10-K 1 a70619e10-k.txt FORM 10-K PERIOD END DECEMBER 31, 2000 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-K ---------------- [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 COMMISSION FILE NUMBERS: ACME INTERMEDIATE HOLDINGS, LLC 333-40277 ACME TELEVISION, LLC 333-40281 ---------------- ACME INTERMEDIATE HOLDINGS, LLC AND ACME TELEVISION, LLC (EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTER) DELAWARE ACME INTERMEDIATE HOLDINGS, LLC 52-2050589 DELAWARE ACME TELEVISION, LLC 52-2050588 (STATE OR OTHER (I.R.S. EMPLOYER JURISDICTION OF IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 2101 E. FOURTH STREET, SUITE 202A SANTA ANA, CALIFORNIA, 92705 (714) 245-9499 (ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES) ---------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE Indicate by check mark whether the registrants (1) have 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, and (2) have been subject to such filing requirements for the past 90 days. Yes [X] No [ ] 100% of the membership units of ACME Intermediate Holdings, LLC are owned directly or indirectly by the Registrants' parent, ACME Communications, Inc. 100% of the membership units of ACME Television, LLC are owned directly or indirectly by ACME Intermediate Holdings, LLC. Such membership units are not publicly traded and, therefore, have no separate, quantifiable market value. As of March 26, 2001, ACME Intermediate Holdings, LLC and ACME Television, LLC had 910,986 and 200, respectively, membership units outstanding; all such units are owned, directly or indirectly, by the Registrants' parent, ACME Communications, Inc. The Registrants meet the conditions set forth in General Instruction I (1) (a) and (b) of Form 10-K and are therefore filing this Form 10-K with the reduced disclosure format. ================================================================================ 2 ACME INTERMEDIATE HOLDINGS, LLC AND ACME TELEVISION, LLC ANNUAL REPORT ON FORM 10-K TABLE OF CONTENTS PAGE ---- PART I Item 1. Business (Abbreviated pursuant to General Instruction I(2)(d) of Form 10-K)................................................... 3 Item 2. Properties...................................................... 10 Item 3. Legal Proceedings............................................... 11 Item 4. Submission of Matters to a Vote of Security Holders (Omitted pursuant to General Instruction I(2)(c) of Form 10-K).. 11 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters............................................. 11 Item 6. Selected Financial Data (Omitted pursuant to General Instruction I(2)(a) of Form 10-K)............................... 11 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Abbreviated pursuant to General Instruction I(2)(a) of Form 10-K)............................... 11 Item 7A. Quantitative and Qualitative Disclosures About Market Risk...... 12 Item 8. Financial Statements and Supplementary Data:.................... 13 Independent Auditors' Report.................................... 13 Consolidated Balance Sheets..................................... 14 Consolidated Statements of Operations........................... 15 Consolidated Statements of Members' Capital..................... 16 Consolidated Statements of Cash Flows........................... 17 Notes to Consolidated Financial Statements...................... 19 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........................................ 34 PART III Item 10. Directors and Executive Officers of the Registrant (Omitted pursuant to General Instruction I(2)(c) of Form 10-K)........... 34 Item 11. Executive Compensation (Omitted pursuant to General Instruction I(2)(c) of Form 10-K)............................... 34 Item 12. Security Ownership of Certain Beneficial Owners and Management (Omitted pursuant to General Instruction I(2)(c) of Form 10-K)................................................... 34 Item 13. Certain Relationships and Related Transactions (Omitted pursuant to General Instruction I(2)(c) of Form 10-K)........... 34 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................................. 35 Schedule I - Condensed Financial Information of ACME Intermediate Holdings, LLC and ACME Television, LLC (Parent Companies)........... 41 Schedule II - Valuation and Qualifying Accounts................. 45 2 3 PART I ITEM 1. BUSINESS (ABBREVIATED PURSUANT TO GENERAL INSTRUCTION I (2) (d) OF FORM 10-K). ACME Communications, Inc. ("ACME Parent") was formed on July 23, 1999, in preparation for and in conjunction with an initial public offering of its stock. On September 27, 1999, the Board of Advisors of ACME Television Holdings, LLC (the parent company of ACME Intermediate Holdings, LLC - "ACME Intermediate") and its members and the Board of Directors and stockholder of ACME Parent approved a merger and reorganization (the "Reorganization"), whereby ACME Parent became the direct parent of ACME Television Holdings. As a result of the Reorganization, ACME Communications is the ultimate parent of ACME Intermediate, and its wholly owned subsidiary, ACME Television, LLC ("ACME Television"). All transactions contemplated as part of the Reorganization closed on October 5, 1999. This integrated Form 10-K is filed pursuant to the Securities Exchange Act of 1934, as amended, for each of ACME Intermediate and its subsidiary, ACME Television. Separate financial information has been provided for each entity and, where appropriate, separate disclosure. Unless the context requires otherwise, references to the "Company" refers to both ACME Intermediate and ACME Television. We currently own and operate ten commercially licensed broadcast television stations in medium-sized markets across the United States. Nine of our stations are network affiliates of The WB Network, making us the third largest WB Network affiliated station group in the country. Our tenth station is a UPN affiliate. Our television stations broadcast in markets that cover, in aggregate, approximately 5.4% of the total U.S. television households. Since our formation in 1997, we have focused primarily on acquiring independently-owned stations, under-performing stations and construction permits for new stations in markets that we believe have the growth potential and demographic profile to support the successful launch of a new WB Network affiliate. We believe that medium-sized markets provide advantages such as fewer competitors and lower operating costs compared to large markets. OUR COMPETITION Broadcast television stations compete for advertising revenues primarily with other broadcast television stations in their respective markets and, to a lesser but increasing extent, with radio stations, cable television system operators, newspapers, billboard companies, direct mail and internet sites. Traditional network and Fox programming generally achieves higher household audience levels than that of The WB Network, UPN and syndicated programming aired by independent stations which is attributable to a number of factors, including: o the traditional networks' efforts to reach a broader audience; o historically, less competition; o generally better channel positions; o more network programming being broadcast weekly; o the traditional networks' cross-promotions; and o the traditional networks' more established market presence than The WB Network. 3 4 However, because The WB Network and UPN provide fewer hours of programming per week than the traditional networks, we have a significantly higher inventory of advertising time for our own use and, therefore, our programs achieve a share of television market advertising revenues greater than their share of the market's audience. We believe that this available advertising time, combined with our efforts to attract (via our programming) the audiences that are key targets of advertisers, and our focus on advertising sales allows us to compete effectively for advertising revenues within our stations' markets. The broadcasting industry is continuously faced with technical changes and innovations, the popularity of competing entertainment and communications media, changes in labor conditions, and governmental restrictions or actions of federal regulatory bodies, including the FCC, any of which could possibly have an adverse effect on a television station's operations and profits. Sources of video service other than conventional television stations, the most common being cable television, can increase competition for a broadcast television station by bringing distant broadcasting signals not otherwise available to the station's audience, serving as a distribution system for national satellite-delivered programming and other non-broadcast programming originated on a cable system and selling advertising time to local advertisers. Other principal sources of competition include home video exhibition, direct-to-home broadcast satellite television, entertainment services and multi-channel multi-point distribution services. Currently, two FCC permittees, DirecTV and Echostar, provide subscription DBS services via high-power communications satellites and small dish receivers, and other companies provide direct-to-home video service using lower powered satellites and larger receivers. Other technology advances and regulatory changes affecting programming delivery through fiber optic telephone lines and video compression could lower entry barriers for new video channels and encourage the development of increasingly specialized niche programming. The Telecommunications Act of 1996 permits telephone companies to provide video distribution services via radio communication, on a common carrier basis, as cable systems or as open video systems, each pursuant to different regulatory schemes. We cannot predict the effect that these and other technological and regulatory changes will have on the broadcast television industry or on the future profitability and value of a particular broadcast television station. Broadcast television stations compete with other television stations in their designated market areas for the acquisition of programming. Generally, cable systems do not compete with local stations for programming, but various national cable networks do from time to time and on an increasing basis acquire programming that could have been offered to local television stations. Public broadcasting stations generally compete with commercially-rated broadcasters for viewers, but do not compete for advertising revenues. Historically, the cost of programming has increased because of an increase in the number of independent stations and a shortage of quality programming. FEDERAL REGULATION OF TELEVISION BROADCASTING Television broadcasting is a regulated industry and is subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended from time to time. The Communications Act prohibits the operation of television broadcasting stations except under a license issued by the FCC. The Communications Act empowers the FCC, among other things: o to issue, revoke and modify broadcast licenses; o to decide whether to approve a change of ownership or control of station licenses; o to regulate the equipment used by stations; and o to adopt and implement regulations to carry out the provisions of the Communications Act. Failure to observe FCC or other governmental rules and policies can result in the imposition of various sanctions, including monetary forfeitures, the grant of short, or less than maximum, license renewal terms or, for a particularly egregious violations, the denial of a license renewal application, the revocation of a license or denial of FCC consent to acquire additional broadcast properties. 4 5 License Grant, Renewal, Transfer and Assignment. A party must obtain a construction permit from the FCC to build a new television station. Once a station is constructed and commences broadcast operations, the permittee will receive a license which must be renewed by the FCC at the end of each license term (which may be as long as eight years under current law). The FCC grants renewal of a broadcast license if it finds that the station has served the public interest, convenience, and necessity, there have been no serious violations by the licensee of the Communications Act or FCC rules and policies, and there have been no other violations of the Communications Act and FCC rules and policies which, taken together, would constitute a pattern of abuse. If the FCC finds that a licensee has failed to meet these standards, the FCC may deny renewal, condition renewal, or impose some other sanction (such as a forfeiture). Any other party with standing may petition the FCC to deny a broadcaster's application for renewal. However, only if the FCC issues an order denying renewal will the FCC accept and consider applications from other parties for a construction permit for a new station to operate on that channel. The FCC may not consider any applicant in making determinations concerning the grant or denial of the licensee's renewal application. Although renewal of licenses is granted in the majority of cases even when petitions to deny have been filed, we cannot be sure our station licenses will be renewed for a full term or without modification. Our current licenses expire as follows: STATION (BY MARKET RANKING) EXPIRATION DATE --------------------------- --------------- KPLR .......................................... February 1, 2006 KWBP .......................................... February 1, 2007 KUWB .......................................... October 1, 2006 KWBQ........................................... October 1, 2006 KASY........................................... October 1, 2006 WBDT........................................... October 1, 2005 WBXX........................................... August 1, 2005 WIWB........................................... December 1, 2005 WTVK........................................... February 1, 2005 WBUI........................................... December 1, 2005 The Communications Act prohibits