10-K 1 jmxi081484_10k.txt FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 2007 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007 Commission File Number 000-25943* JMXI Liquidating Trust (Exact name of registrant as specified in its charter) Delaware 20-6007641 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) c/o Wells Fargo Bank, National Association (as successor by consolidation to Wells Fargo Bank Minnesota, National Association) 625 Marquette Ave., MAC N9311-110 Minneapolis, MN 55479 (Address and zip code of principal executive offices) (612) 667-3961 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None *JMXI Liquidating Trust is the distributee of certain assets and liabilities of JMXI, Inc. and submits reports under JMXI's former Commission file number. This report is not deemed to be "filed" under the Securities Exchange Act of 1934. See, e.g., MGI Properties MGI Liquidating Trust (pub. avail. Sept. 29, 2000) and Burnham Pacific Properties, Inc. (pub. avail. June 21, 2002). Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes |_| No |X| Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes |X| No |_| Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Not applicable. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Not applicable. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): Large Accelerated Filer |_| Accelerated Filer |_| Non-Accelerated Filer |_| Smaller Reporting Company |X| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X| State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter. Not applicable. DOCUMENTS INCORPORATED BY REFERENCE: NONE JMXI LIQUIDATING TRUST TABLE OF CONTENTS Page No. -------- PART I........................................................................1 ITEM 1. BUSINESS..............................................................1 ITEM 1A. RISK FACTORS.........................................................3 ITEM 1B. UNRESOLVED STAFF COMMENTS............................................3 ITEM 2. PROPERTIES............................................................3 ITEM 3. LEGAL PROCEEDINGS.....................................................4 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................4 PART II.......................................................................4 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.............................4 ITEM 6. SELECTED FINANCIAL DATA...............................................5 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.....................................................5 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...........6 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...........................7 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.........................................................15 ITEM 9A. CONTROLS AND PROCEDURES.............................................15 ITEM 9B. OTHER INFORMATION...................................................15 PART III.....................................................................15 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE..............15 ITEM 11. EXECUTIVE COMPENSATION..............................................15 -i- Page No. -------- ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS..............................................16 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.................................................................16 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES..............................16 PART IV......................................................................16 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES..........................16 SIGNATURES...................................................................17 -ii- This report includes "forward-looking statements." These forward-looking statements include, but are not limited to, statements about the Trust's plans, objectives, representations and contentions and are not historical facts, and may be identified by use of terms such as "anticipate," "believe," "estimate," "plan," "may," "expect," "intend," "could," "potential" and similar expressions, although some forward-looking statements are expressed differently. Readers should be aware that the forward-looking statements included in this report represent the Liquidating Trustee's current judgment and expectations, but actual results, events and performance could differ materially from those in the forward-looking statements. The forward-looking statements are subject to a number of risks and uncertainties. The Liquidating Trustee does not intend to update any of these factors or to publicly announce the results of any revisions to these forward-looking statements. PART I ITEM 1. BUSINESS. OVERVIEW The JMXI Liquidating Trust (the "Trust") was established pursuant to the JMXI Liquidating Trust Agreement dated May 1, 2003 (the "Trust Agreement"), by and among Wells Fargo Bank, National Association (the "Liquidating Trustee"), Wells Fargo Bank Delaware Trust Company, the Liquidating Trustee's affiliate (the "Delaware Trustee") and JMXI, Inc., a Delaware corporation ("JMXI"). Pursuant