U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
X QUARTERLY REPORT UNDER 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
EXCHANGE ACT
Commission file No. 0-13167
TM CENTURY, INC.
(Name of small business issuer as specified in its charter)
Delaware 73-1220394
(State of incorporation) (IRS Employer Identification No.)
2002 Academy, Dallas, Texas 75234
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (972) 247-8850
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___
The number of issuer's shares of Common Stock outstanding as of April
30, 1998 was 2,483,193.
Transitional Small Business Disclosure Format (check one): Yes _ No X
<PAGE>
<TABLE>
TM Century, Inc.
Balance Sheets
As of June 30, 1998 (Unaudited) and September 30, 1997
ASSETS
June 30, 1998 September 30, 1997
<S> <C> <C>
CURRENT ASSETS
Cash 443,619 294,333
Accounts and notes receivable 892,752 983,767
less allowance for doubtful accounts (135,182) (250,000)
Inventories, net 700,360 779,953
Deferred federal income taxes 139,130 154,530
Prepaid expenses and other assets 34,879 25,224
TOTAL CURRENT ASSETS 2,075,558 1,987,807
PROPERTY AND EQUIPMENT 2,508,621 2,463,958
Less accumulated depreciation (1,796,865) (1,548,617)
NET PROPERTY AND EQUIPMENT 711,756 915,341
INVENTORIES - NONCURRENT, net 162,385 143,647
OTHER ASSETS 18,324 18,260
TOTAL ASSETS 2,968,023 3,065,055
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 60,135 69,451
Accrued expenses 218,053 205,674
Current portion of obligation under capital 161,574 178,033
lease
Deferred revenue 93,801 56,011
Customer deposits 17,858 26,358
TOTAL CURRENT LIABILITIES 551,421 535,527
OBLIGATIONS UNDER CAPITAL LEASE 12,709 128,755
CUSTOMER DEPOSITS - NONCURRENT 176,227 166,418
DEFERRED FEDERAL INCOME TAXES 11,000 26,400
TOTAL LIABILITIES 751,357 857,100
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; authorized 29,705 29,705
7,500,000 shares;
2,970,481 shares issued; and 2,483,193
shares outstanding
Paid-in capital 2,275,272 2,275,272
Treasury stock - at cost, 487,288 and (1,291,227) (1,291,227)
433,288 shares, respectively
Retained earnings 1,202,916 1,194,205
TOTAL STOCKHOLDERS' EQUITY 2,216,666 2,207,955
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 2,968,023 3,065,055
</TABLE>
<PAGE>
<TABLE>
TM CENTURY, INC.
Statements of Operations and Retained Earnings
(Unaudited)
For the Three Months Ended June 30, 1998 and 1997
1998 1997
<S> <C> <C>
REVENUES 1,703,318 1,962,285
Less commissions 332,715 275,876
NET REVENUES 1,370,603 1,686,409
COSTS AND EXPENSES:
Production, programming 549,145 822,340
and technical costs
General and administrative 509,295 527,718
Selling costs 198,574 347,915
Depreciation 80,250 90,000
TOTAL 1,337,264 1,787,973
OPERATING INCOME (LOSS) 33,339 (101,564)
OTHER INCOME (EXPENSES)
Other, net 2,027 2,082
Interest expense (3,715) (6,629)
TOTAL (1,688) (4,547)
INCOME (LOSS) BEFORE INCOME TAXES 31,651 (106,111)
INCOME TAX (BENEFIT) PROVISION 0 0
NET INCOME (LOSS) 31,651 (106,111)
RETAINED EARNINGS, BEGINNING OF 1,171,265 1,458,799
PERIOD
RETAINED EARNINGS, END OF PERIOD 1,202,916 1,352,688
BASIC AND DILUTED NET INCOME 0.01 (0.04)
(LOSS) PER SHARE
WEIGHTED AVERAGE NUMBER OF BASIC
AND DILUTED COMMON SHARES
OUTSTANDING 2,483,193 2,483,193
</TABLE>
<PAGE>
<TABLE>
TM CENTURY, INC.