the assignment of a broadcast license or the transfer of control of a broadcast licensee without the prior approval of the FCC. In determining whether to permit the assignment or transfer of control of, or the grant or renewal of, a broadcast license, the FCC considers a number of factors pertaining to the licensee, including: o compliance with various rules limiting common ownership of media properties; o the character of the licensee and those persons holding attributable interests therein; and o compliance with the Communications Act's limitations on alien ownership. Character generally refers to the likelihood that the licensee or applicant will comply with applicable law and regulation. Attributable interests generally refers to the level of ownership or other involvement in station operations which would result in the FCC attributing ownership of that station or other media outlet to the person or entity in determining compliance with FCC ownership limitations. To obtain the FCC's prior consent to assign a broadcast license or transfer control of a broadcast licensee, an application must be filed with the FCC. If the application involves a substantial change in ownership or control, the application must be placed on public notice for a period of no less than 30 days during which petitions to deny the application may be filed by interested parties, including certain members of the public. If the FCC grants the application, interested parties have no less than 30 days from the date of public notice of the grant to seek reconsideration or review of that grant by the full commission or, as the case may be, a court of competent jurisdiction. The full FCC commission has an additional 10 days to set 5 6 aside on its own motion any action taken by the FCC's staff. When passing on an assignment or transfer application, the FCC is prohibited from considering whether the public interest might be served by an assignment or transfer to any party other than the assignee or transferee specified in the application. Ownership Restrictions. The officers, directors and equity owners of 5% or more of our outstanding voting stock or the voting stock of a company holding one or more broadcast licenses are deemed to have attributable interests in the broadcast company. Also, specified institutional investors, including mutual funds, insurance companies and banks acting in a fiduciary capacity, may own up to (but not as much as) 20% of the outstanding voting stock without being subject to attribution if they exercise no control over the management or policies of the broadcast company. Finally, even if it owns non-voting stock, a third party could be deemed to have an attributable interest if it owns more than 33 percent of a station's (or the Company's) asset value (which is defined by the FCC to mean the aggregate of equity plus debt) and either has another attributable interest in the same market as the station(s) or provides more than 15 percent of the weekly programming for the station(s). The FCC rules generally prohibit the issuance of a license to to any party, or parties under common control, for a television station if that station's Grade B contour overlaps with the Grade B contour of another television station in the same DMA in which that party or those parties already have an attributable interest. FCC rules provide an exception to that general prohibition under any one of the following circumstances: o there will be eight independent full-power television stations in the DMA after the acquisition or merger and one of the two television stations owned by the same party is not among the top four-ranked stations in the DMA based on audience share; o the station to be acquired is a "failing" station under FCC rules and policies; o the station to be acquired is a "failed" station under FCC rules and policies; or o the acquisition will result in the construction of a previously un-built station. FCC regulations also prohibit one owner from having attributable interests in television broadcast stations that reach in the aggregate more than 35% of the nation's television households. For purposes of this calculation, stations in the UHF band, which covers channels 14 - 69 are attributed with only 50% of the households attributed to stations in the VHF band, which covers channels 2 - 13. Subject to certain exceptions, FCC rules generally allow the holder of an attributable interest in a television station to have an attributable interest in: o up to six radio stations in a market with 20 independent media voices; o up to four radio stations in a market with 10 independent media voices; and o at least one radio station in any market. At the same time, FCC rules and policies generally prohibit a party with an attributable interest in a television station from owning a daily newspaper or cable television system serving a community located within the relevant coverage area of that television station. Restrictions on Foreign Ownership. The Communications Act prohibits the issuance of broadcast licenses to, or the holding of a broadcast license by, foreign citizens or any corporation of which more than 20% of the capital stock is owned of record or voted by non-U.S. citizens or their representatives or by a foreign government or a representative thereof, or by any corporation organized under the laws of a foreign country. The Communications Act also authorizes the FCC to prohibit the issuance of a broadcast license to, or the holding of a broadcast license by, any corporation controlled by any other corporation of which more than 25% of the capital stock is owned of record or voted by aliens. The FCC has interpreted these restrictions to apply to other forms of business organizations, including partnerships. As a result of these 6 7 provisions, the licenses granted to our subsidiaries that hold FCC licenses could be revoked if more than 25% of our stock were directly or indirectly owned or voted by aliens. Our certificate of incorporation contains limitations on alien ownership and control substantially similar to those contained in the Communications Act. Pursuant to our certificate of incorporation, we have the right to refuse to sell shares to aliens or to repurchase alien-owned shares at their fair market value to the extent necessary, in the judgment of our board of directors, to comply with the alien ownership restrictions. Programming and Operation. The Communications Act requires broadcasters to serve the public interest, convenience and necessity. The FCC has gradually restricted or eliminated many of the more formalized procedures it had developed to promote the broadcast of programming responsive to the needs of the station's community of license. Licensees continue to be required, however, to present programming that is responsive to community problems, needs and interests and to maintain certain records demonstrating such responsiveness. Complaints from listeners concerning a station's programming will be considered by the FCC when it evaluates the licensee's renewal application, but these complaints may be filed and considered at any time. Stations must also pay regulatory and application fees and follow various FCC rules that regulate, among other things: o political advertising; o children's programming; o the broadcast of obscene or indecent programming; o sponsorship identification; and o technical operations. Failure to observe these or other rules and policies can result in the imposition of various sanctions, including monetary forfeitures, the grant of short, less than the maximum, renewal terms, or for particularly egregious violations, the denial of a license renewal application or the revocation of a license. Review of Must Carry Rules. FCC regulations implementing the Cable Television Consumer Protection and Competition Act of 1992 require each television broadcaster to elect, at three-year intervals beginning October 1, 1993, to either: o require carriage of its signal by cable systems in the station's market which is referred to as must carry rules; or o negotiate the terms on which such broadcast station would permit transmission of its signal by the cable systems within its market, which is referred to as retransmission consent. The United States Supreme Court upheld the must-carry rules in a 1997 decision. These must carry rights are not absolute, and their exercise is dependent on a variety of factors such as: o the number of active channels on the cable system; o the location and size of the cable system; and o the amount of programming on a broadcast station that duplicates the programming of another broadcast station carried by the cable system. Therefore, under certain circumstances, a cable system may choose to decline to carry a given station. We have elected must carry with respect to each of our stations which are each carried on the related cable system. 7 8 Local Marketing Agreements. Under FCC rules, the licensee of a television station providing more than 15% of another television station's programming under a local marketing agreement is considered to have an attributable interest in the other station for purposes of the FCC's national and local multiple ownership rules if both stations are located in the same market. The FCC also adopted a grandfathering policy providing that local marketing agreements that are in compliance with the previous FCC rules and policies and were entered into before November 5, 1996, would be permitted to continue in force until the FCC conducts its biennial review of regulations in 2004. Local marketing agreements entered into after November 5, 1996 but prior to the recently adopted FCC rules will be grandfathered until August 2001. Prior to the adoption of the FCC's new rules, we did, from time to time, enter into local marketing agreements, generally in connection with pending station acquisitions. By using local marketing agreements, we can provide programming and other services to a station that we have agreed to acquire before we receive all applicable FCC and other governmental approvals. Subject to ownership restrictions in the new FCC rules and policies, FCC rules and policies generally permit local marketing agreements if the station licensee retains ultimate responsibility for and control of the applicable station, including finances, personnel, programming and compliance with the FCC's rules and policies. We cannot be sure that we will be able to air all of our scheduled programming on a station with which we may have a local marketing agreement with, or that we would receive the revenue from the sale of advertising for such programming. Digital Television Services. The FCC has adopted rules for implementing digital television service in the United States. Implementation of digital television will improve the technical quality of television signals and provide broadcasters the flexibility to offer new services, including high-definition television and data broadcasting. The FCC has established service rules and adopted a table of allotments for digital television. Under the table, all eligible broadcasters with a full-power television station are allocated a separate channel for digital television operation. Stations will be permitted to phase in their digital television operations over a period of years following the adoption of a final table of allotments, after which they will be required to surrender their license to broadcast the analog, or non-digital television, signal. Affiliates of the top four networks in the top thirty markets are already required to be on the air with a digital signal. Our stations must be on the air with a digital signal by May 1, 2002. Under applicable law and regulation, television broadcasters must return their analog license to the government by 2006 unless specified conditions exist, that in effect, limit the public's access to digital television transmissions in a particular market. The Communications Act and the FCC's rules impose certain conditions on the FCC's implementation of digital television service. Among other requirements, the FCC must: o limit the initial eligibility for licenses to existing television broadcast licensees or permittees (who held those licenses or permits by April 3, 1997); o allow digital television licensees to offer ancillary and supplementary services; and o charge appropriate fees to broadcasters that supply ancillary and supplementary services for which such broadcasters derive certain non-advertising revenues. Equipment and other costs associated with the digital television transition, including the necessity of temporary dual-mode operations, will impose some near-term financial costs on television stations providing the services. The potential also exists for new sources of revenue to be derived from digital television. We cannot predict the overall effect the transition to digital television might have on our business. 