership's interest in the Bible Programs was assigned to GoodTimes
for an investment of $1,000,000. The Partnership's total investment in
the Bible Programs is $1,369,764. From inception to June 30, 2001,
the Partnership has recognized $2,052,787 of revenue from this film.
The Partnership and GoodTimes funded Jones Documentary Film
Corporation, which in turn, contracted with Agamemnon for the
production of the Bible Programs. JDFC was formed to insulate the
Partnership and GoodTimes from certain risks and potential liabilities
associated with the production of programming in foreign countries.
The Partnership and JDFC granted the General Partner the exclusive
rights to distribute the Bible Programs. To accomplish this, in June
1992, GoodTimes and the General Partner, on its own behalf, formed J/G
Distribution to distribute the Bible Programs. J/G Distribution has
the sole and exclusive right to exhibit and distribute, and to license
others to exhibit and distribute, the Bible Programs in all markets,
all languages, and all media in perpetuity; except for the CD-ROM
version, which right was transferred to an affiliate of the General
Partner in consideration for repayment of funds paid by GoodTimes to
develop and market the CD-ROM version. J/G Distribution holds the
copyright for the benefit of the Partnership (50% interest) and
GoodTimes (50%
Page 21
interest). J/G Distribution is entitled to receive a distribution fee
of 40% of gross revenues from all markets and is entitled to
reimbursement of distribution costs not to exceed 10% of gross
revenues. Out of gross revenues, the General Partner and GoodTimes
share all distribution fees and costs (other than personnel) equally,
and are entitled to certain personnel cost reimbursements. Prior to
the second quarter of 2000, the Partnership was entitled to 50% of the
net revenues received by J/G Distribution. During such quarter, the
Partnership and the General Partner fully recouped their respective
costs under the agreement with Agamemnon. This caused a shift in
future revenue sharing arrangements. Net revenues are now allocated
25% to GoodTimes, with the Partnership, the General Partner and
Agamemnon sharing 75% in accordance with the income pooling
arrangements described below.
The General Partner's interest in J/G Distribution's revenues will be
contributed to the Partnership and will be sold along with the
Partnership's rights in the Films. The General Partner will not
receive any consideration for such contribution.
Under the agreement with Agamemnon, amounts paid to Agamemnon and the
Partnership, along with the General Partner's distribution fees
received through J/G Distribution, are pooled (the "Income Pool") and
shared after deducting and/or recouping from net revenues the
Partnership's production investment in the Bible Programs; certain
other costs; a $135,000 production fee to the General Partner; and
interest on the unrecouped balance of the production investment. Such
recoupment occurred during the second quarter of 2000, and Agamemnon
has since participated in revenues. Agamemnon now receives an amount
equal to 50% of the Income Pool, the General Partner receives one-half
of the distribution fees received through J/G Distribution and the
Partnership receives the balance of the Income Pool.
In June 1992, J/G Distribution entered into a license agreement with
GoodTimes, granting GoodTimes the distribution rights for the United
States and Canadian home video, audio, and book rights to the Bible
Programs. This agreement expires on March 31, 2009.
In general, all international rights are available except for certain
rights in Spain and Benelux.
o THE WHIPPING BOY. In August 1993, the Partnership acquired the film
rights to the Newbury Award-winning book "The Whipping Boy." The
project was co-developed by the Partnership and The Disney Channel,
and produced by the General Partner and German (Gemini Films) and
French co-production partners. The completed film was delivered to
Disney in the second quarter of 1994 and premiered in the North
American television market in July 1994. The Partnership has invested
$2,661,487 in the film, which included a $468,000 production and
overhead fee payable to the General Partner. The Partnership has
received $2,100,000 from Disney for licensing certain rights to the
film to Disney. From inception to June 30, 2001, the Partnership has
received $2,277,930 of gross revenue from the film, which includes the
licensing fee received from Disney.
The Partnership was responsible for approximately one-half of the
$4,100,000 in production costs, with the balance of the production
budget funded by Gemini Films
Page 22
and other co-production partners and/or territorial advances from the
film's international distributors. Pursuant to the co-production
agreement, Gemini Films has, in perpetuity, the copyright and all
exploitation rights to the film in German language territories
(Germany, Austria, German-speaking Switzerland and German-speaking
Luxembourg). The Partnership owns the worldwide copyright, excluding
German language territories, and has all exploitation rights in all
media in North America (the United States and Canada).
Disney has an exclusive license to telecast the film on all satellite
feeds to subscribers of Disney's programming in the United States. The
agreement granted Disney two exclusive telecast periods, to take place
during a ten year period. The first telecast period expired in July
1998 and the second telecast period expires in September 2004. Disney
has the right of first negotiation to license the film for domestic
television.
In exchange for its contribution to the production budget, the French
production partner was granted all French language rights, excluding
North America, in all media for a period of ten years, expiring on
June 30, 2004. It was also granted the exclusive right of first
negotiation to extend the license period for the French territory on
terms acceptable to the General Partner and Gemini Films. If it does
not present an acceptable offer by 120 days prior to the expiration of
the license period, all rights revert to the other participants.
Canal Plus Distribution ("Canal Plus") was selected to exploit the
film outside of North America and German and French speaking
territories. In April 1993, Canal Plus and Gemini Films entered into
an agreement granting Canal Plus the above rights for a license period
of seven years with a ten year cut off. The German language speaking
exploitation rights are the sole property of Gemini Films. Gemini
Films accounts to the Partnership for any revenue derived therefrom;
however, Gemini Films first applies the revenues generated from the
German language territories to reduce Gemini Films' obligations to the
North Rhine Westphalia Film Fund. Thereafter, German language revenues
will be included in the international revenues and shared pursuant to
the agreement.
The Partnership owns all exploitation rights in all media in North
America (the United States and Canada). The Partnership accounts to
Gemini Films for any revenue generated therefrom. From the film's
North American revenues, the Partnership is first entitled to recover
its investment plus interest. Thereafter, the Partnership receives 90%
of all North American revenues and Gemini Films receives 10% of such
revenues.
With respect to international revenues, after Gemini Films recoups its
investment in the film's production budget and any funded overages and
interest on the whole out of net international revenues, the
Partnership will receive 20% of net international revenues and Gemini
Films will receive 80%. Such recoupment has not occurred as of June
30, 2001. The NRW Film Fund shall be prepaid by Gemini Films from its
80% share. Canal Plus earns distribution fees of 15% of the film's
gross receipts outside of North America, and is reimbursed for its
expenses, capped at 10% (excluding dubbing costs).
A buyer of the Partnership's rights in "The Whipping Boy" will be
required to assume certain writer rights to net profits related to the
film and composer rights to royalties.
Page 23
AMOUNTS INVESTED AND CASH DISTRIBUTIONS
Limited partners made contributions of $5,614,500 in the aggregate to
the Partnership, the net proceeds of which have all been invested. The
General Partner made a capital contribution with respect to its general
partner interest of $1,000. From inception through June 30, 2001, the
Partnership made cash distributions to its limited partners totaling
$3,574,053. On a per interest basis, the limited partners had received, as of
June 30, 2001, approximately $312.50 per $500 interest, or approximately 63%
of their initial capital contributions. Details of the amounts of cash
distributions made to partners over the three years ended December 31, 2000
are set out under "Cash Distributions" below. From inception through June 30,
2001, the General Partner has received cash distributions from the
Partnership of $36,104 with respect to its general partner interest.
CASH DISTRIBUTIONS
During the three years ended December 31, 2000, total cash distributions
and cash distributions per interest were:
TOTAL PER $500 INTEREST
------- -----------------
2000 $140,363 $12.50
1999 $140,363 $12.50
1998 $280,726 $25.00
TRANSACTIONS BETWEEN THE GENERAL PARTNER AND THE PARTNERSHIP
The General Partner was reimbursed for all offering costs up to 3.75% of
gross offering proceeds, which reimbursement was $210,544. Ten percent
commission costs ($561,450) paid to an affiliate of the General Partner and
reimbursements to the General Partner for costs for raising Partnership
capital were charged to limited partners' capital. The following summarizes
the transactions between the General Partner and the Partnership pursuant to
which the General Partner has been paid or has had its expenses reimbursed on
an ongoing basis:
o The General Partner has received from inception through June 30, 2001
production and overhead fees of $808,000, all of which were received prior
to 1995.
o The General Partner is entitled to be reimbursed for general and
administrative costs incurred on behalf of and allocable to the
Partnership, including employee salaries and office overhead.
Administrative services to the Partnership consist primarily of accounting
services, allocated to the Partnership at cost. Through June 30, 2001,
the General Partner has received a total of $147,416 as general and
administrative expense reimbursements from the Partnership, of which
$9,605, $7,745, $8,625 and $10,535 was reimbursed for the years ended
December 31, 1998, 1999 and 2000 and the six months ended June 30,
2001, respectively.
o In connection with the distribution of the Bible Programs, J/G Distribution
is entitled to certain distribution rights and fees. The General Partner
owns 50 percent of J/G Distribution. As of June 30, 2001, gross sales
made by J/G Distribution totaled
Page 24
$3,647,836, of which 1,823,918 ($292,040, $238,618, $35,431 and $29,047
for the years ended December 31, 1998, 1999 and 2000 and the six months
ended June 30, 2001, respectively) has been retained by J/G Distribution
for its fees and marketing costs, with the remaining $1,823,918 ($292,040,
$238,618, $35,430 and $29,048 for the years ended December 31, 1998, 1999
and 2000 and the six months ended June 30, 2001, respectively) belonging
to the Partnership, GoodTimes and Agamemnon. Additionally, $250,000 was
received directly by the Partnership as its share of the initial license
fee from A&E. As of June 30, 2001, the Partnership had received $886,134
from J/G Distribution and the $250,000 from A&E. The Partnership received
the outstanding balance of $10,893 due from J/G Distribution in July 2001.
In June 1992, J/G Distribution was granted all distribution rights to
the Bible Programs in all markets, all languages and all media. In October
1994, J/G Distribution entered into an agreement with an affiliate of the
General Partner, to develop two CD-ROM Multimedia products based on the Bible
Programs ("CD-ROM version"). Concurrently, J/G Distribution agreed with
GoodTimes to equally fund the cost of the production. An affiliate of
GoodTimes and an affiliate of the General Partner were each granted certain
rights to distribute the CD-ROM version. In February 1996, the GoodTimes
affiliate assigned its entire interest in the CD-ROM version to an affiliate
of the General Partner, which assignment terminated GoodTimes' rights
regarding the CD-ROM version. No Partnership funds were utilized in the
production of the CD-ROM version; however, if production costs, distribution
fees, costs associated with distribution, production cost overages, plus
interest are ever recovered, a portion of the net revenues belongs to the
Partnership. As of June 30, 2001, the affiliate of the General Partner has
not recouped its production costs and distribution costs, with a deficit to
be recouped of approximately $295,000. Total revenues for 2000 and 2001, to
date, are less than $1,000. It is not expected that the Partnership will
receive any revenues from the CD-ROM version.
NO TRADING MARKET
There is no trading market for the limited partnership interests, and only
very limited sales of such interests have occurred since inception.