Statements of Operations and Retained Earnings
(Unaudited)
For the Nine Months Ended June 30, 1998 and 1997
1998 1997
<S> <C> <C>
REVENUES 5,178,962 5,469,684
Less commissions 965,773 899,542
NET REVENUES 4,213,189 4,570,142
COSTS AND EXPENSES:
Production, programming 1,661,708 2,324,806
and technical costs
General and 1,544,558 1,683,855
administrative
Selling costs 743,852 797,055
Depreciation 248,248 270,365
Reduction in carrying 0 148,000
value of inventories
TOTAL 4,198,366 5,224,081
OPERATING INCOME (LOSS) 14,823 (653,939)
OTHER INCOME (EXPENSES)
Other, net 7,005 6,638
Interest expense (13,117) (21,561)
TOTAL (6,112) (14,923)
INCOME (LOSS) BEFORE INCOME TAXES 8,711 (668,862)
INCOME TAX (BENEFIT) PROVISION 0 0
NET INCOME (LOSS) 8,711 (668,862)
RETAINED EARNINGS, BEGINNING OF 1,194,205 2,021,550
PERIOD
RETAINED EARNINGS, END OF PERIOD 1,202,916 1,352,688
BASIC AND DILUTED NET INCOME 0.00 (0.27)
(LOSS) PER SHARE
WEIGHTED AVERAGE NUMBER OF BASIC
AND DILUTED COMMON SHARES
OUTSTANDING 2,483,193 2,503,881
</TABLE>
<PAGE>
<TABLE>
TM Century, Inc.
Statement of Cash Flows (Unaudited)
For the Nine Months Ended June 30, 1998 and 1997
1998 1997
<C> <S> <S>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) 8,711 (668,862)
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation 248,248 256,869
Amortization 214,800 267,330
Provision for doubtful accounts 41,000 58,000
Reduction in carrying value of inventories 0 148,000
Change in assets and liabilities
(Increase) decrease in:
Trade accounts receivable (64,803) 11,460
Inventories (153,945) 82,727
Prepaid expenses and other assets (9,719) (9,853)
Increase (decrease) in:
Accounts payable and accrued expenses 3,063 42,861
Deferred revenue 37,790 (8,281)
Customer deposits 1,309 (5,561)
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 326,454 174,690
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (44,663) (23,964)
Acquisition of treasury stock 0 (40,911)
NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES (44,663) (64,875)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on capital lease obligations (132,505) (122,497)
NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES (132,505) (122,497)
NET INCREASE (DECREASE) IN CASH 149,286 (12,682)
CASH AT BEGINNING OF PERIOD 294,333 377,855
CASH AND CASH EQUIVALENTS AT END OF PERIOD 443,619 365,173
</TABLE>
<PAGE>
TM CENTURY INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
1. BASIS OF PRESENTATION
The interim financial statements of TM Century, Inc. (the _Company_)
at June 30, 1998, and for the three and nine months ended June 30,
1998 and 1997, are unaudited, but include all adjustments (consisting
only of normal recurring adjustments) which the Company considers
necessary for a fair presentation. The September 30, 1997, balance
sheet was derived from the balance sheet included in the Company's
audited financial statements as filed on Form 10-KSB for the year
ended September 30, 1997. Certain amounts previously reported in
prior interim financial statements have been reclassified to conform
to the 1998 presentation.
The accompanying unaudited interim financial statements are for
interim periods and do not include all disclosures normally provided
in annual financial statements, and should be read in conjunction
with the Company's audited financial statements. The accompanying
unaudited interim financial statements for the three and nine months
ended June 30, 1998, are not necessarily indicative of the results
which can be expected for the entire fiscal year.
2. INCOME TAXES
Deferred income taxes are provided, when applicable, on temporary
differences between the recognition of income and expense for tax and
for financial accounting purposes in accordance with Statement of
Financial Accounting Standards No. 109 (_SFAS 109_). Temporary
differences which give rise to deferred taxes include basis
differences of property and equipment, accelerated tax depreciation
in excess of book depreciation, and valuation allowances provided in
excess of amounts deductible for tax purposes. Under the provisions
of SFAS 109, recognition of deferred tax assets is permitted for such
amounts which can be carried forward to future periods.
The Company has net operating loss carryforwards of approximately
$1.3 million available to offset future taxable income expiring in
2008 through 2010. The Company has recorded a deferred tax asset of
$155,000 after deduction of a valuation allowance of $522,000 to
reduce the total deferred tax asset because it is likely that a
portion of the tax asset will not be realized. Realization is
dependent on generating sufficient taxable income prior to expiration
of the loss carryforwards. Management believes it is more likely than
not that the non-reserved portion of the deferred tax asset will be
realized. The amount of the deferred tax asset considered
realizable, however, could be reduced in the near term if estimates
of future taxable income during the carryforward period are reduced.