8 9 Children's Television Act. FCC rules limit the amount of commercial matter that a television station may broadcast during programming directed primarily at children 12 years old and younger. FCC rules further require television stations to serve the educational and informational needs of children 16 years old and younger through the stations' own programming as well as through other means. Television broadcasters must file periodic reports with the FCC to document their compliance with foregoing obligations. Other Pending FCC and Legislative Proceedings. In 1995, the FCC issued notices of proposed rulemaking proposing to modify or eliminate most of its remaining rules governing the broadcast network-affiliate relationship. The network-affiliate rules were originally intended to limit networks' ability to control programming aired by affiliates or to set station advertising rates and to reduce barriers to entry by networks. The dual network rule, which generally prevents a single entity from owning more than one broadcast television network, is among the rules under consideration in these proceedings. Although the Telecommunications Act substantially relaxed the dual network rule by providing that an entity may own more than one television network, none of the four major national television networks may merge with each other or acquire certain other networks in existence on February 8, 1996. We cannot predict how or when the FCC proceeding will be resolved or how those proceedings or the relaxation of the dual network rule may affect our business. The Satellite Home Viewer Act allows satellite carriers to deliver broadcast programming to subscribers who are unable to obtain television network programming over the air from local television stations. Congress recently amended the act to facilitate the ability of satellite carriers to provide subscribers with programming from both local and non-local television station. The FCC has adopted rules to implement certain of those legislative changes and is conducting rulemaking proceedings to implement others. On February 2, 2000, the FCC released a Report and Order which adopted new rules requiring broadcast licensees to provide equal employment opportunities. The new rules generally require broadcast licensees to widely disseminate information on employment vacancies and to promote diversification in their employment. The new rules supplemented a broadcaster's obligation to refrain from racial or other prohibited discrimination in its employment practices under other applicable federal as well as state and local laws and regulations. On January 16, 2001, the United States Court of Appeals for the District of Columbia Circuit declared certain portions of the new EEO rules to be unconstitutional, and on January 31, 2001, the FCC suspended implementation of all of its EEO rules. The FCC has asked the court to rehear certain aspects of its ruling. It is unclear at this date whether all or any of the FCC's EEO rules will be reinstated or whether the FCC will initiate any effort to fashion new EEO rules to comply with the court's ruling. Federal regulatory agencies and Congress from time to time consider proposals for additional or revised rules. We cannot predict the resolution of these issues or other issues discussed above, although their outcome could, over a period of time, affect, either adversely or favorable, the broadcasting industry generally or us specifically. The foregoing summary of FCC and other governmental regulations is not intended to be comprehensive. For further information concerning the nature and extent of federal regulation of broadcast stations, you should refer to the Communications Act, other Congressional acts, FCC rules, and the public notices and rulings of the FCC. EMPLOYEES At December 31, 1999, we had 331 employees, including 37 who were subject to collective bargaining agreements. We believe that our relationships with our employees and the union representing our unionized employees are good. FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K includes forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "expect," 9 10 "believe," "predict," "potential" or "might" or the negative of such terms or other comparable terminology. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our and the television broadcast industry's actual results, levels of activity, performance, achievements and prospects to be materially different from those expressed or implied by such forward-looking statements. We are under no duty to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Annual Report on Form 10-K. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Annual Report on Form 10-K might not occur. ITEM 2. PROPERTIES All of our leased studio, office and tower facilities are leased pursuant to long-term leases. We believe that all facilities and equipment are adequate, with minor changes and additions, for conducting operations as presently contemplated. Set forth below is information with respect to our studios and other facilities for our current stations. Information as to tower size reflects the height above average terrain of the antenna radiation center. MARKET APPROXIMATE SIZE OWNERSHIP ------ ---------------- --------- St. Louis, Missouri Studio and office facilities .................. 36,000 sq. ft. Leased Tower.......................................... 1,011 ft. Leased Portland, Oregon Studio and office facilities................... 15,255 sq. ft. Owned Tower.......................................... 1,785 ft. Leased Digital Tower (2).............................. 1,716 ft. Owned Salt Lake City, Utah Studio and office facilities................... 9,500 sq. ft. Leased Tower.......................................... 4,075 ft. Leased Digital Tower (2).............................. 4,125 ft. Owned Albuquerque -- Santa Fe, New Mexico Studio and office facilities (joint for KWBQ and KASY)............................... 9,000 sq. ft. Leased Tower (KWBQ) .................................. 1,234 ft. Leased Tower (KASY)................................... 4,187 ft. Leased Dayton, Ohio Studio and office facilities................... 10,000 sq. ft Leased Tower.......................................... 485 ft. Owned Knoxville, Tennessee Studio and office facilities................... 8,000 sq. ft. Leased Tower (1)...................................... 2,399 ft. Owned Green Bay -- Appleton, Wisconsin Studio and office facilities................... 2,640 sq. ft. Leased Tower (1)...................................... 660 ft. Leased Ft. Myers -- Naples, Florida Studio and office facilities................... 5,000 sq. ft. Leased Tower.......................................... 1,000 ft. Leased Champaign -- Springfield -- Decatur, Illinois Studio and office facilities................... 9,600 sq. ft. Owned Tower (1)...................................... 1,030 ft. Owned --------- (1) Tower owned on leased property. (2) Represents partnership interests in digital television towers in the Salt Lake City and Portland markets. 10 11 ITEM 3. LEGAL PROCEEDINGS We are currently, and from time to time, involved in litigation incidental to the conduct of our business. We maintain comprehensive general liability and other insurance that we believe to be adequate for the purpose. We are not currently a party to any lawsuit or proceeding that we believe could have a material adverse effect on our financial condition or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Omitted under the reduced disclosure format pursuant to General Instruction I (2) (c) of Form 10-K. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS All of the membership units of ACME Intermediate are directly or indirectly owned by ACME Communications, Inc. All of the membership units of ACME Television are directly or indirectly owned by ACME Intermediate. No Distributions on ACME Intermediate or ACME Television membership units have ever been declared or paid. The right of ACME Television to make any distributions in the future is subject to restrictions imposed by both the revolving credit facility loan agreement and the indenture governing ACME Television's 10 7/8% senior discount notes. The right of ACME Intermediate to make any distributions is subject to restrictions contained in the indenture governing its 12% senior secured notes. ITEM 6. SELECTED FINANCIAL DATA Omitted under the reduced disclosure format pursuant to General Instruction I (2) (a) of Form 10-K. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (ABBREVIATED PURSUANT TO GENERAL INSTRUCTION I(2)(a) OF FORM 10-K. Results of Operations Years Ended December 31, 2000 compared to Year Ended December 31, 1999 Net revenues for the year ended December 31, 2000 increased $13.4 million (22%) to $73.4 million as compared to $60.0 million for the year ended December 31, 1999. This increase reflects revenue increases at each operating station, and to a lesser extent, to the stations acquired or launched during 1999 which were on the air for the full year 2000. Increases in revenue were driven primarily by increased ratings, distribution and higher unit prices. Station operating expenses increased to $54.1 million compared to the prior year's operating expenses of $45.7 million. This increase of 18% was due to primarily to increased programming expenses at many of our developing stations coupled with the full year impact in 2000 of stations acquired or launched during 1999. Depreciation and amortization expense for the year was $19.8 million compared to $17.1 million for 1999. This $2.7 million increase reflects the full year amortization of intangible assets and increased depreciation relating to the stations that were newly built or acquired in 1999 and ongoing upgrades of existing facilities. 11 12 Corporate expenses for 2000 decreased to $3.3 million from $6.4 million in 1999. Our 1999 expense included a non-recurring $3.0 million charge relating to bonuses paid primarily to the Company's senior management founders in conjunction with ACME Parent's IPO. All other corporate expenses decreased 3% in 2000 over 1999 levels due primarily to decreased incentive bonus expenses. Equity-based compensation of $529,000 in 2000 relates to options granted below market value in 1999 to senior management in exchange for their participation in the Company's previously established long term incentive plan. The $39.7 million in 1999 relates primarily to a charge reflecting the fully vested common stock issued in connection with the Company's initial public offering in September 1999 in exchange for the management carry units that were issued in June 1997 to our senior founding management members. There was no equity-based compensation expense in 1998. Interest expense for the current year was $27.3 million and $20.4 million for ACME Intermediate and ACME Television, respectively, as compared to $25.5 million and $19.5 million, respectively, for 1999. These increases are the result of increasing balances under the company's 10-7/8% Senior Discount Notes due 2004 (the "Television Notes") and 12% Senior Secured Discount Notes due 2005 (the "Intermediate Notes", and together with the Television Notes, the "Senior Notes") partially offset by the elimination of interest charges related to borrowings on the revolving credit facility which was repaid with proceeds from ACME Parent's IPO in October 1999. In 2000, the Company sold its studio facility in St. Louis which resulted in a gain of $1.572 million. We have leased these premises back under a short-term lease and expect to move to new facilities by the end of 2001. We also sold our studio building in Albuquerque pursuant to a purchase option previously granted and leased those premises back under a long-term lease. The sale of that facility resulted in a loss of approximately $67,000. Prior to the Reorganization ACME Parent completed in October of 1999, the Company was a non-taxable entity and therefore no federal income taxes were provided for its operations prior to that date other than at its subsidiary ACME Television of Missouri, Inc. which is a C corporation subject to federal and state taxation. Any liability or benefit from the Company's non-taxable entities' consolidated income or loss prior to the Reorganization was the responsibility of, or benefit to, the individual members. Upon the closing of the Reorganization, the Company became a member of a consolidated taxable group. The Company recorded deferred tax assets and liabilities at the Reorganization date for the difference between the financial statement carrying value of the Company's assets and liabilities and their corresponding tax basis. The tax benefit for 2000 was $8.7 and $6.1 million for ACME Intermediate and ACME Television, respectively, compared to a tax benefit of $4.6 million and $4.0, respectively, for ACME Intermediate and ACME Television in 1999. Our 1999 tax benefits reflect the tax benefit of our fourth quarter taxable losses incurred subsequent to the September 30, 1999 termination of our non-taxable status and also include the one-time impact of that termination. Our net loss for the current year of $21.4 and $17.2 million, for ACME Intermediate and ACME Television, respectively, as compared with losses of $69.6 and $64.3 million, respectively, that were incurred in 1999, represent decreases of $48.2 and $47.1 million, respectively. These decreases in our net losses are primarily the result of the significant reduction in our equity-based compensation expense, our increased revenues and operating margins, net of increased depreciation and amortization expenses. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's revolving credit facility has a variable interest rate. Accordingly, the Company's interest expense could be materially affected by future fluctuations in the applicable interest rate. The Company had no borrowings outstanding as of December 31, 2000. 12 13 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA INDEPENDENT AUDITORS' REPORT The Members ACME Intermediate Holdings, LLC ACME Television, LLC: We have audited the accompanying consolidated balance sheets of ACME Intermediate Holdings, LLC and Subsidiaries and ACME Television, LLC (a wholly-owned subsidiary of ACME Intermediate Holdings, LLC) and Subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of operations, member's capital and cash flows for each of the years in the three-year period ended December 31, 2000. In connection with our audit of the consolidated financial statements, we have also audited the financial statement schedules listed in the index of Item 14. These consolidated financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of ACME Intermediate Holdings, LLC and Subsidiaries and ACME Television, LLC and Subsidiaries as of December 31, 2000 and 1999 and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedules, when considered in relation to the consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. /s/ KPMG LLP Los Angeles, California February 13, 2000 13 14 ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES ACME TELEVISION, LLC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

