DEFINITION, LTD.
QUARTERLY REPORT ON FORM 10-QSB FOR THE
QUARTER ENDED 9/30/97 - PAGE 1U.S. SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
Form 10-QSB
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the Quarterly Period Ended
September 30, 1997
[ ] Transition Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the Transition
Period from to .
Commission File No. 0-20598
Definition, Ltd.
(Name of
Small Business Issuer in its Charter)
NEVADA
75-2293489
(State or other jurisdiction of
(IRS Employer
incorporation organization)
Identification No.)
1334 South Killian Drive, Unit 4, Lake
Park, Florida 33403
(Address of principle executive
offices, including zip code)
(561) 840-0556
(Issuer's telephone number, including area
code)
Securities Registered under Section 12(b) of the Exchange Act:
Title of Each Class
Name of Exchange on Which Registered
None None
Securities Registered under Section 12(g) of the Exchange Act:
Common Stock, $.001 par value per share
(Title of Class)
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 of such
filing requirements for the past 90 days. Yes [ ] No [ X ]
The number of shares outstanding of the issuer's common equity
as of November 15, 1998, was 21,998,580 shares of common stock,
par value $.001.
Transitional Small Business Disclosure Format (check one): Yes [
] No [X]
DEFINITION, LTD.
FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 1997
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Item 2 - Changes in Securities
Item 3 - Defaults Upon Senior Securities
Item 4 - Submission of Matters to a Vote of Security Holders
Item 5 - Other Information
Item 6 - Exhibits and Reports on Form 8-K
PART I
Item 1. Financial Statements.
ASSETS
September 30, 1997 December 31, 1996
Current Assets
Cash and Cash Equivalents $ 0 $ 63,151
Notes Receivable 0 73,600
Accounts Receivable 0 5,626
Total Current Assets 0 142,377
Property and Equipment
Broadcast Resource Library 2,985,536 2,985,536
Computer, Production and Broadcast Equipment
261,398 224,582
Building and Improvements 469,153 469,153
Total 3,716,087 3,679,271
Less Accumulated Depreciation (1,948,693)
(1,519,136)
Property and Equipment, Net 1,767,394 2,160,135
Total Assets $ 1,767,394 $ 2,302,512
LIABILITIES AND
STOCKHOLDERS' EQUITY
September 30, 1997 December 31, 1996
Current Liabilities
Checks Issued In Excess of Cash $ 6,726 $
0
Mortgage Payable, Current Portion
1,611 1,484
Accounts Payable, Trade
8,784 72,500
Payroll Tax Liabilities
23,700 23,700
Total Current Liabilities
40,821 97,684
Long-Term Liabilities
Mortgage Payable, Noncurrent Portion 79,056 80,280
Due To Others 0 27,000
Total Long-Term Liabilities 79,056 107,280
Total Liabilities 119,877 204,964
Stockholders' Equity
Preferred Stock: Authorized $0.01 Par Value, 5,000,000
Shares; Issued and Outstanding, None None None
Common Stock: Authorized $0.001 Par Value, 75,000,000 Shares;
Issued and Outstanding, 10,498,580 Shares and 5,203,512
Shares at September 30, 1997 and December 31, 1996
7,774 5,204
Additional Paid In Capital 11,090,530 8,711,100
Retained Earnings (Deficit) (9,450,787) (6,618,756)
Total Stockholders' Equity 1,647,517 2,097,548
Total Liabilities and Stockholders' Equity $ 1,767,394 $
2,302,512
<PAGE>
Three Months Period Ended September 30, 1997 Three Months
Period Ended September 30, 1996 Nine Months Period Ended
September 30, 1997 Nine Months Period Ended September 30, 1996
Revenues $ 136,049 $ 2,713,318 $ 205,798 $
6,309,113
Cost of Revenues 9,471 1,877,449 9,471 3,568,754
Gross Profit 126,578 835,869 196,327 2,740,359
Operating Expenses
General and Administrative 226,413 638,449 591,655 893,384
