UNITED STATES
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, 1999
____________ Transition Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File No. 0-20598
Definition, Ltd.
----------------
(Exact Name ofregistrant as specified in its charter)
NEVADA 75-2293489
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(State or other jurisdiction of (IRS Employer
incorporation organization) Identification No.)
4625 W. Nevso Drive, Suite 2, Las Vegas, Nevada 89103
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(Address of principle executive offices, including zip code)
Registrant's telephone number, including area code: (702) 253-1333
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Exchange Act during the preceding 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 [X ] No [ ]
The number of shares outstanding of the registrant's common stock as of
November 15, 1999, was 12,201,227, par value $.001.
1
<PAGE>
DEFINITION, LTD.
FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 1999
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
Item 1 - Financial Statements
Consolidated Balance Sheet as of September 30, 1999 . . . . . .
Consolidated Statement of Operations for the Nine Months Ended
September 30, 1999. . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Cash Flows for the Nine Months Ended
September 30, 1999. . . . . . . . . . . . . . . . . . . .
Notes to Interim Consolidated Financial Statements. . . . . . .
All schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
Item 2 - Management's Discussion and Analysis. . . . . . . . . .
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. . . . . . . . . . . .
2
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PART I
Item 1. Financial Statements.
DEFINITION, LTD.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(Unaudited)
ASSETS September 30, December 31,
1999 1998
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<TABLE>
<S> <C> <C>
Current Assets
Cash and Cash Equivalents $ 1,599 $ 31,144
Property and Equipment
Broadcast Resource Library 2,985,536 2,985,536
Computer, Production and
Broadcast Equipment 310,514 310,508
Building and Improvements 469,153 469,153
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3,765,203 3,765,197
Less Accumulated Depreciation (2,925,696) (2,525,834)
---------- ---------
Property and Equipment, Net 839,507 1,239,363
Other Assets
Other Advances 700 0
Prepaid Airtime 0 146,250
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Total Other Assets 700 146,250
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Total Assets $ 841,806 $ 1,416,757
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY September 30, December 31,
1999 1998
Current Liabilities ------------- -----------
Mortgage Payable, Current Portion $ 1,951 $ 1,847
Accounts Payable, Trade 38,300 62,835
Payroll Tax Liabilities 23,700 23,700
Due to Related Party 227,915 164,383
--------- ---------
Total Current Liabilities 291,866 252,765
Long-Term Liabilities
Mortgage Payable, Noncurrent Portion 75,776 76,777
--------- --------
Total Liabilities 367,642 329,542
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, 50,000,000 Shares; Issued
and Outstanding, 11,451,227
and 1,254,929 Shares at September 30,
1999 and December 31, 1998 11,451 1,255
Additional Paid In Capital 14,217,479 12,737,049
Retained Earnings (Deficit) (13,754,766) (11,651,089)
---------- ----------
Total Stockholders' Equity 474,164 1,087,215
Total Liabilities and
Stockholders' Equity $ 841,806 $1,416,757
======= =========
</TABLE>
3
<PAGE>
DEFINITION, LTD.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998,
AND FOR THE NINE MONTHS PERIOD SEPTEMBER 30, 1999 AND 1998
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Three Months Three Months Nine Months Nine Months
Period Ended Period Ended Period Ended Period Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------ ------------ ------------ -------------
<TABLE>
<S> <C> <C> <C> <C>
Revenues $ 4,020 $ 24,475 $ 82,972 $ 69,276
Cost of Revenues 1,000 23,549 74,749 28,164
--------- --------- -------- -------
Gross Profit 3,020 926 8,223 41,112
Operating Expenses
General and
Administrative 126,150 256,042 2,109,892 1,139,861
-------- -------- --------- ---------
Operating Loss (123,130) (255,116) (2,101,669) (1,098,749)
Other Expense
Interest Expense 0 (4,138) (2,008) (9,465)
-------- -------- --------- ---------
Net Loss Available to
Common Stockholders $(123,130) $(259,254) $ (2,103,677) $(1,108,214)
======== ======= ========== ===========
Basic Loss Per Share
of Common Stock $ (0.01) $ (0.50) $ (0.21) $ (2.45)
======== ======= ========= ===========
Weighted Average Number
of Common Shares
Outstanding 11,450,783 521,596 10,169,950 452,373
========== ======= ========== =======
</TABLE>
4
<PAGE>
DEFINITION, LTD.