Certain provisions of the tax law may limit the net operating loss,
capital loss and credit carryforwards available for use in any given
tax year in the event of a significant change in ownership interest.
<PAGE>
3. LONG-TERM DEBT AND LEASE OBLIGATIONS
The Company's Line of Credit was renewed through February 28, 1999
for $500,000 which represented a $200,000 increase compared to the
prior year. The Company's $500,000 revolving Line of Credit with a
bank grants a first lien and security interest in and upon 80% of the
Company's domestic accounts and chattel paper, chattel paper with
installments or other sums more than 90 days past due, and accounts
and chattel paper due from any person or entity not domiciled in the
United States. Borrowings under the Line of Credit bear a
fluctuating interest rate of prime plus 1.5%, payable monthly. The
Line of Credit, which bears an annual commitment fee of 0.5% of the
unused amounts, is renewable annually, subject to the consent of both
parties. No borrowings were drawn under the Line of Credit during the
nine months ended June 30, 1998. In conjunction with the Company's
leasing arrangement discussed below, the availability under the Line
of Credit is reduced from $500,000 to $300,000 due to a $200,000
letter of credit.
4. Earnings Per Share
In February, 1997, the Financial Accounting Standards Board ("FASB")
issued Statement No. 128, "Earnings per Share", effective for periods
ending after December 15, 1997. Basic earnings per share are
calculated on the weighted average number of common shares
outstanding during each period. All prior period earnings per share
amounts have been restated in accordance with FASB No. 128. Diluted
earnings per share are not materially different than basic earnings
per share.
<PAGE>
<TABLE>
The following table provides a reconciliation between basic and
diluted earnings per share, in accordance with FASB 128:
Three Months Nine Months
Ended Ended
June 30 June 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net Income (Loss) 31,651 (106,111) 8,711 (668,862)
Weighted Average Number of
Shares Outstanding
Basic 2,483,193 2,483,193 2,483,193 2,503,881
Dilutive effect of
common stock equivalents 0 0 0 0
Diluted 2,483,193 2,483,193 2,483,193 2,503,881
Earnings Per Share:
Basic and Diluted Net
Income (Loss) 0.01 (0.04) 0.00 (0.27)
</TABLE>
5. Other Matters
The Company has been advised by a State taxing authority of its'
intention to audit the sales tax records of the Company for business
done in such tax jurisdiction. At this time the Company can not
determine the impact of such audit on the financial position of the
Company.
<PAGE>
TM CENTURY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
TM Century, Inc. (the "Company") is engaged primarily in the
creation, production, marketing, and worldwide distribution of
compact disc music libraries, production libraries, morning show
services, and station identification jingles, for radio stations
worldwide.
Forward-Looking Statements
This Quarterly Report contains forward-looking statements about the
business, financial condition and prospects of the Company that
reflect assumptions made by management and management's beliefs based
on information currently available to it. The Company can give no
assurance that the expectations indicated by such forward-looking
statements will be realized. If any of management's assumptions
should prove incorrect, or if any of the risks and uncertainties
underlying such expectations should materialize, the Company's actual
results may differ materially from those indicated by the forward-
looking statements.
The key factors that are not within the Company's control and that
may have a direct bearing on operating results include, but are not
limited to, continued maturation of the domestic and international
markets for compact disc technology; acceptance by the customers of
the Company's existing and any new products and formats; the
development by competitors of products using improved or alternative
technologies and the potential obsolescence of technologies used by
the Company; the continued availability of software, hardware and
other products obtained by the Company from third parties; dependence
on distributors, particularly in the international market, and on
third parties engaged to replicate the Company's products on compact
discs; the retention of employees; the success of the Company's
current and future efforts to reduce operating expenses; the
effectiveness of new marketing strategies; and general economic
conditions. Additionally, the Company may not have the ability to
develop new products cost-effectively. There may be other risks and
uncertainties that management is not able to predict.
