U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-KSB

                     ANNUAL REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended:  September 30, 2000       Commission file No. 0-13167


                                TM CENTURY, INC.
                 (Name of small business issuer 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

      Securities registered pursuant to Section 12(b) of the Exchange Act:

                                      None

      Securities registered pursuant to Section 12(g) of the Exchange Act:

                          Common Stock, $.01 Par Value

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
                                                             ---   ---

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure  will be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB  [  ]

The issuer's revenue for its most recent fiscal year was $6,904,492.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
issuer on September 30, 2000 based upon the average bid and asked prices of such
stock on that date was $486,970.  The number of issuer's  shares of Common Stock
outstanding as of September 30, 2000 was 2,483,193.

                       DOCUMENTS INCORPORATED BY REFERENCE

Certain  information  contained in the Company's 2001  Information  Statement is
incorporated by reference in Part III.

Transitional Small Business Disclosure Format (check one): Yes    No  X
                                                              ---    ---

<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

General
-------

TM  Century,  Inc.  (the  "Company")  is  engaged  primarily  in  the  creation,
production, marketing, and worldwide distribution of music libraries, production
libraries, comedy services, station identification and commercials for broadcast
multimedia 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;  advertising agencies; post production studios; cable facilities;
and a wide variety of commercial businesses.

The  Company  was  incorporated  as a Delaware  corporation  on May 2, 1984.  In
October 1990, the Company  changed its name from TM  Communications,  Inc. to TM
Century,  Inc.  following an August 1990 business  combination  transaction with
Century 21 Programming, Inc. The Company's principal offices are located at 2002
Academy, Dallas, Texas 75234, and its telephone number is (972) 406-6800.

Products
--------

The Company  creates,  produces,  markets,  and  distributes  musical  goods and
services for multimedia clients worldwide. Products include special compilations
of  popular  music on compact  discs and CD ROM,  instrumental  backgrounds  for
commercials  and  sound  effects,  station  identification  jingles,  commercial
jingles and comedy services.

Production  libraries are sold on compact discs and include original  recordings
of  background  music and sound  effects  written and produced by the Company as
sources of production  material for radio/TV  stations,  post production houses,
web sites and  commercial  businesses.  Production  libraries are available in a
variety  of  musical  styles  and are used as  background  music  for  contests,
promotional  announcements,  commercials,  film or audio video presentations and
web sites.

The Company  also  provides a weekly  service of new record  releases on compact
disc  to  radio  stations.   Other  music  libraries  include   compilations  of
copyrighted music of original artists marketed in a variety of music formats.

Products  provided  to clients on compact  disc are  mastered by the Company and
replicated  in house on  compact  discs  available  from a number of  suppliers.
Management  believes  that the loss of the current  sources of supply  would not
cause any  significant  interruption of the Company's  operations,  as there are
several alternative sources of compact discs available.

Due to the wide  variety of music  services in multiple  formats  offered by the
Company on compact disc, a significant number of compact discs are maintained on
the premises.  The  implementation of in-house disc replication for all products
during 2000 has allowed  greater  control  over  inventory  levels  necessary to
satisfy  shipping  requirements on a timely basis,  however,  certain  inventory
levels must be maintained for products produced in prior periods.

Radio jingles  provide short identity songs for radio stations that promote name
recognition  for the station.  These are written and  produced in the  Company's
studios and are provided to customers on digital audio tape or compact disc.

                                       2

<PAGE>

Set  forth  in the  following  tables  are  the  Company's  gross  revenues  (in
thousands) by  significant  product  category for the years ended  September 30,
2000 and 1999.

     (Dollar Amounts in Thousands)

                                                     2000           1999
                                                 -----------    -----------
       Broadcast Services
       Music Libraries                           $     5,714    $     5,032
       Radio Jingles                                   1,142          1,181
       Software and Compact Disc Equipment                 0              2
       Other                                              48             22
                                                 -----------    -----------
       Total                                     $     6,904    $     6,237
                                                 ===========    ===========

Marketing and Distribution
--------------------------

The Company  currently sells and supplies its products and services to customers
in the United  States,  Canada,  Mexico and other parts of the world through its
sales staff in Dallas,  Texas.  Sales are made through  telephone  solicitation,
advertising in trade magazines, trade convention displays, and the Internet.

The Company  also sells its  products  through  distribution  arrangements  with
independent  sales agents  worldwide.  Other than fees paid to independent sales
agents,  no other  significant  costs are incurred by the Company in conjunction
with its international sales activities. Products are shipped from the Company's
headquarters via mail and express delivery services.

Sales of music  libraries  are made  primarily  on an  individual  order  basis.
Contractual  agreements for the sale of production  libraries generally call for
equal  monthly  payments by the customer  over terms of up to 36 months.  Weekly
music services are sold under  contracts of one month to three-year  terms.  The
Company's other products are generally sold pursuant to individual orders.  Both
commercial and station identification jingles are sold on a cash basis.

Customers
---------

The Company's  business is largely  dependent  upon the  broadcasting  industry.
Revenues  are  generated  from  sales to  customers  in the  United  States  and
worldwide.  According  to  industry  publications,  approximately  12,000  radio
stations were licensed by the Federal Communications Commission (FCC) for public
broadcasting in the United States. Management believes that approximately 10,000
stations in the U. S. may require  products and services of the type provided by
the Company. No single customer has accounted for more than 10% of the Company's
revenues  in any of the  past two  years.  In  fiscal  2000  the  Company  saw a
significant  increase in its sales outside the traditional  broadcast  industry,
particularly to Internet based businesses.

Gross  revenues from foreign sales totaled  $1,200,000,  and  $1,600,000 for the
years ended 2000 and 1999, respectively.

Competition
-----------

The Company  competes with several other music  syndicators  that provide either
music libraries or radio jingle packages to the broadcast  industry.  Management
believes the Company  offers a broader array of broadcast  products and services
than any of its  competitors.  Competing  radio  program  syndicators  generally
provide either jingles, production libraries, or music on tape, records, compact
disc, or via  satellite.  Management  believes the Company is one of the leading
suppliers  of radio  music  services  and the  largest  supplier  of radio music
services on compact  disc.  The Company  competes  with several  hundred  jingle
producers;  however,  management believes only a few specialize in radio station
identification  materials.  Management believes the Company is one of the larger
suppliers of radio station identification jingles in the industry. Several dozen
providers of production libraries compete with the Company.  Management believes
it is one of the major suppliers of production  libraries to the radio industry.
While  certain  competing  products  may be  considered  to be equal in price or
technical performance, management believes the Company also competes effectively
on the basis of quality and creativity within each product line.

