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, 2000
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) 406-6800
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 June
30, 2000 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, 2000 (Unaudited) and September 30, 1999
<CAPTION>
ASSETS
June 30, 2000 September 30, 1999
______________ __________________
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 521,251 $ 354,332
Accounts receivable less allowance for doubtful
accounts of $101,592 and $100,000 respectively 648,602 721,538
Inventories, net of allowance for obsolescence of $258,545 456,665 446,279
Prepaid expenses 47,930 31,277
______________ ______________
TOTAL CURRENT ASSETS 1,674,448 1,553,426
PROPERTY AND EQUIPMENT 2,686,595 2,563,220
Less accumulated depreciation and amortization (2,229,704) (2,116,116)
______________ ______________
NET PROPERTY AND EQUIPMENT 456,891 447,104
PRODUCT DEVELOPMENT COSTS, net of accumulated amortization
of $1,753,678 and $1,630,071 respectively 369,807 324,094
COMEDY MATERIAL RIGHTS, net of accumulated amortization
of $37,200 and $18,600 respectively 86,800 105,400
OTHER ASSETS 19,866 19,316
______________ ______________
TOTAL ASSETS $ 2,607,812 $ 2,449,340
============== ==============
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 52,582 $ 63,508
Accrued expenses 134,853 196,978
Current portion of obligation under capital lease 0 3,202
Current portion of note payable 33,333 33,333
Deferred revenue 80,088 127,382
Customer deposits 38,603 37,623
______________ ______________
TOTAL CURRENT LIABILITIES 339,459 462,026
NOTE PAYABLE, less current portion 40,667 65,667
CUSTOMER DEPOSITS - NONCURRENT 137,491 99,114
ACCRUED SETTLEMENT FOR RIAA DISPUTE 405,100 405,100
______________ ______________
TOTAL LIABILITIES 922,717 1,031,907
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; authorized 7,500,000 shares; 29,705 29,705
2,970,481 shares issued; and 2,483,193 shares outstanding
Additional paid-in capital 2,275,272 2,275,272
Treasury stock - at cost, 487,288 shares (1,291,227) (1,291,227)
Retained earnings 671,345 403,683
______________ ______________
TOTAL STOCKHOLDERS' EQUITY 1,685,095 1,417,433
______________ ______________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,607,812 $ 2,449,340
============== ==============
See notes to interim financial statements
</TABLE>
<PAGE>
<TABLE>
TM Century, Inc.
Statements of Operations and Retained Earnings (Unaudited)
For the Three Months Ended June 30, 2000 and 1999
2000 1999
____________ ___________
<S> <C> <C>
REVENUES $ 1,764,987 $ 1,544,101
Less commissions 374,617 292,079
____________ ___________
NET REVENUES 1,390,370 1,252,022
COSTS AND EXPENSES
Production, programming, and technical costs 479,544 488,662
General and administrative costs 514,864 537,589
Selling costs 247,736 162,330
Depreciation and amortization of property and equipment 33,692 71,812
____________ ___________
TOTAL 1,275,836 1,260,393
____________ ___________
OPERATING INCOME (LOSS) 114,534 (8,371)
OTHER INCOME (EXPENSE)
Interest income 3,316 52
Other (expense) income, net 20 (5,024)
____________ ___________
TOTAL 3,336 (4,972)
____________ ___________
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 117,870 (13,343)
PROVISION FOR INCOME TAXES 0 0
____________ ___________
NET INCOME (LOSS) 117,870 (13,343)
RETAINED EARNINGS, BEGINNING OF PERIOD 553,475 95,332
____________ ___________
RETAINED EARNINGS, END OF PERIOD $ 671,345 $ 81,989
============ ===========
BASIC INCOME (LOSS) PER COMMON SHARE $ .05 $ (.01)
============ ===========
DILUTED INCOME (LOSS) PER COMMON SHARE $ .04 $ (.01)
============ ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,483,193 2,483,193
============ ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING,
ASSUMING DILUTION 2,717,429 N/A
============ ===========
See notes to interim financial statements
</TABLE>
<PAGE>
<TABLE>
TM Century, Inc.
