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, 1998 
   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

   X

   The issuer's revenue for its most recent fiscal year was $6,808,489.

   The aggregate market value of the voting stock held by non-affiliates
   of the issuer on  September 30, 1998 based  upon the average bid  and
   asked prices of such stock on that date was $400,000.  The number  of
   issuer's shares of Common Stock outstanding as of September 30,  1998
   was 2,483,193.

                    DOCUMENTS INCORPORATED BY REFERENCE

   Certain information  contained  in  the  Company's  1998  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
   compact disc music libraries, production libraries, comedy  services,
   and station identification and commercials for radio/TV stations  and
   production houses worldwide.

   The Company (formerly TM Communications, Inc.) 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 radio/TV  stations and production houses  worldwide.
   Products include  special compilations  of popular  music on  compact
   discs  and  computer  hard   drives,  instrumental  backgrounds   for
   commercials and  sound effects,  station identification  jingles  and
   comedy services for radio/TV stations and production houses.

   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.  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
   websites.  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 sold in
   eleven different  music formats  ("compact disc  libraries"):   Adult
   Contemporary, Easy Listening,  Classic Hits,  Country, Classic  Rock,
   Contemporary  Hit  Radio,  Urban,  and  Seventies  Rock,  New   Adult
   Contemporary, Dance and Latin.

   All products on compact disc are  mastered by the Company on  compact
   disc or  PCM-1630  digital  audio  tape  and  replicated  by  several
   available suppliers.   Management  believes that  the loss  of  these
   sources of supply would not cause any significant interruption of the
   Company's operations,  as there  are several  alternative sources  of
   compact discs and replication services 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 level  of disc  inventory  is
   required to satisfy the shipping requirements of current sales.
<PAGE>
   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
   analog or digital audio tape or compact disc.

   In June  1997 the  Company sold  its  Ultimate Digital  Studio  (UDS)
   division.    The  UDS   division  distributed  specialized   computer
   broadcast equipment  and software  that controlled  music on  compact
   disc juke boxes.  This product had  been operating at a loss for  the
   previous three fiscal years.


   Set forth in the  following tables are  the Company's gross  revenues
   (in thousands) by  significant product category  for the years  ended
   September 30, 1998, 1997 and 1996.

   (Dollar Amounts in Thousands)                     Period Ended
                                               1998       1997       1996

       Broadcast Services:
       Music Libraries                         $5,567    $5,707     $4,575
       Radio Jingles                            1,183     1,051      1,067
       Software and Compact Disc Equipment         28       465        743
       Other                                       30        23          0

       Total                                   $6,808    $7,246     $6,385


   Marketing and Distribution

   The Company currently sells and supplies its products and services to
   customers in the United States and Canada through its own sales staff
   in  Dallas,  Texas.    Domestic  sales  are  made  through  telephone
   solicitation, advertising in  trade magazines,  and trade  convention
   displays.  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  or
   from the Company's supplier of compact disc replication services  via
   mail and express delivery services.

   Sales of music libraries  are made primarily  on an individual  order
   basis or under  contractual agreements for   the  sale of  production
   libraries.  Such agreements generally call for equal monthly payments
   by the customer over terms of up to 48 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.
<PAGE>
   Customers

   The  Company's  business  is  primarily  dependent  upon  the   radio
   broadcasting industry.   The  Company's revenues  are generated  from
   sales to customers in the United States and Canada and sales  through
   agents worldwide.  According to industry publications,  approximately
   11,000 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 three  years.  Gross  revenues
   from foreign sales totaled $1,900,000, $2,200,000, and $2,300,000 for
   the years ended 1998, 1997 and 1996, 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.

   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  numerous   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.
<PAGE>
   Employees

   As of December 1,  1998, the Company  had approximately 44  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.   Management believes that  its existing facility  and
   additional  space  currently  under  lease  are  sufficient  for  its
   existing activities and potential growth for the foreseeable future.

   ITEM 3. LEGAL PROCEEDINGS

   The Company  has been  advised by  a State  taxing authority  of  its
   intention to audit the sales tax records of the Company for  business
   done in such tax jurisdiction.  The Company does not believe that the
   results of such audit  will have a material  impact on the  financial
   position of the Company.

   On May 22,  1998, the Company  received a letter  from the  Recording
   Industry Association of  America, Inc.  (RIAA) alleging  that it  was
   illegally duplicating sound recordings of 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.

   Following receipt of the letter, the Company and its counsel met with
   RIAA's counsel on June 30,  1998.  At this  meeting, the RIAA made  a
   demand for $3 million to settle  the dispute.  RIAA was advised  that
   the Company's  financial  position  could not  support  such  a  cash
   settlement.

   On July 14, 1998  the Company entered into  a Tolling Agreement  with
   the RIAA.  On July 24, 1998, it formally responded to the RIAA.  

   Since then, Disctronics, one of  the companies that manufactures  CDs
   for the Company's GoldDisc line, contacted the Company and advised it
   that Disctronics  had been  contacted by  the RIAA  and told  not  to
   duplicate any  sound recordings  in the  GoldDisc Series  unless  the
   Company could supply written license agreements.

   By letter dated  August 4,  1998, RIAA  advised the  Company that  it
   would bring suit unless a  meaningful settlement offer was  proffered
   by the  Company by  August  10, 1998.    In September  mediation  was
   undertaken with no settlement resulting.
<PAGE>
   In October 1998, the Company filed suit for declaratory judgment  and
   tortuous interference  with respect  to Disctronics.   The  suit  was
   later dismissed without prejudice by agreement.

   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.

   In management's opinion the likelihood of an unfavorable outcome  and
   an estimate of the  amount or range of  any potential loss cannot  be
   determined.  However, the Company has recorded a reserve for possible
   loss of $385,000 as of September 30, 1998 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.