                                       3

<PAGE>

Seasonality
-----------

The Company is not subject to strong seasonal fluctuations.  However,  quarterly
results are affected by the  introduction of new products and timing of customer
orders.  Because profit margins on the Company's many products vary, the results
for any  quarter  are not  necessarily  indicative  of the  results  that may be
achieved for a full fiscal year.

Trademarks and Copyrights
-------------------------

The Company markets products under various names and trademarks which management
believes provide the Company's products with international industry recognition.
The Company  holds  hundreds of  registered  copyrights  on sound  recordings of
original  music and radio station  jingles.  Management  believes its copyrights
have  significant  value,  as the Company  derives a significant  portion of its
income from the licensed use of its sound recordings and additional  performance
royalties (ASCAP) earned as a result.

Employees
---------

As of December 1, 2000, the Company had  approximately  53 full-time  employees.
The Company also contracts with other personnel and  subcontractors  who provide
creative talent for various projects on an as-needed basis.

ITEM 2. DESCRIPTION OF PROPERTY

The Company's  principal  operations  are conducted  from a leased 46,645 square
foot office and production facility located at 2002 Academy,  Dallas, Texas. The
facility is comprised of sales and administrative offices and recording studios.
The  facility  is leased  from  unaffiliated  third  parties  under a lease that
expires on July 15, 2003. The lease may be extended at the Company's  option for
two additional five-year terms. The first five year term rental rate is based on
a fixed amount per square foot which is  approximately  a 6.3% increase over the
2003  year  rental  rate.  The  second  five  year  term is  subject  to  rental
adjustments based on a formula related to fair market rental.  Effective July 1,
1999 the Company  entered  into an agreement  with an  unrelated  third party to
sublease  approximately  16,000 square feet of space for a term of approximately
50  months.   Management  believes  that  the  facility  currently  occupied  is
sufficient for its existing  activities and potential growth for the foreseeable
future.

ITEM 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.  Settlement  discussions  then ensued and 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 all of the claims asserted,  and, as no actual litigation
has been initiated by the RIAA and no correspondence has been received regarding
this matter since February 1999, it is the opinion of management  that, based on
these  facts,  the  accrued  legal  settlement  for the RIAA  dispute  should be
removed,  as any  ultimate  liability  resulting  from this action is  unlikely.
Accordingly,  the  accompanying  Statement  of  Operations  for the  year  ended
September 30, 2000  includes a $440,523  increase in income  resulting  from the
reversal of the liability previously recorded.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters  submitted  to a vote of the  Company's  security  holders
during the fourth quarter of the fiscal year ended September 30, 2000.



                                       4

<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's common stock is thinly traded in the over-the-counter market under
the symbol "TMCI".  The following table sets forth,  for the periods shown,  the
range of the high and low bid quotations  for the Company's  common stock in the
over-the-counter  market as reported by NASDAQ.  The Company was de-listed  from
NASDAQ in  February  1997 for not meeting the  minimum  NASDAQ  SmallCap  market
requirements. Since that time the stock continues to be traded on the OTC market
with  quotations   obtained  from  the  OTC  bulletin   board.   Quotations  are
inter-dealer quotations,  without retail markups, markdowns or commissions,  and
do not necessarily represent actual transactions.

                                                        Common Stock Bid
                                                        ----------------
                                                     High                Low
                                                     ----               ----
           Fiscal 2000:
                              1st Quarter          $  .81             $  .63
                              2nd Quarter             .81                .53
                              3rd Quarter             .78                .50
                              4th Quarter             .69                .44

           Fiscal 1999:
                              1st Quarter          $  .72             $  .28
                              2nd Quarter            1.12                .28
                              3rd Quarter            1.03                .44
                              4th Quarter            1.12                .47


As of September 30, 2000 the Company had approximately 200 record owners and 265
beneficial owners of its common stock. The Company has not paid dividends on the
common stock and does not anticipate paying dividends in the foreseeable future.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Forward-Looking Statements
--------------------------

This Annual  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;  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.

                                       5

<PAGE>

When used in this Annual 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 Commission Act of 1934.

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 one month to three 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
and 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 2001.

During  fiscal  2000,  the  Company  made  approximately   $175,000  in  capital
expenditures  for the  purchase  of property  and  equipment  which  compares to
capital  expenditures of approximately  $96,000 in 1999. Capital expenditures in
2000 were  primarily  associated  with  upgrades  of  production  equipment  and
purchases of replicating equipment necessary to implement in-house production of
compact  discs for  distribution.  Product  development  costs of $221,000  were
incurred during fiscal 2000 for new music  libraries and music library  updates,
which compares to product  development  expenditures of $155,000 in 1999.  Funds
for operating needs, new product  development,  and capital expenditures for the
year ended  September 30, 2000 were provided from  operations and cash reserves.
The Company  generated cash flows from operations of approximately  $602,000 and
$253,000 during the years ended September 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  $260,000 in fiscal  2001.  The  Company has no other  significant
commitments for capital expenditures in fiscal 2001. Management anticipates that
cash flow from  operations  and cash reserves will be sufficient to meet capital
requirements.

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 the Company agreed to pay to the individual a
total of $124,000, payable over five years through December 2, 2003.

Customer deposits  increased to $185,000 as of September 30, 2000, from $136,700
as of  September  30,  1999,  for  deposits  received  from  customers  ordering
products.  The balance in  customer  deposits  is  dependent  upon the timing of
customer orders for compact disc libraries, jingles, and production libraries.

The Company has net  operating  loss  carryforwards  of  approximately  $867,000
available to offset  future  taxable  income  expiring in 2011  through  2013. A
valuation  allowance of  approximately  $473,000 has been provided to reduce the
net deferred tax asset to zero because it is likely that the tax assets will not
be realized.  Realization is dependent upon generating sufficient taxable income
prior to the expiration of the loss carryforwards.