to the Plan of Distribution of JMXI, Inc. dated May 1, 2003, certain assets and liabilities of JMXI were transferred to the Trust, and JMXI dissolved (the "Dissolution"). The Trust was formed in order to liquidate the assets and liabilities so transferred to it and to distribute the net funds remaining following such liquidation to the former holders of the common shares of JMXI (the "Beneficiaries"). Interests in the Trust ("Beneficial Interests") are not assignable or transferable except by will, intestate succession or operation of law. The Beneficial Interests are not certificated. The Trust was intended to dissolve within three years. The Trust may be dissolved at any time by the action of Beneficiaries having more than 66.7 percent of the aggregate Beneficiary's percentage interest, provided that there remain no liabilities for which the Trust may be responsible. The Trust receives income from subtenants and makes payment to landlords on account of three remaining rental properties pursuant to office leases that it assumed at the time it was formed. The Liquidating Trustee and the landlords have reached an agreement in principle, subject to the execution of a written agreement among the Liquidating Trustee, the subtenants and the landlords, to terminate these leases and obtain full releases from the subtenants for the benefit of each of the Liquidating Trustee and the landlords. After the leases have been terminated and the releases have been obtained (currently expected to occur in the second quarter of 2008), it is expected that the Liquidating Trustee will take action to terminate the Trust and make final distributions to the Beneficiaries. The Liquidating Trustee will provide notice to the Beneficiaries of any final distributions. -1- As of December 31, 2007, the Trust is a tenant or subtenant under three separate real property leases for properties located on the 6th, 12th and 14th floors of a building located at 352 Park Avenue South, New York, New York. The Trust, in turn, subleases each of these properties to a subtenant or sub-subtenant. The Trust is negotiating lease termination agreements for the 6th floor and 14th floor properties. The lease termination agreements, if finalized, would allow the Trust to terminate its lease interest in the properties and receive full releases of any further obligations. The lease for the 12th floor property expires by its own terms on August 27, 2008. The Trust is attempting to negotiate a lease termination agreement for the 12th floor property as well, but if unsuccessful, will fully reserve and escrow at the time of the termination of the Trust all amounts due and owing under the lease, net of expected sublease rental income, until its expiration. The principal assets transferred to the Trust on or about May 1, 2003, included: - Interest in several JMXI bank accounts - Cash in the amount of $7,265,397 (inclusive of interest in JMXI depository accounts) The principal liabilities assumed by the Trust on May 1, 2003, included: - The liabilities and obligations of JMXI under several leases - The obligations of JMXI with respect to claims by certain taxing authorities - The liabilities of JMXI associated with a certain employee lawsuit brought against JMXI TAX TREATMENT Because the Trust is classified as a liquidating trust, it will be treated as a grantor trust for federal income tax purposes and, accordingly, will not be subject to tax on any income or gain recognized by it. Each Beneficiary will be treated as the owner of his pro rata portion of each asset, including cash received by and held by the Trust. Each Beneficiary will be required to take into account in computing his own taxable income his pro rata share of each item of income, gain and loss of the Trust. The Trust will issue an annual information statement to the Beneficiaries with tax information sufficient to enable Beneficiaries to complete their tax returns. Beneficiaries are urged to consult with their own tax advisors as to their own filing requirements and the appropriate tax reporting of this information on their returns. -2- INCOME, PAYMENTS AND DISBURSEMENTS The Trust receives income from subtenants and makes payment to landlords on account of three rental properties pursuant to office leases that it assumed at the time it was formed. The Liquidating Trustee and the landlords have reached an agreement in principle that will only be consummated upon the execution of a written agreement among the Liquidating Trustee, the subtenants and the landlords, to terminate these leases and obtain full releases for the benefit of each of the Liquidating Trustee and the landlords. After the leases have been terminated and the releases have been obtained, it is expected that the Liquidating Trustee will take action to terminate the Trust and make final distributions to the Beneficiaries. Payments by the Trust in satisfaction of liabilities totaled $1,556,603 during the year ended December 31, 2007. The Trust did not make any distributions to Beneficiaries during the year ended December 31, 2007. REPORTS TO BENEFICIARIES; MEETINGS The Liquidating Trustee is required to provide to the Beneficiaries and to file with