DEFINITION, LTD.
QUARTERLY REPORT ON FORM 10-QSB FOR THE QUARTER ENDED 6/30/98 -
PAGE 1
U.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
June 30, 1998
[ ] 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]
<PAGE>
DEFINITION, LTD.
FORM 10-QSB FOR THE QUARTER ENDED JUNE 30, 1998
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
June 30, 1998 December 31, 1997
Current Assets
Cash and Cash Equivalents $ 0 $ 1,990
Accounts Receivable, Other 2,000 0
Total Current Assets 2,000 1,990
Property and Equipment
Broadcast Resource Library 2,985,536 2,985,536
Computer, Production and Broadcast Equipment
293,379 261,398
Building and Improvements 469,153 469,153
3,748,068 3,716,087
Less Accumulated Depreciation
(2,236,276) (1,996,179)
Property and Equipment, Net 1,511,792 1,719,908
Other Assets
Prepaid Airtime 195,000 0
Total Assets $ 1,708,792 $ 1,721,898
LIABILITIES AND
STOCKHOLDERS' EQUITY
June 30, 1998 December 31, 1997
Current Liabilities
Checks Issued In Excess of Cash $ 6,052 $
0
Mortgage Payable, Current Portion
1,749 1,655
Accounts Payable, Trade
37,235 17,500
Payroll Tax Liabilities
23,700 23,700
Total Current Liabilities
68,736 42,855
Long-Term Liabilities
Mortgage Payable, Noncurrent Portion 77,726 78,480
Due To Others 100,729 0
Total Long-Term Liabilities 178,455 78,480
Total Liabilities 247,191 121,335
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, 9,348,580 Shares and 7,773,512
Shares at June 30, 1998 and December 31, 1997 9,349
7,774
Additional Paid In Capital 11,798,955 11,090,530
Retained Earnings (Deficit) (10,346,703) (9,497,741)
Total Stockholders' Equity 1,461,601 1,600,563
Total Liabilities and Stockholders' Equity $ 1,708,792 $
1,721,898
<PAGE>
Three Months Period Ended June 30, 1998 Three Months Period
Ended June 30, 1997 Six Months Period Ended June 30, 1998 Six
Months Period Ended June 30, 1997
Revenues $ 17,662 $ 40,147 $ 44,801 $
69,749
Cost of Revenues 4,615 0 4,615 0
Gross Profit 13,047 40,147 40,186 69,749
Operating Expenses
General and Administrative 82,825 20,073 175,425 51,518
Consulting and Other Professional
Fees 468,300 18,790 468,300 313,724
Depreciation and Amortization 120,460 201,407 240,094
402,814
Total Operating Expenses 671,585 240,270 883,819 768,056
Operating Loss (658,538) (200,123) (843,633) (698,307)
Other Income (Expense)
Gain on Sale of Assets 0 0 0 931,962
Interest Expense (3,023) (1,575) (5,327) (3,179)
Total Other Income (Expense) (3,023) (1,575) (5,327) 928,783
Income (Loss) Before Income Taxes (661,561) (201,698)
(848,960) 230,476
Provision (Benefit) For Income Taxes 0 (79,000)
0 73,000
Net Income (Loss) Available to Common Stockholders $
(661,561) $ (122,698) $ (848,960) $ 157,476
Income (Loss) Per Weighted Average Share of Common
Stock $ (0.08) $ (0.02) $ (0.10) $
0.03
Weighted Average Number of Common Shares
Outstanding 8,136,912 6,149,346 8,136,912 6,149,346
<PAGE>
For the Six Months Period Ended June 30, 998 For the Six
Months Period Ended June 30, 1997
Cash Flows From Operating Activities
Net Income (Loss) $ (848,960) $ 157,476
Adjustments to Reconcile Net Income (Loss) to Net
Cash Used In Operating Activities
Depreciation and Amortization 240,094 402,814
Common Stock Issued for Services 465,000 256,000
Gain on Disposal of Fixed Assets 0 (931,962)
Changes in Assets and Liabilities
(Increase) Decrease in Accounts Receivable
(2,000) 2,611,534
Increase (Decrease)in Checks Issued In Excess of
Cash 6,052 0
Increase (Decrease) in Accounts Payable, Trade
19,735 (2,919,322)
Increase (Decrease) In Accrued Federal Income
Taxes 0 73,000
Total Adjustments 728,881 (507,936)
Net Cash Used In Operating Activities (120,079) (350,460)
Cash Flows From Investing Activities
Purchase of Property and Equipment
(31,981) 1,350,000
Investment in Joint Venture 0 (1,505,924)
Net Cash Flows Used In Investing Activities (31,981) (155,924)
Cash Flows From Financing Activities
Proceeds (Repayments) From Long Term Debt (660) 16,067
Proceeds From the Issuance of Common Stock 50,000 450,000
Advances From Others 100,730 0
Net Cash Provided By Financing Activities 150,070 466,067
For the Six Months Period Ended June 30, 1998 For the Six
Months Period Ended June 30, 1997
Increase (Decrease) in Cash and Cash Equivalents
(1,990) (40,317)
Cash and Cash Equivalents at Beginning of Period 1,990
63,151
Cash and Cash Equivalents at End of Period $ 0
$ 22,834
Supplemental Disclosure of Cash Flow Information:
Cash paid for:
Interest $ 5,985 $ 0
Income taxes $ 0 $ 0
Supplemental Schedule of Noncash Investing and
Financing Activities:
Issuance of Common Stock for Services $ 465,000 $
256,000
Exchange of Common Stock for Investment in Joint
Venture $ 0 $ 2,000,000
Exchange of Common Stock for Prepaid Airtime $ 195,000
$ 0
<PAGE>
Note 1. Interim Consolidated Financial Statements.