When used in this Quarterly Report, words such as _believes,_
_expects,_, _intends,_ _plans,_ _anticipates,_ _estimates_ and
similar expressions are intended to identify forward-looking
statements, although there may be certain forward-looking statements
not accompanied by such expressions. All forward-looking statements
are intended to be covered by the safe harbor created by Section 21E
of the Securities Exchange Act of 1934.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company relies upon current sales of music libraries and jingles
on terms of cash upon delivery for operating liquidity. Liquidity is
also provided by cash receipts from customers under contracts for
production libraries and weekly music service contracts having terms
of up to four years. The Company is obligated to provide music
updates throughout the contract terms for both production library and
weekly music service contracts. Sales of music libraries, jingles,
and the payments under production library and weekly music service
contracts will provide in the opinion of management, adequate
liquidity to meet operating requirements at least through the end of
fiscal 1998.
During the quarter ended June 30, 1998, approximately $62,000 was
spent for the purchase of property and equipment and for product
development costs for new music libraries, music library updates, and
jingles. Funds for operating needs, new product development, and
capital expenditures for the period were provided from cash reserves.
The Company's expenditures for property, equipment, and development
of new products are discretionary. Product development expenditures
are expected to be approximately $220,000 in fiscal 1998.
Management anticipates that cash flow from operations and cash
reserves will be sufficient to meet these capital requirements at
least through the end of fiscal year 1998. The Company has no other
significant commitments for capital expenditures in fiscal 1998.
The Company has been advised by a State taxing authority of its'
intention to audit the sales tax records of the Company for business
done in such tax jurisdiction. At this time the Company can not
determine the impact of such audit on the financial position of the
Company.
<PAGE>
RESULTS OF CONTINUING OPERATIONS
Comparison of the Three-Month Periods Ended March 31, 1997 and 1998
Revenues declined approximately $259,000 or 13.2% in the three-month
period ended June 30, 1998 as compared to the same period for the
previous year. The decrease was primarily due to the sale of all
computerized radio station computer software and equipment inventory
and other assets in June, 1997. The Company's revenue of
computerized radio station computer software and equipment
contributed approximately $161,000 in revenue for three months ended
June 30, 1997. Excluding this revenue for three months ended June
30, 1997, would result in revenues decreasing approximately $98,000
or 5.4% in the three-month period ended June 30, 1998 as compared to
the same period for the previous year. The revenue decrease was
primarily due to a decrease in revenues in the weekly HitDisc and
GoldDisc music services of $259,000. Offsetting these decreases were
revenue increases in production libraries of $89,000, radio Jingles
of $34,000 and Morning Show service of $31,000. The Morning Show
revenue increase is due to an increase in the number of Comedy
customers as well as an increase in the allocation of advertising
revenues.
Production library revenues increased $89,000, or 48.3%. Increases
in production library revenue is due to the substantial increase in
advertising/barter arrangements for the Company's sales and imaging
libraries. Even though production library revenues may decline due
to the expiration of three-year contracts, management believes that
production libraries will continue to generate a significant portion
of overall revenues from sales of existing products through
advertising/barter arrangements and sales of new products. The
Company introduced new production libraries in the second and fourth
quarters of fiscal 1997. Sales and new sales growth are subject to
customer acceptance of the new products.
Jingles increased $34,000 or 12.2% primarily due to an increase in
demand for custom Jingles compared to the same quarter, prior fiscal
year 1997.
Revenues of weekly HitDisc and GoldDisc music services decreased
$15,000 and $244,000 respectively, or 22.5% as compared to the same
period previous year. The decrease in compact disc music library
revenues was due to a decrease in weekly and recurrent music sales to
customers. As the compact disc music library market matures, sales
of compact discs are generated primarily from changes in music
formats or sales of new music libraries or formats rather than from
conversions to compact disc music delivery technology. The market
for compact disc music libraries to broadcast customers has reached a
substantial level of maturity in the United States, which is the
market from which the Company derives most of its music library
revenues. A decline in revenues from music library sales may result
in a proportionately greater decline in operating income because
music libraries provide higher margins than the Company's other
products. However, management believes the introduction of new
products will counteract the declines in revenues from existing music
libraries. New products include pre-recorded music (GoldDrive)
provided to equipment manufacturers of hard drive systems which was
introduced during the fiscal year 1997. Renewals and new sales
growth are subject to customer acceptance of the new products.