Results of  Operations
----------------------

Fiscal 2000 Compared to Fiscal 1999
-----------------------------------

The Company  experienced a 10.7%  increase in revenues from $6.2 million in 1999
to $6.9 million in 2000.  The overall  increase was primarily due to an increase
in advertising revenues which increased to $2.8 million from $1.8 million in the
previous year. Music libraries revenue generated from HitDisc and GoldDisc sales
decreased  $246,000 or 8.4%,  largely due to a decrease in international  sales.
Revenues generated from production libraries increased $621,000,  or 46.7% which
is  attributable  to an increase in the  percentage  of barter  revenue.  Barter
revenues are derived from obtaining  airtime from radio stations in exchange for
such weekly  services and marketing such airtime to  advertisers.  Revenues from
radio jingles decreased by $39,000, or 3.3%,  primarily due to a decrease in the
sales   volume  of  custom   and   syndicated   jingles   packages   being  sold
internationally.  Weekly comedy service revenue  increased from $770,000 in 1999
to $1,079,000 in 2000, or 40%. The overall  increase in  advertising  revenue is
primarily  responsible  for  this  increase,  as  barter  contracts  make  up  a
significant percentage of the total comedy service.

                                       6

<PAGE>

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 rather than from conversions to compact disc music library 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.  However,  the
advent of  computer-based  music storage has opened a new market to the Company;
delivering  music in a form (.wav file  format  and MPEG  format)  which is more
conducive,  convenient  and cost  efficient  for  operators  to load onto  their
computer-based broadcast systems. 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  that  revenues  from weekly music  services will
either remain relatively  unchanged or continue to grow by introducing new music
libraries to the market.  Management believes the international markets have not
reached maturity for compact disc technology.  Renewals and new sales growth are
subject to customer acceptance of the new products.

Music library revenues may also be adversely  affected as radio stations convert
to new  music  delivery  systems  technology  offered  by  competitors,  such as
computer  hard  drives  which  store music in a digital  compression  form.  The
Company began  providing  music libraries on hard drive to the radio industry in
1997. An increasing number of radio stations are converting to or adding systems
using  digital  technology.  Although  music  libraries  on compact  disc can be
transferred  to hard drive  systems,  some of the equipment  manufacturer's  are
offering hard drives with pre-loaded music libraries.

Commissions as a percentage of revenues  increased to 19.9% of revenue in fiscal
2000 from 19.2% of revenue in fiscal  1999.  This  increase is due to changes in
the  revenue  structure  where a greater  percentage  of  revenue is on a barter
basis.

Production,  programming  and technical  costs decreased 5.7% to $1.9 million in
2000 from $2 million in 1999.  The  decrease is  primarily  due to lower  direct
costs which resulted from the conversion to in-house  compact disc  replication.
As a  percentage  of revenue  these costs  decreased  from 33% in 1999 to 28% in
2000.

General and  administrative  costs  decreased  $30,800 or 1.5%.  A reduction  in
professional fees was primarily responsible for this decrease.

Selling  costs  reflected  an  increase  of  $286,000,  or 40.5% over 1999.  The
increase reflects changes in the commission structure as well as the addition of
personnel for domestic and direct international sales.

Depreciation and amortization expense decreased $122,000, or 44%, primarily as a
result of more assets being fully depreciated compared to the prior year.

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.  Settlement  discussions  then ensued and 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 all of the claims asserted,  and, as no actual litigation
has been initiated by the RIAA and no correspondence has been received regarding
this matter since February 1999, it is the opinion of management  that, based on
these  facts,  the  accrued  legal  settlement  for the RIAA  dispute  should be
removed,  as any  ultimate  liability  resulting  from this action is  unlikely.
Accordingly,  the  accompanying  Statement  of  Operations  for the  year  ended
September 30, 2000  includes a $440,523  increase in income  resulting  from the
reversal of the liability previously recorded.

                                       7

<PAGE>

Accounting Matters
------------------

The Financial Accounting Standards Board ("FASB") periodically issues accounting
standards  which may affect  the  financial  accounting  or  disclosures  of the
Company.  There are no accounting  standards that have been issued,  but not yet
adopted by the  Company,  which  would have a material  effect on the  financial
position or results of operations of the Company.

Inflation and Foreign Currency Fluctuations
-------------------------------------------

To date,  inflation and foreign  currency  fluctuations  have not had a material
impact on the Company's  operations.  There can be no assurance,  however,  that
future  inflation  or foreign  currently  fluctuations  will not have a material
adverse  effect  on the  Company,  or that the  Company  will be able to pass on
resulting  cost  increases  without  experiencing  a reduction in demand for its
products.

ITEM 7.   FINANCIAL STATEMENTS

The financial statements and notes thereto,  together with the report thereon of
King Griffin & Adamson P.C. dated November 17, 2000,  included elsewhere in this
report are incorporated by reference in answer to this Item 7.

ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

On May 17,  1999,  the  Company  dismissed  its former  independent  accountants
Deloitte & Touche LLP ("D&T") and engaged King,  Griffin & Adamson P.C. to audit
the  Company's  financial   statements.   The  decision  to  change  independent
accountants was recommended and approved by the Company's Board of Directors.

D&T  served as  independent  auditors  of the  Registrant  for the  years  ended
September 30, 1997 and 1998.  The reports of D&T on the  Registrant's  financial
statements for the years ended  September 30, 1997 and 1998 contained no adverse
opinion or  disclaimer  of opinion  and were not  qualified  or  modified  as to
uncertainty,  audit scope or accounting principle. In connection with its audits
for the years ended September 30, 1997 and 1998, and during the fiscal year 1999
prior to D&T's dismissal,  the Company had no disagreements  with D&T on matters
of accounting  principles  or practices,  financial  statement  disclosures,  or
auditing  scope  or  procedure,  which  disagreements  if  not  resolved  to the
satisfaction  of D&T would have caused them to make  reference  thereto in their
report on the financial statements for such years.



                                       8

<PAGE>

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.

The   information   required  by  this  item  is  contained  under  the  heading
"Information  Concerning the Directors and Executive  Officers" in the Company's
2001 Information  Statement and is incorporated  herein by reference pursuant to
General Instruction E(3).

ITEM 10.  EXECUTIVE COMPENSATION

The information  required by this item is contained under the heading "Executive
Compensation"  in the Company's 2001  Information  Statement and is incorporated
herein by reference pursuant to General Instruction E(3).

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  information  required by this item is contained  under the heading  "Voting
Securities  and  Principal  Stockholders"  in  the  Company's  2001  Information
Statement  and  is  incorporated   herein  by  reference   pursuant  to  General
Instruction E(3).

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information  required by this item is contained under the heading "Executive
Compensation"  in the Company's 2001  Information  Statement and is incorporated
herein by reference pursuant to General Instruction E(3).

