UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark one)
XX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission File Number: 33-30608
DEFINITION, LTD.
(Exact name of small business issuer as specified in its charter)
Nevada 75-2293349
(State of incorporation) (IRS Employer ID Number)
1334 Killian Drive, Lake Park, Florida 33403
(Address of principal executive offices)
(407) 844-7701
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
YES X NO
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date:
September 30, 1996: 5,081,842
Transitional Small Business Disclosure Format (check one): YES NO X
DEFINITION, LTD.
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets at September 30, 1996
(unaudited), and December 31, 1995 3-4
Consolidated Statements of Operations for the
Three Months Ended September 30, 1996,
and 1995 (unaudited) 5
Consolidated Statements of Operations for the
Nine Months Ended September 30, 1996,
and 1995 (unaudited) 6
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1996, and 1995 (unaudited) 7
Notes to Consolidated Financial Statements 8
Part I - Item I - Financial Statements
DEFINITION, LTD.
CONSOLIDATED BALANCE SHEETS
September 30, 1996 and December 31, 1995
(unaudited) (audited)
Sept. 30, Dec. 31,
1996 1995
ASSETS
Current assets
Cash and cash equivalents 17135 177450
Notes receivable 210000 210000
Accounts receivable 7961378 3129480
Accounts receivable - other 2500 10520
Deposits 134520 -
Total current assets 8325533 3527450
Property and equipment
Broadcast resource library 3015536 2985536
Computer, production & broadcast equip. 821105 814896
Building and improvements 469153 250141
Other 2380 887
Accumulated depreciation -1330096 -878390
Net property and equipment 2978078 3173070
Other assets
Contracts and accts rec. - long term 1604665 1876430
Equity invest. in joint venture
& other companies 383933 330602
Total other assets 1988598 2207032
TOTAL ASSETS 13292209 8907552
DEFINITION, LTD.
CONSOLIDATED BALANCE SHEETS - Continued
September 30, 1996 and December 31, 1995
(unaudited) (audited)
Sept. 30, Dec. 31,
1996 1995
Current liabilities
Current portion of long-term debt 1330 1330
Accounts payable - trade 6665 28735
Accounts payable - Other 1968198 -
Accounts payable - affiliates 1158883 641879
Federal income tax payable 656174 184787
Total current liabilities 3791250 856731
Long-term debt 80771 81777
Total liabilities 3872021 938508
Commitments and contingencies
Shareholders' equity
Preferred stock - $0.01 par value.
5,000,000 shares authorized.
Series A - 500,000 shares allocated; no
shares issued and outstanding. - -
Common stock - $0.001 par value.
100,000,000 shares authorized;
5,081,842 and 4,891,842
shares issued and outstanding,
respectively 5082 4892
Additional paid-in capital 10184607 9650422
Retained earnings (deficit) 983621 66852
11173310 9722166
Deferred advertising and broadcast
airtime credits acquired from
an affiliate -1753122 -1753122
Total shareholders' equity 9420188 7969044
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 13292209 8907552
DEFINITION, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended September 30, 1996 and 1995
(unaudited) (unaudited)
Three months Three months
ended ended
Sept. 30, Sept. 30,
1996 1995
Revenues 2713318 1169946
Cost of sales 1877449 398850
Gross profit 835869 771096
Operating expenses
General and administrative 638449 103798
Depreciation and amortization 150568 219338
Total operating expenses 789017 323136
Income from operations 46852 447960
Other income (expense)
Interest and other -2279 -1537
Income before income taxes 44573 446423
Provision for income taxes 15155 -
Net Income 29418 446423
Income (loss) per weighted-average
share of common stock outstanding
Primary 0.01 0.11
Fully diluted 0.01 0.09
Weighted-average number of shares
of common stock outstanding
Primary 5081842 4019695
Fully diluted 5081842 4891537
DEFINITION, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine months ended September 30, 1996 and 1995
(unaudited) (unaudited)
Nine months Nine months
ended ended
Sept. 30, Sept. 30,
1996 1995
Revenues 6309113 2222452
Cost of sales 3568754 699515
Gross profit 2740359 1522937
Operating expenses
General and administrative 893384 215788
Depreciation and amortization 451706 559105
Total operating expenses 1345090 774893
Income from operations 1395269 748044
Other income (expense)
Interest and other -6225 -4957
Income before income taxes 1389044 743087
Provision for income taxes 472275 -
Net Income 916769 743087
Income per weighted-average
share of common stock outstanding
Primary 0.19 0.15
Fully diluted 0.19 --
Weighted-average number of shares
of common stock outstanding
Primary 4955175 4891537
Fully diluted 4955175 --
DEFINITION, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30, 1996 and 1995
(unaudited) (unaudited)
Nine months Nine months
ended ended
Sept. 30, Sept. 30,
1996 1995
Cash Flows from Operating Activities
Net Income 916769 743087
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities
Depreciation and amortization 451706 559105
Common stock issued for services 534375 -
(Increase) decrease in:
Accounts receivable -4824147 -3754162
Contracts & long term receivables 271765 -
Deposits -134250 -
Increase (decrease) in:
Accounts payable
Trade -22070 -124478
Other 1968197 -
Affiliates 517004 992
Accrued federal income tax 471387 -
Deferred revenue - 2927596
Net cash provided by (used in)
operating activities 150736 352140
Cash Flows from Investing Activities
Increase in property and equipment -256714 -3400
Increase in investment in Joint Venture -53331 -
Net cash provided by (used in)
investing activities -310045 -3400
Cash Flows from Financing Activities
Decrease in bank overdraft - -2617
Decrease in Long Term Debt -1006 -585
Advances from affiliates - -242012
Net cash provided by (used in)
financing activities -1006 -245214
INCREASE (DECREASE) IN CASH -160315 103526
Cash at beginning of period 177450 11227
Cash at end of period 17135 114753
Supplemental Disclosure of Noncash
Investing and Financing Activities
Purchase of office condominium and
improvements with long-term mortgage
payable and advances from affiliates 219012 105000
Exchange of inventory and broadcast
airtime credits for barter trade credits 0 232966
Reclassification and offset of
trade accounts receivable and accounts
payable to affiliates 0 181053
DEFINITION, LTD.