LIST OF LIMITED PARTNERS
A limited partner of the Partnership is entitled to request copies of the
names of the limited partners showing the names and addresses of all limited
partners in the Partnership. The right to receive a limited partner list may be
conditioned upon the requesting limited partner paying the cost of copying and a
showing that the request is for a proper purpose. Reasonable requests would
include requests for the limited partner list for the purpose of opposing the
Proposal. Requests for limited partner lists may be addressed to ACS Securities
Services, Inc., at 3988 N. Central Expressway, Building 5, 6th Floor, Dallas, TX
75204; Attention: Ms. Shari Eastwood.
BOOKS AND RECORDS
The Partnership's limited partnership agreement provides that its books and
records are available for inspection by limited partners or their duly
authorized representatives at all reasonable times at the Partnership's
principal office in Englewood, Colorado. A written request must be received
stating a proper purpose for inspection of such books and records, with the
inspection to be conducted at the limited partner's expense. A limited partner
may
Page 25
request in writing and receive without charge copies of the Partnership's
limited partnership agreement, certificate of limited partnership and tax
returns.
LEGAL PROCEEDINGS
The General Partner is not aware of any material pending legal proceedings
to which the Partnership is a party or of which any of the Film Rights are the
subject.
VOTING ON THE PROPOSAL
VOTE REQUIRED; PRINCIPAL HOLDERS
Under the limited partnership agreement, the Proposal must be approved
by the affirmative vote of the limited partners holding a majority of the
limited partnership interests in the Partnership as of the record date. The
General Partner does not have the authority under the Partnership's limited
partnership agreement to sell substantially all of the Partnership's assets
absent such a vote. As of July 31, 2001, the number of interests outstanding
was 11,229 and the number of record holders was 645. Each limited partner
appearing on the records of the Partnership as of September 28, 2001, the
"record date," is entitled to notice of, and to participate in, this vote of
limited partners. It is very important that all limited partners participate
in the voting. The ability of the Partnership to complete the transaction
discussed in this proxy statement and the Partnership's ability to make a
distribution to its limited partners of the net proceeds of the sale of the
Partnership's assets are dependent upon the approval of the transaction by
the holders of a majority of the Partnership's limited partnership interests.
An abstention by a limited partner will have the same effect as a vote
against the Proposal.
The General Partner and its affiliates own no limited partnership
interests. The General Partnership interest in the Partnership does not have a
vote on the Proposal, but the General Partner has approved the Proposal and
recommends that the limited partners vote in favor of it. To the General
Partner's knowledge, there is no holder of interests of more than 5% of the
interests.
PROXIES; REVOCATION
A sample of the form of proxy is attached to this proxy statement. The
actual proxy to be used to register your vote on the Proposal is the separate
sheet of paper included with this proxy statement. If you wish, you can fax your
executed proxy to us at 214-887-7198, Attention: Shari Eastwood, of ACS
Securities Services, Inc. Investors may also vote by toll-free telephone at
1-866-ACS-VOTE (1-866-227-8683). PLEASE USE THE ENCLOSED PROXY TO CAST YOUR VOTE
ON THE PROPOSAL OR SEE THE ACCOMPANYING INSTRUCTION PAGE FOR MORE DETAILS ON
VOTING BY TELEPHONE.
If the proxy is properly signed and is not revoked by a limited partner,
the interests it represents will be voted in accordance with the instructions
of the limited partner. If no specific instructions are given, the interests
will be counted as a vote "FOR" the Proposal and the grant of authority to
extend the solicitation period. Proxies cannot be revoked except by delivery
of a proxy dated as of a later date, by voting in person at the Special
Meeting, or by giving written or oral notice of revocation to the Secretary
of the General Partner.
Page 26
SOLICITATION
The solicitation is being made by Jones Entertainment Group, Ltd. in its
capacity as General Partner on behalf of the Partnership. The Partnership
will bear the costs of the preparation of this proxy statement and of the
solicitation of proxies, which is estimated at $15,000. Such costs will be
allocated to the limited partners and to the General Partner according to
their respective percentage interests pursuant to the limited partnership
agreement. Solicitations will be made primarily by mail. However, a number of
regular employees of the General Partner may, to ensure the presence of a
quorum, solicit proxies in person or by telephone. The General Partner may
contact brokers and representatives who originally sold the interests to
limited partners and request their assistance in encouraging limited partners
to return their proxies or to vote by telephone. These brokers or
representatives would not be compensated for this assistance nor would they
be asked to make any recommendation as to how the limited partners should
vote. Additionally, the General Partner may retain a proxy solicitor to
assist in contacting brokers or limited partners to encourage the return of
proxies, although it does not anticipate doing so. Should such a solicitor be
retained, its costs would be part of the aforesaid estimated $15,000.
NO APPRAISAL OR DISSENTERS' RIGHTS PROVIDED
Limited partners are not entitled to any dissenters' or appraisal rights
with respect to the Proposal, as would be available to shareholders in a
corporation engaging in a corporate transaction.
RECOMMENDATION OF THE GENERAL PARTNER
The General Partner believes that it is in the best interests of the
limited partners to sell the Film Rights and to dissolve the Partnership. The
General Partner believes the terms of the Proposal are fair to the limited
partners. Dissolution will allow the limited partners to receive any
remaining value of the Partnership's programming assets currently, rather
than receiving distributions, if any, over the remaining life of the
Partnership. If operations continue, revenues will continue to decline while
direct, operating, general and administrative expenses continue, reducing the
likelihood of cash distributions. Continued operations also mean continuation
of the additional costs incurred by the limited partners, including the costs
associated with inclusion of information from the Schedule K-1 relating to
the Partnership in their personal income tax returns. Dissolution of the
Partnership will allow preparation of final tax returns.
THE GENERAL PARTNER RECOMMENDS THAT
LIMITED PARTNERS VOTE FOR THE PROPOSAL.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following summarizes the material federal income tax consequences to
the limited partners if the Proposal to sell the Partnership's assets and
dissolve the Partnership is approved. This discussion is not
Page 27
based upon an opinion of counsel and it is possible that different results
than those described may occur. Statements regarding tax consequences are
based upon relevant provisions of the Internal Revenue Code of 1986, as
amended, the "Code", Treasury Regulations in effect on the date hereof,
reported judicial decisions, published positions of the IRS, further
assumptions that the Partnership constitutes a partnership for federal tax
purposes, and that the Partnership will be dissolved as described herein. The
laws, regulations, administrative rulings and judicial decisions which form
the basis for conclusions regarding the tax consequences described herein are
complex, are subject to prospective or retroactive change at any time, and
any change may adversely affect the limited partners.
This summary does not describe all the tax aspects which may affect limited
partners because the tax consequences may vary depending upon the individual
circumstances of a limited partner. It is directed to the limited partners that
are the original purchasers of the interests and hold interests as "capital
assets," generally, property held for investment. Each limited partner that is a
corporation, trust, estate, tax-exempt entity or other partnership is strongly
encouraged to consult its own tax advisor as to the rules which are specifically
applicable to it. This summary does not address foreign, state or local tax
consequences, and is inapplicable to nonresident aliens, foreign corporations,
debtors under the jurisdiction of a court in a case under federal bankruptcy
laws or in a receivership, foreclosure or similar proceeding, or an investment
company, financial institution or insurance company.
TAXABLE GAIN OR LOSS UPON SALE OF PROGRAMMING ASSETS
A limited partner will realize and recognize gain or loss, or a
combination of both, on the Partnership's sale of its programming assets
prior to dissolution. The amount of gain realized with respect to each
programming asset, or related asset, will be an amount equal to the excess of
the amount realized by the Partnership and allocated to the limited partner,
for example, cash or consideration received, over the limited partner's
adjusted tax basis for such programming asset. Conversely, the amount of loss
realized with respect to each programming asset or related asset will be an
amount equal to the excess of the limited partner's tax basis over the amount
realized by the Partnership for such programming asset and allocated to the
limited partner. It is projected that net taxable gain will be realized upon
the sale of Partnership programming assets and that such gain will be
allocated among the limited partners in accordance with the limited
partnership agreement. The limited partnership agreement includes an
allocation provision that requires allocations pursuant to a dissolution be
made among partners in a fashion that equalizes capital accounts of the
partners so that the amount in each partner's capital account will reflect
such partner's sharing ratio of income and loss. The extent to which capital
accounts can be equalized, however, is limited by the amount of gain and loss
available to be allocated.
Realized gains and losses generally must be recognized and reported in the
year the sale occurs. Accordingly, each limited partner will realize and
recognize his or her allocable share of gains and losses in his tax year within
which the Partnership programming assets are sold. Each limited partner's
recognized allocable share of the net partnership Section 1231 gains or losses
must be netted with that limited partner's individual Section 1231 gains and
losses recognized during the year in order to determine the character of such
net gains or net losses under Section 1231. Net gains will be treated as capital
gains except to the extent recharacterized as ordinary income due to recapture
and net losses will be treated as ordinary
Page 28
losses. IT IS ANTICIPATED THAT ALL GAINS ON THE SALE OF THE FILM RIGHTS WILL BE
TREATED AS ORDINARY INCOME DUE TO THE DEPRECIATION RECAPTURE PROVISION OF
SECTION 1245 OF THE CODE.
DISSOLUTION OF THE PARTNERSHIP
After the sale of its Film Rights, the Partnership's assets will consist
solely of any net cash remaining after payment of the Partnership's
obligations. Any such cash will be distributed to the partners in liquidation
of his or her partnership interest. The Partnership will not realize gain or
loss upon such distribution of cash to its partners. If the amount of cash
distributed to a limited partner in liquidation of his or her partnership
interest is less than such limited partner's adjusted tax basis in his or her
interests, the limited partner will realize and recognize a capital loss to
the extent of the excess. If the amount of cash distributed is greater than
such limited partner's adjusted tax basis in his or her interests, the
limited partner will recognize a capital gain to the extent of the excess.
CAPITAL GAINS TAX
Net long-term capital gains of individuals, trusts and estates generally
will be taxed at a maximum rate of 20%, while ordinarily income, including
income from the recapture of depreciation, will be taxed at a maximum rate of
35.5% or 39.1%, depending on the taxpayer's taxable income. The amount of net
capital losses that can be utilized to offset ordinary income will be limited
to the sum of net capital gains from other sources recognized by the limited
partner during the tax year, plus $3,000, or $1,500, in the case of a married
individual filing a separate return. The excess amount of such net long-term
capital loss may be carried forward and utilized in subsequent years subject
to the same limitations. Corporations are taxed on net long-term capital
gains at their ordinary Section 11 rates and are allowed to carry net capital
losses back three years and forward five years. Section 1231 net losses can
be fully utilized to offset ordinary income.
PASSIVE LOSS LIMITATIONS
Limited partners that are individuals, trusts, estates, or personal service
corporations are subject to the passive activity loss limitations rules that
were enacted as part of the Tax Reform Act of 1986. Generally, losses from a
passive activity can only be deducted to the extent of income from other passive
activities.
A limited partner's allocable share of partnership income, gain, loss, and
deduction is treated as derived from a passive activity, except to the extent of
partnership portfolio income, which includes interest, dividends, royalty income
and gains from the sale of property held for investment purposes. A limited
partner's allocable share of any gain realized on sale of Partnership assets
(other than gain from the sale of portfolio investments) will be characterized
as passive activity income that may be offset by passive activity losses from
other passive activity investments. Moreover, because the sale of all of the
Partnership's assets will terminate the limited partner's interest in the
passive activity, a limited partner's allocable share of any loss (i) previously
realized as a limited partner in the Partnership and suspended because of its
passive characterization, (ii) realized on the sale of partnership assets, or
(iii) realized by the limited partner upon liquidation of his or her
partnership interest, will not be characterized as losses from a passive
activity.