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited) (Unaudited)
Nine Months Nine Months
Period Ended Period Ended
September 30, September 30,
1999 1998
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<TABLE>
<S> <C> <C>
Cash Flows From Operating Activities
Net Loss $ (2,103,677) $ (1,108,214)
Adjustments to Reconcile Net Loss
to Net Cash Used In Operating Activities
Depreciation and Amortization 406,356 361,238
Common Stock Issued for Services 1,589,405 515,000
Changes in Assets and Liabilities
(Increase) Decrease in Accounts
Receivable 0 (4,725)
(Increase) Decrease in Other Advances (700) 0
Increase (Decrease) in Accounts
Payable, Trade (12,560) 5,800
--------- ------
Total Adjustments 1,982,501 877,313
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Net Cash Used In Operating Activities (121,176) (230,901)
Cash Flows From Investing Activities
Purchase of Property and Equipment 0 (51,062)
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Net Cash Flows Used In Investing Activities 0 (51,062)
Cash Flows From Financing Activities
Proceeds (Repayments) From Long Term Debt (897) (1,079)
Proceeds From the Issuance of Common Stock 0 200,000
Contributed Capital 28,996 0
Advances From Others 63,532 142,229
-------- -------
Net Cash Provided By Financing Activities 91,631 341,150
Increase (Decrease) in Cash and
Cash Equivalents (29,545) 59,187
Cash and Cash Equivalents at Beginning
of Period 31,144 1,990
------- -------
Cash and Cash Equivalents at End of Period $ 1,599 $ 61,177
======= =======
Supplemental Disclosure of Cash Flow
Information:
Cash paid for:
Interest $ 2,008 $ 9,465
Income taxes $ 0 $ 0
Supplemental Schedule of Noncash Investing
and Financing Activities:
Issuance of Common Stock for Services $1,589,405 $ 515,000
Conversion of Debt to Equity $ 11,975 $ 0
Exchange of Common Stock for Prepaid
Airtime $ 0 $ 195,000
Cancellation of Portion of Prepaid
Airtime for Common Stock Issued $ (139,750) $ 0
</TABLE>
5
<PAGE>
NOTE 1. Statement of Information Furnished
The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with Form 10QSB instructions and in the opinion
of management contains all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position as of
September 30, 1999, the results of operations for the three and nine months
ended September 30, 1999, and the statement of cash flows for the nine months
ended September 30, 1999. These results have been determined on the basis
of generally accepted accounting principles and practices and applied
consistently with those used in the preparation of the Company's 1998
Annual Report on Form 10-KSB.
Certain information and footnote disclosure normally included in the
financial statements presented in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested that
the accompanying consolidated financial statements be read in conjunction
with the accompanying consolidated financial statements and notes thereto
incorporated by reference in the Company's 1998 Annual Report on Form 10-KSB.
NOTE 2. Stock Split
On January 8, 1999, the Board of Directors approved a 20:1 reverse stock
split at $0.001 par value (no effect to par value) reducing the outstanding
shares at December 31, 1998, of 25,098,580 to 1,254,929. All per share and
per share information have been adjusted retroactively to reflect the stock
split.
NOTE 3. Prepaid Airtime
On August 13, 1999, the Company canceled 16,250 shares of common stock
(325,000 shares pre 1/99 stock split) issued to Omni-Lingual Broadcasting
Corp. per its agreement dated February 23, 1999. The stock was issued in
exchange for airtime. Prepaid airtime was recorded on the books at $195,000,
or $0.60 per share, and amortized over a period of sixty months. As of
February 23, 1999, $55,250, or 17 months of the airtime, was amortized and
included in the statement of operations. Also, per the agreement, 4,604
shares were issued, representing the pro-rated amount of stock earned by the
airing of the Ed Taxin Show from October 1, 1997 to February 26, 1999.
NOTE 4. Disposal of Subsidiary
The Company has entered into an agreement to sell the television subsidiary
operations, Definition Technologies, Inc., to one of its stockholders, due
to the financial drain on the parent Company. Plans to dispose were to be
completed effective July 1, 1999. However, the agreement remains to be
consummated as of the date of these financial statements. The Company
anticipates closure prior to its year end, December 31, 1999.
NOTE 5. Acquisition of New Film Library
On September 7, 1999, the Company entered into an agreement to acquire a
new film library for a total cost of $2.5 million, in exchange for the
issuance of 175,000 shares of its preferred stock at $10.00 per share, or
$1,750,000, and 750,000 shares of its common stock at $1.00 per share, or
$750,000. The Company's Board of Directors approved the transaction on
October 6, 1999. The common shares were issued on October 19, 1999, and
the preferred shares are expected to be issued before year end.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
When used in this discussion, the words "believes", "anticipates", "expects",
and similar expressions are intended to identify forward-looking statements.