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits:
3     (a)  Certificate of Incorporation and By-Laws (1)
      (b)  Certificate of Merger:  Video Image Inc. and TM Communications,  Inc.
           (1)
      (c)  Certificate  of  Amendment  of  Certificate  of  Incorporation  of TM
           Century,  Inc.  effective March 27, 1992.  (Exhibit 1) (2) (March 31,
           1992)

10   Material Contracts:
      (a)  *Long Term  Performance  Incentive  Plan of TM  Century,  Inc.  dated
           December 3, 1991. (Exhibit 10(bb))(3)
      (b)  *TM Century,  Inc. Bonus Plan for Executive  Management dated October
           1, 1992 (Exhibit 10(j)) (4)
      (c)  Lease  Agreement,   dated  as  of  April  23,  1993  by  and  between
           NationsBank of Texas,  N.A.,  Trustee and TM Century,  Inc.  (Exhibit
           1)(March 31, 1993)(2)
      (d)  First Amendment of Lease,  dated as of August 22, 1994 by and between
           NationsBank of Texas,  N.A.,  Trustee and TM Century,  Inc.  (Exhibit
           10(m)) (5)
      (e)  *Employment  Agreement between TM Century, Inc. and R. David Graupner
           dated May 31, 1999. (Exhibit 10.2) (June 30, 1999)(2)
      (f)  *Consulting  Agreement  between TM Century,  Inc. and Neil W. Sargent
           dated June 28, 1999. (Exhibit 10.3) (June 30, 1999)(2)
      (g)  *Amended and Restated 1991 Long Term Performance Incentive Plan of TM
           Century dated July 2, 1999 (Exhibit 10h)(6)
      (h)  *TM Century,  Inc. 2000 Stock Option Plan  effective  March 20, 2000.
           (Exhibit 10.1) (March 31, 2000)(2)

27   Financial Data Schedule


                                       9

<PAGE>

Notes to Exhibits:

     (1)  Incorporated  by  reference to the  similarly-numbered  exhibit to the
          Registration  Statement on Form S-18 (No. 2- 93588-FW),  filed October
          2, 1984, as amended.
     (2)  Incorporated  by reference to the  indicated  exhibit to the Quarterly
          Report on Form 10-Q for the indicated period, of the Registrant.
     (3)  Incorporated  by  reference  to the  indicated  exhibit  to the Annual
          Report on Form 10-K for the fiscal year ended September 30, 1991.
     (4)  Incorporated  by  reference  to the  indicated  exhibit  to the Annual
          Report on Form 10-K for the fiscal year ended  September  30, 1992, of
          the Registrant.
     (5)  Incorporated  by  reference  to the  indicated  exhibit  to the Annual
          Report on Form 10-KSB for the fiscal year ended September 30, 1994.
     (6)  Incorporated  by  reference  to the  indicated  exhibit  to the Annual
          Report on Form 10-KSB for the fiscal year ended September 30, 1999.

* The documents filed or incorporated by reference as Exhibits 10(a),  (b), (e),
(f), (g) and (h) hereto constitute management contracts or compensatory plans or
arrangements.

(b)  Reports on Form 8-K

No reports on Form 8-K were filed  during the fourth  quarter of the fiscal year
ended September 30, 2000.





                                       10

<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: December 19, 2000

                                            TM CENTURY, INC.


                                            BY:/s/Teri R.S. James
                                               -----------------------
                                               Teri R.S. James
                                               Chief Financial Officer

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.

                                                              DATE:

/s/Teri R.S. James                                            December 19, 2000
------------------
TERI R.S. JAMES, Chief Financial Officer
(Principal financial and accounting officer)


/s/R.David Graupner                                           December 19, 2000
-------------------
R. DAVID GRAUPNER, President and Chief Executive Officer
(Principal executive officer)


/s/Marjorie L. McIntyre                                       December 19, 2000
-----------------------
MARJORIE L. MCINTYRE, Chairman of the Board of Directors


/s/A.  Ann Armstrong                                          December 19, 2000
---------------------------
A. ANN ARMSTRONG, Director


/s/Carol M. Long                                              December 19, 2000
----------------
CAROL LONG, Director

/s/Michael Cope                                               December 19, 2000
------------------
MICHAEL COPE, Director



                                       11

<PAGE>

                                TM CENTURY, INC.

                          INDEX TO FINANCIAL STATEMENTS

Financial Statements:

Report of Independent Certified Public Accountants                           13

Balance Sheets at September 30, 2000 and 1999                                14

Statements of Operations for the Years Ended
   September 30, 2000 and 1999                                               15

Statement of Stockholders' Equity for the Years Ended
   September 30, 2000 and 1999                                               16

Statements of Cash Flows for the Years Ended
   September 30, 2000 and 1999                                               17

Notes to Financial Statements                                                18





                                       12


<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
               --------------------------------------------------


To The Board of Directors
TM Century, Inc.

We have  audited  the  accompanying  balance  sheets of TM  Century,  Inc. as of
September  30,  2000  and  1999,  and  the  related  statements  of  operations,
stockholders'  equity,  and cash flows for the years then ended. These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position  of TM  Century,  Inc.  as of
September  30,  2000 and 1999,  and the results of its  operations  and its cash
flows for the years then ended in conformity with generally accepted  accounting
principles.

                                           /s/KING GRIFFIN & ADAMSON P.C.

Dallas, Texas
November 17, 2000



                                       13

<PAGE>

<TABLE>
<CAPTION>

                                TM Century, Inc.
                                 Balance Sheets
                           September 30, 2000 and 1999

                                     ASSETS

                                                                        2000           1999
                                                                    -----------    -----------
<S>                                                                 <C>            <C>
CURRENT ASSETS
       Cash and cash equivalents                                    $   422,339    $   354,332
       Short-term investments                                           321,495           --
       Accounts receivable, less allowance for doubtful accounts
         of $95,510 and $100,000 respectively                           693,997        721,538
       Inventories, net of allowance for obsolescence of $258,545       448,293        446,279
       Prepaid expenses                                                  44,685         31,277
                                                                    -----------    -----------
             TOTAL CURRENT ASSETS                                     1,930,809      1,553,426

PROPERTY AND EQUIPMENT                                                2,730,584      2,563,220
       Less accumulated depreciation and amortization                (2,263,000)    (2,116,116)
                                                                    -----------    -----------
             NET PROPERTY AND EQUIPMENT                                 467,584        447,104