the Securities and Exchange Commission an annual report on Form 10-K and reports on Form 8-K whenever, in the opinion of the Liquidating Trustee, a significant event relating to the Trust's assets has occurred. Generally, there will not be meetings of the Beneficiaries. However, holders of at least 10 percent of the aggregate Beneficial Interests may require the Liquidating Trustee to call a meeting of the Beneficiaries. ITEM 1A. RISK FACTORS. Risks to the Trust include the Trust's subtenants defaulting on their lease obligations and any claims being asserted against the Trust. In the event that subtenants default on their lease obligations or that additional claims are asserted against the Trust, no assurances can be made regarding the amount of money, if any, that will be distributed to the Beneficiaries of the Trust. ITEM 1B. UNRESOLVED STAFF COMMENTS. Not applicable. ITEM 2. PROPERTIES. At December 31, 2007, the Trust owned no properties, but is a tenant or subtenant under three separate real property leases for properties located on the 6th, 12th and 14th floors of a building located at 352 Park Avenue South, New York, New York. The Trust, in turn, subleases each of these properties to a subtenant or sub-subtenant. The Trust is negotiating lease termination agreements for the 6th floor and 14th floor properties. The lease termination agreements will allow the Trust to terminate its lease interest in the properties and receive full releases of any further obligations. The lease for the 12th floor property expires by its own terms on August 27, 2008. The Trust is attempting to negotiate a lease termination agreement for the 12th floor property as well, but if unsuccessful, will fully reserve all amounts due and owing under the lease until its expiration. -3- ITEM 3. LEGAL PROCEEDINGS. The Trust is presently unaware of any material pending litigation for which it may be liable, other than as discussed below. A complaint was filed against JMXI in 2001 by a former landlord following termination and surrender of space for approximately $39,000. The landlord failed to respond to JMXI's answer and counterclaim and has refused to respond to repeated requests to dismiss or settle the action. The case has never been assigned to a specific judge. No documents have been filed with the court since May 2001. JMXI's counsel has advised it to take no further action with respect to this matter, since it appears that the landlord has abandoned the litigation. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to a vote of the Beneficiaries, through the solicitation of proxies or otherwise, during the fiscal year ended December 31, 2007. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. There is no public market for the Beneficial Interests of the Trust. Beneficial Interests are not transferable except by will, intestate succession or operation of law. As of December 31, 2007, the Trust had approximately 543 Beneficiaries of record and 36,010,575 units of Beneficial Interest outstanding. -4- ITEM 6. SELECTED FINANCIAL DATA. The following selected unaudited financial data of the Trust are qualified by reference to and should be read in conjunction with the unaudited financial statements, related notes thereto and other financial data included elsewhere herein. The operating results reflected below are for the period from inception of the Trust through December 31, 2007, and for the year ended December 31, 2007. These historical results are not necessarily indicative of the results to be expected in the future.
Inception For the Year Through Ended 12/31/07 12/31/07 (Unaudited) (Unaudited) ----------------------------------------------------------------------------------------------------------------------- Operating results and distributions: Increase in net assets $ 6,472,449 $ 79,244 Increase in net assets per beneficial unit before distributions 0.18 -- Distributions to Beneficiaries per beneficial unit None None As of 12/31/07 (Unaudited) ----------------------------------------------------------------------------------------------------------------------- Net asset data (at December 31, 2007): Total assets (cash and cash equivalents) $ 6,472,449 Total liabilities 6,472,449 Beneficiaries' net assets in liquidation (cash basis) -- Net asset value per beneficial unit --
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion of results of operations and financial condition should be read in conjunction with the Selected Financial Data (Item 6) and the Unaudited Financial Statements and Notes thereto (Item 8). Application of Critical Accounting Policies -- Cash Basis of Accounting. The Trust financial statements are prepared on a cash basis of accounting. Transactions (including the recording of interest earned) are recorded when cash is received or disbursed. The statement of cash receipts and disbursements includes cash receipts as additions and cash disbursements as expenses/deductions. The Trust Agreement provides for the fiscal year of the Trust to end on December 31. -5- The Trust, a grantor trust, was formed in order to liquidate the assets and liabilities transferred to it by JMXI and to distribute the net funds remaining