Such statements are subject to certain risks and uncertainties, which could
cause actual results to differ materially from those projected. Readers are
cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. The Company undertakes no obligation
to republish revised forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events. Readers are also urged to carefully review and
consider the various disclosures made by the Company which attempt to advise
interested parties of the factors which affect the Company's business, in
this report, as well as the Company's periodic reports on Forms 10-KSB,
10-QSB and 8-K filed with the Securities and Exchange Commission.
(1) Results of Operations
Revenues. The Company continues to operate its TV Station with revenues for
the three months ended September 30, 1999 of $4,020, compared to the three
months ended September 30, 1998 of $24,475, a decrease of $20,455. As
discussed in the notes to the interim consolidated financial statements, the
Company has plans to dispose of its television subsidiary operations, which
is expected to take place prior to year end. Revenues have decreased
directly as a result. Revenues for the nine month period ended September
30, 1999 versus the same period in 1998, increased from $69,276 to $82,972.
There was no apparent reason for the increase. To date, the Company has
not relied on any revenues for funding. During the next several years, the
Company expects to derive the majority of its potential revenues from the
distribution of its newly acquired film library. See notes to the interim
consolidated financial statements.
General and Administrative Expenses. During the three months ended
September 30, 1999, the Company incurred $126,150 in general and
administrative expenses, a decrease of 50.7% from third quarter 1998 expenses
of $256,042. General and administrative expenses for the nine month period
ended September 30, 1999, increased 85.1% from $1,139,861 to $2,109,892. The
increase is primarily attributable to the issuance of common stock for
consulting services of $1,609,405. The Company experienced a net loss of
$2,103,677 for the nine months period ended September 30, 1999, compared to
a net loss of the prior period of $1,108,214, or an increase of $995,463.
The majority of the loss is attributable to the common stock issued for
services rendered as discussed above.
Provision for Income Taxes. As of September 30, 1999, the Company's
accumulated deficit was $13,754,766. Accordingly, the Company has recorded
a full valuation allowance against any income tax benefit to date.
(2) Liquidity
The Company's liquidity position continues to be poor. Working capital
continues to deteriorate. At September 30, 1999, the Company had a negative
working capital of $290,267, as compared to $221,621 at December 31, 1998.
Due to the "start-up" nature of the Company's business, the Company expects
to incur losses as it expands its business. The Company may raise additional
funds through public or private equity investment in order to expand the
range and scope of its business operations. The Company may seek access to
the private or public equity but there is no assurance that such additional
funds will be available for the Company to finance its operations on
acceptable terms, if at all.
7
<PAGE>
PART II
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
1. On August 13, the Company canceled 16,250 shares of common stock
(325,000 pre 1/99 split) and reissued 4,604 shares of common stock to
Omni-Lingual Broadcasting Corp. in accordance with a mutual agreement dated
February 23, 1999. See notes to interim consolidated statements.
2. On August 23, 1999, the Company canceled 400,000 shares of common stock
issued to an officer of the Company on March 1, 1999, at $0.05 per share, or
$20,000.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
On October 12, 1999, the Company filed Form 8-K/A regarding Item 4. Changes
in Registrant's certifying accountant. The amendment was filed to include as
an exhibit, the letter to the Securities Exchange Commission from its prior
auditors, Dance, Hinckley & Company, formerly known as Smith, Dance and
Company.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act, the Registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DEFINITION, LTD.
By: ________________
/s/ Donna Anderson
President and
Chief Executive Officer
Dated: November 15, 1999
8
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-END> SEP-30-1999 SEP-30-1999
<CASH> 1,599 1,599
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,599 1,599
<PP&E> 839,507 839,507
<DEPRECIATION> 399,856 399,856
<TOTAL-ASSETS> 841,806 841,806
<CURRENT-LIABILITIES> 367,642 367,642
<BONDS> 0 0
0 0
0 0
<COMMON> 11,451 11,451
<OTHER-SE> 462,713 462,713
<TOTAL-LIABILITY-AND-EQUITY> 841,806 841,806
<SALES> 4,020 82,972
<TOTAL-REVENUES> 4,020 82,972
<CGS> 1,000 74,749
<TOTAL-COSTS> 127,150 2,184,641
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 2,008
<INCOME-PRETAX> (123,130) (2,103,677)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (123,130) (2,103,677)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (123,130) (2,103,677)
<EPS-BASIC> (0.01) (0.21)
<EPS-DILUTED> (0.01) (0.21)
</TABLE>