PRODUCT DEVELOPMENT COSTS, net of accumulated amortization
       of $1,784,549 and $1,630,071 respectively                        377,240        324,094
COMEDY MATERIAL RIGHTS, net of accumulated amortization
       of $43,400 and $18,600 respectively                               80,601        105,400
OTHER ASSETS                                                             19,804         19,316
                                                                    -----------    -----------

       TOTAL ASSETS                                                 $ 2,876,038    $ 2,449,340
                                                                    ===========    ===========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
       Current portion of obligation under capital lease            $      --      $     3,202
       Current portion of note payable                                   33,333         33,333
       Accounts payable                                                  48,833         63,508
       Accrued expenses                                                 113,017        196,978
       Deferred revenue                                                 100,850        127,382
       Customer deposits                                                 46,916         37,623
                                                                    -----------    -----------
             TOTAL CURRENT LIABILITIES                                  342,949        462,026

NOTE PAYABLE, less current portion                                       32,334         65,667
CUSTOMER DEPOSITS - NONCURRENT                                          138,072         99,114
ACCRUED LEGAL SETTLEMENT FOR RIAA DISPUTE                                  --          405,100
                                                                    -----------    -----------
             TOTAL LIABILITIES                                          513,355      1,031,907

COMMITMENTS AND CONTINGENCIES (NOTE 7)                                     --             --

STOCKHOLDERS' EQUITY
       Common stock, $.01 par value; authorized 7,500,000 shares;        29,705         29,705
          2,970,481 shares issued; 2,483,193 shares outstanding
       Additional paid-in capital                                     2,275,272      2,275,272
       Retained earnings                                              1,348,933        403,683
       Treasury stock - at cost, 487,288 shares                      (1,291,227)    (1,291,227)
                                                                    -----------    -----------
             TOTAL STOCKHOLDERS' EQUITY                               2,362,683      1,417,433
                                                                    -----------    -----------

       TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                   $ 2,876,038    $ 2,449,340
                                                                    ===========    ===========

</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       14

<PAGE>

<TABLE>
<CAPTION>

                                TM Century, Inc.
                            Statements of Operations
                     Years Ended September 30, 2000 and 1999

                                                                    2000          1999
                                                                -----------   -----------
<S>                                                             <C>           <C>
REVENUES                                                        $ 6,904,492   $ 6,237,102
      Less  Commissions                                           1,372,902     1,198,184
                                                                -----------   -----------
           NET REVENUES                                           5,531,590     5,038,918

COSTS AND EXPENSES
      Production, Programming, and Technical Costs                1,918,907     2,035,462
      General and Administrative                                  1,969,368     2,000,183
      Selling Costs                                                 992,130       706,059
      Depreciation and Amortization of Property and Equipment       154,884       277,451
      Reduction in Carrying Value of Inventories                       --          12,000
                                                                -----------   -----------
           TOTAL COSTS AND EXPENSES                               5,035,289     5,031,155

                                                                -----------   -----------
OPERATING INCOME                                                    496,301         7,763

OTHER INCOME (EXPENSE)
      Interest income                                                 7,372         3,838
      Other income (expense), net                                     1,054        (3,971)
                                                                -----------   -----------
           TOTAL INCOME (EXPENSE)                                     8,426          (133)

CHANGE IN ESTIMATE OF LEGAL SETTLEMENT FOR RIAA DISPUTE             440,523       (20,100)
                                                                -----------   -----------

NET INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES                 945,250       (12,470)

PROVISION FOR INCOME TAXES                                             --            --
                                                                -----------   -----------
NET INCOME (LOSS)                                               $   945,250   $   (12,470)
                                                                ===========   ===========

BASIC NET INCOME (LOSS) PER COMMON SHARE                        $      0.38   $     (0.01)
                                                                ===========   ===========

DILUTED NET INCOME (LOSS) PER COMMON SHARE                      $      0.38   $     (0.01)
                                                                ===========   ===========


WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                        2,483,193     2,483,193
                                                                ===========   ===========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING,
      ASSUMING DILUTION                                           2,487,486     2,483,193
                                                                ===========   ===========

</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       15

<PAGE>

<TABLE>
<CAPTION>

                                TM Century, Inc.
                        Statement of Stockholders' Equity
                     Years Ended September 30, 2000 and 1999

                                     Common Stock                                            Treasury Stock
                              -------------------------    Additional                  -------------------------       Total
                               Number of                    Paid-In       Retained      Number of      Amount      Stockholders'
                                 Shares        Amount       Capital       Earnings        Shares      (at cost)        Equity
                              -----------   -----------   -----------   -----------    -----------   -----------    -----------
<S>                           <C>           <C>           <C>           <C>            <C>           <C>            <C>
BALANCE, OCTOBER 1, 1998        2,970,481   $    29,705   $ 2,275,272   $   416,153        487,288   $(1,291,227)   $ 1,429,903

Net Loss                             --            --            --         (12,470)          --            --          (12,470)
                              -----------   -----------   -----------   -----------    -----------   -----------    -----------

BALANCE, SEPTEMBER 30, 1999     2,970,481        29,705     2,275,272       403,683        487,288    (1,291,227)     1,417,433

Net Income                           --            --            --         945,250           --            --          945,250
                              -----------   -----------   -----------   -----------    -----------   -----------    -----------

BALANCE, SEPTEMBER 30, 2000     2,970,481   $    29,705   $ 2,275,272   $ 1,348,933        487,288   $(1,291,227)   $ 2,362,683
                              ===========   ===========   ===========   ===========    ===========   ===========    ===========

</TABLE>






   The accompanying notes are an integral part of these financial statements.