Statements of Operations and Retained Earnings (Unaudited)
For the Nine Months Ended June 30, 2000 and 1999
2000 1999
____________ ___________
<S> <C> <C>
REVENUES $ 5,051,778 $ 4,566,828
Less commissions 1,000,871 879,009
____________ ___________
NET REVENUES 4,050,907 3,687,819
COSTS AND EXPENSES
Production, programming, and technical costs 1,436,831 1,592,238
General and administrative costs 1,483,847 1,665,240
Selling costs 746,487 499,854
Depreciation and amortization of property and equipment 121,588 230,843
Reduction in carrying value of inventories 0 12,000
____________ ___________
TOTAL 3,788,753 4,000,175
____________ ___________
OPERATING INCOME (LOSS) 262,154 (312,356)
OTHER INCOME (EXPENSE)
Interest income 4,454 2,057
Other (expense) income, net 1,054 (23,865)
____________ ___________
TOTAL 5,508 (21,808)
____________ ___________
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 267,662 (334,164)
PROVISION FOR INCOME TAXES 0 0
____________ ___________
NET INCOME (LOSS) 267,662 (334,164)
RETAINED EARNINGS, BEGINNING OF PERIOD 403,683 416,153
____________ ___________
RETAINED EARNINGS, END OF PERIOD $ 671,345 $ 81,989
============ ===========
BASIC INCOME (LOSS) PER COMMON SHARE $ .11 $ (.13)
============ ===========
DILUTED INCOME (LOSS) PER COMMON SHARE $ .10 $ (.13)
============ ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,483,193 2,483,193
============ ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING,
ASSUMING DILUTION 2,706,076 N/A
============ ===========
See notes to interim financial statements
</TABLE>
<PAGE>
<TABLE>
TM Century, Inc.
Statement of Cash Flows (Unaudited)
For the Nine Months Ended June 30, 2000 and 1999
2000 1999
___________ ___________
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 267,662 $ (334,164)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Depreciation and amortization of property and equipment 121,588 230,843
Amortization 142,207 133,797
Provision for settlement of RIAA dispute 0 20,100
Provision for doubtful accounts 1,592 (50,332)
Reduction in carrying value of inventories 0 12,000
Increase (decrease) in cash from changes in operating assets
and liabilities:
Accounts receivable 71,344 223,450
Inventories (10,386) 27,480
Product development costs (169,320) (92,505)
Prepaid expenses (16,653) 17,400
Other assets (550) 0
Accounts payable and accrued expenses (73,051) (55,704)
Deferred revenue (47,294) (32,960)
Customer deposits 39,357 17,594
___________ ___________
NET CASH PROVIDED BY OPERATING ACTIVITIES 326,496 116,999
INVESTING ACTIVITIES
Purchases of property and equipment (131,375) (86,923)
___________ ___________
NET CASH USED BY INVESTING ACTIVITIES (131,375) (86,923)
FINANCING ACTIVITIES
Principal payments on note payable (25,000) (16,667)
Principal payments on capital lease obligations (3,202) (115,910)
___________ ___________
NET CASH USED BY FINANCING ACTIVITIES (28,202) (132,577)
___________ ___________
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 166,919 (102,501)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 354,332 348,957
___________ ___________
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 521,251 $ 246,456
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 46 $ 3,765
=========== ===========
Non-cash investing and financing activities:
Note payable incurred to purchase Comedy Service $ 0 $ 124,000
=========== ===========
See notes to interim financial statements
</TABLE>
<PAGE>
TM CENTURY INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
1. BASIS OF PRESENTATION
The interim financial statements of TM Century, Inc. (the "Company")
at June 30, 2000, and for the three and nine months ended June 30,
2000 and 1999, are unaudited, and include all adjustments (consisting
only of normal recurring adjustments) which the Company considers
necessary for a fair presentation. The September 30, 1999, 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, 1999. Certain amounts previously reported in
prior interim financial statements have been reclassified to conform
to the 2000 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, 2000, are not necessarily indicative of the results
which can be expected for the entire fiscal year.