following such liquidation to the former shareholders of JMXI. The Trust began operations on May 1, 2003, when JMXI transferred certain of its assets, subject to certain identified liabilities, to the Trust. The Liquidating Trustee is charged with the duty to operate the Trust, liquidate its remaining assets, provide for and satisfy its remaining liabilities, and make distributions to the Beneficiaries of the Trust. During the year ended December 31, 2007, the Trust incurred legal expenses and expenses related to Advisory Services (as defined in the Trust Agreement) of $25,530, representing an increase of $8,786 from the previous year. The Trust recorded an increase in net cash and cash equivalents before distributions to Beneficiaries of $79,244 ($0.00 per unit) for the year ended December 31, 2007. The increase in net assets primarily resulted from property operating income (which is defined as sublease rental income less rent paid), interest income, and general and administrative expense. At December 31, 2007, the Trust had cash and cash equivalents of $6,472,449. The Liquidating Trustee believes that its cash resources and receivables are sufficient to meet all anticipated liquidity requirements. Certain depository accounts are anticipated to be transferred into the Trust at a later date. Management has not assessed the dollar amount of these assets to be received in the future. The Trust historically maintained two accounts. The main account ("Principal Trust Account") is used to process the day-to-day activities of the Trust. Pursuant to terms of the Trust Agreement, the Trust entered into an escrow agreement ("Escrow Agreement") with Ipsos UK Limited (the "Guarantor") and Wells Fargo Bank, National Association (the "Escrow Agent") to escrow funds ("Escrow Account") for payment of a lease commitment related to property in England. Pursuant to the terms of the Trust Agreement, the Guarantor and the Trust agreed to reimburse the Escrow Agent in equal amounts for all reasonable expenses in performance of its duties. In July 2004, the Escrow Account was terminated, and all obligations of the Trust, including all obligations for payments due to the Escrow Agent, were deemed satisfied with respect thereto. The former subsidiary of JMXI, MMXI UK ("MMXI"), was liquidated after paying its creditors. The remaining assets of approximately $2,600,000 were released to the Trust. Subsequently, in November 2004, the liquidator of MMXI, appointed in accordance with UK law, was able to release another $130,000 to the Trust from the reserve it had maintained to satisfy liquidation costs. In addition, in September 2005, $142,830 was released and transferred to the Trust. This amount is the result of a tax refund on account of value-added tax paid by MMXI. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Trust is presently exposed to the effects of interest rate changes primarily from the financial instruments comprising its portfolio of cash and cash equivalents and fluctuations in exchange rates. -6- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. CONTENTS Unaudited Financial Statements Page Number ------------------------------ ----------- Cash balance sheets 8 Statements of cash receipts and disbursements 9 Notes to financial statements 10 - 14 -7- JMXI LIQUIDATING TRUST CASH BALANCE SHEETS DECEMBER 31, 2007 AND 2006
ASSETS 2007 2006 -------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents (Note 2) $ 6,472,449 $ 6,393,205 ----------- ----------- TOTAL ASSETS $ 6,472,449 $ 6,393,205 =========== =========== Commitments and Contingencies (Notes 3, 4, 6 and 7) LIABILITIES (RESERVES) Distribution Reserve for Allowed and Disputed Liabilities (Note 3) $ 6,472,449 $ 6,393,205 ----------- ----------- TOTAL LIABILITIES (RESERVES) $ 6,472,449 $ 6,393,205 =========== ===========
See Notes to Financial Statements. -8- JMXI LIQUIDATING TRUST STATEMENTS OF CASH RECEIPTS AND DISBURSEMENTS FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006
2007 2006 ----------------------------------------------------------------------------------- Receipts: Amounts transferred to the Trust (Note 3) $ -- $ 45,169 Sublease rental income received (Note 4) 1,348,665 1,437,333 Interest received 287,182 277,425 ---------- ---------- TOTAL RECEIPTS 1,635,847 1,759,927 ---------- ---------- Disbursements: Rent paid (Note 4) 1,510,801 1,527,436 Legal fees 11,470 233 Accounting fees 8,473 6,971 Other miscellaneous disbursements 329 3,190 Trustee fees (Note 5) 5,232 5,613 Trustee expenses (Note 5) 20,298 11,131 ---------- ---------- TOTAL DISBURSEMENTS 1,556,603 1,554,574 ---------- ---------- EXCESS OF CASH RECEIPTS OVER CASH DISBURSEMENTS 79,244 205,353 Cash and cash equivalents: Beginning 6,393,205 6,187,852 ---------- ---------- Ending $6,472,449 $6,393,205 ========== ==========