                                       16

<PAGE>

<TABLE>
<CAPTION>

                                TM Century, Inc.
                            Statements of Cash Flows
                     Years Ended September 30, 2000 and 1999

                                                                                2000         1999
                                                                              ---------    ---------
<S>                                                                           <C>          <C>
OPERATING ACTIVITIES
  Net income (loss)                                                           $ 945,250    $ (12,470)
  Adjustments to reconcile net income (loss) to
  net cash provided by operating activities
       Depreciation and amortization of property and equipment                  154,884      277,451
       Amortization of product development costs and comedy material rights     192,925      170,320
       Provision for legal settlement of RIAA dispute                          (440,523)      20,100
       Provision for doubtful accounts                                           (4,490)    (130,000)
       Reduction in carrying value of inventories                                  --         12,000
  Increase (decrease) from changes in operating assets and liabilities:
       Accounts receivable                                                       32,031      172,115
       Inventories                                                               (2,014)      12,484
       Product development costs                                               (221,272)    (155,188)
       Prepaid expenses                                                         (13,408)      (1,440)
       Other assets                                                                (488)      (1,056)
       Accounts payable and accrued expenses                                    (63,213)     (73,400)
       Deferred revenue                                                         (26,532)      18,688
       Customer deposits                                                         48,251      (58,064)
                                                                              ---------    ---------
  NET CASH PROVIDED BY OPERATING ACTIVITIES                                     601,401      251,540

INVESTING ACTIVITIES
  Purchase of short-term investments                                           (321,495)        --
  Purchases of property and equipment                                          (175,364)     (95,748)
                                                                              ---------    ---------
  NET CASH USED BY INVESTING ACTIVITIES                                        (496,859)     (95,748)

FINANCING ACTIVITIES
  Principal payments on note payable                                            (33,333)     (25,000)
  Principal payments on capital lease obligations                                (3,202)    (125,417)
                                                                              ---------    ---------
  NET CASH USED BY FINANCING ACTIVITIES                                         (36,535)    (150,417)
                                                                              ---------    ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                        68,007        5,375

CASH AND CASH EQUIVALENTS  AT BEGINNING OF YEAR                                 354,332      348,957
                                                                              ---------    ---------

CASH  AND CASH EQUIVALENTS AT END OF YEAR                                     $ 422,339    $ 354,332
                                                                              =========    =========

</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       17

<PAGE>

                                TM CENTURY, INC.
                          NOTES TO FINANCIAL STATEMENTS


1.  THE COMPANY

TM  Century,  Inc.  (the  "Company")  is  primarily  engaged  in  the  creation,
production,  marketing,  and  distribution  of goods and  services for radio and
television stations;  radio,  television,  satellite and Internet networks;  web
sites and portals;  post  production  houses;  and corporate  users,  worldwide.
Products include special  compilations of popular music on compact discs,  sound
effects, comedy services, station identification and commercial jingles.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

Cash and Cash Equivalents

Cash and cash  equivalents  of the Company are composed of demand  deposits with
banks and other highly  liquid debt  instruments  with  maturity  terms of three
months or less when purchased.

Short-term Investments

Short-term investments are comprised of mutual funds.

Accounts Receivable

The  Company  extends  unsecured  credit in the  normal  course of  business  to
virtually  all of its  customers.  Management  has  provided  an  allowance  for
doubtful  accounts  which  reflects its opinion of amounts which may  ultimately
become  uncollectible.  In the event of non-performance of accounts  receivable,
the maximum  exposure to the Company is the recorded amount shown on the balance
sheet.

Inventories and Product Development Costs

Inventories created by the Company are carried at the lower of average cost on a
first-in, first-out ("FIFO") basis or market, and charged to expense as follows:

         Music  libraries  -  The  Company   produces  music   compilations  and
         background  music  libraries which are provided to clients under one to
         three year lease contracts or under buyout arrangements.  Current music
         update services are charged to expense in the period in which incurred.

         Identification  Jingles  -  Jingles  provide  short  identity  songs to
         clients  in order to  promote  name  recognition.  The costs to produce
         jingles are expensed upon delivery of the product.

Product  development  costs (the costs to develop new libraries and updates) are
carried  at actual  cost and are  amortized  on a  straight-line  basis over the
economic life of the product (typically, three to five years).

The  provision  for obsolete  and  slow-moving  inventory  is adjusted  based on
current inventory levels, historical and expected future sales levels.

Comedy Material Rights

Comedy Material Rights are recorded at cost and are amortized on a straight-line
basis over the economic life of the product (5 years).

                                       18

<PAGE>

                                TM CENTURY, INC.
                          NOTES TO FINANCIAL STATEMENTS


Property and Equipment

Expenditures  for additions,  renewals,  and  betterments  are recorded at cost.
Expenditures  for  maintenance  and repairs are charged to expense as  incurred.
Property  leased under  capital  leases is included in property  and  equipment.
Depreciation  and  amortization  of property and  equipment  are computed on the
straight-line  method based upon the estimated useful lives of the assets or the
applicable minimum lease term if shorter, as follows:

      Office furniture                                            3 to 7 years
      Computer software & equipment                               3 to 7 years
      Production equipment                                        5 to 7 years
      Leasehold improvements               the shorter of the estimated useful
                                                 life or the term of the lease
      Vehicle                                                          5 years
      Capital lease                        the shorter of the estimated useful
                                                 life or the term of the lease


Revenue Recognition

Revenues are recognized according to contract terms as follows:

         Library  Lease  Contracts  - Monthly  upon  delivery  of the product in
         accordance with the terms of the lease contracts.

         Library Buyouts - Upon delivery of the product.

         Identification Jingles - Upon delivery of the product.

         Music Scheduling Software - Monthly in accordance with the terms of the
         lease contracts.

         Software and Compact Disc Equipment - Upon delivery of the product.

         Barter  Contracts - Monthly,  as advertising  revenues are generated by
         third  party  agents,  in  accordance  with  the  terms  of  the  lease
         contracts.

Income Taxes

The Company  provides for income taxes under the asset and  liability  approach.
This method  requires that deferred tax assets and liabilities be recognized for
the future tax  consequences  attributable to differences  between the financial
statement  carrying  amounts  of  existing  assets  and  liabilities  and  their
respective tax bases. Valuation allowances are established,  when necessary,  to
reduce deferred tax assets to the amount  expected to be realized.  Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled.  The effect on deferred tax assets and liabilities of a
change in tax rates is  recognized  in income in the period  that  includes  the
enactment date.

Net Income (Loss) Per Share

Basic and diluted net income  (loss) per common  share is based on the  weighted
average  number of common  shares and common  stock  equivalents,  if  dilutive,
outstanding during the respective periods.  Diluted earnings per share of common
stock  includes the impact of  outstanding  dilutive  stock options for the year
ended  September 30, 2000. In 1999 the impact of  outstanding  stock options was
antidilutive.  The Company had 332,500 and 339,000 stock options  outstanding as
of September 30, 2000 and 1999, respectively.


                                       19

<PAGE>

                                TM CENTURY, INC.
                          NOTES TO FINANCIAL STATEMENTS


Stock Based Compensation

The Company  accounts for  stock-based  employee  compensation  arrangements  in
accordance  with provisions of Accounting  Principals  Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees," and complies with the disclosure
provisions of SFAS No. 123, "Accounting for Stock Based Compensation." Under APB
Opinion No. 25,  compensation  expense for employees is based on the excess,  if
any, on the date of grant,  between the fair value of the  Company's  stock over
the exercise price.