Page 29
Through December 31, 2000, the passive activity losses from inception of
the Partnership are approximately $112 per $500 limited partner interest. These
losses can be deducted on disposition of the Film Rights if they have not
previously been utilized by the limited partners.
THE FOREGOING DISCUSSION IS INTENDED TO BE A SUMMARY OF THE MATERIAL INCOME
TAX CONSIDERATIONS OF THE SALE OF PARTNERSHIP ASSETS AND DISSOLUTION. EACH
LIMITED PARTNER SHOULD CONSULT ITS OWN TAX ADVISOR CONCERNING ITS PARTICULAR TAX
CIRCUMSTANCES AND THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES
TO IT OF THE SALE OF PARTNERSHIP ASSETS AND THE DISSOLUTION OF THE PARTNERSHIP.
DOCUMENTS INCLUDED
Included with this proxy statement are the following documents:
o The Partnership's Annual Report on Form 10-K for the year ended December
31, 2000.
o The Partnership's Amendment No. 1 to its Annual Report on Form 10-K for
the year ended December 31, 2000.
o The Partnership's Quarterly Report on Form 10-Q for the quarter ended March
31, 2001.
o The Partnership's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2001.
FORWARD-LOOKING STATEMENTS
Some of the information included in this proxy statement, any attachments
and the documents incorporated by reference contain forward-looking statements.
Forward-looking statements use forward-looking terms such as "believe,"
"expect," "may," "intend," "will," "project," "should" or "anticipate" or other
similar words. These statements discuss "forward-looking" information such as:
o future net revenues from film distribution;
o future cash distributions to investors in the Partnership; and
o amounts or ranges of net proceeds from sales of the Partnership's assets.
Other factors that could cause actual results to differ materially from
those anticipated are discussed in the Partnership's periodic filings with the
Securities and Exchange Commission, including its Annual Report on Form 10-K for
the year ended December 31, 2000.
When considering these forward-looking statements, you should keep in mind
the risk factors and other cautionary statements in this proxy statement, any
attachment and the documents incorporated by reference. The Partnership will not
update these forward-looking statements unless the securities laws require an
updating.
Page 30
OTHER MATTERS
INCORPORATION BY REFERENCE
The Partnership's Annual Report on Form 10-K, as amended, for the fiscal
year ended December 31, 2000 and the Partnership's Quarterly Reports on Form
10-Q for the fiscal quarters ended March 31, 2001 and June 30, 2001 are
incorporated by reference in their entirety in this Proxy Statement. All
subsequent documents filed by the Partnership prior to the vote pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities and Exchange Act of 1934
are hereby incorporated by reference.
JONES ENTERTAINMENT GROUP, LTD.
as General Partner of the Partnership
/s/ Lorri Ellis
--------------------------------------
Lorri Ellis
Secretary
Page 31
FORM OF PROXY
JONES PROGRAMMING PARTNERS 2-A, LTD.
**VOTING OPTIONS**
YOU MAY VOTE BY TELEPHONE
(OR COMPLETE THE PROXY CARD BELOW AND RETURN IT BY MAIL IN
THE ENCLOSED ENVELOPE)
If voting by proxy, you may vote either by mail, fax or telephone. Your
telephone vote authorizes the named proxies to vote your interests in the same
manner as if you marked, signed and returned your proxy card by mail. To vote by
telephone, please read the accompanying proxy statement and then follow these
steps:
TO VOTE BY PHONE: CALL TOLL FREE 1-866-227-8683 ANY TIME ON A TOUCH-TONE
TELEPHONE.
THERE IS NO CHARGE TO YOU FOR THE CALL. PLEASE HAVE THIS
FORM AVAILABLE WHEN YOU CALL THE TOLL-FREE NUMBER.
Enter the 10-digit pin number located below.
To vote FOR on the Proposal, as the General Partner
recommends, PRESS 1.
To vote AGAINST the Proposal PRESS 2.
To ABSTAIN on the Proposal PRESS 3.
If you vote by telephone, please DO NOT mail back the proxy.
THANK YOU FOR VOTING!
/ /
PIN NUMBER FOR
TELEPHONIC VOTING
FOLD AND DETACH HERE
-------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE PARTNERSHIP
BY THE GENERAL PARTNER
FOR A SPECIAL MEETING OF THE LIMITED PARTNERS
The undersigned hereby appoints Timothy J. Burke and Lorri Ellis as
Proxies, each with the power to appoint his or her substitute, and hereby
authorizes them to represent and to vote, as designed herein, all limited
partnership interests of JONES PROGRAMMING PARTNERS 2-A, LTD. held of record
by the undersigned on September 28, 2001 for a special meeting of limited
partners to be held at the corporate offices of the General Partner, 9697 E.
Mineral Avenue, Englewood, Colorado, on Monday, November 5, 2001, at 10:30
a.m., Mountain Time.
THE GENERAL PARTNER RECOMMENDS A VOTE "FOR" THE FOLLOWING ITEM:
1) The adoption of a proposal for the sale of substantially all of the assets
of the Partnership and the ultimate dissolution of the Partnership. (Note:
The asset sale and dissolution of the Partnership comprise a single
proposal, and a vote in favor of the proposal will constitute a vote in
favor of each of these matters.)
/ / FOR / / AGAINST / / ABSTAIN
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE HEREON. IF
NO SPECIFICATION IS MADE, IT WILL BE VOTED FOR THE PROPOSAL.
(TO BE SIGNED ON OTHER SIDE.)
Page A-1
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO ACT UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING.
----------------------------------------
Date
----------------------------------------
Signature
----------------------------------------
(Signature if held jointly)
Please sign exactly as your name appears
at the left. When partnership interests
are held by joint tenants, both should
sign. When signing as attorney,
executor, administrator, trustee or
corporation, please sign in full
corporate name by president or other
authorized person. If a partnership,
please sign in partnership name by
authorized person.
YOU MAY FAX YOUR SIGNED PROXY TO 214-887-7198.
Page A-2
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ______ to ______
Commission file number: 0-20944
JONES PROGRAMMING PARTNERS 2-A, LTD.
------------------------------------
(Exact name of registrant as specified in its charter)
COLORADO 84-1088819
------------------------ ---------------------------------
(State of Organization) (IRS Employer Identification No.)
9697 EAST MINERAL AVENUE, ENGLEWOOD, COLORADO 80112 (303) 792-3111
--------------------------------------------------- --------------
(Address of principal executive office and Zip Code) (Registrant's telephone no.
including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or l5(d) of the Securities Exchange Act of
l934 during the preceding l2 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
------- -------
Aggregate market value of the voting stock held by non-affiliates of the
registrant: N/A
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. X
------
DOCUMENTS INCORPORATED BY REFERENCE: None
Information contained in this Form 10-K Report contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements, other than statements of
historical facts, included in this Form 10-K Report that address activities,
events or developments that the General Partner or the Partnership expects,
believes or anticipates will or may occur in the future are forward-looking
statements. These forward-looking statements are based upon certain assumptions
and are subject to a number of risks and uncertainties. Actual results could
differ materially from the results predicted by these forward-looking
statements.
PART I.
ITEM 1. BUSINESS
Jones Programming Partners 2-A, Ltd. (the "Partnership") is a Colorado
limited partnership that was formed in March 1992 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, produce and distribute original programming to be owned by
the Partnership. 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 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 4.
During 2000, the Partnership had two programming properties: "Charlton Heston
Presents: The Bible" and "The Whipping Boy." It is not anticipated that the
Partnership will invest in any additional programming, but instead will focus on
the distribution and/or sale of its existing programming projects. Following is
a description of these programming projects.
CHARLTON HESTON PRESENTS: THE BIBLE
In May 1992, the General Partner, on behalf of the Partnership, entered
into an agreement with Agamemnon Films, an unaffiliated party, to produce four
one-hour programs for television, entitled "Charlton Heston Presents: The Bible"
(the "Bible Programs"). The production costs of the Bible Programs were
approximately $2,370,000, which included a $240,000 production and overhead fee
paid to the General Partner. In return for agreeing to fund these production
costs, the Partnership acquired all rights to the Bible Programs in all markets
and in all media in perpetuity. The Partnership subsequently assigned half of
its ownership of the Bible Programs to an unaffiliated party for an investment
of $1,000,000 toward the production costs for the Bible Programs. After
consideration of the reimbursement, the Partnership's total investment in the
Bible Programs was $1,369,764. In June 1998, the Partnership fully amortized its
net investment in this film. From inception to December 31, 2000, the
Partnership has recognized $2,036,811 of revenue from this film, of which
$900,677 was retained by the distributors of the film for their fees and
marketing costs. Of the remaining $1,136,134, the Partnership received
$1,129,421 as of December 31, 2000. The Partnership will receive the outstanding
balance of $6,713 due from J/G Distribution Company in 2001.
THE WHIPPING BOY
In August 1993, the Partnership acquired the rights to the Newbury
Award-winning book, "The Whipping Boy." "The Whipping Boy" was produced as a
two-hour telefilm which premiered in the North American television market on The
Disney Channel. The film's final cost was approximately $4,100,000. As of
December 31, 2000, the Partnership had invested $2,661,487 in the film, which
included a $468,000 production and overhead fee paid to the General Partner. The
film was co-produced by the General Partner and Gemini Films, a German company.
From inception to December 31, 2000, the Partnership has recognized $2,277,544
of revenue from this film, of which $2,100,000 represents the initial license
fee from The Disney Channel that was used to finance the film's production. Of
the remaining $177,544, $8,497 was retained by the distributors of the film for
their fees and marketing costs and $169,047 was received by the Partnership as
of December 31, 2000.
During the fourth quarter of 1999, the General Partner reassessed the
anticipated gross revenues remaining from the distribution of "The Whipping Boy"
based on revised estimated television sales projections and actual results of
the film's distribution in comparison to the film's prior projections. A
determination was made by the
2
General Partner that the Partnership's net investment in "The Whipping Boy" of
$147,883 exceeded the film's estimated net realizable value of $7,883 as of
December 31, 1999, resulting in a write-down of $140,000. The film's estimated
net realizable value was calculated based on an estimate of anticipated revenues
remaining over the life of the film from international and domestic television
distribution, net of estimated distribution fees and costs, as of December 31,
1999.
During the fourth quarter of 2000, the General Partner again reassessed
the anticipated gross revenue remaining from the distribution of "The Whipping
Boy" based on revised estimated television sales projections and actual results
of the film's distribution in comparison to the film's prior projections. A
determination was made by the General Partner that the Partnership's net
investment in "The Whipping boy" of $6,722 should be fully written off,
resulting in a final write down of $6,722.
As of December 31, 2000 the Partnership, after consideration of
amortization and write-downs, fully amortized its net investment in the film.