Notes to the Consolidated Financial Statements
Nine months ended September 30, 1996 and 1995
(Unaudited)
Note 1. Interim consolidated financial statements.
In the opinion of management, the accompanying consolidated financial
statements for the nine months ended September 30, 1996 and 1995, reflect
all adjustments (consisting only of normal recurring adjustments) necessary
to present fairly the financial condition, results of operation, and cash
flows of Definition, Ltd., and subsidiaries (the "Company") and include the
accounts of the Company and all of its subsidiaries. All material
intercompany transactions and balances are eliminated.
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations. It is suggested that these unaudited financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on Form 10-KSB filed with
the Securities and Exchange Commission for the year ended December 31, 1995.
Certain reclassifications and adjustments may have been made to the financial
statements for the comparative period of the prior fiscal year to conform
with 1995 presentation. The results of operations for the interim periods
are not necessarily indicative of the results to be obtained for the entire
year.
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The discussion below pertains to the financial condition of the Company,
including subsidiary operations, for the three months and nine months ended
September 30, 1996, and 1995. Unless otherwise noted, references to the
Company include all of its subsidiaries.
Results of Operations
Three Months Ended September 30, 1996 versus Three Months Ended Sept. 30, 1995
Revenues from the Company s operations for the three months ended
September 30, 1996 were $2,713,318 compared to $1,169,946 during the same
period of 1995. This increase is due mainly to the Companys exploitation
of its film library and by importing works of art and other items of a cultural
nature, then selling such merchandise in cooperation with Hoffstra
University, Hempstead, New York and other third parties.
The Cost of sales for the three months ended September 30, 1996 was
$1,877,449 compared to $398,850 for the three months ended September 30,
1995. The increase can be attributed to the increased cost of duplication
costs of the film library as well as a higher cost of sales associated with the
purchase of works of art that were sold by the Company.
General and Administrative expenses increased by $534,651, from $103,798
during the three months ended September 30, 1995 to $638,449 during the
comparable period in 1996. During the third quarter of 1996, the Company
issued common stock valued at $534,375 in payment for consulting services.
Otherwise, the general and administrative costs were comparable.
Nine Months Ended September 30, 1996 versus Nine Months Ended September 30,
1995
Revenues from the Company s operations for the nine months ended September
30, 1996 were $6,309,113 compared to $2,222,452 during the same period of
1995. This increase is due mainly to the Companys exploitation of its film
library, as well as importing works of art and other items of a cultural
nature, then selling such merchandise in cooperation with Hoffstra
University, Hempstead, New York and other third parties.
The cost of sales for the nine months ended September 30, 1996 was $3,568,754
compared to $699,515 for the nine months ended September 30, 1995. The
increase can be attributed to the increased cost of duplication costs of the
film library as well as a higher cost of sales associated with the purchase of
works of art that were sold by the Company.
General and administrative expenses increased by $677,596, from $215,788
during the nine months ended September 30, 1995 to $893,384 during the
comparable period in 1996. During the third quarter of 1996, the Company
issued common stock valued at $534,375 in payment for consulting services.
Otherwise, the general and administrative costs remained relatively constant.
Depreciation expense decreased by $107,000 from the first nine months of
1995 to the first nine months of 1996.
Earning per share was $.19 per share for the nine months ended September 30,
1996 compared to $.15 for the nine months ended September 30, 1995.
Liquidity
The Company s overall working capital position was improved at September 30,
1996 to $4,534,284, compared to working capital of $2,670,719 at December 31,
1995. This increase in working capital is attributable to an increase in
accounts receivable, which more than offset the decrease in cash and cash
equivalents from December 31, 1995 to September 30, 1996. The Company
expects that its Import Segment will, during the remainder of 1996 and the
early part of 1997, begin to generate significant positive cash flow.
Management also anticipates that the payment term structure of trade accounts
receivable will be sufficient to support the cash flow needs of the Companys
operations as well as support its debt service.
Capital Expenditures
The Company does not expect to acquire any capital assets in the foreseeable
future. However, the Company has announced that its Board of Directors has
authorized exploratory discussions relating to a business combination
transaction with Dallas, Texas-based TeleWorld. These discussions are very
preliminary in nature and there can be no prediction made with respect to
the result of such discussions.
Part II - Other Information
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None during the reporting period
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
DEFINITION, LTD.
November 14, 1996
Gerald Beeson, Executive Vice President
Chief Executive Officer
And Chief Accounting Officer