In the opinion of management, the accompanying consolidated
financial statements for the three and six months period ended
June 30, 1998 and 1997, 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, 1997. 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 June 30, 1998 versus June 30, 1997:
The Company continues to operate its TV Station with revenues
for the three months ended June 30, 1998 (Current Period) of
$17,662, compared to the three months ended June 30, 1997 (Prior
Period) of $40,147, a decrease $22,485, or 56%. There was no
apparent reason for the decrease.
The Company's General and Administrative costs increased from
$20,073 for the prior period compared to $82,825 for the current
period, for a net increase of $62,752, or 312%. The increase
was due principally to an increase in salaries of $47,700, due
to the addition of approximately seven employees since the first
of the year. The remainder of the increase represents
additional overhead incurred for the Company's general operating
expenses, such as office supplies, postage, rent and utilities.
Consulting and other professional fees increased from $18,790 in
the prior period to $468,300 in the current period, for a net
increase of $449,510, or 2400%. The increase is primarily due
to the issuance of 1,500,000 shares of common stock for
consulting and legal services rendered at $0.35 per share, or
$525,000, less the cancellation of 300,000 shares of common
stock issued in 1997 for legal services rendered at $0.20 per
share, or ($60,000), for a total of $465,000. Depreciation
expense decreased from $201,407 in the prior period to $120,460
in the current period, for a net decrease of $80,947, or 41%.
The Company experienced a net loss of $661,561 for the current
period compared to a net loss of the prior period of $201,698,
or an increase of $459,863. The majority of the loss is
attributable to the common stock issued for services rendered as
discussed above.
Six Months Ended June 30, 1998 versus June 30, 1997
The Company continues to operate its TV Station with revenues
for the six months ended June 30, 1998 (Current Period) of
$44,801, compared to the six months ended June 30, 1997 (Prior
Period) of $69,749, a decrease $24,948, or 36%. There was no
apparent reason for the decrease.
The Company's General and Administrative costs increased from
$51,518 for the prior period compared to $175,425 for the
current period, for a net increase of $123,907, or 241%. The
increase was due principally to an increase in salaries of
$94,200, due to the addition of approximately seven employees
since the first of the year. The remainder of the increase
represents additional overhead incurred for the Company's
general operating expenses, such as office supplies, postage,
rent and utilities. Consulting and other professional fees
increased from $313,724 in the prior period to $468,300 in the
current period, for a net increase of $154,576, or 49%. The
increase is primarily due to the issuance of 1,500,000 shares of
common stock for consulting and legal services rendered at $0.35
per share, or $525,000, less the cancellation of 300,000 shares
of common stock issued in 1997 for legal services rendered at
$0.20 per share, or ($60,000), for a total of $465,000.
Consulting and professional fees of the prior period 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. Depreciation expense
decreased from $402,814 in the prior period to $240,094 in the
current period, for a net decrease of $162,720, or 40%. The
Company experienced a net loss of $848,960 for the current
period compared to a net income of the prior period of $157,476,
or an decrease of $1,006,436. As discussed in the prior 10-QSB,
the Company had been focusing on the development of the Video
Streaming Technology, which was sold in the first quarter of
1997 resulting in a gain (approximately $932,000) which is the
basis for the prior year net profits.
(2) Liquidity
The Company's liquidity position continues to be poor. Working
capital continues to deteriorate. At June 30, 1998, the Company
had a negative working capital of $61,736, as compared to
$40,865 at December 31, 1997. The decrease is related to the
increase in accounts payable to cover general operating
expenses. Cash flows has been impacted by the decrease in sales
over the periods. Again, 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 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 June 30, 1998, the Company
issued/canceled shares of its common stock as follows:
1. Canceled 300,000 shares for services rendered at $0.20 per
share, or $60,000.
2. Issued 1,500,000 shares for consulting and legal services
rendered at $0.35 per share, or $525,000.
3. Issued 30,000 shares for cash at $1.00 per share, or $30,000.
4. Issued 325,000 shares in exchange for prepaid airtime.
5. Fractional share adjustment of 68 shares, no dollar value.
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.