Depreciation and Amortization 26,743 150,568 429,557
451,706
Total Operating Expenses 253,156 789,017 1,021,212 1,345,090
Operating Income (Loss) (126,578) 46,852 (824,885) 1,395,269
Other Income (Expense)
Write-off, Investment in J.V. (2,000,000) 0 (2,000,000) 0
Reverse Gain on Sale of Fixed Assets (931,962) 0 0 0
Interest Expense (3,967) (2,279) (7,146) (6,225)
Total Other Expense (2,935,929) (2,279) (2,007,146) (6,225)
Income (Loss) Before Income Taxes (3,062,507) 44,573
(2,832,031) 1,389,044
Provision (Benefit) For Income Taxes (73,000) 15,155
0 472,275
Net Income (Loss) Available to Common Stockholders $
(2,989,507) $ 29,418 $ (2,832,031) $ 916,769
Income (Loss) Per Weighted Average Share of Common
Stock $ (0.45) $ 0.01 $ (0.42) $
0.18
Weighted Average Number of Common Shares
Outstanding 6,700,179 5,081,842 6,700,179 5,081,842
<PAGE>
For the Nine Months Ended September 30, 1997 For the Nine
Months Ended September 30, 1996
Cash Flows From Operating Activities
Net Income (Loss) $ (2,832,031) $ 916,769
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided By (Used In) Operating Activities
Depreciation and Amortization 429,557 451,706
Common Stock Issued for Services 382,000 534,375
Write-Off of Assets 2,000,000 0
Bad Debt Expense 46,600 0
Changes in Assets and Liabilities
(Increase) Decrease in Accounts Receivable 0 (4,824,147)
(Increase) Decrease in Accounts Receivable 0 271,765
(Increase) Decrease in Accounts Receivable 0 (134,250)
(Increase) Decrease in Accounts Receivable, Other 5,626
0
Increase (Decrease) in Checks Issued in Excess of
Cash 6,726 0
Increase (Decrease) in Accounts Payable
(63,716) 2,463,131
Increase (Decrease) in Accrued Federal Income
Tax 0 471,387
Total Adjustments 2,806,793 (766,033)
Net Cash Provided By (Used In) Operating Activities (25,238)
150,736
Cash Flows From Investing Activities
Purchase of Property and Equipment
(36,816) (256,714)
Investment in Joint Venture 0 (53,331)
Net Cash Flows Used In Investing Activities (36,816) (310,045)
Cash Flows From Financing Activities
Proceeds (Repayments) From Long Term Debt (1,097) (1,006)
Net Cash Provided By (Used In) Financing
Activities (1,097) (1,006)
For the Nine Months Ended September 30, 1997 For the Nine
Months Ended September 30, 1997
Increase (Decrease) in Cash and Cash Equivalents
(63,151) (160,315)
Cash and Cash Equivalents at Beginning of Period 63,151
177,450
Cash and Cash Equivalents at End of Period $ 0
$ 17,135
Supplemental Disclosure of Cash Flow Information:
Cash paid for:
Interest $ 6,432 $ 6,225
Income taxes $ 0 $ 0
Supplemental Schedule of Noncash Investing and
Financing Activities:
Issuance of Common Stock for Services $ 382,000 $
534,375
Exchange of Common Stock for Investment in Joint
Venture $ 2,000,000 $ 0
Note 1. Interim Consolidated Financial Statements.
In the opinion of management, the accompanying consolidated
financial statements for the three and nine months ended
September 30, 1997 and 1996, reflect all adjustments (consisting
only of normal recurring adjustments) necessary to present
fairly the financial condition, results of operations, 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 have been
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 to be included in the
Company's Annual Report on Form 10-KSB which was filed with the
Securities and Exchange Commission for the year ended December
31, 1996. Certain reclassifications and adjustments may have
been made to the financial statements for the comparative period
of the prior fiscal year to conform with the present
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.