   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, 1998.
<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 1998:
                   1st Quarter      $.81       $.38
                   2nd Quarter       .63        .44
                   3rd Quarter       .50        .41
                   4th Quarter       .60        .28

   Fiscal 1997:
                   1st Quarter      $.94       $.50
                   2nd Quarter      1.12        .56
                   3rd Quarter      1.00        .40
                   4th Quarter       .66        .44


   As of September  30, 1998 the  Company had  approximately 206  record
   owners and 400 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.
<PAGE>
   ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

   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, 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 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 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
   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 1999.
<PAGE>
   During fiscal 1998, the Company made approximately $44,500 in capital
   expenditures  for  the  purchase  of  property  and  equipment  which
   compares to capital expenditures of approximately $97,000 in 1997 and
   $73,000 in  1996.    Capital  expenditures  in  1998  were  primarily
   associated  with   upgrades  of   production  equipment.      Product
   development costs of  $163,000 were incurred  during fiscal 1998  for
   software development, new music libraries, and music library updates,
   which compares  to product  development expenditures  of $198,500  in
   1997 and $146,000 in  1996.  Funds for  operating needs, new  product
   development, and capital  expenditures for the  year ended  September
   30, 1998  were  provided from  operations  and cash  reserves.    The
   Company's expenditures for  property, equipment,  and development  of
   new products are discretionary.  Product development expenditures are
   expected to be approximately $125,000 in fiscal 1999. The Company has
   no other significant commitments  for capital expenditures in  fiscal
   1999.  Management anticipates that cash flow from operations and cash
   reserves will be sufficient to meet capital requirements.

   The Company's Line of  Credit was renewed  through February 28,  1999
   for the lessor of either; 80% of the Company's domestic accounts  and
   chattel paper (excluding  Accounts over  90 days  old, chattel  paper
   with installments  or other  sums more  than 90  days past  due,  and
   accounts and  chattel  paper  due  from  any  person  or  entity  not
   domiciled in the United States, or  from any shareholder, officer  or
   employee), or  $500,000.   This represents  approximately a  $200,000
   increase  compared  to  the  prior  year.    The  Company's  $500,000
   revolving Line of Credit with a bank grants a first lien and security
   interest in and  upon all accounts,  chattel paper, contract  rights,
   general intangibles and deposit accounts.  Borrowings under the  Line
   of Credit  bear  a fluctuating  interest  rate of  prime  plus  1.5%,
   payable  monthly.    The  Line  of  Credit,  which  bears  an  annual
   commitment fee of 0.5% of the unused amounts, is renewable  annually,
   subject to the  consent of both  parties.  No  borrowings were  drawn
   under the  Line  of  Credit  during  fiscal  1998  and  no  long-term
   borrowing is anticipated in the foreseeable future at current  levels
   of business operation.

   In May  1996 the  Company  entered into  a  lease agreement  for  the
   financing of  an  upgrade  of  its  computer  hardware  and  software
   systems, which was completed  in fiscal year 1997.   The cost of  the
   project was $529,000, of which $426,000 was financed as of  September
   30, 1996 and the remaining $103,000 was financed in fiscal 1997.  The
   Company is required  to repay the  amount financed  in equal  monthly
   payments of  principal and  interest during  the term  of the  lease.
   Monthly payments on the lease commenced in June 1996 in the amount of
   approximately $13,000.    The  required monthly  payments  have  been
   increased to approximately $16,000 as a  result of the December  1996
   computer upgrade of $103,000.  The  term of the lease is three  years
   and the  lease is  backed by  a letter  of credit  in the  amount  of
   $200,000.  The letter  of credit reduces  the availability under  the
   Company's revolving Line of  Credit from $500,000  to $300,000.   The
   letter of credit requirement  is reviewed on an  annual basis by  the
   Lessor.
<PAGE>
   Customer deposits increased  to $194,800  as of  September 30,  1998,
   from $192,800 as of  September 30, 1997,  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
   $1,497,000 available to offset future taxable income expiring in 2008
   through 2011.   A valuation allowance  of approximately $846,000  has
   been provided to reduce the net deferred tax asset to zero because it
   is likely that the  tax asset will not  be realized.  Realization  is
   dependent upon  generating sufficient  taxable  income prior  to  the
   expiration of the loss carryforwards.  The amount of the deferred tax
   asset has been reduced to zero  due to the Company experiencing  four
   consecutive year  losses.    Although  realization  is  not  assured,
   management has taken certain  steps intended to  achieve a return  to
   profitable operations in future periods.  These steps include certain
   corporate restructuring, continued cost reduction measures which have
   reduced certain expenses to manageable levels, the discontinuation of
   unprofitable product lines  during fiscal  years 1996  and 1997,  new
   approaches to marketing current products, and the introduction of new
   products.

   The Board  of Directors  authorized the  Company  to purchase  up  to
   75,000 shares  of its  common stock  on the  open market  or  through
   privately negotiated transactions, from time to time, dependent  upon
   market conditions, through December 31, 1997.  The Company  purchased
   54,000 shares of  its common  stock for a  total cost  of $42,000  in
   fiscal year 1997, which purchases were funded by cash reserves of the
   Company.

   The Company  has assessed  its Year  2000  issues and  determined  an
   immaterial effect  exists  on  any  operating  systems  hardware  and
   software.  The Company converted  its main operating software  system
   that is Year 2000 compatible in March, 1998 and the consultant who is
   responsible for creating the in-house Contract Administration  System
   indicated there would be  minimal  Year 2000  issues.  The  Company's
   vendor purchased accounting system consultant believes the accounting
   system is Year 2000 compatible.  In addition, the Company's Microsoft
   Windows  NT   consultant  confirmed   that  the   Company's   network
   environment  is  Year  2000   compliant.    The  Company's   in-house
   programmer analyst also believes there are no major Year 2000  issues
   for the Company.   Furthermore the Company's assessment  incorporates
   existing vendors and suppliers relationships and management  believes
   there would be no material effect on the Company's business,  results
   of operations, or financial  condition if they  do not timely  become
   Year 2000  compliant.   The  most  reasonably likely  worst  scenario
   estimates the cost to be approximately $50,000 to deal with any  Year
   2000 issues.  Any necessary funds will come from operations and  cash
   reserves.
<PAGE>
   Results of Continuing Operations