GENERAL MATTERS
The General Partner, on behalf of the Partnership, is pursuing the sale
of the Partnership's interests in its programming. See further discussion of the
Partnership's distribution efforts concerning its films in ITEM 7, MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. There
is no assurance that the Partnership will be successful in obtaining a buyer or
buyers for the assets of the Partnership or that the terms or conditions of any
sale will be favorable to the Partnership. Many of the factors set forth below
which affect the distribution of the films will also affect the saleability of
the films themselves. If efforts to sell the Partnership's assets are not
successful, the Partnership will continue to seek distribution for its films.
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% commission for arranging the sale, or sales, of the Partnership's
films.
The Partnership has encountered intense competition in connection with
its attempts to distribute its programming. There is competition within the
television programming industry for exhibition time on cable television
networks, broadcast networks and independent television stations. Acceptance of
the programming in certain distribution media may be limited and the programming
will compete with other types of television programming in all domestic and
international distribution media and markets. The age and technical
specifications of the Partnership's programming may also limit distribution in
certain international and domestic markets. The success of programming is also
dependent in part on public taste, which is unpredictable and susceptible to
change. In international markets, the Partnership has, in the past, and may
again encounter additional risks, such as foreign currency rate fluctuations,
compliance and regulatory requirements, differences in tax laws, and economic
and political environments.
The Partnership's films have been distributed in a number of markets.
It is not known whether the Partnership can successfully exploit any of its
films in these or other markets in the future. There can be no assurance that
the distribution efforts made by the Partnership, the General Partner or
unaffiliated parties on behalf of the Partnership for the programming will be
successful.
3
ITEM 2. PROPERTIES
See ITEM 1.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II.
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 February 28, 2001, the number of equity security
holders in the Partnership was 642.
4
ITEM 6. SELECTED FINANCIAL DATA
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------
1996 1997 1998 1999 2000
--------------- ------------ ------------- ------------- ------------
Gross revenues $ 329,875 $ 215,834 $ 292,569 $ 240,736 $ 28,447
Costs of filmed entertainment 281,451 199,899 19,829 2,117 1,161
Distribution fees and expenses 105,707 92,702 146,077 80,037 11,957
Loss on write-down of
film production cost 575,000 - 194,907 140,000 6,722
Operating, general and administrative
expenses 31,701 78,965 30,720 27,549 32,082
Operating loss (663,984) (155,732) (98,964) (8,967) (23,475)
Net loss (575,789) (118,640) (82,162) (5,322) (16,939)
Net loss per limited partnership unit (50.76) (10.46) (7.24) (.47) (1.49)
Weighted average number of limited
partnership units outstanding 11,229 11,229 11,229 11,229 11,229
General partner's deficit (33,479) (40,337) (43,995) (45,466) (47,053)
Limited partners' capital 1,410,494 731,588 369,522 223,890 66,757
Total assets 1,555,607 965,564 340,863 187,453 27,720
General partner advances 29,106 8,622 7,511 836 1,016
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
2000 COMPARED TO 1999
Revenues of the Partnership decreased $212,289, from $240,736 in 1999 to $28,447
in 2000. This decrease in revenues was primarily the result of a significant
decrease in home video and other sales of "The Bible Programs". Also, revenues
from "The Whipping Boy" decreased in 2000 compared to 1999.
Filmed entertainment costs decreased $956, from $2,117 in 1999 to $1,161 in
2000. This decrease corresponds to the decrease in revenues from "The Whipping
Boy" in 2000 compared to 1999. Filmed entertainment costs are amortized over the
life of each film in the ratio that current gross revenues bear to anticipated
total gross revenues.
Distribution fees and expenses decreased $68,080, from $80,037 in 1999 to
$11,957 in 2000. This decrease was the result of decreased home video sales of
the "Bible Programs" under the Partnership's distribution agreement with J/G
Distribution Company, which is owned 50% by the General Partner and 50% by
GoodTimes Home Video Corporation. Distribution fees and expenses relate to the
compensation due and costs incurred by various parties 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.
Loss on write-down of film production was $140,000 in 1999, and an additional
$6,722 was written down in 2000. The loss on write-down of film production in
2000 was the result of a full write-down of the Partnerships' net investment in
"The Whipping Boy".
5
Operating, general and administrative expenses increased $4,533, from $27,549 in
1999 to $32,082 in 2000. This increase was primarily the result of an increase
in legal expenses related to the potential sale of the Partnership's assets
during 2000 compared to 1999.
Interest income increased $2,953, from $3,583 in 1999 to $6,536 in 2000. This
increase was the result of higher interest rates and higher average levels of
invested cash balances during 2000 compared to 1999.
Limited Partners' net loss per partnership unit increased $(1.02), from $(.47)
in 1999 to $(1.49) in 2000. This change was due to the results of operations as
discussed above.
1999 COMPARED TO 1998
Revenues of the Partnership decreased $51,833, from $292,569 in 1998 to $240,736
in 1999. This decrease in revenues was primarily related to a $53,421 decrease
in the sales of "The Bible Programs," from $292,040 in 1998 to $238,619 in 1999.
Filmed entertainment costs decreased $17,712, from $19,829 in 1998 to $2,117 in
1999. This decrease was the result of the full amortization of the capitalized
production costs relating to "The Bible Programs" during 1998. Filmed
entertainment costs are amortized over the life of each film in the ratio that
current gross revenues bear to anticipated total gross revenues.
Distribution fees and expenses decreased $66,040, from $146,077 in 1998 to
$80,037 in 1999. This decrease was the result of decreased home video sales of
the "Bible Programs" under the Partnership's distribution agreement with J/G
Distribution Company. Distribution fees and expenses relate to the compensation
due and costs incurred by unaffiliated parties 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.
Loss on write-down of film production was $194,907 in 1998, and an additional
$140,000 was written down in 1999. The 1999 write down resulted in a remaining
net investment in "The Whipping Boy" of $7,883 as of December 31, 1999.
Operating, general and administrative expenses decreased $3,171, from $30,720 in
1998 to $27,549 in 1999. This decrease was due primarily to decreased direct
costs allocable to the operations of the Partnership that were charged to the
Partnership by the General Partner and its affiliates in 1999 as compared to
1998. The decrease in direct costs allocable to the Partnership's operations
resulted mainly from the decrease in direct time spent by the affiliates of the
General Partner on the accounting and legal functions of the Partnership.
Interest income decreased $13,199, from $16,782 in 1998 to $3,583 in 1999. This
decrease was due primarily to lower levels of invested cash balances existing
during 1999 as compared to 1998.
Limited Partners' net loss per partnership unit changed $6.77, from $(7.24) in
1998 to $(.47) in 1999. 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 its programming. As
of December 31, 2000, the Partnership had approximately $21,000 in cash. Cash
generated from operations for the year ended December 31, 2000 was approximately
$34,000. The
6
Partnership will not invest in any additional programming projects, but instead
will focus on the distribution and/or sale of its two existing films. The
Partnership had outstanding receivables totaling approximately $7,000 as of
December 31, 2000. The Partnership anticipates that these amounts will be
received in the first quarter of 2001.
Regular quarterly distributions were suspended beginning with the quarter ended
September 30, 1998. However, a distribution of $141,782 was declared for the
three months ended March 31, 1999, and was paid in May 1999. A distribution of
$141,781 was declared for the three months ended June 30, 2000 and was paid in
August 2000. The Partnership will retain a certain level of working capital,
including any necessary reserves, to fund its operating activities. It is
anticipated that future distributions, if any, will only be made once proceeds
are received from the sale, or sales, of the Partnership's assets. There is no
assurance regarding any future distributions.
The General Partner, on behalf of the Partnership, is pursuing the sale of the
Partnership's interests in its programming. The General Partner cannot predict
when or at what price the Partnership's interests in its programming ultimately
will be sold, but has initiated sales efforts. The projects may be sold as a
group or on a one by one basis, in the judgement of the General Partner. 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
programming projects will be charged to the Partnership. It is anticipated that
the net proceeds from the sale, or sales, of the Partnership's interests in its
programming will be distributed to the partners after such sale. It is probable
that the distributions of the proceeds from the sale or sales of the
Partnership's programming projects, together with all prior distributions paid
to the limited partners, will return to the limited partners less than 70% of
their initial capital contributions to the Partnership. 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%
commission for arranging the sale, or sales, of the Partnership's films.
In May 1992, the General Partner, on behalf of the Partnership, entered into an
agreement with Agamemnon Films ("Agamemnon") with respect to the production of
the Bible Programs. Pursuant to this agreement, Agamemnon does not participate
in profit sharing until certain revenues to the General Partner and the
Partnership from the distribution of the Bible Programs are first applied
towards the Partnership's recoupment of its production investment, its share of
production overages, and a production fee plus interest on the unrecouped
investment. In 2000, the Partnership fully recouped the requisite amount and
Agamemnon began to participate in profits from the distribution of the Bible
Programs. The Partnership will therefore receive a decreased percentage of the
net proceeds from the distribution of the Bible Programs.
The General Partner believes that the Partnership has, and will continue to
have, sufficient liquidity to fund its operations and to meet its obligations so
long as quarterly distributions are suspended. Any cash flow from operating
activities will be primarily generated from the Bible Programs.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK.
The Partnership does not hold any financial instruments which present
significant interest or market risk.
7
ITEM 8. FINANCIAL STATEMENTS
JONES PROGRAMMING PARTNERS 2-A, LTD.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 2000
INDEX
PAGE
-----------
Report of Independent Public Accountants 9
Statements of Financial Position 10
Statements of Operations 11
Statements of Partners' Capital (Deficit) 12
Statements of Cash Flows 13
Notes to Financial Statements 14
8
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Jones Programming Partners 2-A, Ltd.:
We have audited the accompanying statements of financial position of
Jones Programming Partners 2-A, Ltd. (a Colorado limited partnership) as of
December 31, 1999 and 2000, and the related statements of operations, partners'
capital (deficit) and cash flows for each of the three years in the period ended
December 31, 2000. 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 2-A, Ltd. as of December 31, 1999 and 2000, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2000 in conformity with accounting principles generally accepted in
the United States.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 2, 2001.
9
JONES PROGRAMMING PARTNERS 2-A, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF FINANCIAL POSITION
DECEMBER 31,
-----------------------------------
ASSETS 1999 2000
------------ -------------
CASH AND CASH EQUIVALENTS (Note 2) $ 128,458 $ 21,007
ACCOUNTS RECEIVABLE (Note 5) 51,112 6,713
INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION,
net of accumulated amortization of
$4,023,368 and $4,031,252 as of December 31,
1999 and 2000, respectively (Notes 2, 4 and 5) 7,883 --
----------- -----------
Total assets $ 187,453 $ 27,720
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
LIABILITIES:
Accounts payable to affiliates $ 836 $ 1,016
Accrued liabilities 8,193 7,000
----------- -----------
Total liabilities 9,029 8,016
----------- -----------
PARTNERS' CAPITAL (DEFICIT) (Note 3):
General partner -
Contributed capital 1,000 1,000
Distributions (34,685) (36,103)
Accumulated deficit (11,781) (11,950)
----------- -----------
Total general partner's deficit (45,466) (47,053)
----------- -----------
Limited partners -
Net contributed capital (11,229 units
outstanding as of December 31, 1999 and 2000) 4,823,980 4,823,980
Distributions (3,433,691) (3,574,054)
Accumulated deficit (1,166,399) (1,183,169)
----------- -----------
Total limited partners' capital 223,890 66,757
----------- -----------
Total partners' capital (deficit) 178,424 19,704
----------- -----------
Total liabilities and partners' capital (deficit) $ 187,453 $ 27,720
=========== ===========
The accompanying notes are an integral part of these financial statements.