(1) Results of Operations
Three Months Ended September 30, 1997 versus September 30, 1996:
The Company continues to operate its TV Station with revenues
for the three months ended September 30, 1997 (Current Period)
of $136,049, compared to the three months ended September 30,
1996 (Prior Period) of $2,713,318, a decrease of $2,577,269.
This decrease is due to the Company's end to the exploitation of
its film library and other items of a cultural nature, which it
sold to third parties. Revenues for the current period consists
of those for the television segment only, which management
anticipates to improve significantly over the next twelve
months.
Cost of revenues decreased from $1,877,449 in the prior period
to $9,471 during the current period, for a net decrease of
$1,867,978. The decrease is entirely attributable to the
elimination of duplication costs of the film library as well as
the costs associated with the purchase of art works for resale,
which the Company is not actively doing this period.
The Company's operating expenses decreased from $789,017 for the
prior period compared to $253,156 for the current period, for a
net decrease of $535,861. The decrease is attributable to a
reduction in operating expenses due to the elimination of the
end to the Company's exploitation of its film library. The
Company experienced a net income of $29,418 for the prior period
compared to a net loss of the current period of $2,989,507, or
an increase of $3,018,925. The majority of the loss is
attributable to the write-off of the Company's investment in
joint venture of $2,000,000. A reversal of the gain recognized
in the first quarter of the prior period was made for $931,962
because the Company wrote-off its investment in the joint
venture, which generated this gain.
Nine Months Ended September 30, 1997 versus September 30, 1996:
The Company continues to operate its TV Station with revenues
for the nine months ended September 30, 1997 (Current Period) of
$205,798 compared to the nine months ended September 30, 1997
(Prior Period) of $6,309,113, a decrease of $6,103,315. This
decrease is due to the Company's end to the exploitation of its
film library and other items of a cultural nature, which it sold
to third parties. Revenues for the current period consists of
those for the television segment only, which management
anticipates to improve significantly over the next twelve months.
Cost of revenues decreased from $3,568,754 in the prior period
to $9,471 during the current period, for a net decrease of
$3,559,283. The decrease is entirely attributable to the
elimination of duplication costs of the film library as well as
the costs associated with the purchase of art works for resale,
which the Company is not actively doing this period.
The Company's operating expenses decreased from $1,345,090 for
the prior period compared to $1,021,212 for the current period,
for a net decrease of $323,878. Operating expenses of the prior
period relate to relate to the Company's attempt to inquire into
the possible acquisition or merger with other similar businesses
in 1997, an effort the Company has primarily put an end to.
The Company experienced a net income of $916,769 for the prior
period compared to a net loss of the current period of
$2,832,031, or an increase of $3,748,800. The majority of the
loss is attributable to the write-off of the Company's
investment in joint venture of $2,000,000. A reversal of the
gain recognized in the first quarter of the prior period was
made for $931,962 because the Company wrote-off its investment
in the joint venture, which generated this gain.
(2) Liquidity
The Company's overall liquidity position has deteriorated over
the quarter. Working capital is a negative $40,821 at September
30, 1997, compared to a positive of $44,693 at December 31,
1996. The decrease results from a decrease in sales over the
periods as well as an increase in the need to meet current
operating expenses, which directly impacts cash flows.
Management anticipates revenues to increase and also intends to
seek additional funding from private or public equity
investments to meet the increased working capital needs, if
necessary, in the next 12 months.
PART II
Item 1. Legal Proceedings.
The Company is not currently engaged in any legal proceeding,
nor, to the Company's knowledge, is any suit or other legal
action pending or threatened.
Item 2. Changes in Securities.
During the three months ended September 30, 1997, the Company
issued shares of its common stock as follows:
1. Issuance of 300,000 shares of common stock for legal
services rendered, at $.20 per share, or $60,000.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to Vote of Security Holders.
None
Item 5. Other Information.
No events to report.
Item 6. Exhibits and Reports on Form 8-K.
There are no exhibits to be included in this quarterly report on
Form 10-QSB.
Reports on Form 8-K: None
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DEFINITION, LTD.
By:
Charles Kiefner
President and
Chief Executive Officer
Dated ___________________
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