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of certain assets, liabilities,  revenues, and expenses.
Actual results may differ from such estimates.

Concentrations

The  Company  maintains  cash  balances at banks,  which may,  at times,  exceed
federally insured limits.  However,  management monitors these balances and does
not believe excess risk is present.

Reclassifications

Certain  amounts in the 1999  financial  statements  have been  reclassified  to
conform with the classifications  used in the 2000 financial  statements with no
effect on previously reported net loss or stockholders' equity.

3.   SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Supplemental disclosures as of September 30:


                                                        2000            1999
                                                     ----------      ----------
     Cash paid for interest                          $       46      $    3,971

     Noncash investing and financing activities:
           Issuance of note payable for comedy
           material rights                           $       --      $  124,000



4.  INVENTORIES

Inventories  include raw materials for in-house  production  and  replication of
compact discs as well as compact discs completed and ready to ship as follows:

                                                      September 30
                                                 ----------------------
                                                   2000         1999
                                                 ---------    ---------
       Raw materials                             $  42,272    $  15,317
       Finished goods                              664,566      689,507
       Allowance for obsolescence                 (258,545)    (258,545)
                                                 ---------    ---------
       Total                                     $ 448,293    $ 446,279
                                                 =========    =========

During 1999, the Company  recorded a provision of $12,000 to reduce the carrying
value of its music and production libraries to the lower of cost or market.


                                       20

<PAGE>


                                TM CENTURY, INC.
                          NOTES TO FINANCIAL STATEMENTS


5.  PROPERTY AND EQUIPMENT

Property and equipment consists of the following at September 30, 2000 and 1999:

                                                     2000               1999
                                               -------------      -------------
         Office furniture                      $     544,616      $     528,753
         Computer software & equipment               202,053            173,951
         Production equipment                      1,044,612            950,962
         Leasehold improvements                      391,434            380,827
         Vehicle                                      19,142                  -
         Capital lease                               528,727            528,727
                                               -------------      -------------
                Total                          $   2,730,584      $   2,563,220
                                               =============      =============

The capital lease is for computer software and equipment acquired in fiscal 1997
and 1996.  Amortization  of  approximately  $8,500 and  $131,000  is included in
depreciation and  amortization of property and equipment  expense for the fiscal
years ended September 30, 2000 and 1999, respectively.

6.  NOTE PAYABLE

During   1999,   the   Company   issued   a   $124,000   non-interest   bearing,
uncollateralized  note payable in exchange for comedy material rights. This note
requires  monthly  payments  of $2,778  through  December  2,  2001 and  monthly
payments of $1,000 thereafter through December 2, 2003.

Future minimum  payments  associated  with this note payable as of September 30,
2000 are as follows:

         2001                                 $    33,333
         2002                                      17,334
         2003                                      12,000
         2004                                       3,000
                                              -----------
         Future minimum note payments         $    65,667
                                              ===========

7.  COMMITMENTS AND CONTINGENCIES

Leases

The Company  leases its  facilities  under a ten year lease which began July 15,
1993.  The lease may be  extended  at the  Company's  option for two  additional
five-year  terms.  The Company has  subleased a portion of its facility  through
July,  2003.  Future  minimum  rental  revenue  from the  sublease  agreement is
$455,000.

Future minimum lease payments under operating leases (excluding  sublease rental
income) with initial lease terms in excess of one year are as follows:

         2001                                 $   326,508
         2002                                     326,508
         2003                                     299,299
                                              -----------
         Future minimum lease payments        $   952,315
                                              ===========

Rent expense under operating leases was $220,565 and $285,345 for 2000 and 1999,
respectively.

Employment Agreements

Effective May 31, 1999, the Company entered into a thirty-eight month employment
contract with an executive  officer and director of the Company  which  provides
for a base annual  salary of $150,000  and  eligibility  to  participate  in the
Company's  Bonus Plan. The  Compensation  Committee voted to amend the agreement
effective  October  1,  2000 to  provide  for a base  salary  of  $180,000.  The
amendment does not affect the agreement term.

                                       21

<PAGE>

                                TM CENTURY, INC.
                          NOTES TO FINANCIAL STATEMENTS


The Company has consulting  agreements  with certain members and a former member
of the Board of Directors.  A twelve month consulting agreement was entered into
with a  former  officer  of the  Company  on June 1,  2000  which  provides  for
compensation totaling $60,938 over the term of the agreement. Total compensation
expensed in connection with these consulting agreements was $118,163 and $86,900
in 2000 and 1999 respectively.

Commitments  for future  salaries  under  employment  agreements  and consulting
agreements are as follows:

         2001                                          $     285,975
         2002                                                216,600
         2003                                                 21,600
         2004                                                 16,200
                                                       -------------
         Total employment & consulting commitments     $     540,375
                                                       =============

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.  Settlement  discussions  then ensued and 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 all of the claims asserted,  and, as no actual litigation
has been initiated by the RIAA and no correspondence has been received regarding
this matter since February 1999, it is the opinion of management  that, based on
these  facts,  the  accrued  legal  settlement  for the RIAA  dispute  should be
removed,  as any  ultimate  liability  resulting  from this action is  unlikely.
Accordingly,  the  accompanying  Statement  of  Operations  for the  year  ended
September 30, 2000  includes a $440,523  increase in income  resulting  from the
reversal of the liability previously recorded.



                                       22

<PAGE>

                                TM CENTURY, INC.
                          NOTES TO FINANCIAL STATEMENTS


8.  INCOME TAXES

Differences between the statutory federal income tax rate and the effective rate
for the years ended September 30, 2000 and 1999 are as follows:

                                                     2000         1999
                                                  ---------    ---------
        Income tax provision at statutory rate      35.00%      (35.00%)
        Effect of graduated tax rates               (1.00)        1.00
        Change in valuation allowance              (28.21)       32.50
        Change in prior year estimate               (7.04)         .00
        Other                                        1.25         1.50
                                                  ---------    ---------
                                                     0.00%        0.00%
                                                  =========    =========


At September  30, 2000,  the Company has net  operating  loss  carryforwards  of
approximately  $867,000  available to offset future taxable  income  expiring in
2011 through  2013. A valuation  allowance  of  approximately  $473,000 has been
provided to reduce the net deferred tax asset to zero because of the uncertainty
of  generating  future  taxable  income.  The valuation  allowance  decreased by
$266,636 during the year ended September 30, 2000. 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.