10
JONES PROGRAMMING PARTNERS 2-A, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1998 1999 2000
------------- ------------- --------------
REVENUES (Notes 2 and 5) $ 292,569 $ 240,736 $ 28,447
COSTS AND EXPENSES:
Costs of filmed entertainment (Note 2) 19,829 2,117 1,161
Distribution fees and expenses (Notes 2 and 5) 146,077 80,037 11,957
Loss on write-down of
film production cost (Note 5) 194,907 140,000 6,722
Operating, general and
administrative expenses (Note 4) 30,720 27,549 32,082
----------- ------------ ------------
Total costs and expenses 391,533 249,703 51,922
----------- ------------ ------------
OPERATING LOSS (98,964) (8,967) (23,475)
----------- ------------ ------------
OTHER INCOME:
Interest income 16,782 3,583 6,536
Other income 20 62 -
----------- ------------ ------------
Total other income 16,802 3,645 6,536
----------- ------------ ------------
NET LOSS $ (82,162) $ (5,322) $ (16,939)
=========== ============ ============
ALLOCATION OF NET LOSS:
General partner $ (822) $ (53) $ (169)
=========== ============ ============
Limited partners $ (81,340) $ (5,269) $ (16,770)
=========== ============ ============
NET LOSS PER LIMITED
PARTNERSHIP UNIT $ (7.24) $ (.47) $ (1.49)
=========== ============ ============
WEIGHTED AVERAGE NUMBER
OF LIMITED PARTNERSHIP UNITS
OUTSTANDING 11,229 11,229 11,229
=========== ============ ============
The accompanying notes are an integral part of these financial statements.
11
JONES PROGRAMMING PARTNERS 2-A, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
1998 1999 2000
------------- ------------- -------------
GENERAL PARTNER:
Balance, beginning of period $ (40,337) $ (43,995) $ (45,466)
Distributions (2,836) (1,418) (1,418)
Net loss (822) (53) (169)
--------- --------- ---------
Balance, end of period $ (43,995) $ (45,466) $ (47,053)
========= ========= =========
LIMITED PARTNERS:
Balance, beginning of period $ 731,588 $ 369,522 $ 223,890
Distributions (280,726) (140,363) (140,363)
Net loss (81,340) (5,269) (16,770)
--------- --------- ---------
Balance, end of period $ 369,522 $ 223,890 $ 66,757
========= ========= =========
TOTAL PARTNERS' CAPITAL (DEFICIT) $ 325,527 $ 178,424 $ 19,704
========= ========= =========
The accompanying notes are an integral part of these financial statements.
12
JONES PROGRAMMING PARTNERS 2-A, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------
1998 1999 2000
----------- ----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (82,162) $ (5,322) $ (16,939)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Amortization of filmed entertainment costs 19,829 2,117 1,161
Loss on write-down of film production cost 194,907 140,000 6,722
Decrease in accounts receivable 12,235 11,476 44,399
Increase (decrease) in accrued liabilities (116,085) 368 (1,193)
Increase (decrease) in accounts payable to affiliates (1,111) (6,675) 180
--------- --------- ---------
Net cash provided by operating activities 27,613 141,964 34,330
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (425,343) (141,781) (141,781)
--------- --------- ---------
Net cash used in financing activities (425,343) (141,781) (141,781)
--------- --------- ---------
INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS $(397,730) $ 183 $(107,451)
CASH AND CASH EQUIVALENTS, beginning of period 526,005 128,275 128,458
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 128,275 $ 128,458 $ 21,007
========= ========= =========
The accompanying notes are an integral part of these financial statements.
13
JONES PROGRAMMING PARTNERS 2-A, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION AND BUSINESS
In March 1992, Jones Programming Partners 2-A, Ltd. (the "Partnership"),
was formed as a limited partnership pursuant to the laws of the State of
Colorado to engage in the acquisition, development, production, licensing
and distribution of original entertainment programming. Jones Entertainment
Group, Ltd. is the "General Partner" of the Partnership.
(2) 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
("SFAS No. 139") and AICPA Statement of Position No. 00-2 ("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 recognizes revenue.
INVESTMENT IN AND ADVANCES FOR FILM PRODUCTIONS - Investment in and
advances for film production consists of advances to production entities
for story rights, production, and film completion costs, and is 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 5.)
DISTRIBUTION COSTS - Commissions, distribution expenses and marketing costs
incurred in connection with domestic and international distribution are
recorded at the time that the related license fees are recorded as revenue
by the Partnership.
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.
(3) PARTNERS' CAPITAL (DEFICIT)
The capitalization of the Partnership is set forth in the accompanying
Statements of Partners' Capital (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.
14
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. It is probable that the distributions of
the proceeds from the sales of the Partnership's programming projects,
together with all prior distributions paid to the limited partners, will
return to the limited partners less than 70% of their initial capital
contributions to the Partnership.
(4) TRANSACTIONS WITH AFFILIATES
The Partnership and Jones Documentary Film Corporation ("JDFC") granted the
General Partner the exclusive rights to distribute four one-hour programs
for television, entitled "Charlton Heston Presents: The Bible" (the "Bible
Programs"). To accomplish this, the General Partner, on its own behalf, and
GoodTimes Home Video Corporation ("GoodTimes"), an unaffiliated entity
directly involved in the specialty home video and international television
distribution business, entered into an agreement to form J/G Distribution
Company to distribute the Bible Programs. J/G Distribution Company was
formed in June 1992 and the Partnership granted it the sole and exclusive
right to exhibit and distribute, and to license others to exhibit and
distribute, the Bible Programs in all markets, all languages, and all media
in perpetuity. J/G Distribution Company holds the copyright for the benefit
of the Partnership (50 percent interest) and GoodTimes (50 percent
interest). Once the Partnership is fully recouped, pursuant to the
Jones/Agamemnon agreement, Agamemnon Films begins to receive a portion of
the revenue generated from the distribution of the Bible Programs. In the
fourth quarter of 2000, Agamemnon Films began to participate in profit
sharing from the distribution of the Bible Programs. J/G Distribution
Company is currently distributing the Bible Programs in the retail home
video market. As of December 31, 2000, gross sales made by J/G Distribution
Company totaled $3,589,741, of which $1,794,871 has been retained by J/G
Distribution Company for its fees and marketing costs, with the remaining
$1,794,870 belonging to the Partnership, GoodTimes, and Agamemnon Films. As
of December 31, 2000, the Partnership had received $879,421 from J/G
Distribution Company. The Partnership expects to receive the outstanding
balance of $6,713 due from J/G Distribution Company in 2001.
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 $9,605, $7,745, and $8,625 for expenses and administrative services
for the years ended December 31, 1998, 1999, and 2000, respectively.
(5) INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION
"CHARLTON HESTON PRESENTS: THE BIBLE"
In May 1992, the General Partner, on behalf of the Partnership, entered
into an agreement with Agamemnon Films, an unaffiliated party, to produce
four one-hour programs for television, entitled "Charlton Heston Presents:
The Bible". The production costs of the Bible Programs were approximately
$2,370,000, which included a $240,000 production and overhead fee paid to
the General Partner. In return for agreeing to fund these production costs,
the Partnership acquired all rights to the Bible Programs in all markets
and in all media in perpetuity. The Partnership subsequently assigned half
of its ownership of the Bible Programs to GoodTimes for an investment of
$1,000,000 toward the production
15
costs for the Bible Programs. After consideration of the reimbursement, the
Partnership's total investment in the Bible Programs is $1,369,764. From
inception to December 31, 2000, the Partnership has recognized $2,036,811
of revenue from this film, of which $900,677 was paid for distribution fees
and marketing costs. Of the remaining $1,136,134, the Partnership received
$1,129,421 as of December 31, 2000. The Partnership will receive the
outstanding balance of $6,713 due from J/G Distribution Company in 2001.
In June 1998, the Partnership fully amortized its net investment in this
film.
"THE WHIPPING BOY"
In August 1993, the Partnership acquired the rights to the Newbury
Award-winning book "The Whipping Boy." "The Whipping Boy" was produced as a
two hour telefilm which premiered in the North American television market
on The Disney Channel. The film's final cost was approximately $4,100,000.
As of December 31, 2000, the Partnership had invested $2,661,487 in the
film, which included a $468,000 production and overhead fee paid to the
General Partner. The film was co-produced by the General Partner and Gemini
Films, a German company. The completed picture was delivered to The Disney
Channel in the second quarter of 1994. From inception to December 31, 2000,
the Partnership has recognized $2,277,544 of revenue from this film, of
which $2,100,000 represents the initial license fee from The Disney Channel
that was used to finance the film's production. Of the remaining $177,544,
$8,497 was retained by the distributors of the film for their fees and
marketing costs and the remaining $169,047 was received by the Partnership
as of December 31, 2000.
In the fourth quarter of 1998, the General Partner reassessed the
anticipated gross revenue remaining from the distribution of the "The
Whipping Boy" based on revised estimated television sales projections and
actual results of the film's distribution in comparison to the film's prior
projections. A determination was made by the General Partner that the
Partnership's net investment in "The Whipping Boy" of $344,907 exceeded the
film's estimated net realizable value of $150,000 as of December 31, 1998,
resulting in a write-down of $194,907. The film's estimated net realizable
value was calculated based on an estimate of anticipated revenues remaining
over the life of the film from international and domestic television
distribution, net of estimated distribution fees and costs, as of December
31, 1998.
Likewise, during the fourth quarter of 1999, the General Partner reassessed
the anticipated gross revenue remaining from the distribution of "The
Whipping Boy" based on revised estimated television sales projections and
actual results of the film's distribution in comparison to the film's prior
projections. A determination was made by the General Partner that the
Partnership's net investment in "The Whipping Boy" of $147,883 exceeded the
film's estimated net realizable value of $7,883 as of December 31, 1999,
resulting in a write-down of $140,000. The film's estimated net realizable
value was calculated based on an estimate of anticipated revenues remaining
over the life of the film from international and domestic television
distribution, net of estimated distribution fees and costs, as of December
31, 1999.
During the fourth quarter of 2000, the General Partner again reassessed the
anticipated gross revenue remaining from the distribution of "The Whipping
Boy" based on revised estimated television sales projections and actual
results of the film's distribution in comparison to the film's prior
projections. A determination was made by the General Partner that the
Partnership's remaining net investment in "The Whipping Boy" should be
written off, resulting in a final write-down of $6,722.
As of December 31, 2000 the Partnership, after consideration of
amortization and write-downs, fully amortized its net investment in the
film.
16
(6) INCOME TAXES
Income taxes 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 will be 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 the Partnership's recorded income or loss,
the tax liability of the General and limited partners would be adjusted
accordingly.
The Partnership's only significant book-tax difference between the
financial reporting and tax bases of the Partnership's assets and
liabilities is associated with the difference between film production cost
amortization and loss from write-down of film production cost recognized
under generally accepted accounting principles and the amount of expense
allowed for tax purposes. Film production cost recognized under accounting
principles generally accepted in the United States exceeded (was less than)
the amount of expense recognized for tax purposes by approximately
$214,000, $99,000 and $(20,000) for the years ended December 31, 1998,
1999, and 2000, respectively.