See Notes to Financial Statements. -9- JMXI LIQUIDATING TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -------------------------------------------------------------------------------- NOTE 1. NATURE OF ORGANIZATION The JMXI Liquidating Trust (the Trust), a grantor trust, was established pursuant to the JMXI Liquidating Trust Agreement dated May 1, 2003 (the Trust Agreement), by and between JMXI, Inc. (JMXI), Wells Fargo Bank, National Association (the Liquidating Trustee) and Wells Fargo Delaware Trust Company (the Delaware Trustee). Pursuant to the Plan of Distribution of JMXI, Inc. dated April 22, 2003, certain assets and liabilities of JMXI were transferred to the Trust, and JMXI, Inc. dissolved (the Dissolution). The Trust was formed in order to liquidate the assets and liabilities so transferred to it and to distribute the net funds remaining following such liquidation to the former shareholders of JMXI (the Beneficiaries). Interests in the Trust (Beneficial Interests) are not assignable or transferable except by will, intestate succession or operation of law. The common stock transfer books of JMXI were permanently closed on May 1, 2003. All shareholders of JMXI at that time were deemed to be Beneficiaries of the Trust. As of December 31, 2007, the Trust had approximately 543 Beneficiaries of record and 36,010,575 units of Beneficial Interest outstanding. The Trust was intended to dissolve within three years from the date of the Trust Agreement; however, the business of the Trust was not completed as of such date. The Trust may be dissolved at any time by the action of Beneficiaries having more than 66.7 percent of the aggregate Beneficiary's percentage interest, provided that there remain no liabilities for which the Trust may be responsible. As of December 31, 2007, there were outstanding lease commitments and, as a result, the Trust cannot be terminated until such commitments are resolved. Subsequent to December 31, 2007, the Trustee and the landlords are in negotiations to terminate the three remaining lease agreements. Assuming that these negotiations are successful and the lease agreements are terminated, it is expected that the Liquidating Trustee will take action to terminate the Trust and make final distributions to the Beneficiaries. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION: The Trust's accounts are maintained on a cash receipts and disbursements basis, and the statement of cash receipts and disbursements reflects cash received and disbursed. The statements of cash receipts and disbursements reflect activity in the Principal Trust Account for the years ended December 31, 2007 and 2006. The cash receipts and disbursements basis is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. Therefore, noncash transactions, including receivables, payables, and accrued revenue and expenses, which would be recognized under accounting principles generally accepted in the United States of America and which may be material in amount, are not recognized in the accompanying financial statements. -10- JMXI LIQUIDATING TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -------------------------------------------------------------------------------- NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CASH AND CASH EQUIVALENTS: Cash and cash equivalents consisted of a Principal Trust Account as of January 1, 2006. The Principal Trust Account is invested in U.S. Treasury cash reserve money market funds (money market funds). No minimum excess cash balance is required to be maintained. The balance in the Principal Trust Account as of December 31, 2007 and 2006, was $6,472,449 and $6,393,205, respectively. CONCENTRATION OF CREDIT RISK: The Trust is presently exposed to interest rate changes primarily as a result of the short maturity of the financial instruments comprising its portfolio of cash equivalents. In addition, the Trust maintains its cash and cash equivalents in the Principal Trust Account that, at times, may exceed federally insured limits. The Trust has not experienced any losses in such account. INCOME TAX STATUS: The Trust is considered a liquidating trust and is exempt from paying income taxes under Treasury Regulations Section 301.7701-4 of the Internal Revenue Code and applicable sections of state statutes. NOTE 3. ASSETS AND LIABILITIES TRANSFERRED TO THE TRUST The Trust assumed certain assets and all asserted and unasserted liabilities arising out of JMXI's ownership of assets. Assets transferred to the Trust included depository accounts, equity interests in JMXI, Inc. foreign subsidiaries, certain amounts receivable and prepaid, and the rights to sublease rental income on certain leased properties. Certain depository accounts and equity interests are not yet liquid and are anticipated to be transferred into the Trust at a later date. Certain receivables are also anticipated to be received and will be transferred into the Trust when received. Management has not assessed the dollar amount of these assets to be received in the future. The principal assets transferred to the Trust in the period from May 1, 2003, through December 31, 2003, included cash in the amount of $6,694,310 and the interest in several JMXI, Inc. depository accounts totaling $571,087. In June 2003, the Trust entered into an escrow agreement (Escrow Agreement) with Ipsos UK Limited (the Guarantor) and Wells Fargo Bank, National Association (the Escrow Agent) to escrow funds (Escrow Account) for payment of a lease commitment related to property in England. During 2004, settlement claims