2. LONG-TERM DEBT
Effective January 2, 1999, the Company purchased the remaining 50%
interest of certain comedy material that was written and produced by
an individual for broadcast by radio stations and marketed by the
Company, resulting in the Company owning 100% of such Comedy Service.
For consideration of the comedy material and the Company being able
to use the individual's name in connection with promoting the Comedy
Service for a period of five years, the Company agreed to pay to the
individual a total of $124,000, payable over five years through
December 2, 2003.
3. LEGAL PROCEEDINGS
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 the RIAA's member companies
in its Mobile Beat Series I and II and Mobile Beat Holiday Series.
The RIAA alleged substantial damages in the amount of $76,000,000 and
stated that it would consider a pre-complaint settlement. Settlement
discussions then ensued and are continuing. On June 30, 1998 the
Company and its counsel met with RIAA and its counsel. At this
meeting the RIAA made a demand for $3 million to settle the dispute.
In September, 1998 mediation was undertaken with no settlement
resulting.
<PAGE>
Thus far no discovery has been undertaken. The Company believes that
it has a meritorious defense to many of 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.
The Company recorded a reserve for possible loss of $385,000 on the
terms of its latest settlement offer based on annual payments of
$50,000 over a period of eleven years. The recorded reserve reflects
a discount of the settlement offer using a discount rate of 8% per
annum. During 1999, the Company accrued interest in the amount of
$20,100 through June 30, 1999.
As the RIAA has rejected the most recent settlement offer with no
counter offer, the Company will not continue to accrue any additional
provision for settlement of the dispute, nor will it continue to
accrue legal costs related to the matter, however, it is management's
opinion that the accrual balance is a "best estimate" based on
current circumstances.
4. EARNINGS PER SHARE
Basic earnings per share are calculated on the weighted average
number of common shares outstanding during each period. Stock
options exercisable at June 30, 2000 had a dilutive effect on
Earnings Per Share for the three and nine month periods ending June
30, 2000. No dilution is shown for the three and nine months ended
June 30, 1999 as the effect would be anti-dilutive for those periods.
<TABLE>
The following table provides a reconciliation between basic and
diluted earnings per share:
Three Months Ended Nine Months Ended
June 30 June 30
_______________________ _______________________
2000 1999 2000 1999
____ ____ ____ ____
<S> <C> <C> <C> <C>
Net Income (Loss) $ 117,870 $ (13,343) $ 267,662 $ (334,164)
Weighted Average Number of Shares Outstanding
Basic 2,483,193 2,483,193 2,483,193 2,483,193
Dilutive effect of common stock equivalents 234,236 0 222,883 0
__________ __________ __________ __________
Diluted 2,717,429 2,483,193 2,706,076 2,483,193
Earnings Per Share:
Basic Net Income (Loss) $ .05 $ (0.01) $ .11 $ (0.13)
========== ========== ========== ==========
Diluted Net Income (Loss) $ .04 $ (0.01) $ .10 $ (0.13)
========== ========== ========== ==========
</TABLE>
<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, comedy services,
station identification jingles and commercials for broadcast media
use.
TM Century's clients include radio and television stations; radio,
television, satellite and Internet networks; web sites and portals;
the American Forces Radio Network; numerous advertising agencies and
commercial businesses.
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 2000.
During the quarter ended June 30, 2000 approximately $40,000 was
spent for the purchase of property and equipment, primarily
associated with upgrades of computer hardware and the purchase of
equipment to be used for replicating compact discs in-house.
Purchases of property and equipment for the same period in 1999 was
$34,000 and included costs related to the sublease of a portion of
the office and the resultant reconfiguration of the remaining office
space. Expenditures for product development for the quarter were
approximately $56,000 and $25,000 for 2000 and 1999, respectively.