   Fiscal 1998 Compared to Fiscal 1997

   Revenues decreased 6.0% to $6.8 million in 1998 from $7.2 million  in
   1997.   The overall  decrease  was primarily  due  to a  decrease  in
   international sales,  compact  discs  sales prices  and  volume,  and
   specialized radio station computer equipment and software sales,  and
   was partially  offset  by an  increase  in production  libraries  and
   jingles sales.  The decrease in  compact disc sales was $410,000,  or
   10% and is partially attributed to a decrease in weekly music service
   revenues of $22,000 or  1%.  The reduction  in the specialized  radio
   computer equipment and software sales can  be attributed to the  sale
   of  the  Ultimate  Digital  Studio  division  (UDS)  in  June   1997.
   Production libraries increased $317,000, or 42% primarily due to  the
   introduction of two new music libraries  during fiscal year 1997  and
   one at the beginning of fiscal year 1998, and the continual sales  of
   pre-1997 music libraries.  Revenues  from radio jingles increased  by
   $131,000 or 13% primarily due to  an increase in the sales volume  of
   custom and syndicated jingles packages being sold.

   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.   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 radio  stations.   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.

   A $46,000  or  6% decrease  in  weekly comedy  services  revenue  was
   primarily due  to a  reduction in  the percentage  of barter  revenue
   allocated to Comedy  from the  total barter  revenue, which  includes
   other products.   Revenues are  derived from  obtaining airtime  from
   radio stations in  exchange for  such weekly  services and  marketing
   such airtime to advertisers.  The  Company has begun to market  other
   products using  similar barter  arrangements.   Revenues  from  other
   barter arrangements are expected to increase in the future.

   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.  The Company's
   hard drive  sales  have  not  generated  significant  revenues.    An
   increasing number  of  radio stations  are  converting to  or  adding
   systems  using  digital  compression  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.
<PAGE>
   Revenues  from  specialized  radio  station  computer  equipment  and
   software sales decreased $437,000  primarily due to  the sale of  the
   Ultimate Digital Studio (UDS) division in June 1997.

   Commissions as a percentage of revenues  increased to 19% of  revenue
   in fiscal 1998 from 17% of revenue in fiscal 1997.  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  24% to  $2.2
   million in  1998 from  $2.9 million  in  1997.   As a  percentage  of
   revenue these costs decreased from 40% in  1997 to 32% in 1998.   The
   decrease is  primarily  due to  lower  replication direct  costs  and
   amortization expenses.

   General and administrative costs  decreased $15,600 or 1%,  primarily
   due to a decrease in salaries  and benefits and other  administrative
   expenses.  Such decreases were offset by an increase in  professional
   fees and bad debt expenses.

   Selling costs decreased $170,000 or 15%, primarily due to a  decrease
   in  salaries  and  benefits,  domestic  commissions  and  advertising
   expenses.

   Depreciation expense decreased $7,000, or  2%, primarily as a  result
   of more assets being fully depreciated compared to the prior year.

   During 1997, the Company recorded a  provision of $218,000 to  reduce
   the carrying value of its production  libraries to the lower of  cost
   or market.  The amount retained  in inventory was reduced to  amounts
   supported by current sales levels.

   In fiscal 1998 the  Company recorded a reserve  for possible loss  of
   $385,000 as  of  September  30,  1998 on  the  terms  of  its  latest
   settlement offer to the RIAA 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.

   The Company has  reduced its net  deferred tax asset  of $128,130  at
   September 30, 1997 to zero at September 30, 1998 because it is likely
   that the tax asset will not be realized.  This reduction resulted  in
   deferred income tax expense of $128,130 in fiscal 1998.

<PAGE>
   Fiscal 1997 Compared to Fiscal 1996

   Revenues increased 13% to $7.2 million  in 1997 from $6.4 million  in
   1996.  The overall increase was primarily due to an increase in music
   library sales  prices  and volume,  and  was partially  offset  by  a
   reduction  in  software  and  compact  disc  equipment  sales.    The
   reduction in  software  and  compact  disc  equipment  sales  can  be
   attributed to the sale of the Ultimate Digital Studio division  (UDS)
   in June 1997.  The increase  in music library sales of $1.1  million,
   or 25%, resulted from an increase in sales of compact disc  libraries
   and  production  libraries,  and   weekly  music  service   revenues.
   Revenues from radio jingles decreased by $16,000 or 2% primarily  due
   to a decrease in publishers royalties received from the  broadcasting
   of the Company's jingles.

   Sales of  weekly music  services increased  $425,000,  or 21%.    The
   increase in  compact  disc music  library  revenues was  due  to  the
   introduction in the  fourth quarter  of 1996  of a  new music  format
   targeted to  non-broadcast  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 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.  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 continue  to grow  by targeting  new
   music formats to  non-broadcast customers and  introducing new  music
   libraries to radio stations.   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.

   An increase in revenue from weekly comedy services was primarily  due
   to barter arrangements  whereby revenues are  derived from  obtaining
   commercial airtime from  radio stations in  exchange for such  weekly
   services and marketing such airtime to advertisers.  The Company  has
   begun to  market other  products using  similar barter  arrangements.
   Revenues from such  barter arrangements are  expected to increase  in
   the future.

   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 both equipment manufacturers and  directly
   to end  customers  in  fiscal 1997,  but  several  of  the  Company's
   competitors have been providing products in  this format at a  longer
   period of time and the Company's hard drive sales have not  generated
   significant revenues.   An increasing  number of  radio stations  are
   converting to or adding systems using digital compression technology.
   Although music libraries on compact disc  can be transferred to  hard
   drive systems, some  of the Company's  competitors are offering  hard
   drives with pre-loaded music libraries.
<PAGE>
   Revenues from  specialized  computer  equipment  and  software  sales
   decreased $279,000 primarily due to the sale of the Ultimate  Digital
   Studio (UDS) division and revisions in software necessary to  satisfy
   market requirements   The Company  expects that  it will  be able  to
   rebuild its revenues but does not expect revenue levels to attain its
   former levels  from  software  sales over  the  next  five  years  by
   entering into strategic  alliances with other  companies who  develop
   computer  software  used  in  programming  music  sequences  and  for
   automated playback systems.