See the notes to the consolidated financial statements 14 15 ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES ACME TELEVISION, LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS

--------------- (1) Equity-based compensation is comprised of station operating expenses and corporate expenses of $132,000 and $39.6 million, respectively, in 1999 and $313,000 and $216,000, respectively, in 2000. See the notes to the consolidated financial statements 15 16 ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES ACME TELEVISION, LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF MEMBERS' CAPITAL ACME INTERMEDIATE HOLDINGS, LLC

ACME TELEVISION, LLC

See the notes to the consolidated financial statements 16 17 ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES ACME TELEVISION, LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

See the notes to the consolidated financial statements 17 18 ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES ACME TELEVISION, LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

See the notes to the consolidated financial statements 18 19 ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES ACME TELEVISION, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) DESCRIPTION OF THE BUSINESS AND FORMATION PRESENTATION Financial statements are presented for each of ACME Intermediate Holdings, LLC ("ACME Intermediate") and its wholly-owned subsidiary, ACME Television, LLC ("ACME Television"). Unless the context states otherwise, references to the "Company" refers to both ACME Intermediate and ACME Television. Segment information is not presented since all of the Company's revenue is attributed to a single reportable segment. REORGANIZATION OF PARENT ACME Communications, Inc. was formed on July 23, 1999, in preparation for and in conjunction with an initial public offering of its stock. On September 27, 1999, the Board of Advisors of ACME Television Holdings, LLC (the parent company of ACME Intermediate) and its members and the Board of Directors of ACME Communications, Inc. and its stockholder approved a merger and reorganization (the "Reorganization"), whereby ACME Communications, Inc. became the direct parent of ACME Television Holdings, LLC. As a result of the Reorganization, ACME Communications, Inc. is the ultimate parent of ACME Intermediate and its wholly-owned subsidiary ACME Television. All transactions contemplated as part of the Reorganization closed on October 5, 1999. References to "ACME Parent" herein refer to either ACME Television Holdings, or, subsequent to the Reorganization, ACME Communications, Inc. FORMATION ACME Intermediate was formed on August 8, 1997. Upon formation, ACME Intermediate received a contribution from ACME Parent, of ACME Parent's wholly-owned subsidiaries - ACME Television of Oregon, LLC ("ACME Oregon") and ACME Television of Tennessee, LLC ("ACME Tennessee") and certain other net assets. This Contribution of $25,455,000 (including cash of $2,380,000) was made in exchange for membership units in ACME Intermediate and was treated as a transaction between entities under common control, similar to a pooling of interests. Accordingly, the transaction was recorded at historical cost and ACME Intermediate has reflected the results of operations of the contributed entities for the year ended December 31, 1997. In addition, on September 30, 1997, ACME Parent made an additional contribution of $21,746,000 in exchange for membership units in the Company. ACME Television was formed on August 8, 1997. Upon formation, ACME Television received a contribution from ACME Parent through ACME Intermediate of ACME Parent's wholly-owned subsidiaries - ACME Oregon and ACME Tennessee and certain other net assets. This Contribution of $25,455,000 (including cash of $2,380,000) was made in exchange for membership units in the Company and was treated as a transaction between entities under common control, similar to a pooling of interests. Accordingly, the transaction was recorded at historical cost and ACME Television has reflected the results of operations of the contributed entities for the year ended December 31, 1997. In addition, on September 30, 1997, ACME Intermediate made an additional contribution of $60,061,000 in exchange for membership units in ACME Television. ACME Parent owns directly or indirectly, 100% of the outstanding membership units of ACME Intermediate. ACME Intermediate owns, directly or indirectly, 100% of the outstanding membership units of ACME Television. 19 20 NATURE OF BUSINESS ACME Intermediate is a holding company with no assets or independent operations other than its wholly-owned subsidiary, ACME Television. ACME Television, through its wholly-owned subsidiaries, owns and operates the following ten commercially licensed broadcast television stations located throughout the United States: NETWORK STATION - CHANNEL MARKET AFFILIATION ----------------- ------ ----------- KPLR - 11 St. Louis....................................... WB KWBP - 32 Portland, OR.................................... WB KUWB - 30 Salt Lake City.................................. WB KWBQ - 19 Albuquerque - Santa Fe.......................... WB KASY - 50 Albuquerque - Santa Fe.......................... UPN WBDT - 26 Dayton.......................................... WB WBXX - 20 Knoxville....................................... WB WIWB - 14 Green Bay - Appleton............................ WB WTVK - 46 Ft. Myers/Naples................................ WB WBUI - 23 Champaign-Springfield-Decatur................... WB (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF CONSOLIDATION The Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All significant inter-company transactions have been eliminated. REVENUE RECOGNITION Revenue from the sale of airtime related to advertising and contracted time is recognized at the time of broadcast. The Company records such revenues net of commissions of advertising agencies and national sales representatives. CASH AND CASH EQUIVALENTS For purposes of reporting the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. ACCOUNTS RECEIVABLE Accounts receivable are presented net of the related allowance for doubtful accounts which totaled $716,000 and $1,009,000 at December 31, 1999 and 2000, respectively. CONCENTRATION OF CREDIT RISK AND FAIR VALUE OF FINANCIAL STATEMENTS Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of accounts receivable and cash. Due to the short-term nature of these instruments, the carrying value approximates the fair market value. The Company believes that concentrations of credit risk with respect to accounts receivable, which are unsecured, are limited due to the Company's ongoing relationship with its clients. The Company provides its estimate of uncollectible accounts. The Company has not experienced significant losses relating to accounts receivable. The estimated fair market of the 12% senior discount notes and the 10 7/8% senior secured notes was approximately $43 million and $151 million, respectively, at December 31, 2000. 20 21 PROGRAM RIGHTS Program rights represent costs incurred for the right to broadcast certain features and syndicated television programs. Program rights are stated, on a gross basis, at the lower of amortized cost or estimated realizable value. The cost of such program rights and the corresponding liability are recorded when the initial program becomes available for broadcast under the contract. Generally, program rights are amortized over the life of the contract on a straight-line basis related to the usage of the program. The portion of the cost estimated to be amortized within one year and after one year are reflected in the balance sheets as current and non-current assets, respectively. The gross payments under these contracts that are due within one year and after one year are similarly classified as current and non-current liabilities. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. The cost of maintenance is expensed when incurred. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the respective assets. When property is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the appropriate accounts and any gain or loss is included in the results of current operations. The principal lives used in determining depreciation rates of various assets are as follows: Buildings and Improvements................. 20 - 30 years Broadcast and other equipment.............. 3 - 20 years Furniture and fixtures..................... 5 - 7 years Vehicles................................... 5 years INTANGIBLE ASSETS Intangible assets consist of broadcast licenses and goodwill, both of which are amortized on a straight-line basis over a 20-year life. December 31, -------------------- 1999 2000 -------- -------- (in thousands) Broadcast licenses $199,731 $200,188 Goodwill 106,818 106,707 -------- -------- Total intangible assets 306,549 306,895 Less: accumulated amortization (23,575) (38,931) -------- -------- Net intangible assets $282,974 $267,964 ======== ======== BARTER AND TRADE TRANSACTIONS Revenue and expenses associated with barter agreements in which broadcast time is exchanged for programming rights are recorded at the estimated average rate of the airtime exchanged. Trade transactions, which represent the exchange of advertising time for goods or services, are recorded at the estimated fair value of the products or services received. Barter and trade revenue is recognized when advertisements are broadcast. Merchandise or services received from airtime trade sales are charged to expense or capitalized when used or received. LOCAL MARKETING AGREEMENTS In connection with station acquisitions, and pending FCC approval of the transfer of license assets, the Company generally enters into local marketing agreements with the sellers. Under the terms of these agreements, we obtain the right to program and sell advertising time on 100% of the station's inventory of broadcast time, incur certain operating expenses and may make payments to the sellers. As the holder of the FCC license, the seller/licensee retains ultimate control and responsibility for all programming broadcast on the station. We, in turn, record revenues from the sale of advertising time and operating expenses for costs incurred. Included in the accompanying consolidated statements of operations for the years ended December 31, 1998, 1999, and 2000 are net revenues of $6.8 million, $125,000 and $0, respectively, that relate to local marketing agreements. Payments of fees to the sellers for the years ended December 31, 1998, 1999, and 2000 were $228,000, $27,500, and $0 respectively. At December 31, 2000, the Company was not obligated for any future payments to sellers. 21 22 CARRYING VALUE OF LONG-LIVED ASSETS The Company follows Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The carrying value of long-lived assets (tangible, identifiable intangible, and goodwill) is reviewed if the facts and circumstances suggest that they may be impaired. For purposes of this review, assets are grouped at the operating company level, which is the lowest level for which there are identifiable cash flows. If this review indicates that an asset's carrying value will not be recoverable, as determined based on future expected, undiscounted cash flows, the carrying value is reduced to fair market value. DEBT DISCOUNT ACME Intermediate issued 12% Senior Secured Discount Notes and ACME Television issued 10 7/8% Senior Discount Notes at a discount from the face value of the notes. The discount on the notes is being accreted using the level yield method. INCOME TAXES The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." In accordance with SFAS No. 109, income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Prior to the Reorganization, the Company was a non-taxable entity, therefore, no income taxes have been provided for its operations other than at its subsidiary ACME Television of Missouri, Inc. which is a "C" corporation subject to federal and state taxation. Any liability or benefit from the Company's non-taxable entities' consolidated income or loss prior to the Reorganization is the responsibility of, or benefit to, the individual members. In conjunction with the Reorganization, the Company became part of a consolidated taxable group. As of the Reorganization date, the Company recorded deferred tax assets and liabilities for the difference between the financial statement carrying value of the Company's assets and liabilities and their associated tax basis. ACCOUNTING FOR STOCK OPTIONS ACME Parent has issued stock options to the executives of ACME Parent and the Company and to certain Company employees. The Company has adopted Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," which permits entities to recognize (over the vesting period) the expense of all stock-based awards. The expense is calculated based on the fair value at the date of grant. Alternatively, SFAS No. 123 allows entities to continue to apply the provisions of APB Opinion No. 25 and provide pro forma net income disclosure for employee stock option grants made, as if the fair-value-based method defined in SFAS No. 123 had been applied. The Company has elected to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123 (see Note 13). 22 23 REPORTING COMPREHENSIVE INCOME In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income." This statement, which establishes standards for reporting and disclosure of comprehensive income, is effective for interim and annual periods beginning after December 15, 1997. The Company adopted SFAS No. 130 effective January 1, 1998. Adoption had no impact on the Company's consolidated financial position or results of operations. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles 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. These estimates include the allowance for doubtful accounts net of the realizable value of programming rights and the evaluation of the recoverability of intangible assets. Actual results could differ from those estimates. RECLASSIFICATIONS Certain amounts previously reported for 1998 and 1999 have been reclassified to conform to the 2000 financial statement presentation. (3) PROPERTY AND EQUIPMENT Property and equipment consist of the following: DECEMBER 31, ----------------------- 1999 2000 -------- -------- (In thousands) Land .......................... $ 1,097 $ 541 Buildings and improvements .... 5,555 5,459 Broadcast and other equipment . 22,678 29,111 Furniture and fixtures ........ 776 909 Vehicles ...................... 290 470 Construction in process ....... 427 2,954 -------- -------- Total .................... 30,823 39,444 Less: Accumulated depreciation (5,707) (9,973) -------- -------- Net property and equipment .... $ 25,116 $ 29,471 ======== ======== Included in property and equipment are assets acquired under capital leases with a total cost of $9,512,641 and $12,843,556 and the associated accumulated depreciation of $2,045,668 and $3,647,846 at December 31, 1999 and 2000, respectively. (4) ACQUISITIONS On July 29, 1997, the Company entered into a stock purchase agreement to acquire Koplar Communications, Inc. ("KCI") the owner of station KPLR. On September 30, 1997, the Company placed $143.0 million in to an escrow account (classified as a deposit on the December 31, 1997 consolidated balance sheet). In connection with this acquisition, the Company entered into a long-term local marketing agreement with KPLR and filed the requisite applications with the FCC for the transfer of the Station's license to the Company. 23 24 Pursuant to the local marketing agreement, the Company retained all revenues generated by the station, bore substantially all operating expenses (excluding depreciation and amortization) of the station and was obligated to pay a local marketing agreement fee. These revenues and expenses for the period October 1 through December 31, 1997 are included in the Company's operating results for the year ended December 31, 1997. On March 13, 1998, the Company completed its acquisition of KCI by acquiring all of the outstanding stock of KCI for a total consideration of approximately $146.3 million. The acquisition was accounted for using the purchase method. Pursuant to the local marketing agreement referred to above, all revenues and operating expenses of the station (excluding depreciation and amortization) for the period from September 30, 1997 to March 31, 1998 (the effective date of the purchase transaction) are included in the Company's operating results. The purchase transaction was recorded on the consolidated balance sheet of the Company effective March 31, 1998 and the Company's results of operations includes revenues and expenses (including amortization of intangible assets) beginning April 1, 1998. The fair value of the assets acquired and liabilities assumed relating to the acquisition of KPLR (in thousands): Assets acquired: Cash and cash equivalents ................. $ 779 Accounts receivables, net ............... 1,703 Program broadcast rights ................ 8,490 Property and equipment .................. 2,233 Prepaid expenses and other current assets 416 FCC license ............................. 82,563 Goodwill ................................ 93,775 Other assets ............................ 395 --------- Total assets acquired ................ $ 190,354 ========= Liabilities assumed: Accounts payable ........................ $ (1,005) Accrued liabilities ..................... (1,332) Program broadcast rights payable ........ (8,258) Deferred income taxes ................... (29,889) Other liabilities ....................... (3,531) --------- Total liabilities assumed ............ $ (44,015) --------- Total purchase price ................. $ 146,339 ========= During 1997, the Company entered into an agreement that provided it with the right to: (i) acquire 49% of the licensee of KUPX (formerly KZAR) in exchange for membership units valued at $6.0 million, and (ii) pay $3.0 million for an option to acquire the remaining 51% interest in the licensee of KUPX for $5.0 million, exercisable immediately after the station commences on-air operations. On December 15, 1997, the Company acquired the 49% interest in the licensee of KUPX, paid $3.0 million to acquire the option and loaned the sellers $4.0 million (to be applied to the subsequent majority interest purchase price). On January 22, 1998, the Company issued $6.0 million of its member units to the sellers for the 49% interest in the license of KUPX in connection with the above transaction. The amount of the issuance was based upon a fixed dollar amount of consideration. The Company accounted for the 49% investment using the equity method of accounting. On February 16, 1999, the Company acquired the remaining 51% interest in KUPX. The $4.0 million loan was applied against the remaining purchase price of $5.0 million. In May 1998 the Company and the majority owners of KUPX entered into an agreement with another broadcaster in Salt Lake City to (i) swap KUPX for KUWB, subject to FCC approval (ii) enable the Company to operate KUWB under a local marketing agreement and (iii) enable the owner of KUWB to operate KUPX under a local marketing agreement. Pursuant to the LMA's, the Company retains all operating revenues and expenses (excluding depreciation and amortization) of KUWB and the owner of KUWB retains all operating revenues and expenses (excluding depreciation and amortization) of KUPX. In March 1999, the FCC approved the swap of KUPX for KUWB and the transaction closed during the third quarter of 1999. The Company has accounted for the swap as a business combination and has recorded KUPX at its fair value. There was no significant difference between the fair value of KUPX and the historical cost of KUWB. 24 25 On August 22, 1997, the Company entered into an agreement with affiliates of the sellers of KZAR to acquire 100% of the interests in the construction permit for KAUO for a consideration of $10,000. This agreement was consummated on January 22, 1998. Subsequently, the call letters of KAUO were changed to KWBQ. Construction of KWBQ was completed and the station commenced broadcasting in March 1999. On June 30, 1998, the Company acquired substantially all the assets and assumed certain liabilities of WTVK-Channel 46 serving the Fort Myers-Naples, Florida marketplace for approximately $14.5 million in cash and 1,047 membership units (valued at approximately $1.0 million). The acquisition was accounted for using the purchase method. The excess of the purchase price over the fair value of the net assets assumed of approximately $15.5 million has been recorded as an intangible broadcast license and goodwill, both of which are being amortized over a period of 20 years. The Company had entered into a local marketing agreement with WTVK wherein the Company, effective March 3, 1998, retained all revenues generated by the station, bore all operating expenses of the station (excluding depreciation and amortization) and had the right to program the station (subject to WTVK's ultimate authority for programming) and the station's existing programming commitments. The local marketing agreement terminated upon the consummation of the acquisition. Consequently, under the local marketing agreement the revenues and operating expenses (excluding depreciation and amortization) of the station are included in the Company's results of operations from March 3, 1998 to June 30, 1998. The purchase transaction was recorded on the consolidated balance sheet of the Company on June 30, 1998 and the Company's results of operations includes revenues and expenses (including amortization of intangible assets) beginning July 1, 1998. On April 23, 1999, the Company acquired the non-FCC license assets of three Paxson Communication Corporation ("PCC") stations serving the Dayton, OH, Green Bay, WI and Champaign-Decatur, IL markets for $32.0 million. On June 23, 1999, following FCC approval of the transfer of the FCC licenses, the Company acquired the licenses and completed the acquisition of the three stations by making a final payment to PCC of $8.0 million. The Company entered into local marketing agreements with the seller wherein the Company, effective June 2, 1999, retained all revenues generated by the stations, bore all operating expenses of the stations (excluding amortization) and had the right to program the stations (subject to the seller's ultimate authority for programming) and the stations' existing programming commitments. The local marketing agreement terminated upon the consummation of the acquisition. Consequently, under the local marketing agreement the revenues and operating expenses (excluding amortization) of the station are included in the Company's results of operations from June 2, 1999 to June 23, 1999. The purchase of the FCC licenses was recorded on the consolidated balance sheet of the Company on June 23, 1999 and the Company's results of operations includes revenues and expenses (including amortization of intangible assets) beginning June 24, 1999. The Company financed this $40.0 million transaction by a $25.0 million borrowing under its revolving credit agreement and the issuance of $15.0 million in redeemable preferred units by ACME Intermediate (see Notes 7 and 11). The acquisition was accounted for using the purchase method. The excess of the purchase price over the fair market value of the assets acquired of approximately $35.6 million has been recorded as intangible broadcast licenses and goodwill, all of which are being amortized over a period of 20 years. On December 3, 1999, the Company acquired substantially all of the assets and assumed certain liabilities of station KASY TV-50, serving the Albuquerque - Santa Fe, New Mexico market, from Ramar Communications ("Ramar") for approximately $27 million. The Company entered into an interim LMA arrangement with Ramar to begin operating the station effective November 1, 1999. The interim LMA terminated upon the completion of the acquisition. Under the local marketing agreement, all of the revenues and operating expenses (excluding depreciation and amortization) of the station are included in the Company's results of operations from November 1, 1999 to December 3, 1999. The purchase transaction was recorded on December 3, 1999 and the Company's results of operations (including depreciation and amortization) beginning December 3, 1999. 25 26 The unaudited pro forma financial information for the years ended December 31, 1998 and 1999, set forth below reflects the net revenues and net loss assuming the KWBP, WBXX, KPLR, KUWB, WTVK, KWBQ, KASY, WBDT, WBUI and WIWB transactions had taken place at the beginning of each respective year. This unaudited pro forma financial information does not necessarily reflect the results of operations that would have occurred had the acquisitions occurred on January 1, 1998 and 1999. YEARS ENDED DECEMBER 31, 1998 YEARS ENDED DECEMBER 31, 1999 ----------------------------- ----------------------------- ACME ACME ACME ACME INTERMEDIATE TELEVISION INTERMEDIATE TELEVISION ------------- ----------- ------------- ---------- Net revenues $ 49,905 $ 49,905 $ 63,109 $ 63,109 Net loss $(25,104) $(19,898) $(73,430) $(68,062) (5) UNIT OFFERING AND 12% SENIOR SECURED DISCOUNT NOTES On September 30, 1997, ACME Intermediate issued 71,634 Units (the Unit Offering) consisting of 71,634 membership units (representing 8% of the ACME Intermediate's outstanding membership equity) and $71,634,000 (par value at maturity) in 12% senior secured discount notes due 2005 (Intermediate Notes). Cash interest on the Intermediate Notes is payable semi-annually in arrears, commencing with the six-month period ending March 31, 2003. The Notes mature on September 30, 2005 and may not be prepaid prior to September 30, 2000 and subsequently, may not be prepaid without penalty prior to October 1, 2003. The net proceeds from the Unit Offering, after the deduction of underwriter fees and other related offering costs, were $38.3 million and were received by the Company on September 30, 1997. The Company has allocated approximately $4.2 million of such net proceeds to minority interest, $35.6 million to the Intermediate notes and $1.5 million to prepaid financing costs -- the latter which is being amortized over the eight-year term of the notes. The Intermediate Notes contain certain covenants and restrictions including restrictions on future indebtedness and restricted payments, as defined, and limitations on liens, investments, transactions with affiliates and certain asset sales. The Company was in compliance with all such covenants and restrictions at December 31, 2000. In connection with the Reorganization the membership units issued in the Unit Offering (representing a minority interest) were acquired by ACME Parent for shares of its common stock. The acquisition of minority interest was recorded based upon the fair market value of the stock issued. The Intermediate Notes are secured by a first priority lien on the limited liability company interests in ACME Television and ACME Subsidiary Holdings II, LLC, both of which are direct wholly-owned subsidiaries of ACME Intermediate. ACME Subsidiary Holdings II, LLC was formed solely to own a 0.5% interest in ACME Television, has no other assets or operations and does not constitute a substantial portion of the collateral for the Intermediate Notes. (6) 10 7/8% SENIOR DISCOUNT NOTES On September 30, 1997, ACME Television issued 10.875% senior discount notes due 2004 (Notes) with a face value of $175,000,000 and received $127,370,000 in gross proceeds from such issuance. These Notes provide for semi-annual cash interest payments commencing with the six-month period ending on March 31, 2001. At December 31, 2000 $4,758,000 in accrued interest on these notes was included in current accrued liabilities. The Notes are subordinated to ACME Television's bank revolver (see Note 7) and to the ACME Television's capital equipment finance facilities (see Note 10). The Notes mature on September 30, 2004. Other than prepayment with the proceeds of a public equity offering, the notes may not be prepaid prior to September 30, 2001 and may not be prepaid without penalty prior to October 1, 2003. The Notes contain certain covenants and restrictions including restrictions on future indebtedness and limitations on investments, and transactions with affiliates. ACME Television was in compliance with all such covenants and restrictions at December 31, 2000. Costs associated with the issuance of these notes, including the underwriters fees and related professional fees are included in long-term other assets and will be amortized over the seven year term of the notes. 26 27 ACME Television's subsidiaries (hereinafter referred to in this section collectively as Subsidiary Guarantors) are fully, unconditionally, and jointly and severally liable for ACME Television's notes. The Subsidiary Guarantors are wholly owned and constitute all of ACME Television's direct and indirect subsidiaries except for ACME Finance Corporation, a wholly owned finance subsidiary of ACME Television with essentially no independent operations that is jointly and severally liable with the Company on the Notes. ACME Television has not included separate financial statements of the aforementioned subsidiaries because (i) ACME Television is a holding company with no assets or independent operations other than its investments in its subsidiaries and (ii) the separate financial statements and other disclosures concerning such subsidiaries are not deemed material to investors. Various agreements to which ACME Television and/or the Subsidiary Guarantors are parities restrict the activity of the Subsidiary Guarantors to make distributions to the Company. The Investment and Loan Agreement (the Investment Agreement), dated June 17, 1997, as amended, among the Company and the parties thereto and the Limited Liability Company Agreement (the LLC Agreement), dated June 17, 1997, as amended, among the Company and the parties thereto each contain certain restrictions on the ability of the Subsidiary Guarantors to declare or pay dividends to ACME Television in the absence of the consent of certain parties thereto. The Indenture governing the Notes prevents the Subsidiary Guarantors from declaring or paying any dividend or distribution to ACME Television unless certain financial covenants are satisfied and there has been no default thereof. The revolving credit facility with Canadian Imperial Bank Corporation (see Note 7) also prohibits distributions from the Subsidiary Guarantors to ACME Television except in certain circumstances during which default has not occurred thereunder. (7) ISSUANCE OF REDEEMABLE PREFERRED MEMBERSHIP UNITS On April 23, 1999, in connection with the acquisition of the non-FCC assets of the three Paxson Communications Corporation stations, ACME Intermediate issued 7,000 units of a newly created class of mandatory redeemable preferred membership units to ACME Parent in exchange for a $7 million cash contribution. On June 23, 1999, an additional $8 million contribution was received by ACME Intermediate from ACME Parent in exchange for an additional 8,000 redeemable preferred units. ACME Intermediate, on the same days of receipt from ACME Parent, contributed to ACME Television the aggregate $15 million. The terms of the ACME Intermediate preferred units provided for dividend accruals at the rate of 22.5% per annum for the first six months following issuance and were mandatorily redeemable to ACME Parent on the earlier of (a) the completion of new permanent financing, including an initial public offering or a debt offering or (b) October 1, 2005. ACME Intermediate redeemed all of the preferred units at the close of ACME Parent's initial public offering on October 5, 1999. (8) BANK REVOLVER ACME Television has a revolving credit facility (the Loan Agreement) with Canadian Imperial Bank Corporation (CIBC), as agent and lead lender. Under the terms of the Loan Agreement, advances bear interest at a base rate, that at our option, is either the bank's prime rate or LIBOR, plus a spread. Commitment fees are charged at a rate of .5% per annum, paid quarterly, on the unused portion of the facility. On December 29, 2000, the Loan Agreement was amended to provide less restrictive financial covenants and the Company voluntarily reduced the Banks' aggregate commitment from $40 million to $30 million as of December 31, 2000. The commitment amortization rate was reduced throughout the balance of the term, which ends September 30, 2002. As of December 31, 1999 and 2000 there were no outstanding balances under the Loan Agreement. The Loan Agreement contains certain covenants and restrictions including restrictions on future indebtedness and limitations on investments and transactions with affiliates. ACME Television was in compliance with all such covenants and restrictions at December 31, 2000. Costs associated with the procuring of bank credit facilities, including loan fees and related professional fees, are included in long-term other assets and are amortized over the term of the Loan Agreement. 27 28 (9) COMMITMENTS AND CONTINGENCIES OBLIGATIONS UNDER OPERATING LEASES The Company is obligated under non-cancelable operating leases for office space, office equipment, broadcast equipment and transmission sites. Future minimum lease payments as of the year ended December 31, 2000, under non-cancelable operating leases with initial or remaining terms of one year or more are: (In thousands) 20O1............................... $1,752 2002............................... 1,430 2003............................... 1,289 2004............................... 1,067 2005............................... 754 Thereafter......................... 3,178 ------ Total.......................... $9,470 ====== Total rental expense under operating leases for the twelve months ended December 31, 1998, 1999 and 2000 was $967,463, $850,383 and $1,739,591, respectively. OBLIGATIONS UNDER CAPITAL LEASES As of December 31, 2000, approximately $9,529,000 of equipment was leased under capital equipment facilities. These obligations are reflected as current obligations under capital leases of $1,617,000 and $2,271,000 and as non-current liabilities under capital lease of $5,796,000 and $7,258,000 at December 31, 1999 and 2000 respectively. These capital lease obligations expire over the next five years. Future minimum lease payments as of December 31, 2000 under capital leases are: (In thousands) 2001............................... $ 2,917 2002............................... 2,897 2003............................... 2,721 2004............................... 1,724 2005............................... 918 -------- Total.............................. $ 11,177 Less: Amount representing interest................... (1,648) -------- Present value of minimum lease payments......................... 9,529 Less: Current portion.............. (2,271) -------- Long-term portion.................. $ 7,258 ======== 28 29 PROGRAM RIGHTS PAYABLE Commitments for program rights that have been executed, but which have not been recorded in the accompanying financial statements, as the underlying programming is not yet available for broadcast, were approximately $7,862,000 and $23,475,000 as of December 31, 1999 and 2000, respectively. Maturities on the Company's program rights payables (including commitments not recognized in the accompanying financial statements due to the lack of current availability for broadcast) for each of the next five years are: (In thousands) 20O1................................ $12,108 2002................................ 12,107 2003................................ 10,299 2004................................ 7,866 2005................................ 3,385 Thereafter.......................... 23 ------- Total.......................... $45,788 ======= CERTAIN COMPENSATION ARRANGEMENTS In June 1997, ACME Parent issued an aggregate of 100 management carry units to certain executives. These units entitled holders to certain distribution rights upon achievement of certain returns by non-management investors and were subject to forfeiture or repurchase by ACME Parent in the event of termination of each individual's employment by the Company under certain specified circumstances. These management carry units were accounted for as a variable plan resulting in an expense when it is probable that any such distributions will be made. The Company determined the value of these at the issuance date to be immaterial. Upon the closing of ACME Parent's IPO these management carry units were exchanged for fully vested shares of ACME Parent's common stock. The issuance of the management carry units related to management services provided to the Company by the executives and therefore all expense recognized in connection with these awards were charged to the Company by ACME Parent and have been treated as a capital contribution by ACME Parent to the Company. During 1999, the Company recorded an expense of $39.6 million relating to the units. No expense was recorded relating to these units in 2000 or 1998. LEGAL PROCEEDINGS We are currently, and from time to time, involved in litigation incidental to the conduct of our business. We are not currently a party to any lawsuit or proceeding that we believe would have a material adverse effect on our financial condition, results of operations or liquidity. 29 30 (10) INCOME TAXES The income tax benefit consists of the following:

The differences between the income tax benefit and income taxes computed using the U.S. Federal statutory income tax rates (34%) consist of the following:

30 31 DEFERRED INCOME TAXES Prior to the Reorganization, the Company was a non-taxable entity, therefore no income taxes have been provided for its operations other than at its subsidiary ACME Television of Missouri, Inc. which is a C corporation subject to federal and state taxation. Any liability or benefit from the Company's non-taxable entities' consolidated income or loss prior to the Reorganization is the responsibility of, or benefit to, the individual members. The 1999 data listed below take into consideration the tax effect to the Company after its Reorganization.

(11) RELATED PARTY TRANSACTIONS The Company's stations have entered into affiliation agreements and, from time to time, related marketing arrangements with The WB Network. Jamie Kellner, Chief Executive Officer, is an owner and the chief executive officer of The WB Network. Pursuant to June 1995 agreements among Koplar Communications, Inc., Roberts Broadcasting, Michael Roberts and Steven C. Roberts, Roberts Broadcasting cannot (i) transfer its license for WHSL, East St. Louis, Illinois, (ii) commit any programming time of the station for commercial programming or advertising or (iii) enter into a local marketing agreement with respect to such station until June 1, 2000. In the event that the current affiliation agreement for WHSL is terminated, the substitute format must be substantially similar to the current home shopping network format or, in the alternative, an infomercial format. The annual payment from KPLR for these agreements was $200,000 during the first three years. The Company paid $300,000 in both 1998 and 1999 under this agreement, no payments were made in 2000. 31 32 In connection with our Salt Lake City and New Mexico stations, the Company has entered into long-term agreements to lease studio facilities and/or transmission tower space for KUWB, KUPX and KWBQ from an affiliate of Michael Roberts. Michael Roberts serves on ACME Parent's Board of Directors. These leases have terms of approximately fifteen years and provide for monthly payments aggregating approximately $25,000, subject to adjustment based on the Consumer Price Index. In connection with the recent acquisition of WBUI, WIWB and WBDT in June of 1999, we paid CEA, Inc. a broker's fee of $125,000. CEA, Inc. also received compensation from the seller in connection with the purchase of WBUI, WIWB and WBDT. One of ACME Parent's directors, Mr. Collis, is an officer of an affiliate of CEA Capital Partners. (12) DEFINED CONTRIBUTION PLAN In 1998, the Company established a 401(k) defined contribution plan (the Plan) which covers all eligible employees (as defined in the Plan). Participants are allowed to make non-forfeitable contributions up to 15% of their annual salary, but may not exceed the annual maximum contribution limitations established by the Internal Revenue Service. The Company currently matches 50% of the amounts contributed by each participant but does not match participants' contributions in excess of 6% of their contribution per pay period. The Company contributed and expensed $200,000 to the Plan for the year ended December 31, 1998, and $173,000 for the year ended December 31, 1999 and $273,000 for the year ended December 31, 2000. (13) STOCK OPTION COMPENSATION ACME Parents' 1999 Stock Incentive Plan provides additional means to attract, motivate, reward and retain key personnel. All of the options granted to date under the Plan have been to Company employees or to executives of ACME Parent who render services to the Company. The administrator has the authority to grant different types of stock and cash incentive awards and to select participants. While only stock options and restricted stock awards are contemplated at this time, other forms of awards may be granted to give us flexibility to structure future incentives. Our employees, officers, directors, and consultants may be selected to receive awards under the plan. A maximum of 4,200,000 shares of ACME Parent's common stock may be issued under the plan, (approximately 25.08% of our outstanding shares). The number of shares subject to stock options and stock appreciation rights granted under the plan to any one person in a calendar year cannot exceed 1,000,000 shares. The number of shares subject to all awards granted under the plan to any one person in a calendar year cannot exceed 1,000,000 shares. Performance-based awards payable solely in cash that are granted under the plan to any one person in a calendar year cannot provide for payment of more than $1,000,000. Each share limit and award under the plan is subject to adjustment for certain changes in our capital structure, reorganizations and other extraordinary events. Shares subject to awards that are not paid or exercised before they expire or are terminated are available for future grants under the plan. 32 33 Stock option activity during the year consisted of the following:

The following table summarizes information concerning currently outstanding and exercisable options:

The Company applies Accounting Principles Board Opinion No. 25 and related interpretations, in accounting for stock options. Accordingly, no compensation cost has been recognized for options granted at or above fair market value at the time of grant. For the grants that were made at an option price lower than fair market value at the time of grant, compensation expense of $132,000 was recognized in the fourth quarter of 1999 (the first quarter of the vesting period) and $529,000 for the year ended December 31, 2000. The options granted at below fair market value at the date of grant were granted upon conversion of the Company's Long Term Incentive Plan (LTIP). The Company recognized compensation expense under the LTIP of $338,000 during the year ended December 31, 1999 and $400,000 during the year ended December 31, 1998. All amounts expensed prior to the conversion of the LTIP ($738,000) are netted against the total of the below market option compensation expense to arrive at the expense to be recognized over the vesting period of such options. 33 34 Had the Company chosen to adopt the provisions of Statement of Financial Accounting Standards No. 123, and recognized compensation cost based upon the fair value of all options granted (including those granted at or above fair market value) at the date of grant, the Company's net loss (in thousands) for the year ended December 31, 1999 and 2000 would have been as follows:

The fair value of the options granted were used to calculate the pro forma net income and net income per common share above, on the date of grant, using a binomial option-pricing model with the following weighted average assumptions: 1999 2000 ------- ------- Dividend yield............................ -- -- Expected volatility....................... 50.00% 121.00% Risk free interest rate................... 6.11% 5.87% Expected life (in months)................. 60 60 Weighted average fair value of grants..... $12.03 $13.99 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 Omitted under the reduced disclosure format pursuant to General Instruction I (2) (c) of Form 10-K. ITEM 11. EXECUTIVE COMPENSATION Omitted under the reduced disclosure format pursuant to General Instruction I (2) (c) of Form 10-K. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Omitted under the reduced disclosure format pursuant to General Instruction I (2) (c) of Form 10-K. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Omitted under the reduced disclosure format pursuant to General Instruction I (2) (c) of Form 10-K. 34 35 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. FINANCIAL STATEMENTS The following financial statements are included in Item 8: ACME Intermediate Holdings, LLC and Subsidiaries and ACME Television, LLC and Subsidiaries: o Consolidated Balance Sheets as of December 31, 1998 and 1999. o Consolidated Statements of Operations for the years ended December 31, 1998, 1999 and 2000. o Consolidated Statements of Members' Capital for the years ended December 31, 1998, 1999 and 2000. o Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1999 and 2000. o Notes to the Consolidated Financial Statements. (a) 2. FINANCIAL STATEMENT SCHEDULES The following financial statement schedules are included in Item 14 (d): Schedule I - Condensed Financial Information of ACME Intermediate Holdings, LLC and ACME Television, LLC (Parent Companies): o Balance Sheet as of December 31, 1999 and 2000. o Statements of Operations for the years ended December 31, 1998, 1999 and 2000. o Statements of Cash Flows for the years ended December 31, 1998, 1999 and 2000. o Notes to the Condensed Financial Information. Schedule II - Valuation and Qualifying Accounts All other schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or the notes thereto, included in Item 8 herewith. (a) 3. EXHIBITS EXHIBIT NUMBER EXHIBIT DESCRIPTION ------- ------------------- 3.1(1) Certificate of Formation of ACME Intermediate Holdings, LLC. 3.2(1) Limited Liability Company Agreement of ACME Intermediate Holdings, LLC. 3.3(2) Certificate of Formation of ACME Television, LLC. 3.4(2) Limited Liability Company Agreement of ACME Television, LLC. 4.1(1) Indenture, dated September 30, 1997, by and among ACME Intermediate Holdings, LLC and ACME Intermediate Finance, Inc., as Issuers, and Wilmington Trust Company. 4.2(1) Indenture, dated September 30, 1997, by and among ACME Television, LLC and ACME Finance Corporation, as issuers, the Guarantors named therein, and Wilmington Trust Company. 4.3(4) First Supplemental Indenture, dated February 11, 1998, by and among ACME Television, LLC and ACME Finance Corporation, the Guarantors named therein, and Wilmington Trust Company. 4.4(4) Second Supplemental Indenture, dated March 13, 1998, by and among ACME Television, LLC and ACME Finance Corporation, the Guarantors named therein, and Wilmington Trust Company. 35 36 EXHIBIT NUMBER EXHIBIT DESCRIPTION ------- ------------------- 4.5(6) Third Supplemental Indenture, dated August 21, 1998, by and among ACME Television, LLC and ACME Finance Corporation, as issuers, the Guarantors named therein, and Wilmington Trust Company. 10.1(9) Asset Purchase Agreement, dated April 23, 1999, by and among Paxson Communications Corporation, Paxson Communications License Company, LLC, Paxson Communications of Green Bay-14, Inc., Paxson Communications of Dayton-26, Inc., Paxson Dayton License, Inc., Paxson Communications of Decatur-23, Inc., Paxson Decatur License, Inc., ACME Television of Ohio, LLC, ACME Television Licenses of Ohio, LLC, ACME Television of Wisconsin, LLC, ACME Television Licenses of Wisconsin, LLC, ACME Television of Illinois, LLC and ACME Television Licenses of Illinois, LLC for WDPX(TV), Springfield, Ohio, WPXG(TV), Suring, WI and WPXU(TV), Decatur, IL. 10.2(3) Time Brokerage Agreement, dated April 23, 1999, by and among Paxson Communications License Company, LLC, Paxson Communications of Green Bay-14, Inc., and ACME Television of Wisconsin, LLC for Station WPXG-TV, Suring, Wisconsin. 10.3(3) Time Brokerage Agreement, dated April 23, 1999, by and among Paxson Decatur License, Inc., Paxson Communications of Decatur-23, Inc., and ACME Television of Illinois, LLC for Station WPXU-TV, Decatur, Illinois. 10.4(3) Time Brokerage Agreement, dated April 23, 1999, by and among Paxson Dayton License, Inc., Paxson Communications of Dayton-26, Inc., and ACME Television of Ohio, LLC for Station WDPX-TV, Springfield, Ohio. 10.5(10) Amendment to Asset Purchase Agreement, dated July 30, 1999, by and between ACME Television of New Mexico, LLC and ACME Television Licenses of New Mexico, LLC and Ramar Communications II, Ltd., with respect to television station KASY-TV, Santa Fe, New Mexico. 10.6(8) Asset Purchase Agreement, dated February 19, 1999, by and between ACME Television of New Mexico, LLC and ACME Television Licenses of New Mexico, LLC and Ramar Communications II, Ltd., with respect to television station KASY-TV, Albuquerque, New Mexico. 10.7(10) Station Affiliation Agreement, dated March 15, 1998, by and between ACME Television Holdings, LLC and The WB Television Network Partners, L.P. 10.8(1) Station Affiliation Agreement, dated September 24, 1997, by and between ACME Holdings of St. Louis, LLC and The WB Television Network Partners, L.P. 10.9(3) Management Agreement between Edward J. Koplar and ACME Television Licenses of Missouri, Inc. 10.10(3) Station Affiliation Agreement, dated August 18, 1997, by and between ACME Holdings of Knoxville, LLC and The WB Television Network Partners, L.P. 10.11(3) Station Affiliation Agreement, dated June 10, 1997, by and between ACME Holdings of Oregon, LLC and The WB Television Network Partners, L.P. 10.12(10) Joint Sales Agreement by and between ACME Television Holdings, LLC and DP Media, Inc., dated April 23, 1999. 10.13(10) Option Agreement, dated April 23, 1999, by and between ACME Television Holdings, LLC and DP Media, Inc. 10.14(1) Station Affiliation Commitment Letter dated August 21, 1997, to ACME Communications, Inc. from The WB Television Network. 10.15(10) ACME Communications, Inc. 1999 Stock Incentive Plan. 10.16(10) Form of Employment Agreement, as amended, by and between ACME Communications, Inc. and Doug Gealy. 10.17(10) Form of Employment Agreement, as amended, by and between ACME Communications, Inc. and Tom Allen. 10.18(10) Consulting Agreement, as amended, by and between ACME Communications, Inc. and Jamie Kellner. 10.19(1) First Amended and Restated Credit Agreement, dated as of December 2, 1997, by and among ACME Television, LLC, the Lenders named therein and Canadian Imperial Bank of Commerce, New York Agency, as agent for the Lenders. 36 37 EXHIBIT NUMBER EXHIBIT DESCRIPTION ------- ------------------- 10.20(3) Securities and Pledge Agreement, dated December 2, 1997, by and between ACME Subsidiary Holdings III, LLC and Canadian Imperial Bank of Commerce, as agent for the benefit of CIBC, Inc. and other financial institutions. 10.21(10) Amendment No. 1 to First Amended and Restated Credit Agreement, dated June 30, 1998. 10.22(10) Amendment No. 2 to First Amended and Restated Credit Agreement, dated June 30, 1998. 10.23(10) Third Amendment to First Amended and Restated Credit Agreement, dated March 1, 1999. 10.24(10) Fourth Amendment to First Amended and Restated Credit Agreement, dated April 23, 1999. 10.25(10) Fifth Amendment to Credit Agreement, dated September 1999. 10.26(12) Sixth Amendment to Credit Agreement, dated December 29, 1999. 10.27(12) Seventh Amendment to Credit Agreement, dated December 29, 2000. 10.28(3) Form of Guaranty by and among ACME subsidiaries, Canadian Imperial Bank of Commerce, as agent, and the Lenders under the First Amended and Restated Credit Agreement. 10.29(3) Form of Security and Pledge Agreement by and among ACME subsidiaries, Canadian Imperial Bank of Commerce, as agent, and the Lenders under the First Amended and Restated Credit Agreement. 10.30(10) Form of Registration Rights Agreement, by and among ACME Communications, Inc. and the parties on the signature pagesthereto. 10.31(1) Note Purchase Agreement, dated September 24, 1997, by and among ACME Intermediate Holdings, LLC, ACME Intermediate Finance, Inc. and CIBC Wood Gundy Securities Corp., as Initial Purchaser. 10.32(2) Note Purchase Agreement, dated September 24, 1997, by and among ACME Television, LLC, ACME Finance Corporation, CIBC Wood Gundy Securities Corp. and Merrill Lynch, Pierce, Fenner & Smith Incorporated. 10.33(1) Securities Pledge Agreement, dated September 30, 1997, by and between ACME Intermediate Holdings, LLC and ACME Intermediate Finance, Inc., as Pledgers, and Wilmington Trust Company, as Trustee. 10.34(10) Employment Agreement, dated September 27, 1999 by and between ACME Communications, Inc. and Ed Danduran. 10.35(10) Station Affiliation Agreement, dated April 9, 1998, by and between ACME Television Licenses of Utah LLC and The WB Television Network. 10.36(10) Station Affiliation Agreement, dated March 4, 1999, by and between ACME Television Licenses of New Mexico LLC and The WB Television Network. 10.37(10) Station Affiliation Agreement, dated May 1, 1999, by and between ACME Television Licenses of Wisconsin LLC and The WB Television Network. 10.38(10) Station Affiliation Agreement, dated May 1, 1999, by and between ACME Television Licenses of Illinois LLC and The WB Television Network. 10.39(10) Station Affiliation Agreement, dated May 1, 1999, by and between ACME Television Licenses of Ohio LLC and The WB Television Network. 10.40(11) Second Amendment to Asset Purchase Agreement, dated November 1, 1999, by and between ACME Television of New Mexico, LLC and Ramar Communications II, Ltd., with respect to television station KASY-TV, Santa Fe, New Mexico. 10.41(11) Time Brokerage Agreement dated November 1, 1999, by and between Ramar Communications, II, Ltd. and ACME Television of New Mexico, LLC. 37 38 ------------------------- (1) Incorporated by reference to the Registration Statement for ACME Intermediate Holdings, LLC on Form S-4, File No. 333-4027, filed on November 14, 1997. (2) Incorporated by reference to the Registration Statement for ACME Television, LLC on Form S-4, File No. 333-40281, filed on November 14, 1997. (3) Incorporated by reference to the Registration Statement for ACME Television, LLC on Form S-4/A, File No. 333-40281, filed on January 16, 1998 (4) Incorporated by reference to ACME Intermediate Holdings LLC's Quarterly Report on Form 10-Q for the period ending March 31, 1998. (5) Incorporated by reference to ACME Intermediate Holdings LLC's Quarterly Report on Form 10-Q for the period ending June 30, 1998. (6) Incorporated by reference to ACME Intermediate Holdings LLC's Quarterly Report on Form 10-Q for the period ending September 30, 1998. (7) Incorporated by reference to ACME Intermediate Holdings LLC's Annual Report on Form 10-K for the for the year ended December 31, 1998. (8) Incorporated by reference to ACME Television Holdings LLC's Quarterly Report on Form 10-Q for the period ending March 31, 1999. (9) Incorporated by reference to ACME Intermediate Holdings LLC's Report on Form 8-K filed May 7, 1999. (10) Incorporated by reference to the Registration Statement for ACME Communications, Inc. on Form S-1, File No.333-84191, filed on September 29, 1999. (11) Incorporated by reference to ACME Communications, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999, filed March 28, 2000. (12) Incorporated by reference to ACME Communications, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2000, filed March 30, 2001. (b) REPORTS ON FORM 8-K. The Company filed no reports on Form 8-K during the three months ended December 31, 2000. 38 39 SIGNATURES Pursuant to the requirements of Sections 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. ACME Intermediate Holdings, LLC Date: April 2, 2001 /s/ THOMAS ALLEN -------------------------------- Thomas Allen Executive Vice President and Chief Financial Officer and Director (Principal Financial Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

39 40 SIGNATURES Pursuant to the requirements of Sections 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. ACME Television, LLC Date: April 2, 2001 /s/ THOMAS ALLEN -------------------------------- Thomas Allen Executive Vice President and Chief Financial Officer and Director (Principal Financial Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

40 41 SCHEDULE I ACME INTERMEDIATE HOLDINGS, LLC ACME TELEVISION, LLC (PARENT COMPANIES) CONDENSED FINANCIAL INFORMATION BALANCE SHEETS

See accompanying notes to condensed financial information. 41 42 ACME INTERMEDIATE HOLDINGS, LLC ACME TELEVISION, LLC (PARENT COMPANIES) CONDENSED FINANCIAL INFORMATION STATEMENT OF OPERATIONS

See accompanying notes to condensed financial information. 42 43 ACME INTERMEDIATE HOLDINGS, LLC AND ACME TELEVISION, LLC (PARENT COMPANIES) CONDENSED FINANCIAL INFORMATION STATEMENT OF CASH FLOWS