Funds for operating needs, new product development and capital
expenditures for the period were provided from cash reserves and
operations of the Company. The Company generated cash flows from
operations of approximately $326,000 and $117,000 during the nine
months ended June 30, 2000 and 1999, respectively. The Company's
expenditures for property, equipment, and development of new products
are discretionary. Product development expenditures are expected to
be approximately $210,000 in fiscal 2000. 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 2000. The Company has no other significant commitments for
capital expenditures in fiscal 2000.
RESULTS OF CONTINUING OPERATIONS
Comparison of the Three-Month Periods Ended June 30, 1999 and 2000
__________________________________________________________________
Revenues increased approximately $221,000 or 14.0% in the three-month
period ended June 30, 2000 as compared to the same period for the
previous year. The revenue increase was primarily due to an increase
in revenues for production libraries of $192,000, Comedy services of
$110,000 and Jingles of $2,900, offset by decreases in revenues from
music services of $62,000 and other revenue of $22,000.
<PAGE>
Revenues of weekly HitDisc services increased $2,000, while GoldDisc
revenues decreased $64,000, resulting in a net decrease in music
services revenue of 8.7% as compared to the same period of the
previous year. The decrease in compact disc music library revenues
was primarily due to a decrease in weekly and recurrent music sales
for international 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. The Company has engaged in the
development of additional delivery media for music services as a
method of increasing product sales. 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. In addition, the Company contracts
with third party sales representatives for sales in certain foreign
markets. Changes in representatives and the terms of ongoing
agreements are expected to favorably impact future revenues from
international sales. Renewals and new sales growth are subject to
customer acceptance of the new products.
Production library revenues increased $192,000, or 56.0%. Increases
in production library revenue is due to the continuing increase in
advertising sales. 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 continues to concentrate on new product
development in this category and has broadened the target market
beyond the radio broadcast industry to include television, post
production houses, web sites and commercial businesses. Sales and
new sales growth are subject to customer acceptance of the new
products.
Jingles revenue increased $2,900 or 1.09% over the same period in
1999 due to a combination of circumstances including increased sales
of international jingles and an increase in royalties revenue.
Commissions increased $82,000 or 28.00%, and reflects the increase in
barter revenue. As a percentage of revenues, commissions increased
from 18.9% to 21.2% due to changes in the revenue structure where a
greater percentage of revenue is on barter.
Production, programming and technical costs decreased $9,000 or 1.9%,
and as a percentage of revenue decreased from 31.6% to 27.2%. Costs
related to production and shipping of products decreased 11.7% over
the same quarter last year due to cost reduction efforts and staff
reorganization resulting in more efficient disc production. These
savings were offset by an increase in royalty expenses which are
driven by sales of production libraries and syndicated jingles.
<PAGE>
General and administrative costs decreased $23,000 or 4.2%,
reflecting a decrease in legal costs and facilities expenses.
Selling costs increased $85,000 or 52.6%, and as a percentage of
revenues increased from 10.5% to 14.0%. The increase in expenses was
created by an increase in the international sales staff to facilitate
direct international sales efforts, as well as the addition of sales
staff members to allow a broadening of the domestic sales market.
Depreciation and amortization of property and equipment decreased
$38,000 or 53.1% and is primarily due to more depreciable assets
nearing the end of their depreciable years.
Comparison of the Nine-Month Periods Ended June 30, 1999 and 2000
_________________________________________________________________
Revenues increased approximately $485,000 or 10.6% in the nine-month
period ended June 30, 2000 as compared to the same period for the
previous year. The revenue increase was primarily due to an increase
in revenues for production libraries of $458,000 and Comedy service
of $219,000. Offsetting these increases were decreases in music
services revenue of $120,000, Jingles revenue of $60,000 and other
revenue of $12,000.