   Commissions as a percentage of revenues  increased to 17% of  revenue
   in fiscal 1997 from 7% of revenue  in fiscal 1996.  This increase  is
   due to changes in the commission structure.

   Production, programming  and technical  costs  decreased 2%  to  $2.9
   million in  1997 from  $3.0 million  in  1996.   As a  percentage  of
   revenue these  costs decreased  from 47%  in fiscal  1996 to  40%  in
   fiscal 1997.

   General and administrative costs decreased $168,000, or 7%, primarily
   due to a reduction in salaries and benefits.

   Selling costs increased $370,000 or 49%, primarily due to an increase
   in  salaries  and  benefits  allocation,  advertising  and  promotion
   expenditures as a result of the  introduction of two new products  in
   1997 and convention costs.

   Depreciation expense increased $93,000, or 38%, primarily as a result
   of computer equipment  and software  acquired under  a capital  lease
   during fiscal years 1996 and 1997.

   During 1997, the Company recorded a  provision of $218,000 to  reduce
   the carrying value of its production  libraries to the lower of  cost
   or market.  The amount retained  in inventory was reduced to  amounts
   supported by current sales levels.

   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.

   ITEM 7.   FINANCIAL STATEMENTS

   The financial statements and notes thereto, together with the  report
   thereon of Deloitte  & Touche LLP  dated December  4, 1998,  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

   None.

<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 1999 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 1999 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  1999
   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 1999 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 Merger: TM Communications, Inc. and Century
             21 Programming, Inc. (Exhibit 3(c)) (2)
      (d)    Certificate of Amendment of Certificate of Incorporation of
             TM Century, Inc. effective March 27, 1992. (Exhibit 1) (3)
             (March 31, 1992)

   10 Material Contracts:
      (a) Loan and Security Agreement and Term Note among Merrill Lynch
          Business Financial Services and TM Communications, Inc. and
          subsidiaries dated August 31, 1990 (Exhibit 10(q)) (2)
      (b) Agreement for Sale of Stock, Secured Note, Security Agreement,
          Pledge Agreement, and Guaranty dated January 1, 1991, from TF
          Productions to TM Century, Inc. (Exhibits 1-3) (3) (December
          30, 1990)
      (c) *Long Term Performance Incentive Plan of TM Century, Inc. dated
          December 3, 1991. (Exhibit 10(bb))(4)
      (d) Amendment No. 1 to Term Note and Amendment No. 2 to Loan and
          Security Agreement dated February 26, 1992 among Merrill Lynch
          Business Financial Services Inc. and TM Century, Inc. and
          subsidiaries. (Exhibit 2) (3) (March 31, 1992)
<PAGE>
      (e) WCMA Line of Credit Extension Letter Agreement by and between
          Merrill Lynch Business Financial Services Inc. and TM Century,
          Inc. dated April 21, 1994. (Exhibit 2) (3) (March 31, 1994)
      (f) WMCA Line of Credit Extension Letter Agreement by and between
          Merrill Lynch Business Financial Services Inc. and TM Century,
          Inc. dated  January 16, 1995. (Exhibit 10(f)) (8)
      (g) Agreement dated November 30, 1994 between TM Century, Inc. and
          P. Craig Turner regarding Mr. Turner's resignation as President
          and Chief Executive Officer and director of the Registrant.
          (Exhibit 10.1) (6)
      (h) *TM Century, Inc. Bonus Plan for Executive Management dated
          October 1, 1992 (Exhibit 10(j)) (5)
      (i) Lease Agreement, dated as of April 23, 1993 by and between
          NationsBank of Texas, N.A., Trustee and TM Century, Inc.
          (Exhibit 1) (3) (March 31, 1993)
      (j) Purchase and Sale Agreement by and between Merriman Patrick
          Turner Productions, Inc. and TM Century, Inc. dated March 29,
          1994. (Exhibit 1) (3) (March 31, 1994)
      (k) 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)) (7)
      (l) *Consulting Agreement between TM Century, Inc. and Carol M.
          Peek dated January 27, 1995. (Exhibit 1) (3) (December 31,
          1994)
      (m) *Employment Agreement between TM Century, Inc. and Neil W.
          Sargent dated March 22, 1995. (Exhibit 1) (3) (March 31, 1995)
      (n) Distribution agreement between TM Century, Inc. and Radio
          Express, Inc. dated November 1, 1992. (Exhibit (o)) (8)
      (o) Software Remarketing Agreement between Electronic Data Systems
          Corporation and TM Century, Inc. dated February 9, 1996.
          (Exhibit 1) (3) (December 31, 1995)
      (p) WMCA Line of Credit Extension  Letter Agreement by and  between
          Merrill Lynch Business  Financial Services Inc. and TM  Century,
          Inc. dated March 18, 1996.  (Exhibit 1) (3) (March 31, 1996)
      (q) Letter Amendment  Agreement  and Letter  of  Credit  Supplement
          Agreement to  Loan and Security Agreement  and Term Note by  and
          between Merrill  Lynch Business Financial  Services Inc. and  TM
          Century,  Inc. dated  April 22,  1996 and  April 18,  1996;  and
          Letter  of  Credit  Agreement  by  and  between  Merrill   Lynch
          Business Financial  Services Inc., The  Northern Trust  Company,
          and TM Century, Inc.  dated April 30, 1996. (Exhibit 10(a))  (3)
          (June 30, 1996)
      (r) Master Lease Agreement by  and between USL Capital  Corporation
          and TM  Century, Inc.  dated May  2, 1996.  (Exhibit 10(b))  (3)
          (June 30, 1996)
      (s) *Employment Agreement  between TM  Century, Inc.  and R.  David
          Graupner dated May 6, 1996. (Exhibit 10(c)) (3) (June 30, 1996)
      (t) *Consulting Agreement between TM Century, Inc. and Marjorie  L.
          McIntyre dated July 5, 1996.
      (u) WMCA Line of  Credit Extension Letter  Agreement by and  between
          Merrill Lynch Business  Financial Services Inc. and TM  Century,
          Inc. dated April 21, 1998. (Exhibit 10.1) (3) (March 31, 1998)
      (v) Letter of Credit  Amendment Agreement by  and between  Northern
          Trust  Company  and  TM Century,  Inc.  dated  April  21,  1998.
          (Exhibit 10.2 (1) (March 31, 1998)
<PAGE>
      (w) *Employment Agreement between TM Century, Inc. and Neil W.
          Sargent dated April 17, 1998, amending Employment Agreement
          between TM Century, Inc. and Neil W. Sargent dated March 22,
          1995. (Exhibit 1) (3) (March 31, 1995)