of $174,000 were disbursed from the Escrow Account. Obligations under the Escrow Agreement were satisfied, and approximately $2.6 million was released and transferred from the Escrow Account to the Principal Trust Account. -11- JMXI LIQUIDATING TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -------------------------------------------------------------------------------- NOTE 3. ASSETS AND LIABILITIES TRANSFERRED TO THE TRUST (CONTINUED) In addition to the $2,636,682 transferred as a result of the closing of the Escrow Account during 2004, an additional $771,996 was transferred into the Principal Trust Account from certain depository accounts as they became liquid. During 2005, $143,224 was transferred to the Principal Trust Account, which consisted primarily of a tax refund on account of valued-added tax paid by a former subsidiary. During 2006, $45,169 related to the remaining assets of MMXI Europe, B.V. and JMXI Latin America, B.V. was transferred into the Principal Trust Account, which consisted primarily of a tax refund on account of value-added tax paid by a former subsidiary. No additional monies from depository accounts, tax refunds or other sources were received in 2007. The principal known liabilities assumed by the Trust included: o The liabilities and obligations of JMXI under operating leases of properties o The liabilities of JMXI associated with professional services not yet billed and certain advisory service agreements o Potential amounts payable under pending litigation, including the fees of legal counsel to be incurred in defending those claims o The obligations of JMXI with respect to amounts owed to certain taxing authorities and vendors (including disputed obligations), and employee benefit-related liabilities Management is unable to ascertain the amount, if any, by which assets will exceed final liabilities. As a result, all available assets have been reserved for potential allowed and disputed liabilities of the Trust, as defined in Sections 9.1 and 9.2 of the Trust Agreement. NOTE 4. RENT PAID AND SUBLEASE RENTAL INCOME RECEIVED As detailed in Attachment 2 to the Trust Agreement, the Trust has assumed numerous operating leases in New York, California and England for various terms through 2011. A significant number of these leased properties, or portions thereof, have been subleased to several occupants for various terms and amounts through 2011. -12- JMXI LIQUIDATING TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -------------------------------------------------------------------------------- NOTE 4. RENT PAID AND SUBLEASE RENTAL INCOME RECEIVED (CONTINUED) As of December 31, 2007, the Trust is party to three remaining lease agreements as either tenant or subtenant for three separate real property leases for properties located on the 6th, 12th and 14th floors of a building located at 352 Park Avenue South, New York, New York. The Trust, in turn, subleases each of these properties to a subtenant or sub-subtenant. The Trust is negotiating lease termination agreements for the 6th and 14th floor properties. The lease termination agreements, if finalized, will allow the Trust to terminate its lease interest in the properties and receive full releases of any further obligations. The lease for the 12th floor property expires by its own terms on August 27, 2008. The Trust is attempting to negotiate a lease termination agreement for the 12th floor property as well, but if unsuccessful, will fully reserve and escrow, at lease termination, all amounts due and owing under this lease net of expected sublease rental income until its expiration. The Liquidating Trustee and the landlords have reached an agreement in principle, subject to the execution of a written agreement among the Liquidating Trustee, the subtenants and the landlords, to terminate these leases and obtain full releases for the benefit of each of the Liquidating Trustee and the landlords. After the leases have been terminated and the releases have been obtained (currently expected to occur in the second quarter of 2008), it is expected that the Liquidating Trustee will take action to terminate the Trust and make final distributions to the Beneficiaries. The Liquidating Trustee will provide notice to the Beneficiaries of any final distributions. NOTE 5. FEES PAID TO THE TRUSTEES In accordance with the Trust Agreement and Escrow Agreement, fees paid during the years ended December 31, 2007 and 2006, to the Liquidating Trustee and Delaware Trustee consisted of the following: Years Ended December 31 ------------------------------- 2007 2006 -------------------------------------------------------------------- Liquidating Trustee: Beneficiary account maintenance $ 2,732 $ 3,113 Delaware Trustee: Annual fee 2,500 2,500 ------- ------- Total trustee fees $ 5,232 $ 5,613 ======= ======= Trustee expenses relate to legal fees paid to counsel engaged by the Liquidating Trustee to provide consultation to the Liquidating Trustee regarding Trust matters. -13- JMXI LIQUIDATING TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -------------------------------------------------------------------------------- NOTE 6. INTERIM DISTRIBUTIONS Article 