17
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III.
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.
NAME AGE POSITIONS WITH THE GENERAL PARTNER
---- --- -----------------------------------
Glenn R. Jones 71 Chairman of the Board, Chief Executive
Officer, and President
Timothy Burke 50 Vice President and Director
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. 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 24 years of financial experience, and has been employed with Jones for
18 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. EXECUTIVE COMPENSATION
The Partnership has no employees; however, various personnel are required
to operate its business. Such personnel are employed by 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. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
As of February 28, 2001, no person or entity owns more than 5 percent of
the limited partnership interests in the Partnership.
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
18
transactions, which are set forth in the Partnership's limited partnership
agreement, 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.
In connection with the distribution of "Charlton Heston Presents: The
Bible," J/G Distribution Company, which is owned 50% by the General Partner and
50% by GoodTimes, is entitled to certain distribution rights and fees. See ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS for a description of these distribution rights and fees. As of
December 31, 2000, gross sales made by J/G Distribution Company totaled
$3,589,741, of which $1,794,871 has been retained by J/G Distribution Company
for its fees and marketing costs, with the remaining $1,794,870 belonging to the
Partnership, GoodTimes, and Agamemnon Films. Additionally, $250,000 was received
directly by the Partnership as its share of the initial license fee from A&E. As
of December 31, 2000, the Partnership had received $879,421 from J/G
Distribution Company and the $250,000 from A&E. The Partnership will receive the
outstanding balance of $6,713 due from J/G Distribution Company in 2001.
19
PART IV.
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:
4.1 Limited Partnership Agreement. (1)
(1) Incorporated by reference from the Partnership's Annual Report on
Form 10-K for year ended December 31, 1989.
(b) REPORTS ON FORM 8-K:
None.
20
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.
JONES PROGRAMMING PARTNERS 2-A, LTD.,
a Colorado limited partnership
By Jones Entertainment Group, Ltd.,
its General Partner
By: /s/ GLENN R. JONES
---------------------------------
Glenn R. Jones
Chairman of the Board, Chief
Executive Officer
Dated: March 21, 2001 and President
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.
By: /s/ GLENN R. JONES
---------------------------------
Glenn R. Jones
Chairman of the Board, Chief
Executive Officer and President
Dated: March 21, 2001 (Principal Executive Officer)
By: /s/ TIMOTHY J. BURKE
---------------------------------
Dated: March 21, 2001 Timothy J. Burke
21
FORM 10-K/A NO. 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number: 0-20944
-------
JONES PROGRAMMINNG PARTNERS 2-A, LTD.
-------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-1088819
-------- ----------
(State of Organization) (IRS Employer
Identification No.)
9697 E. Mineral Avenue,
Englewood, Colorado 80112 (303) 792-3111
-------------------------- --------------
(Address of principal executive (Registrant's telephone
office and Zip Code) no. including area code)
Securities Registered Pursuant to Section 12(b) of the Act: None
----------------------------------------------------------
Securities Registered Pursuant to Section 12(g) of the Act: Limited Partnership
---------------------------------------------------------- Interests
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
---- ----
Aggregate market value of the voting stock held by non-affiliates of the
registrant: N/A
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. X
------
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
The following document is filed as part of this report:
(3) Exhibits.
4.1 Limited Partnership Agreement. (1)
--------------
(1) Incorporated by reference from the Registrant's Revised Schedule 14A filed
on August 29, 2001.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, as amended,
the Registrant has caused this Amendment No. 1 to its Annual Report on Form 10-K
to be signed on its behalf by the undersigned hereunto duly authorized.
JONES PROGRAMMING PARTNERS 2-A, LTD.,
a Colorado limited partnership
By: Jones Entertainment Group, Ltd.,
its General Partner
Dated: September 14, 2001 By: /s/ Timothy J. Burke
--------------------------------------
Timothy J. Burke
Vice President and Director
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number: 0-20944
JONES PROGRAMMING PARTNERS 2-A, LTD.
------------------------------------
(Exact name of registrant as specified in charter)
COLORADO 84-1088819
-------- ----------
(State of organization) (I.R.S. Employer
Identification No.)
9697 E. MINERAL AVENUE, ENGLEWOOD, COLORADO 80112 (303) 792-3111
-------------------------------------------------- --------------
(Address of principal executive office) (Registrant's telephone no,
including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by Section l3 or l5(d) of the Securities Exchange Act of l934 during
the preceding l2 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
-------- --------
JONES PROGRAMMING PARTNERS 2-A, LTD.
(A Limited Partnership)
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Statements of Financial Position as of
December 31, 2000 and March 31, 2001 3
Unaudited Statements of Operations for the
Three Months Ended March 31, 2000 and 2001 4
Unaudited Statements of Cash Flows for the
Three Months Ended March 31, 2000 and 2001 5
Notes to Unaudited Financial Statements as of
March 31, 2001 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
PART II. OTHER INFORMATION 10
2
JONES PROGRAMMING PARTNERS 2-A, LTD.
(A Limited Partnership)
UNAUDITED STATEMENTS OF FINANCIAL POSITION
December 31, March 31,
ASSETS 2000 2001
------------ ------------
CASH AND CASH EQUIVALENTS $ 21,007 $ 18,273
ACCOUNTS RECEIVABLE 6,713 -
INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION,
net of accumulated amortization of $4,031,252 as of
December 31, 2000 and March 31, 2001, respectively - -
------------ ------------
Total assets $ 27,720 $ 18,273
============ ============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
LIABILITIES:
Accounts payable to affiliates $ 1,016 $ 11,282
Accrued liabilities 7,000 1,750
------------ ------------
Total liabilities 8,016 13,032
------------ ------------
PARTNERS' CAPITAL (deficit):
General partner-
Contributed capital 1,000 1,000
Distributions (36,103) (36,103)
Accumulated deficit (11,950) (12,095)
------------ ------------
Total general partner's deficit (47,053) (47,198)
------------ ------------
Limited partners -
Contributed capital, net of offering costs (11,229 units outstanding
as of December 31, 2000 and March 31, 2001) 4,823,980 4,823,980
Distributions (3,574,054) (3,574,054)
Accumulated deficit (1,183,169) (1,197,487)
------------ ------------
Total limited partners' capital 66,757 52,439
------------ ------------
Total partners' capital (deficit) 19,704 5,241
------------ ------------
Total liabilities and partners' capital (deficit) $ 27,720 $ 18,273
============ ============
The accompanying notes are an integral part of these financial statements.
3
JONES PROGRAMMING PARTNERS 2-A, LTD.
(A Limited Partnership)
UNAUDITED STATEMENTS OF OPERATIONS
For the Three Months
Ended March 31,
------------------------
2000 2001
----------- ----------
REVENUES $ 287 $ 386
COSTS AND EXPENSES:
Costs of filmed entertainment 287 -
Operating, general and administrative expenses 8,020 15,016
----------- ----------
Total costs and expenses 8,307 15,016
----------- ----------
OPERATING LOSS (8,020) (14,630)
----------- ----------
INTEREST INCOME 1,535 167
----------- ----------
NET LOSS $ (6,485) $ (14,463)
=========== ==========
ALLOCATION OF NET LOSS:
General Partner $ (65) $ (145)
=========== ==========
Limited Partners $ (6,420) $ (14,318)
=========== ==========
NET LOSS PER LIMITED PARTNERSHIP UNIT $ (.57) $ (1.28)
=========== ==========
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 11,229 11,229
=========== ==========
The accompanying notes are an integral part of these financial statements.
4
JONES PROGRAMMING PARTNERS 2-A, LTD.
(A Limited Partnership)
UNAUDITED STATEMENTS OF CASH FLOWS
For the Three Months
Ended March 31,
------------------------------
2000 2001
---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (6,485) $ (14,463)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Amortization of filmed entertainment costs 287 -
Net change in assets and liabilities:
Decrease in accounts receivable 51,112 6,713
Decrease in accrued liabilities (3,668) (5,250)
Increase in accounts payable to affiliates 8,967 10,266
---------- -----------
Net cash provided by (used in) operating activities 50,213 (2,734)
---------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 50,213 (2,734)
CASH AND CASH EQUIVALENTS, beginning of period 128,458 21,007
---------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 178,671 $ 18,273
========== ===========
The accompanying notes are an integral part of these financial statements.
5
JONES PROGRAMMING PARTNERS 2-A, LTD.
(A Limited Partnership)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
This Form 10-Q is being filed in conformity with the SEC requirements
for unaudited financial statements and does not contain all of the
necessary footnote disclosures required for a fair presentation of the
Statements of Financial Position and Statements of Operations and Cash
Flows in conformity with accounting principles generally accepted in
the United States. However, in the opinion of management, this data
includes all adjustments, consisting of normal recurring accruals,
necessary to present fairly the financial position of Jones Programming
Partners 2-A, Ltd. (the "Partnership") as of December 31, 2000 and
March 31, 2001 and its results of operations and its cash flows for the
three month periods ended March 31, 2000 and 2001. Results of
operations for these periods are not necessarily indicative of results
to be expected for the full year.
(2) TRANSACTIONS WITH AFFILIATED ENTITIES
Jones Entertainment Group, Ltd. ("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 $3,710 and $6,833 to the Partnership for direct expenses
for the three months ended March 31, 2000 and 2001, respectively.
The Partnership and Jones Documentary Film Corporation ("JDFC") granted
the General Partner the exclusive rights to distribute four one-hour
programs for television, entitled "Charlton Heston Presents: The Bible"
(the "Bible Programs"). To accomplish this, the General Partner, on its
own behalf, and GoodTimes Home Video Corporation ("GoodTimes"), an
unaffiliated entity directly involved in the specialty home video and
international television distribution business, entered into an
agreement to form J/G Distribution Company to distribute the Bible
Programs. J/G Distribution Company was formed in June 1992 and is owned
50 percent by GoodTimes and 50 percent by the General Partner. The
Partnership granted J/G Distribution Company the sole and exclusive
right to exhibit and distribute, and to license others to exhibit and
distribute, the Bible Programs in all markets, all languages, and all
media in perpetuity. J/G Distribution Company holds the copyright for
the benefit of the Partnership (50 percent interest) and GoodTimes (50
percent interest). Once the Partnership is fully recouped, pursuant to
the Jones/Agamemnon agreement, Agamemnon Films begins to receive a
portion of the revenue generated from the distribution of the Bible
Programs. During 2000, Agamemnon Films began to participate in profit
sharing from the distribution of the Bible Programs. J/G Distribution
Company is currently distributing the Bible Programs in the retail home
video market. As of March 31, 2001, gross sales made by J/G
Distribution Company totaled $3,589,741, of which $1,794,871 has been
retained by J/G Distribution Company for its fees and marketing costs,
with the remaining $1,794,870 belonging to the Partnership, GoodTimes,
and Agamemnon Films. Additionally, $250,000 was received directly by
the Partnership as its share of the initial license fee from A & E
Television Networks ("A&E"). As of March 31, 2001, the Partnership had
received $886,134 from J/G Distribution Company and $250,000 from A&E.