<PAGE>
Production, programming and technical costs decreased $273,000 or
33.2%, and as a percentage of revenue decreased from 41.9% to 32.2%.
The decrease as a percentage of revenues is primarily due to the
reduction in expenses which resulted from the sale of all
computerized radio station computer software and equipment inventory
and assets in June 1997.
Commissions increased $57,000 or 20.6%, and as a percentage of
revenues increased from 14.1% to 19.6%. Commissions increased
proportionally to the increase in commissioned sales. Commissions as
a percentage of selling and commission costs increased from 44.2% to
62.6% due to lower selling costs in the three months ended fiscal
year 1998 compared to same period prior year.
Selling costs decreased $149,000 or 42.9%, and as a percentage of
revenues decreased from 17.8% to 11.7%. The decrease in expenses is
primarily due to a reduction in sales salaries as a result of changes
in sales force and in-house commission plans. Selling costs as a
percentage of selling and commission costs decreased from 55.8% to
37.4%.
General and administrative costs decreased $18,000 or 3.5% and is
primarily due to the Company's continued efforts in reducing
operating expenses.
Depreciation decreased $10,000 or 10.8% and was primarily due to the
sale of all computerized radio station computer software and
equipment inventory and assets in June, 1997, and offset by increases
in production equipment in the first and second quarters of fiscal
year 1998.
<PAGE>
Comparison of the Nine-Month Periods Ended June 30, 1997 and 1998
Revenues declined approximately $291,000 or 5.3% in the nine month
period ended June 30, 1998 as compared to the same period for the
previous year. The decrease was primarily due to the sale of all
computerized radio station computer software and equipment inventory
and other assets in June, 1997. The Company's revenue of
computerized radio station computer software and equipment
contributed approximately $431,000 in revenue for nine months ended
June 30, 1997. Excluding this revenue for nine months ended June 30,
1997 would result in revenues increasing approximately $140,000 or
2.8% in the nine month period ended June 30, 1998 as compared to the
same period for the previous year. The revenue increase was
primarily due to increase in revenues for the weekly HitDisc music
service of $19,000, production libraries of $238,000 and radio
Jingles of $142,000. Offsetting these increases were decreases in
the GoldDisc music service of $193,000 and the Morning Show service
of $88,000.
Revenues of the weekly HitDisc music service increased $19,000 or
1.0% as compared to the same period previous year. The increase in
compact disc music library revenues was primarily due to an increase
in weekly music sales. As the compact disc music library market
matures, sales of compact discs are generated primarily from changes
in music formats or sales of new music libraries or formats rather
than from conversions to compact disc music delivery technology. The
market for compact disc music libraries to broadcast customers has
reached a substantial level of maturity in the United States, which
is the market from which the Company derives most of its music
library revenues. A decline in revenues from music library sales may
result in a proportionately greater decline in operating income
because music libraries provide higher margins than the Company's
other products. However, management believes the introduction of
new products will counteract the declines in revenues from existing
music libraries. New products include pre-recorded music (GoldDrive)
provided to equipment manufacturers of hard drive systems which was
introduced during the fiscal year 1997. Renewals and new sales
growth are subject to customer acceptance of the new products.
Production library revenues increased $238,000, or 44.6%. Increases
in production library revenue is due to the substantial increase in
advertising/barter arrangements for the Company's sales and imaging
libraries. Even though production library revenues may decline due
to the expiration of three-year contracts, management believes that
production libraries will continue to generate a significant portion
of overall revenues from sales of existing products through
advertising/barter arrangements and sales of new products. The
Company introduced new production libraries in the second and fourth
quarters of fiscal 1997. Sales and new sales growth are subject to
customer acceptance of the new products.
Jingles increased $142,000 or 19.7% primarily due to an increase in
demand for custom Jingles compared to the same period, prior fiscal
year 1997.
<PAGE>
GoldDisc revenues decreased $193,000 or 14.0% primarily due to a
reduction in non-recurring sales to customers. The Morning Show
service decreased as a result of a decrease in the allocation of
advertising revenues.
Production, programming and technical costs decreased $663,000 or
28.5%, and as a percentage of revenue decreased from 42.5% to 32.1%.
The decrease as a percentage of revenues is primarily due to the
reduction in expenses which resulted from the sale of all
computerized radio station computer software and equipment inventory
and assets in June 1997.