Revenues of weekly HitDisc services decreased $68,000, while GoldDisc
revenues decreased $52,000, a net decrease of 5.5% as compared to the
same period for the previous year. The decrease in compact disc
music library revenues was primarily due to a decrease in weekly and
recurrent music sales for international 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. The Company has
engaged in the development of additional delivery media for music
services as a method of increasing product sales. 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. In addition,
the Company contracts with third party sales representatives for
sales in certain foreign markets. Changes in representatives and the
terms of ongoing agreements are expected to favorably impact future
revenues from international sales. Renewals and new sales growth are
subject to customer acceptance of the new products.
<PAGE>
Production library revenues increased $458,000, or 48.9%. Increases
in production library revenue is primarily due to the substantial
increase in advertising sales. 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 continues to concentrate on new product
development in this category and has broadened the target market
beyond the radio broadcast industry to include television, post
production houses, web sites and commercial businesses. Sales and
new sales growth are subject to customer acceptance of the new
products.
Revenues for Jingles decreased approximately $60,000 or 6.6%
primarily because of a decrease in international jingle sales
compared to the same nine month period in fiscal 1999.
Comedy network revenues increased $219,000 or 39.7% over the same
period in the prior year due to strong advertising revenue generated
by advertising/barter arrangements with radio industry clients.
Commissions increased $122,000 or 13.9%, as a result of the increase
in barter revenue, offset by the decrease in revenues derived from
third party international representatives. As a percentage of
revenues, commissions increased from 19.2% to 19.8%.
Production, programming and technical costs decreased $155,000 or
9.8%, and as a percentage of revenues decreased from 34.9% to 28.4%.
Costs related to production and shipping of products decreased 13%
over the same period due to cost reduction efforts and staff
reorganization which resulted in more efficient disc production.
General and administrative costs decreased $181,000 or 10.9% as a
result of the Company's continued efforts in reducing operating
expenses. These efforts include subleasing a portion of the
Company's office space, restructuring management salaries and
reducing the amount of bad debt expense by continuing an aggressive
collection policy toward accounts receivable.
Selling costs increased $247,000 or 49.3%, and as a percentage of
revenues increased from 11.0% to 14.8%. The increase in expenses is
due to an increase in sales salaries as a result of changes in sales
force and in-house commission plans.
Depreciation and amortization of property and equipment decreased
$109,000 or 47.3% and is primarily due to more depreciable assets
nearing the end of their depreciable years.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal proceedings
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 the RIAA's member companies
in its Mobile Beat Series I and II and Mobile Beat Holiday Series.
The RIAA alleged substantial damages in the amount of $76,000,000 and
stated that it would consider a pre-complaint settlement. Settlement
discussions then ensued and are continuing. On June 30, 1998 the
Company and its counsel met with RIAA and its counsel. At this
meeting the RIAA made a demand for $3 million to settle the dispute.
In September, 1998 mediation was undertaken with no settlement
resulting.
Thus far no discovery has been undertaken. The Company believes that
it has a meritorious defense to many of 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.
The Company recorded a reserve for possible loss of $385,000 on the
terms of its latest settlement offer based on annual payments of
$50,000 over a period of eleven years. The recorded reserve reflects
a discount of the settlement offer using a discount rate of 8% per
annum. During 1999 the Company accrued interest in the amount of
$20,100 through June 30, 1999.
As the RIAA has rejected the most recent settlement offer with no
counter offer, the Company will not continue to accrue any additional
provision for settlement of the dispute, nor will it continue to
accrue legal costs related to the matter, however, it is management's
opinion that the accrual balance is a "best estimate" based on
current circumstances.
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 - None
Item 5. Other information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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 June 30, 2000.
<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 10, 2000
TM CENTURY, INC.
BY:/s/Teri R.S. James
Teri R.S. James
Vice President of Finance
(Principal Accounting Officer)
BY:/s/R. David Graupner
R. David Graupner
Chief Executive Officer
(Principal Executive Officer)