See accompanying notes to condensed financial information. 43 44 ACME INTERMEDIATE HOLDINGS, LLC AND ACME TELEVISION, LLC (PARENT COMPANIES) NOTES TO CONDENSED FINANCIAL INFORMATION 1. FORMATION AND BASIS OF PRESENTATION Pursuant to the rules and regulations of the Securities and Exchange Commission, the Condensed Financial Statements of ACME Intermediate Holdings, LLC and ACME Television, LLC, do not include all of the information and notes normally included with financial statements prepared in accordance with generally accepted accounting principles. It is therefore suggested that these Condensed Financial Statements be read in conjunction with the Consolidated Financial Statements and Notes thereto included at Item 8 of this filing. The accompanying condensed financial statements are presented for ACME Intermediate Holdings, LLC and ACME Television, LLC. 2. CASH DIVIDENDS There have been no cash dividends declared by either ACME Intermediate Holdings, LLC or ACME Television, LLC. 3. LONG-TERM DEBT There are no cash interest payments due on ACME Intermediate Holdings, LLC's Senior Secured Discount Notes until March 31, 2003. There are no cash interest payments due on ACME Television, LLC's Senior Discount Notes until March 31, 2001. 44 45 SCHEDULE II ACME INTERMEDIATE HOLDINGS, LLC AND ACME TELEVISION, LLC VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1999 AND DECEMBER 31, 2000

45 46 EXHIBIT INDEX EXHIBIT NUMBER EXHIBIT DESCRIPTION ------- ------------------- 3.1(1) Certificate of Formation of ACME Intermediate Holdings, LLC. 3.2(1) Limited Liability Company Agreement of ACME Intermediate Holdings, LLC. 3.3(2) Certificate of Formation of ACME Television, LLC. 3.4(2) Limited Liability Company Agreement of ACME Television, LLC. 4.1(1) Indenture, dated September 30, 1997, by and among ACME Intermediate Holdings, LLC and ACME Intermediate Finance, Inc., as Issuers, and Wilmington Trust Company. 4.2(1) Indenture, dated September 30, 1997, by and among ACME Television, LLC and ACME Finance Corporation, as issuers, the Guarantors named therein, and Wilmington Trust Company. 4.3(4) First Supplemental Indenture, dated February 11, 1998, by and among ACME Television, LLC and ACME Finance Corporation, the Guarantors named therein, and Wilmington Trust Company. 4.4(4) Second Supplemental Indenture, dated March 13, 1998, by and among ACME Television, LLC and ACME Finance Corporation, the Guarantors named therein, and Wilmington Trust Company. 4.5(6) Third Supplemental Indenture, dated August 21, 1998, by and among ACME Television, LLC and ACME Finance Corporation, as issuers, the Guarantors named therein, and Wilmington Trust Company. 10.1(9) Asset Purchase Agreement, dated April 23, 1999, by and among Paxson Communications Corporation, Paxson Communications License Company, LLC, Paxson Communications of Green Bay-14, Inc., Paxson Communications of Dayton-26, Inc., Paxson Dayton License, Inc., Paxson Communications of Decatur-23, Inc., Paxson Decatur License, Inc., ACME Television of Ohio, LLC, ACME Television Licenses of Ohio, LLC, ACME Television of Wisconsin, LLC, ACME Television Licenses of Wisconsin, LLC, ACME Television of Illinois, LLC and ACME Television Licenses of Illinois, LLC for WDPX(TV), Springfield, Ohio, WPXG(TV), Suring, WI and WPXU(TV), Decatur, IL. 10.2(3) Time Brokerage Agreement, dated April 23, 1999, by and among Paxson Communications License Company, LLC, Paxson Communications of Green Bay-14, Inc., and ACME Television of Wisconsin, LLC for Station WPXG-TV, Suring, Wisconsin. 10.3(3) Time Brokerage Agreement, dated April 23, 1999, by and among Paxson Decatur License, Inc., Paxson Communications of Decatur-23, Inc., and ACME Television of Illinois, LLC for Station WPXU-TV, Decatur, Illinois. 10.4(3) Time Brokerage Agreement, dated April 23, 1999, by and among Paxson Dayton License, Inc., Paxson Communications of Dayton-26, Inc., and ACME Television of Ohio, LLC for Station WDPX-TV, Springfield, Ohio. 10.5(10) Amendment to Asset Purchase Agreement, dated July 30, 1999, by and between ACME Television of New Mexico, LLC and ACME Television Licenses of New Mexico, LLC and Ramar Communications II, Ltd., with respect to television station KASY-TV, Santa Fe, New Mexico. 10.6(8) Asset Purchase Agreement, dated February 19, 1999, by and between ACME Television of New Mexico, LLC and ACME Television Licenses of New Mexico, LLC and Ramar Communications II, Ltd., with respect to television station KASY-TV, Albuquerque, New Mexico. 10.7(10) Station Affiliation Agreement, dated March 15, 1998, by and between ACME Television Holdings, LLC and The WB Television Network Partners, L.P. 47 EXHIBIT NUMBER EXHIBIT DESCRIPTION ------- ------------------- 10.8(1) Station Affiliation Agreement, dated September 24, 1997, by and between ACME Holdings of St. Louis, LLC and The WB Television Network Partners, L.P. 10.9(3) Management Agreement between Edward J. Koplar and ACME Television Licenses of Missouri, Inc. 10.10(3) Station Affiliation Agreement, dated August 18, 1997, by and between ACME Holdings of Knoxville, LLC and The WB Television Network Partners, L.P. 10.11(3) Station Affiliation Agreement, dated June 10, 1997, by and between ACME Holdings of Oregon, LLC and The WB Television Network Partners, L.P. 10.12(10) Joint Sales Agreement by and between ACME Television Holdings, LLC and DP Media, Inc., dated April 23, 1999. 10.13(10) Option Agreement, dated April 23, 1999, by and between ACME Television Holdings, LLC and DP Media, Inc. 10.14(1) Station Affiliation Commitment Letter dated August 21, 1997, to ACME Communications, Inc. from The WB Television Network. 10.15(10) ACME Communications, Inc. 1999 Stock Incentive Plan. 10.16(10) Form of Employment Agreement, as amended, by and between ACME Communications, Inc. and Doug Gealy. 10.17(10) Form of Employment Agreement, as amended, by and between ACME Communications, Inc. and Tom Allen. 10.18(10) Consulting Agreement, as amended, by and between ACME Communications, Inc. and Jamie Kellner. 10.19(1) First Amended and Restated Credit Agreement, dated as of December 2, 1997, by and among ACME Television, LLC, the Lenders named therein and Canadian Imperial Bank of Commerce, New York Agency, as agent for the Lenders. 10.20(3) Securities and Pledge Agreement, dated December 2, 1997, by and between ACME Subsidiary Holdings III, LLC and Canadian Imperial Bank of Commerce, as agent for the benefit of CIBC, Inc. and other financial institutions. 10.21(10) Amendment No. 1 to First Amended and Restated Credit Agreement, dated June 30, 1998. 10.22(10) Amendment No. 2 to First Amended and Restated Credit Agreement, dated June 30, 1998. 10.23(10) Third Amendment to First Amended and Restated Credit Agreement, dated March 1, 1999. 10.24(10) Fourth Amendment to First Amended and Restated Credit Agreement, dated April 23, 1999. 10.25(10) Fifth Amendment to Credit Agreement, dated September 1999. 10.26(12) Sixth Amendment to Credit Agreement, dated December 29, 1999. 10.27(12) Seventh Amendment to Credit Agreement, dated December 29, 2000. 10.28(3) Form of Guaranty by and among ACME subsidiaries, Canadian Imperial Bank of Commerce, as agent, and the Lenders under the First Amended and Restated Credit Agreement. 10.29(3) Form of Security and Pledge Agreement by and among ACME subsidiaries, Canadian Imperial Bank of Commerce, as agent, and the Lenders under the First Amended and Restated Credit Agreement. 10.30(10) Form of Registration Rights Agreement, by and among ACME Communications, Inc. and the parties on the signature pagesthereto. 10.31(1) Note Purchase Agreement, dated September 24, 1997, by and among ACME Intermediate Holdings, LLC, ACME Intermediate Finance, Inc. and CIBC Wood Gundy Securities Corp., as Initial Purchaser. 48 EXHIBIT NUMBER EXHIBIT DESCRIPTION ------- ------------------- 10.32(2) Note Purchase Agreement, dated September 24, 1997, by and among ACME Television, LLC, ACME Finance Corporation, CIBC Wood Gundy Securities Corp. and Merrill Lynch, Pierce, Fenner & Smith Incorporated. 10.33(1) Securities Pledge Agreement, dated September 30, 1997, by and between ACME Intermediate Holdings, LLC and ACME Intermediate Finance, Inc., as Pledgers, and Wilmington Trust Company, as Trustee. 10.34(10) Employment Agreement, dated September 27, 1999 by and between ACME Communications, Inc. and Ed Danduran. 10.35(10) Station Affiliation Agreement, dated April 9, 1998, by and between ACME Television Licenses of Utah LLC and The WB Television Network. 10.36(10) Station Affiliation Agreement, dated March 4, 1999, by and between ACME Television Licenses of New Mexico LLC and The WB Television Network. 10.37(10) Station Affiliation Agreement, dated May 1, 1999, by and between ACME Television Licenses of Wisconsin LLC and The WB Television Network. 10.38(10) Station Affiliation Agreement, dated May 1, 1999, by and between ACME Television Licenses of Illinois LLC and The WB Television Network. 10.39(10) Station Affiliation Agreement, dated May 1, 1999, by and between ACME Television Licenses of Ohio LLC and The WB Television Network. 10.40(11) Second Amendment to Asset Purchase Agreement, dated November 1, 1999, by and between ACME Television of New Mexico, LLC and Ramar Communications II, Ltd., with respect to television station KASY-TV, Santa Fe, New Mexico. 10.41(11) Time Brokerage Agreement dated November 1, 1999, by and between Ramar Communications, II, Ltd. and ACME Television of New Mexico, LLC. ------------------------- (1) Incorporated by reference to the Registration Statement for ACME Intermediate Holdings, LLC on Form S-4, File No. 333-4027, filed on November 14, 1997. (2) Incorporated by reference to the Registration Statement for ACME Television, LLC on Form S-4, File No. 333-40281, filed on November 14, 1997. (3) Incorporated by reference to the Registration Statement for ACME Television, LLC on Form S-4/A, File No. 333-40281, filed on January 16, 1998 (4) Incorporated by reference to ACME Intermediate Holdings LLC's Quarterly Report on Form 10-Q for the period ending March 31, 1998. (5) Incorporated by reference to ACME Intermediate Holdings LLC's Quarterly Report on Form 10-Q for the period ending June 30, 1998. (6) Incorporated by reference to ACME Intermediate Holdings LLC's Quarterly Report on Form 10-Q for the period ending September 30, 1998. (7) Incorporated by reference to ACME Intermediate Holdings LLC's Annual Report on Form 10-K for the for the year ended December 31, 1998. (8) Incorporated by reference to ACME Television Holdings LLC's Quarterly Report on Form 10-Q for the period ending March 31, 1999. (9) Incorporated by reference to ACME Intermediate Holdings LLC's Report on Form 8-K filed May 7, 1999. (10) Incorporated by reference to the Registration Statement for ACME Communications, Inc. on Form S-1, File No.333-84191, filed on September 29, 1999. (11) Incorporated by reference to ACME Communications, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999, filed March 28, 2000. (12) Incorporated by reference to ACME Communications, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2000, filed March 30, 2001.

ACME INTERMEDIATE HOLDINGS LLC 10-K