Commissions increased $66,000 or 7.4%, and as a percentage of
revenues increased from 16.5% to 18.7% Commissions as a percentage
of selling and commission costs increased from 53.0% to 56.5% due to
lower selling costs in the nine months ended fiscal year 1998
compared to same period prior year.
Selling costs increased $53,000 or 6.7%, and as a percentage of
revenues decreased from 14.6% to 14.4%. The decrease in expenses is
primarily due to a decrease in sales salaries as a result of changes
in sales force and in-house commission plans. Selling costs as a
percentage of selling and commission costs decreased from 47.0% to
43.5%.
General and administrative costs decreased $139,000 or 8.3% and is
primarily due to the Company's continued efforts in reducing
operating expenses.
Depreciation decreased $22,000 or 8.2% primarily due to the sale of
all computerized radio station computer software and equipment
inventory and other assets in June, 1997, and offset by increases in
production equipment in the first and second quarters of fiscal year
1998.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal proceedings - Not applicable.
Item 2. Changes in securities - Not applicable.
Item 3. Defaults upon senior securities - Not applicable.
Item 4. Submission of matters to a vote of security holders
The holders of approximately 71% of the outstanding common stock
of the Company, by written consent executed as of April 28, 1998
in accordance with Delaware law, (i) re-elected each of the four
directors of the Company, Marjorie L. McIntyre, Neil W. Sargent,
A. Ann Armstrong and Donald E. Latin, and (ii) approved the
appointment of Deloitte & Touche as the Company's independent
public accountants for the fiscal year ending September 30,
1998. The Company did not solicit proxies or consents in
connection therewith.
Item 5. Other information - The Company has been advised by a State
taxing authority of its' intention to audit the sales tax
records of the Company for business done in such tax
jurisdiction. At this time the Company can not determine the
impact of such audit on the financial position of the Company.
On May 22, 1998, the Company received a letter from the
Recording Industry Association of America, Inc. (RIAA) alleging
that it was illegally duplicating sound recordings of RIAA's
member companies in its Mobile Beat Series I and II and Mobile
Beat Holiday Series. The RIAA alleged substantial damages and
state that it would consider a pre-complaint settlement.
Following receipt of the letter, counsel for the Company met
with RIAA's counsel on June 30, 1998. At this meeting, the RIAA
made a demand for $3 million to settle the dispute. RIAA was
advised that the Company's financial position could not support
such a cash settlement.
On July 14, 1998, the Company entered into a Tolling Agreement
with the RIAA. On July 24, 1998, it formally responded to the
RIAA.
Since then, Distronics, one of the companies that manufacturers
CDs for the Company's Gold Disc line, contacted the Company and
advised it that Distronics had been contacted by the RIAA and
told not to duplicate any sound recordings in the Gold Disc
Series unless the Company could supply written license
agreements.
By letter date August 4, 1998, RIAA advised the Company that it
would bring suit unless a meaningful settlement offer was
proffered by the Company by August 10, 1998. The matter is now
under discussion by the Company.
Thus far no suit has been filed and no discovery has been
undertaking. The Company believes that it has a meritorious
defense to the claims asserted, but it is possible that it will
not prevail if the matter is brought to litigation. Any
significant cash amount paid in settlement or awarded in
judgment would likely have an adverse effect on the Company.
(a) Exhibits
Material Contracts:
10. Material Contracts: None.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the three
month period ending March 31, 1998.
<PAGE>
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.
Dated: August 6, 1998
TM CENTURY, INC.
BY:/s/Roger A. Holeman
Roger A. Holeman
Chief Financial Officer
(Principal Accounting Officer)
BY:/s/Neil W. Sargent
Neil W. Sargent
Chief Executive Officer
(Principal Executive Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS DOCUMENT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRATED FROM THE
BALANCE SHEETS AND STATEMENTS OF OPERATIONS OF THE FORM 10-QSB FOR THE
QUARTERLY PERIOD ENDED JUNE 30, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 443619
<SECURITIES> 0
<RECEIVABLES> 892752
<ALLOWANCES> 135182
<INVENTORY> 700360
<CURRENT-ASSETS> 2075558
<PP&E> 2508621
<DEPRECIATION> 1796865
<TOTAL-ASSETS> 2968023
<CURRENT-LIABILITIES> 554421
<BONDS> 0
0
0
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