(3) INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION
"CHARLTON HESTON PRESENTS: THE BIBLE"
In May 1992, the General Partner, on behalf of the Partnership, entered
into an agreement with Agamemnon Films, an unaffiliated third party, to
produce four one-hour programs for television, entitled "Charlton
Heston Presents: The Bible". The production costs of the Bible Programs
were approximately $2,370,000, which included a $240,000 production and
overhead fee paid to the General Partner. In return for agreeing to
fund these production costs, the Partnership acquired all rights to the
Bible Programs in all markets and in all media in perpetuity. The
Partnership subsequently assigned half of its ownership of the Bible
Programs to GoodTimes for
6
an investment of $1,000,000 toward the production costs for the Bible
Programs. After consideration of the reimbursement, the Partnership's
total investment in the Bible Programs was $1,369,764. In June 1998,
the Partnership fully amortized its net investment in this film. From
inception to March 31, 2001, the Partnership has recognized $2,036,811
of revenue from this film, of which $900,677 was retained by the
distributors of the film for their fees and marketing costs and
$1,136,134 was received by the Partnership as of March 31, 2001.
"THE WHIPPING BOY"
In August 1993, the Partnership acquired the film rights to the Newbury
Award-winning book "The Whipping Boy." "The Whipping Boy" was produced
as a two hour telefilm which premiered in the North American television
market on The Disney Channel. The film's final cost was approximately
$4,100,000. As of March 31, 2001, the Partnership had invested
$2,661,487 in the film, which included a $468,000 production and
overhead fee paid to the General Partner. The film was co-produced by
the General Partner and Gemini Films, a German company. The completed
picture was delivered to The Disney Channel in the second quarter of
1994. From inception to March 31, 2001, the Partnership has recognized
$2,277,930 of gross revenue from this film, of which $2,100,000
represents the initial license fee from The Disney Channel that was
used to finance the film's production. Of the remaining $177,930,
$8,497 has been retained by the distributors of the film for their fees
and marketing costs and $169,433 has been received by the Partnership
as of March 31, 2001. In December 2000, the Partnership, after
consideration of approximately $1,744,000 in amortization and
approximately $917,000 in write-downs, fully amortized its net
investment in the film.
7
JONES PROGRAMMING PARTNERS 2-A, LTD.
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 its programming. As
of March 31, 2001, the Partnership had approximately $18,000 in cash. Cash used
in operations for the three months ended March 31, 2001 was approximately
$3,000. The Partnership will not invest in any additional programming projects,
but instead will focus on the distribution and/or sale of its two existing
films.
Regular quarterly distributions were suspended beginning with the quarter ended
September 30, 1998. However, a distribution of $141,781 was declared for the
three months ended March 31, 1999, and was paid in May 1999. A distribution of
$141,781 was declared for the three months ended June 30, 2000 and was paid in
August 2000. The Partnership will retain a certain level of working capital,
including any necessary reserves, to fund its operating activities. It is
anticipated that future distributions, if any, will only be made once proceeds
are received from the sale, or sales, of the Partnership's assets. There is no
assurance regarding any future distributions.
The General Partner, on behalf of the Partnership, is pursuing the sale of the
Partnership's interests in its programming. The General Partner has no
obligation to purchase any assets of the Partnership, nor is it anticipated that
the General Partner will purchase any of such assets. The General Partner cannot
predict when or at what price the Partnership's interests in its programming
ultimately will be sold, but has initiated sales efforts. The films may be sold
as a group or on an individual basis, in the judgement of the General Partner.
The films could also be packaged with the films of an affiliated public limited
partnership. 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 programming projects will be charged to the Partnership. It is
anticipated that the net proceeds from the sale, or sales, of the Partnership's
interests in its programming will be distributed to the partners after such
sale, or sales. It is probable that the distributions of the proceeds from the
sale or sales of the Partnership's programming projects, together with all prior
distributions paid to the limited partners, will return to the limited partners
less than 70% 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. Pursuant to the services agreement, the broker will receive
a 10% commission for arranging the sale, or sales, of the Partnership's films.
In May 1992, the General Partner, on behalf of the Partnership, entered into an
agreement with Agamemnon Films ("Agamemnon") with respect to the production of
the Bible Programs. Pursuant to this agreement, Agamemnon does not participate
in profit sharing until certain revenues to the General Partner and the
Partnership from the distribution of the Bible Programs are first applied
towards the Partnership's recoupment of its production investment, its share of
production overages, and a production fee plus interest on the unrecouped
investment. In 2000, the Partnership fully recouped the requisite amount and
Agamemnon began to participate in profits from the distribution of the Bible
Programs. The Partnership will therefore receive a decreased percentage of the
net proceeds from the distribution of the Bible Programs.
The General Partner believes that the Partnership has, and will continue to
have, sufficient liquidity to fund its operations and to meet its obligations so
long as quarterly distributions are suspended. Any cash flow from operating
activities will be primarily generated from the Bible Programs. The General
Partner does not anticipate cash flow from the films to increase significantly
in the future. The lack of significant cash flow presently being generated by
the Partnership's films may negatively effect the ultimate sales price of the
films.
8
RESULTS OF OPERATIONS
Revenues of the Partnership increased $99, from $287 to $386 for the three
months ended March 31, 2000 and 2001, respectively. This increase was the result
of an increase in revenue from the "The Whipping Boy" for the three months ended
March 31, 2001 compared to the same period in 2000.
Filmed entertainment costs decreased $287, from $287 to $0 for the three months
ended March 31, 2000 and 2001, respectively. This decrease was the result of the
Partnership's net investment in the "The Whipping Boy" becoming fully amortized
in December 2000. Filmed entertainment costs are amortized over the life of the
film in the ratio that current gross revenues bear to anticipated total gross
revenues.
Operating, general and administrative expenses increased $6,996, from $8,020 to
$15,016 for the three months ended March 31, 2000 and 2001, respectively. The
increase was primarily due to an increase in legal, tax, and investor relations
expenses during the three months ended March 31, 2001 compared to the same
period in 2000.
Interest income decreased $1,368, from $1,535 to $167 for the three months ended
March 31, 2000 and 2001, respectively. This decrease was the result of
significantly lower levels of invested cash balances during the three months
ended March 31, 2001 compared to the same period in 2000.
Limited Partners' net loss per partnership unit increased $(.71), from $(.57) to
$(1.28) for the three months ended March 31, 2000 and 2001, respectively. This
change was due to the result of operations as discussed above.
9
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
None
b) Reports on Form 8-K
None
10
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.
JONES PROGRAMMING PARTNERS 2-A, LTD.
BY: JONES ENTERTAINMENT GROUP, LTD.
General Partner
By: /s/ TIMOTHY J. BURKE
------------------------------------
Timothy J. Burke
Vice President
Dated: May 10, 2001
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended JUNE 30, 2001.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number: 0-20944
JONES PROGRAMMING PARTNERS 2-A, LTD.
--------------------------------------------------
(Exact name of registrant as specified in charter)
Colorado 84-1088819
-------- ----------
(State of organization) (I.R.S. Employer Identification No.)
9697 E. Mineral Avenue, Englewood, Colorado 80112 (303) 792-3111
-------------------------------------------------- --------------
(Address of principal executive office) (Registrant's telephone no,
including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by Section l3 or l5(d) of the Securities Exchange Act of l934 during
the preceding l2 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 / /
JONES PROGRAMMING PARTNERS 2-A, LTD.
(A Limited Partnership)
INDEX
Page
Number
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Statements of Financial Position as of
December 31, 2000 and June 30, 2001 3
Unaudited Statements of Operations for the
Three and Six Months Ended June 30, 2000 and 2001 4
Unaudited Statements of Cash Flows for the
Six Months Ended June 30, 2000 and 2001 5
Notes to Unaudited Financial Statements as of
June 30, 2001 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
PART II. OTHER INFORMATION 10
2
JONES PROGRAMMING PARTNERS 2-A, LTD.
(A Limited Partnership)
UNAUDITED STATEMENTS OF FINANCIAL POSITION
December 31, June 30,
ASSETS 2000 2001
----------- -----------
CASH AND CASH EQUIVALENTS $ 21,007 $ 18,537
ACCOUNTS RECEIVABLE 6,713 10,893
INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION,
net of accumulated amortization of $4,031,252 and $4,031,252 as of
December 31, 2000 and June 30, 2001, respectively (Note 3) -- --
----------- -----------
Total assets $ 27,720 $ 29,430
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
LIABILITIES:
Accounts payable to affiliates $ 1,016 $ 24,591
Accrued liabilities 7,000 3,500
----------- -----------
Total liabilities 8,016 28,091
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General partner-
Contributed capital 1,000 1,000
Distributions (36,103) (36,103)
Accumulated deficit (11,950) (12,134)
----------- -----------
Total general partner's deficit (47,053) (47,237)
----------- -----------
Limited partners -
Contributed capital, net of offering costs (11,229 units outstanding
as of December 31, 2000 and June 30, 2001) 4,823,980 4,823,980
Distributions (3,574,054) (3,574,054)
Accumulated deficit (1,183,169) (1,201,350)
----------- -----------
Total limited partners' capital 66,757 48,576
----------- -----------
Total partners' capital 19,704 1,339
----------- -----------
Total liabilities and partners' capital $ 27,720 $ 29,430
=========== ===========
The accompanying notes are an integral part of these
unaudited financial statements.
3
JONES PROGRAMMING PARTNERS 2-A, LTD.
(A Limited Partnership)
UNAUDITED STATEMENTS OF OPERATIONS
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------------- --------------------------
2000 2001 2000 2001
-------- -------- -------- --------
REVENUES $ 12,968 $ 15,976 $ 13,255 $ 16,362
COSTS AND EXPENSES:
Costs of filmed entertainment -- -- 287 --
Distribution fees and expenses 6,484 5,083 6,484 5,083
Operating, general and administrative expenses 8,803 15,059 16,823 30,075
-------- -------- -------- --------
Total costs and expenses 15,287 20,142 23,594 35,158
-------- -------- -------- --------
OPERATING LOSS (2,319) (4,166) (10,339) (18,796)
-------- -------- -------- --------
INTEREST INCOME 2,400 264 3,935 431
-------- -------- -------- --------
NET INCOME (LOSS) $ 81 $ (3,902) $ (6,404) $(18,365)
======== ======== ======== ========
ALLOCATION OF NET INCOME (LOSS):
General partner $ 1 $ (39) $ (64) $ (184)
======== ======== ======== ========
Limited partners $ 80 $ (3,863) $ (6,340) $(18,181)
======== ======== ======== ========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ .01 $ (.34) $ (.56) $ (1.62)
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 11,229 11,229 11,229 11,229
======== ======== ======== ========
The accompanying notes are an integral part of these
unaudited financial statements.
4
JONES PROGRAMMING PARTNERS 2-A, LTD.
(A Limited Partnership)
UNAUDITED STATEMENTS OF CASH FLOWS
For the Six Months
Ended June 30,
----------------------------
2000 2001
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (6,404) $ (18,365)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Amortization of filmed entertainment costs 287 --
Net change in assets and liabilities:
Decrease (increase) in accounts receivable 51,112 (4,180)
Increase in accounts payable to affiliates 17,745 23,575
Decrease in accrued liabilities (3,643) (3,500)
--------- ---------
Net cash provided by (used in) operating activities 59,097 (2,470)
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 59,097 (2,470)
CASH AND CASH EQUIVALENTS, beginning of period 128,458 21,007
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 187,555 $ 18,537
========= =========
SUPPLEMENTAL NON-CASH DISCLOSURE
Accrued distributions payable to partners $ 141,781 $ --
========= =========
The accompanying notes are an integral part of these
unaudited financial statements.