   27 Financial Data Schedule

   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, 1990, as amended.
        (4)  Incorporated by reference to  the indicated exhibit to  the
             Annual  Report  on  Form  10-K  for  the  fiscal  year   ended
             September 30, 1991.
        (5)  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.
        (6)  Incorporated by reference to  the indicated exhibit to  the
             Current Report on Form 8-K dated    November 30, 1994, of  the
             Registrant.
        (7)  Incorporated by reference  to the indicated  exhibit to  the
             Annual  Report  on  Form 10-KSB  for  the  fiscal  year  ended
             September 30, 1994.
        (8)  Incorporated by reference  to the indicated  exhibit to  the
             Annual  Report  on  Form 10-KSB  for  the  fiscal  year  ended
             September 30, 1995.
        (9)  Incorporated by reference  to the indicated  exhibit to  the
             Annual  Report  on  Form 10-KSB  for  the  fiscal  year  ended
             September 30, 1996.
        (10) Incorporated by reference to  the indicated exhibit to  the
             Annual  Report  on  Form 10-KSB  for  the  fiscal  year  ended
             September 30, 1997.

   * The documents filed or incorporated by reference as Exhibits 10(c),
     (h), (l), (m),  (s),  (t)  and  (w)  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, 1998.
<PAGE>

                                SIGNATURES

   In accordance  with Section  13 or  15(d) of  the Exchange  Act,  the
   registrant caused  this report  to be  signed on  its behalf  by  the
   undersigned thereunto duly authorized.

                                      Dated: December 16, 1998

                                      TM CENTURY, INC.


                                      BY:/s/Roger Holeman
                                      Roger Holeman
                                      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/Roger Holeman                                         December 16, 1998
   ROGER HOLEMAN, Chief Financial Officer
   (Principal financial and accounting officer)


   /s/Neil W. Sargent                                       December 16, 1998
   NEIL W. SARGENT, President and Chief Executive Officer
   (Principal executive officer)


   /s/Marjorie L. McIntyre                                  December 16, 1998
   MARJORIE L. MCINTYRE, Chairman of the Board of Directors


   /s/A.  Ann Armstrong                                     December 16, 1998
   A. ANN ARMSTRONG, Director


   /s/Donald E. Latin                                       December 16, 1998
   DONALD E. LATIN, Director


<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 16, 1998

                                 TM CENTURY, INC.



                                 BY: Roger Holeman
                                 Chief Financial Officer

   In accordance with 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:


                                                            December 16, 1998
   ROGER HOLEMAN, Chief Financial Officer
   (Principal financial and accounting officer)


                                                            December 16, 1998
   NEIL W. SARGENT., President and Chief Executive Officer
   (Principal executive officer)


                                                            December 16, 1998
   MARJORIE L. MCINTYRE, Chairman of the Board of Directors


                                                            December 16, 1998
   A.  ANN ARMSTRONG, Director


                                                            December 16, 1998
   DONALD E. LATIN, Director

<PAGE>
                             TM CENTURY, INC.

                       INDEX TO FINANCIAL STATEMENTS

   Financial Statements:

   Independent Auditors' Report                                            18

   Balance Sheets, September 30, 1998 and 1997                             19

   Statements of Operations for the Years Ended September 30, 1998, 1997
   and 1996                                                                20

   Statements of Stockholders' Equity for the Years Ended September  30,
   1998, 1997 and 1996                                                     21

   Statements of Cash Flows for the Years Ended September 30, 1998, 1997
   and 1996                                                                22

   Notes to Financial Statements                                           23




   INDEPENDENT AUDITORS' REPORT

   To the Stockholders and Board of Directors of TM Century, Inc.:

   We  have  audited  the  balance  sheets  of  TM  Century,  Inc.  (the
   "Company"), as  of  September 30,  1998  and 1997,  and  the  related
   statements of  operations, stockholders'  equity and  cash flows  for
   each of  the three  years in  the period  ended September  30,  1998.
   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 audit 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, such  financial statements  present fairly,  in  all
   material respects, the financial position of the Company at September
   30, 1998 and  1997, and the  results of its  operations and its  cash
   flows for each of the three  years in the period ended September  30,
   1998, in conformity with generally accepted accounting principles.




   DELOITTE & TOUCHE LLP
   Dallas, Texas
   December 4, 1998
<PAGE>
<TABLE>

                                TM Century, Inc.
                                 Balance Sheets
                As of September 30, 1998 and September 30, 1997

                                     ASSETS

                                                                         1998         1997
          <S>                                                            <C>           <C>
   CURRENT ASSETS
      Cash                                                          $   348,957  $   294,333
      Accounts receivable, less allowance
         for doubtful accounts of $230,000 and $250,000 respectively    763,653      733,767
      Inventories, net                                                  612,992      779,953
      Deferred federal income taxes                                           0      154,530
      Prepaid expenses and other current assets                          29,837       25,224
            TOTAL CURRENT ASSETS                                      1,755,439    1,987,807

   PROPERTY AND EQUIPMENT                                             2,508,394    2,463,958
      Less accumulated depreciation                                  (1,879,587)  (1,548,617)
                                                                            
            NET PROPERTY AND EQUIPMENT                                  628,807      915,341

   INVENTORIES - NONCURRENT, net                                        178,397      143,647
   OTHER ASSETS                                                          18,260       18,260

      TOTAL ASSETS                                                  $ 2,580,903  $ 3,065,055


                      LIABILITIES AND STOCKHOLDERS' EQUITY

   CURRENT LIABILITIES
      Accounts payable                                              $   100,050  $    69,451
      Accrued expenses                                                  233,836      205,674
      Current portion of obligation under capital lease                 122,212      178,033
      Deferred revenue                                                  108,694       56,011
      Customer deposits                                                  17,858       26,358
            TOTAL CURRENT LIABILITIES                                   582,650      535,527