9.8 of the Trust Agreement contains provisions in which interim liquidating distributions may be made. These distributions may be made after the Liquidating Trustee conducts a review of all Trust assets and considers the extent to which these assets exceed the anticipated final liabilities. Distributions will be made at the Liquidating Trustee's discretion ratably to Beneficiaries in accordance with each Beneficiary's percentage interests. During 2007 and 2006, no amounts were distributed or payable by the Liquidating Trustee to the Beneficiaries. NOTE 7. COMMITMENTS At the inception of the Trust, there were several actions against JMXI. No estimate of potential liabilities to the Trust was determinable at that time. All active litigation claims were settled in 2005 and there were no remaining claims. As discussed in Notes 1 and 4, the Liquidating Trustee is currently negotiating to terminate its three remaining lease commitments. Any liability associated with the termination of these lease agreements has not been included in the December 31, 2007, financial statements. -14- ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. ITEM 9A. CONTROLS AND PROCEDURES. (a) Evaluation of Disclosure Controls and Procedures One of the Liquidating Trustee's vice presidents, after evaluating the effectiveness of the Trust's disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 (the "Exchange Act") Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this annual report (the "Evaluation Date"), has concluded that, as of the Evaluation Date, the Trust's disclosure controls and procedures were effective. This annual report does not include an attestation report of the Trust's registered public accounting firm regarding internal control over financial reporting. The Liquidating Trustee's report was not subject to attestation by the Trust's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Trust to provide only the Liquidating Trustee's report in this annual report. (b) Changes in Internal Controls There were no significant changes in the Trust's internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 and 15d-15 that occurred during the last fiscal year that have materially affected, or are reasonably likely to materially affect, the Trust's internal controls over financial reporting. The Trust has adopted a Disclosure Controls Policy, which is designed to insure the reliability and timeliness of its reporting. ITEM 9B. OTHER INFORMATION. None. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. Wells Fargo Bank, National Association serves as the Liquidating Trustee of the Trust. The Trust does not have employees or officers. The Trust has not adopted a Code of Ethics and does not have a Nominating Committee or Audit Committee because it does not have any directors, officers or employees. ITEM 11. EXECUTIVE COMPENSATION. Under terms of the Trust Agreement, the Liquidating Trustee received payments during the year ended December 31, 2007, of $5,232, comprised of Liquidating Trustee administration and beneficiary account maintenance fees for the period from May 1, 2007, through April 30, 2008. -15- The Trust does not have a compensation committee because it does not have any directors, officers or employees. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The Trust does not have any securities that vote for the election of the Liquidating Trustee and, consequently, does not have any "voting securities" within the meaning of the Securities Exchange Act of 1934, as amended, and the regulations thereunder applicable to the disclosure of 5 percent holders of voting securities. The Liquidating Trustee is not a beneficial owner of any Beneficial Interests. The Liquidating Trustee has no knowledge of any arrangements which may result in a change of control of the Trust. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. None. The Trust does not have any directors, officers or employees. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. None. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Financial Statements; Exhibits. 1. The financial statements are filed as part of this report under Item 8, Financial Statements and Supplementary Data. 2. Financial statement schedules have been omitted because the information is either not required, not applicable, or is included in Item 8. 3. Exhibits. Exhibit 2.1 - Plan of Distribution of JMXI, Inc., dated May 1, 2003. Exhibit 2.2 - JMXI Liquidating Trust Agreement, by and among the Company, Wells Fargo Bank, National Association, as liquidating trustee, and Wells Fargo Delaware Trust Company, as Delaware trustee, dated May 1, 2003.* Exhibit 31.1 - Certification.+ ___________________________ * Filed as an exhibit to the Current Report on Form 8-K dated May 8, 2003, of JMXI, Inc., predecessor of JMXI Liquidating Trust, and incorporated herein by reference. + Filed herewith. -16- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. JMXI Liquidating Trust ---------------------- (Registrant) By: Wells Fargo Bank, National Association, as liquidating trustee By: /s/ Nicholas D. Tally -------------------------------- Name: Nicholas D. Tally Title: Vice President Dated: March 31, 2008 -17-