5
JONES PROGRAMMING PARTNERS 2-A, LTD.
(A Limited Partnership)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
This Form 10-Q is being filed in conformity with the SEC requirements for
unaudited financial statements and does not contain all of the necessary
footnote disclosures required for a fair presentation of the Statements of
Financial Position and Statements of Operations and Cash Flows in
conformity with accounting principles generally accepted in the United
States. However, in the opinion of management, this data includes all
adjustments, consisting of normal recurring accruals, necessary to present
fairly the financial position of Jones Programming Partners 2-A, Ltd. (the
"Partnership") as of December 31, 2000 and June 30, 2001, its results of
operations for the three and six month periods ended June 30, 2000 and
2001, and its cash flows for the six month periods ended June 30, 2000 and
2001. Results of operations for these periods are not necessarily
indicative of results to be expected for the full year.
(2) TRANSACTIONS WITH AFFILIATED ENTITIES
Jones Entertainment Group, Ltd. (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 $1,266 and $3,702 to the
Partnership for direct expenses to the Partnership for the three months
ended June 30, 2000 and 2001, respectively. For the six months ended June
30, 2000 and 2001, $4,976 and $10,535, respectively, of direct expenses
were charged to the Partnership.
The Partnership and Jones Documentary Film Corporation granted the General
Partner the exclusive rights to distribute four one-hour programs for
television, entitled "Charlton Heston Presents: The Bible" (the "Bible
Programs"). To accomplish this, the General Partner, on its own behalf, and
GoodTimes Home Video Corporation ("GoodTimes"), an unaffiliated entity
directly involved in the specialty home video and international television
distribution business, entered into an agreement to form J/G Distribution
Company to distribute the Bible Programs. J/G Distribution Company was
formed in June 1992 and is owned 50 percent by GoodTimes and 50 percent by
the General Partner. The Partnership granted J/G Distribution Company the
sole and exclusive right to exhibit and distribute, and to license others
to exhibit and distribute, the Bible Programs in all markets, all
languages, and all media in perpetuity; except for the CD-ROM version. J/G
Distribution Company holds the copyright for the benefit of the Partnership
(50 percent interest) and GoodTimes (50 percent interest). Once the
Partnership is fully recouped, Agamemnon Films ("Agamemnon") begins to
receive a portion of the revenue generated from the distribution of the
Bible Programs, pursuant to the Jones/Agamemnon agreement. During 2000,
Agamemnon began to participate in profit sharing from the distribution of
the Bible Programs. J/G Distribution Company is currently distributing the
Bible Programs in the retail home video market. As of June 30, 2001, gross
sales made by J/G Distribution Company totaled $3,647,836, of which
$1,823,918 has been retained by J/G Distribution Company for its fees and
marketing costs, with the remaining $1,823,918 allocated to the
Partnership, GoodTimes, and Agamemnon in accordance with the income sharing
agreement. Additionally, $250,000 was received directly by the Partnership
as its share of the initial license fee from A & E Television Networks
("A&E"). As of June 30, 2001, the Partnership had received $886,134 from
J/G Distribution Company and $250,000 from A&E. The $10,893 balance was
received by the Partnership in July 2001.
6
(3) INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION
"CHARLTON HESTON PRESENTS: THE BIBLE"
The production costs of the Bible Programs were approximately $2,370,000,
which included a $240,000 production and overhead fee paid to the General
Partner. In return for agreeing to fund these production costs, the
Partnership acquired all rights to the Bible Programs in all markets and in
all media in perpetuity. The Partnership subsequently assigned half of its
ownership of the Bible Programs to an unaffiliated party for an investment
of $1,000,000 toward the production costs for the Bible Programs. After
consideration of the reimbursement, the Partnership's total investment in
the Bible Programs was $1,369,764. In June 1998, the Partnership fully
amortized its net investment in this film. From inception to June 30, 2001,
the Partnership has recognized $2,052,787 of revenue from this film, of
which $905,760 was retained by the distributors of the film for their fees
and marketing costs. Of the remaining $1,147,027, the Partnership received
$1,136,134 as of June 30, 2001. The Partnership received the remaining
$10,893 in July 2001.
"THE WHIPPING BOY"
"The Whipping Boy" is a two hour telefilm which premiered in the North
American television market on The Disney Channel. The film's final cost was
approximately $4,100,000. As of June 30, 2001, the Partnership had invested
$2,661,487 in the film, which included a $468,000 production and overhead
fee paid to the General Partner. The completed picture was delivered to The
Disney Channel in the second quarter of 1994. From inception to June 30,
2001, the Partnership has recognized $2,277,930 of gross revenue from this
film, of which $2,100,000 represents the initial license fee from The
Disney Channel. Of the remaining $177,930, $8,497 has been retained by the
distributors of the film for their fees and marketing costs and $169,433
has been received by the Partnership as of June 30, 2001. In December 2000,
the Partnership, after consideration of approximately $1,744,000 in
amortization and approximately $917,000 in write-downs, fully amortized its
net investment in the film.
7
JONES PROGRAMMING PARTNERS 2-A, LTD.
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 its programming. As
of June 30, 2001, the Partnership had approximately $19,000 in cash. Cash used
in operations for the six months ended June 30, 2001 was approximately $2,000.
As of June 30, 2001, accounts payable to affiliates totaled approximately
$25,000. The Partnership made a $10,000 payment towards this accounts payable
liability in July 2001. The Partnership will not invest in any additional
programming projects, but instead will focus on the distribution and/or sale of
its two films.
Regular quarterly distributions were suspended beginning with the quarter ended
September 30, 1998. However, a distribution of $141,781 was declared for the
three months ended March 31, 1999, and was paid in May 1999. A distribution of
$141,781 was declared for the three months ended June 30, 2000 and was paid in
August 2000. The Partnership will retain a certain level of working capital,
including any necessary reserves, to fund its operating activities. It is
anticipated that future distributions, if any, will only be made once proceeds
are received from the sale, or sales, of the Partnership's assets. There is no
assurance regarding any future distributions.
The General Partner, on behalf of the Partnership, is pursuing the sale of the
Partnership's assets. This activity is the principal focus of the Partnership.
The General Partner will not purchase any assets of the Partnership. The General
Partner cannot predict when or at what price the Partnership's interests in its
programming ultimately will be sold, but has initiated sales efforts. The sale
of the Partnership's assets will be subject to a vote of the limited partners.
The films may be sold as a group or on an individual basis, in the judgement of
the General Partner. The films could also be packaged with the films of an
affiliated public limited partnership. 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. It is
probable that the distributions of the proceeds from the sale or sales of the
Partnership's programming projects, together with all prior distributions paid
to the limited partners, will return to the limited partners less than 70% 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. The broker was paid $5,500 for film evaluation services. Pursuant to the
services agreement, the broker will also receive a 10% commission for arranging
the sale, or sales, of the Partnership's films.
In May 1992, the General Partner, on behalf of the Partnership, entered into an
agreement with Agamemnon with respect to the production of the Bible Programs.
Pursuant to this agreement, Agamemnon does not participate in profit sharing
until certain revenues to the General Partner and the Partnership from the
distribution of the Bible Programs are first applied towards the Partnership's
recoupment of its production investment, its share of production overages, and a
production fee plus interest on the unrecouped investment. In 2000, the
Partnership fully recouped the requisite amount and Agamemnon began to
participate in profits from the distribution of the Bible Programs. The
Partnership will therefore receive a decreased percentage of the net proceeds
from the distribution of the Bible Programs.
The General Partner believes that the Partnership has sufficient liquidity to
fund its operations and to meet its obligations through the remainder of the
year, so long as distributions are suspended. Any cash flow from operating
activities will be primarily generated from the Bible Programs. The General
Partner does not anticipate cash flow from the films to increase significantly
in the future. The lack of significant cash flow presently being generated by
the Partnership's films may negatively affect the ultimate sales price of the
films.
8
RESULTS OF OPERATIONS
Revenues of the Partnership increased $3,008, from $12,968 to $15,976 for the
three months ended June 30, 2000 and 2001, respectively. Revenues of the
Partnership increased $3,107, from $13,255 to $16,362 for the six months ended
June 30, 2000 and 2001, respectively. These increases were primarily the result
of an increase in royalty revenue received from the distribution of the Bible
Programs for the three and six month periods ended June 30, 2001 as compared to
the same periods in 2000.
The Partnership did not incur any filmed entertainment costs for the three month
periods ending June 30, 2000 and 2001. Filmed entertainment costs decreased
$287, from $287 to $0 for the six months ended June 30, 2000 and 2001,
respectively. This decrease was the result of the Partnership's net investment
in the "The Whipping Boy" becoming fully amortized in December 2000. Filmed
entertainment costs are amortized over the life of the film in the ratio that
current gross revenues bear to anticipated total gross revenues.
Distribution fees and expenses decreased $1,401, from $6,484 to $5,083 for the
three and six month periods ended June 30, 2000 and 2001, respectively. The
decrease was primarily the result of the elimination of recoverable distribution
costs for the Bible Programs that occurred when the Partnership reached a
recouped position in the film during 2000. Distribution fees and expenses
generally relate to the compensation due and costs incurred by unaffiliated
parties in selling the Partnership's programming in the domestic and
international markets. The timing and amount of the distribution fees and
expenses vary depending upon the individual market in which programming is
distributed.
Operating, general and administrative expenses increased $6,256, from $8,803 to
$15,059 for the three months ended June 30, 2000 and 2001, respectively. This
increase was due primarily to an increase in accounting and tax preparation
expenses combined with an increase in professional service expenses related to
efforts to sell the Partnership's programming assets. Operating, general and
administrative expenses increased $13,252, from $16,823 to $30,075 for the six
months ended June 30, 2000 and 2001, respectively. This increase resulted
primarily from an increase in accounting, tax preparation and investor relation
expenses combined with an increase in legal and professional services expenses
related to efforts to sell the Partnership's programming assets.
Interest income decreased $2,136, from $2,400 to $264 for the three months ended
June 30, 2000 and 2001, respectively. Interest income decreased $3,504, from
$3,935 to $431 for the six months ended June 30, 2000 and 2001, respectively.
These decreases were primarily the result of lower levels of invested cash
balances during the three and six month periods ended June 30, 2001 as compared
to the same periods in 2000.
Limited Partners' net income (loss) per partnership unit changed $(.35), from
$.01 to $(.34) for the three months ended June 30, 2000 and 2001, respectively.
Limited Partners' net loss per partnership unit changed $(1.06), from $(.56) to
$(1.62) for the six months ended June 30, 2000 and 2001, respectively. These
changes were due to the results of operations as discussed above.
9
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
None
b) Reports on Form 8-K
None
10
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.
JONES PROGRAMMING PARTNERS 2-A, LTD.
BY: JONES ENTERTAINMENT GROUP, LTD.
General Partner
By: /s/ Timothy J. Burke
---------------------------------
Timothy J. Burke
Vice President
Dated: August 6, 2001
11