   OBLIGATIONS UNDER CAPITAL LEASE                                        6,407      128,755
   CUSTOMER DEPOSITS - NONCURRENT                                       176,943      166,418
   DEFERRED FEDERAL INCOME TAXES                                              0       26,400
   COMMITMENTS AND CONTINGENCIES                                        385,000            0
            TOTAL LIABILITIES                                         1,151,000      857,100

   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
      Paid-in capital                                                 2,275,272    2,275,272
      Treasury stock - at cost, 487,288 shares                       (1,291,227)  (1,291,227)
                                                                            
      Retained earnings                                                 416,153    1,194,205
            TOTAL STOCKHOLDERS' EQUITY                                1,429,903    2,207,955

      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                    $ 2,580,903  $ 3,065,055
</TABLE>

   See notes to financial statements 
<PAGE>
<TABLE>
                                TM Century, Inc.
                            Statements of Operations
                       September 30, 1998, 1997 and 1996

           
                                              1998          1997          1996
           <S>                                 <C>           <C>           <C>
   REVENUES                                $6,808,489    $7,246,661    $6,385,318
     Less  Commissions                      1,302,280     1,213,679       415,872
        NET REVENUES                        5,506,209     6,032,982     5,969,446

   COSTS AND EXPENSES
     Production, Programming, and           2,208,172     2,897,893     2,977,787
        Technical Costs
     General and Administrative             2,250,933     2,266,540     2,434,429
     Selling Costs                            953,179     1,122,774       752,915
     Depreciation                             330,970       338,111       244,823
     Reduction in Carrying Value of            22,266       218,000       229,580
     Inventories
        Total Costs and Expenses            5,765,520     6,843,318     6,639,534

   OPERATING LOSS                            (259,311)     (810,336)     (670,088)

   OTHER INCOME (EXPENSE)
     Interest income                           10,352        10,613        12,855
     Interest expense                         (15,963)      (28,440)       (8,138)
     Other                                          0           818       (57,759)
                                               (5,611)      (17,009)      (53,042)

   PROVISION FOR SETTLEMENT OF RIAA DISPUTE  (385,000)            0             0
   
   LOSS BEFORE PROVISION FOR INCOME TAXES    (649,922)     (827,345)     (723,130)
   
   (PROVISION) BENEFIT FOR INCOME TAXES
        Current                                     0             0             0
        Deferred                             (128,130)            0        34,313
        Total (Provision) Benefit for        (128,130)            0        34,313
        Income Taxes

   NET LOSS                                $ (778,052)   $ (827,345)   $ (688,817)

   BASIC AND DILUTED LOSS PER COMMON SHARE $    (0.31)   $    (0.33)   $    (0.27)
   
   WEIGHTED AVERAGE NUMBER OF COMMON
   SHARES OUTSTANDING                       2,483,193     2,496,210     2,537,193
</TABLE>

   See notes to financial statements
<PAGE>
<TABLE>
                                           TM Century, Inc.
                                  Statements of Stockholders' Equity
                           Years ended September 30, 1998, 1997 and 1996
         
               
                                             Common Stock     Additional                              Total
                                              Number of          Paid-In      Treasury      Retained      Stockholders'
                                          Shares      Amount     Capital        Stock        Earnings         Equity
             <S>                            <C>         <C>        <C>           <C>           <C>             <C>
   BALANCE, SEPTEMBER 30, 1995           2,970,481   $29,705    $2,275,272   $(1,250,316)   $2,710,367     $3,765,028

   Net Loss                                                0             0             0      (688,817)      (688,817)

   BALANCE, SEPTEMBER 30, 1996           2,970,481    29,705     2,275,272    (1,250,316)    2,021,550      3,076,211

   Purchase of Treasury Stock                              0             0       (40,911)            0        (40,911)
                                                                                                          
   Net Loss                                                0             0             0      (827,345)      (827,345)

   BALANCE, SEPTEMBER 30, 1997           2,970,481    29,705     2,275,272    (1,291,227)    1,194,205      2,207,955

   Net Loss                                                0             0             0      (778,052)      (778,052)
                                                                              
   BALANCE, SEPTEMBER 30, 1998           2,970,481   $29,705    $2,275,272   $(1,291,227)   $  416,153     $1,429,903
         
</TABLE>

   See notes to financial statements
<PAGE>
<TABLE>
                                    TM Century, Inc.
                                Statements of Cash Flows
                     Years Ended September 30, 1998, 1997 and 1996
            
                                                                     1998        1997         1996
                     <S>                                              <C>         <C>          <C>
   OPERATING ACTIVITIES
         Net loss                                                 $(778,052)  $(827,345)   $(688,817)
         Adjustments to reconcile net income to net                                        
         cash provided by (used in) operating activities
            Depreciation                                            330,970     338,111      244,823
            Amortization                                            289,620     385,079      391,519
            Provision for settlement of RIAA dispute                385,000           0            0
            Deferred income taxes                                   128,130           0      (37,577)
            Provision for doubtful accounts                         (20,000)    140,498       80,000
            Loss (gain) on disposition of property and equipment          0        (818)      37,115
            Reduction in carrying value of inventories               22,266     148,000      229,580
         Increase (decrease) in cash from changes in operating
         assets and liabilities:
            Trade accounts receivable                                (9,886)    (44,417)       1,527
            Inventories                                            (179,675)    114,791       48,844
            Prepaid expenses and other current assets                (4,613)     26,349      (28,597)
            Accounts payable and accrued expenses                    58,761     (73,754)     (57,659)
            Federal income taxes receivable/payable                       0           0      132,220
            Deferred revenue                                         52,683      31,713       24,298
            Customer deposits                                         2,025     (38,323)    (124,496)
         NET CASH PROVIDED BY OPERATING ACTIVITIES                  277,229     199,884      252,780
      