The  components  of the net deferred  income tax asset at September 30, 2000 and
1999 are as follows:

                                                          2000          1999
                                                       ----------    ----------
           Allowance for doubtful accounts             $   33,429    $   35,000
           Property and equipment                          45,493         5,950
           Inventory allowance for obsolescence            90,491        90,491
           Net operating loss carryforwards               303,550       466,373
           Accrued legal settlement for RIAA dispute         --         141,785
                                                       ----------    ----------
           Total deferred tax asset                       472,963       739,599
           Valuation allowance                           (472,963)     (739,599)
                                                       ----------    ----------
           Net deferred tax asset                      $     --      $     --
                                                       ==========    ==========

9.  EARNINGS (LOSS) PER SHARE

The  following  table  provides a  reconciliation  between basic and diluted net
income or (loss) per share:

                                                              Year Ended
                                                             September 30
                                                       ------------------------
                                                          2000          1999
                                                       ----------    ----------
      Net Income (Loss)                                $  945,250    $  (12,470)

      Weighted Average Number of Shares Outstanding
         Basic                                          2,483,193     2,483,193
         Dilutive effect of common stock equivalents        4,293             0
                                                       ----------    ----------
         Diluted                                        2,487,486     2,483,193

      Earnings (Loss) Per Share:
         Basic Net Income (Loss)                       $     0.38    $    (0.01)
                                                       ==========    ==========
         Diluted Net Income (Loss)                     $     0.38    $    (0.01)
                                                       ==========    ==========


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<PAGE>

                                TM CENTURY, INC.
                          NOTES TO FINANCIAL STATEMENTS


10.  STOCK OPTIONS

On December 3, 1991, the Board of Directors  approved a Long Term Incentive Plan
(the "Plan")  which  provides for grants of Incentive  Stock Options to selected
employees  and for grants of  Nonqualified  Stock Options to any persons who, in
the opinion of the Board of Directors, perform significant services on behalf of
the Company.  Each member of the Compensation  Committee who was not an employee
or full-time consultant of the Company was automatically  granted in December of
each year, commencing in 1991, for five years (but only for so long as he or she
remained a member of the Compensation  Committee),  a Nonqualified  Stock Option
for 2,500 shares.  The maximum number of shares which may be issued  pursuant to
the exercise of options under the Plan was 187,500 shares. Effective October 28,
1993, the Board of Directors  approved an amendment to the Plan which  increased
the  total  number of shares  which  may be issued to  250,000  shares of common
stock. The Board of Directors approved an amendment to the Plan,  effective July
2,  1999,  which  increased  the total  number of shares  which may be issued to
350,000 shares of common stock and provided for Employee Incentive Options based
upon an employee's length of employment.

The option  price of  Incentive  Stock  Options is not less than the fair market
value of the common stock at the date of grant. All outstanding  Incentive Stock
Options vest over a period of five years from the date of grant at a rate of 20%
upon grant,  35% after year one, 50% after year two,  65% after year three,  80%
after year four and 100% after year five.

The option prices of outstanding Nonqualified Stock Options issued to members of
the  Company's  Board of  Directors  range  from  $.75 to $1.20 per  share.  All
outstanding  Nonqualified  Stock  Options are 20% vested upon grant,  50% vested
after year one, and 100% vested after two years.

Employee  Incentive Stock Options are granted based on the employee's  length of
employment  at an option price not less than the fair market value of the common
stock at the date of grant. All Employee Incentive Stock Options are 100% vested
upon grant.

On March 20, 2000 the Board of  Directors  approved  the 2000 Stock  Option Plan
(the "Plan")  which  provides for grants of Incentive  Stock Options to selected
employees  and for grants of  Nonqualified  Stock Options to any persons who, in
the opinion of the Board of Directors, perform significant services on behalf of
the Company.  The maximum number of shares which may be issued under the Plan is
350,000 shares.  No shares have been granted under this Plan as of September 30,
2000.

Option  information for the fiscal years ended September 30, 2000 and 1999 is as
follows:

                                                                        Weighted
                                                                          Avg.
                                             Number of     Price       Price Per
                                               Shares     Per Share      Share
                                             ---------  -------------  ---------
  Options outstanding at October 1, 1998       205,000  $.355 - $2.50    1.1690
     Granted                                   146,500   $.515-$.75       .7199
     Exercised                                    --         --            --
     Forfeited                                 (12,500)     $1.20        1.2000
                                             ---------
  Options outstanding at September 30, 1999    339,000  $.355 - $2.50     .9335
     Granted                                    21,000  $.560 - $.910     .7602
     Exercised                                    --         --            --
     Forfeited                                 (27,500) $.515 - $.810     .6367
                                             ---------
  Options outstanding at September 30, 2000    332,500  $.355 - $2.50     .9475
                                             =========

  Options exercisable at September 30, 2000    250,000  $.355 - $2.50    1.0163
                                             =========

The weighted average remaining contractual life of the stock options outstanding
at September 30, 2000 is 7.42 years.

At  September  30, 2000 the Company  has  reserved a total of 700,000  shares of
common stock for exercise of stock options.

                                       24
<PAGE>

                                TM CENTURY, INC.
                          NOTES TO FINANCIAL STATEMENTS


The  Company  applies  APB  Opinion  No.  25,  "Accounting  for Stock  Issued to
Employees" in accounting for its stock option and award plans.  During the years
ended  September 30, 2000 and 1999 the exercise price of each option granted was
greater than or equal to the market price of the Company's  stock on the date of
grant. Accordingly,  no compensation expense has been recognized. For the fiscal
years 2000 and 1999, the net income (loss) on a proforma basis as if the Company
had utilized the accounting  methodology prescribed by SFAS No. 123, "Accounting
for  Stock-Based   Compensation,"   would  have  been  $944,021  and  ($22,244),
respectively  and would have resulted in no difference in reported net income or
loss per share.

The estimated  weighted  average grant date fair value of options granted during
fiscal years 2000 and 1999 using the Black-Scholes  Model were $.4214 and $.3949
per share,  respectively.  For  purposes of  determining  the fair value of each
option, the Company used the following assumptions:

                                            2000           1999
                                         ----------     ----------
        Risk-free interest rate               6 %            6 %

        Volatility                           75 %          187 %

        Expected life  (years)               10             10








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