   INVESTING ACTIVITIES
         (Increase) Decrease in other assets                              0      (2,872)       1,000
         Purchases of property and equipment                        (44,436)    (96,891)     (72,949)
         Principal payments received on notes receivable                  0           0        4,423
         Proceeds from sale of property and equipment                     0      20,916        5,080
         NET CASH USED IN INVESTING ACTIVITIES                      (44,436)    (78,847)     (62,446)
         
   FINANCING ACTIVITIES
         Acquisition of treasury stock                                    0     (40,911)           0
         Principal payments on capital lease obligations           (178,169)   (163,648)     (58,291)
         NET CASH USED IN FINANCING ACTIVITIES                     (178,169)   (204,559)     (58,291)

   NET INCREASE (DECREASE) IN CASH                                   54,624     (83,522)     132,043
   
   CASH AT BEGINNING OF YEAR                                        294,333     377,855      245,812
    
   CASH AND CASH EQUIVALENTS AT END OF YEAR                       $ 348,957   $ 294,333    $ 377,855
</TABLE>

   See notes to financial statements
<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 stations  worldwide.   Products  include  special
   compilations of popular music on compact discs, sound effects, comedy
   services and station identification 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  short-term investments  with maturities  of
   three months or less when purchased.

   Inventories

   Inventories created  by  the  Company or  purchased  for  resale  are
   carried at the lower of cost or market, as follows:

        Music libraries - The  Company produces music  compilations
        and background music libraries which are provided to  radio
        stations under one  to four year  lease contracts or  under
        buyout arrangements.   The costs to  develop the  libraries
        are amortized on a straight-line  basis over the lesser  of
        three to five years  or the economic  life of the  product.
        Current music update services are charged to expense in the
        period  in  which  incurred.    The  portion  of  libraries
        expected to be  amortized within  one year  is included  in
        current assets.

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


   Revenue Recognition

   Revenues are recognized 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.
<PAGE>
   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 and amortized over the life of the
   lease. Depreciation and  amortization 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 and equipment          3 to 7 years
          Production equipment                    5 to 7 years
          Leasehold improvements                  5 to 10 years

   The Company  adopted  Statement  of  Financial  Accounting  Standards
   ("SFAS") No.  121,   "Accounting  for  the Impairment  of  Long-Lived
   Assets and  for Long-lived  Assets to  be  Disposed Of  ",  effective
   October 1, 1996.  The effect of such adoption was not significant  to
   the Company's financial condition or results of operations.

   Income Taxes

   Deferred income  taxes are  provided, when  applicable, on  temporary
   differences between the recognition of income and expense for tax and
   for financial accounting  purposes in accordance  with SFAS No.  109.
   Deferred  income  taxes  are  provided,  when  applicable,  for   all
   significant temporary differences  by the  liability method,  whereby
   deferred tax assets and  liabilities are determined  by the tax  laws
   and statutory rates in effect at the balance sheet date.

   Net Loss Per Share

   Basic and diluted  loss per  common share  is based  on the  weighted
   average  number  of  common  shares  outstanding  and  common   stock
   equivalents, if  dilutive, outstanding  during the  periods.   As  of
   September 30, 1998 the Company had 205,000 stock options outstanding.
   These options were excluded from the calculation of basic and diluted
   net loss  per  share  since including  such  options  would  have  an
   antidilutive effect.

   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.

   Reclassifications

   Certain amounts in the 1997 and  1996 financial statements have  been
   reclassified to conform  with the  classifications used  in the  1998
   financial statements with no effect on previously reported net income
   or stockholders' equity.
<PAGE>
   New Accounting Pronouncements

   In February 1997, the  Financial Accounting Standards Board  ("FASB")
   issued SFAS  No. 128,  "Earnings per  Share", which  establishes  new
   standards for  computing and  presenting earnings  per share  and  is
   effective for financial  statements issued for  periods ending  after
   December 15, 1997.   The Company's adoption of  SFAS No. 128 did  not
   have a significant  impact upon the  Company's reported earnings  per
   share.

   The FASB  issued, in  February 1997,  SFAS  No. 129,  "Disclosure  of
   Information about Capital Structure", which establishes standards for
   disclosing information  about an  entity's capital  structure and  is
   effective for financial statements for periods ending after  December
   15, 1997.    The Company's adoption of  SFAS No. 129  did not have  a
   significant impact upon the Company's results of operations.

   In June 1997, the FASB issued SFAS No. 130, "Reporting  Comprehensive
   Income", which  establishes standards  for reporting  and display  of
   comprehensive income and its components in the financial  statements.
   SFAS No. 130 is effective for  fiscal years beginning after  December
   15, 1997.   The Company's adoption  of SFAS No.  130 did  not have  a
   significant impact upon the Company's reported results of operations.

   The FASB also issued, in June 1997, SFAS No. 131, "Disclosures  about
   Segments of an Enterprise and Related Information", which establishes
   standards for  the way  public companies  disclose information  about
   operating segments, products and services, geographic areas and major
   customers.  SFAS No.  131 is effective  for financial statements  for
   periods beginning  after  December 15,  1997.   The  effect  of  such
   adoption will  not  have  a significant  impact  upon  the  Company's
   results of operations,  but will result  in additional disclosure  in
   the 1999 financial statements.

   The  FASB  issued,  in  February  1998,  SFAS  No.  132,  "Employers'
   Disclosures about Pensions and Other Postretirement Benefits",  which
   revises   employer's   disclosures   about   provisions   and   other
   postretirement  benefit  plans   and  is   effective  for   financial
   statements issued for periods beginning after December 15, 1997.  The
   Company  does  not  expect  the  adoption  of  SFAS  132  to  have  a
   significant effect on the 1999 financial statements.

   In  June  1998,  the  FASB  issued  SFAS  No.  133,  "Accounting  for
   Derivative Instruments  and  Hedging Activities",  which  establishes
   accounting and reporting standards for derivative instruments.   SFAS
   No. 133 is  effective for all  fiscal quarters for  all fiscal  years
   beginning after  June 15,  1999.   The Company  does not  expect  the
   adoption of SFAS 133 to have a significant impact upon the  Company's
   reported results of operations.
<PAGE>
   3.   SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

   Supplemental disclosures as of September 30:
                                                         1998           1997

     Cash paid for interest                         $    15,967    $    25,871

     Noncash investing and financing activities:
          Capital lease obligation incurred         $      -       $   102,578

   4.  INVENTORIES

   Inventories consisted of the following at September 30, 1998 and 1997:
<TABLE>
                                             1998                      1997
           <S>                         <C>          <C>          <C>           <C>
                                     Current      Long-Term     Current     Long-Term

      Music libraries               $ 142,230   $ 2,646,018   $ 107,766   $ 2,898,244
      Compact discs                   470,762         -         666,992         -
      Software                           -            -            -          391,827
      Compact disc equipment             -            -           5,195         -

             Total cost               612,992     2,646,018     779,953     3,290,071
      Accumulated amortization                   (2,467,621)               (3,146,424)

             Inventories, net       $ 612,992   $   178,397   $ 779,953   $   143,647

</TABLE>

   Amounts charged to  expense for capitalized  software costs were  $0,
   $43,512 and $51,975 in 1998, 1997 and 1996, respectively.
<PAGE>
   In 1998 the Company did not need to record a provision to reduce  the
   carrying value of its music and  compact disc libraries to the  lower
   of cost or market.  However, the Company did write-off  approximately
   $22,000 of mobile beat inventory due  to the RIAA legal dispute  (See
   Note 7).  During 1997 the Company recorded a provision of $218,000 to
   reduce the carrying value of its music and compact disc libraries  to
   the lower of cost  or market.  The  amount retained in inventory  was
   reduced to amounts supported by current sales levels.

   5.  PROPERTY AND EQUIPMENT

   Property and  equipment consisted  of the  following at September 30,
   1998 and 1997:

                                             1998           1997

        Office furniture                  $   503,069    $   502,247
        Computer Software & Equipment         162,395        141,810
        Production equipment
                                              944,397        925,540
        Leasehold improvements                369,810        365,639
        Capital Lease                         528,723        528,722

               Total                      $ 2,508,394    $ 2,463,958


   The Capital Lease is for approximately $529,000 in computer  software
   and equipment acquired under capital leases in fiscal 1997 and  1996.
   Amortization of the lease of  approximately $176,000 and $203,000  is
   included in depreciation expense for the fiscal years ended September
   30, 1998 and 1997, respectively.
<PAGE>
   6.  CREDIT FACILITIES AND CAPITAL LEASE OBLIGATIONS

   Effective February 28, 1998, the Company's Line of Credit was renewed
   through February  28, 1999  for  the lessor  of  either; 80%  of  the
   Company's domestic  accounts and  chattel paper  (excluding  Accounts
   over 90 days old, chattel paper with installments or other sums  more
   than 90 days past  due, and accounts and  chattel paper due from  any
   person or entity  not domiciled  in the  United States,  or from  any
   shareholder, officer or  employee), or $500,000.   This represents  a
   $200,000 increase compared to the prior year.  The Company's $500,000
   revolving Line of Credit with a bank grants a first lien and security
   interest in and  upon all accounts,  chattel paper, contract  rights,
   general intangibles and deposit accounts.  Borrowings under the  Line
   of Credit  bear  a fluctuating  interest  rate of  prime  plus  1.5%,
   payable  monthly.    The  Line  of  Credit,  which  bears  an  annual
   commitment fee of 0.5% of the unused amounts, is renewable  annually,
   subject to the  consent of both  parties.  No  borrowings were  drawn
   under the Line of Credit during the fiscal years ended September  30,
   1998 and 1997.  In conjunction with the Company's leasing arrangement
   discussed below, the availability under the Company's Line of  Credit
   was reduced from $500,000 to $300,000.

   In May 1996, the Company entered  into a capital lease agreement  for
   the financing of the  upgrade of its  computer hardware and  software
   systems.  The total cost of the project as of September 30, 1998,  is
   approximately $529,000.  The lease is backed by a $200,000 letter  of
   credit which must be renewed annually  subject to the renewal of  the
   Company's Line of Credit.   The requirement of  the letter of  credit
   will be reviewed on an annual basis.   The lease has a term of  three
   years and contains an  option to purchase the  equipment at its  fair
   market value or renew  the lease at its  fair market rental value  at
   the end of the initial term.

   Future minimum lease payments  under the lease as  of  September  30,
   1998 are as follows:

        1999                                        $ 126,145
        2000                                            6,478

        Total minimum lease payments                  132,623

        Less amount representing interest              (4,004)

        Net present value of minimum lease payments   128,619

        Less current portion                         (122,212)

        Long term capital lease obligation          $   6,407


   The Company paid  $15,963, $25,871 and  $8,138 of  interest on  notes
   payable and capital  lease obligations during  1998, 1997, and  1996,
   respectively.
<PAGE>
   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 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.

   Future minimum  lease payments  under operating  leases with  initial
   lease terms in excess of one year are as follows:

        1999                                   $    283,762
        2000                                        326,508
        2001                                        326,508
        2002                                        299,299
        2003                                        299,299
        Thereafter                                        0

        Future minimum lease payments          $  1,535,376

   Rent expense  under  operating  leases  was  $287,852,  $261,663  and
   $245,470 for 1998, 1997, and 1996, respectively.

   Employment Agreements

   Effective  April  1995,  the   Company  entered  into  a   three-year
   employment contract with  an executive  officer and  director of  the
   Company which  provides for  a base  annual  salary of  $180,000  and
   eligibility to participate  in the Company's  Bonus Plan.   Effective
   August  10,  1998  the  Company  amended  the  April  1995  agreement
   retroactively to April 17, 1998 which  provides for a base salary  of
   $172,000 and may be reduced by the amount of any pay increases  given
   by the Company to its Chief Operating Officer, but in no event  shall
   such reductions exceed $35,000.

   The Company  has consulting  agreements with  certain members  and  a
   former member of the Board of  Directors.  The compensation  expensed
   was  $120,000,  $180,000  and  $180,000  in  1998,  1997  and   1996,
   respectively.

   Aggregate commitments for future salaries under employment agreements
   and consulting agreements  is $558,000.
<PAGE>
   Legal Proceedings

   The Company  has been  advised by  a State  taxing authority  of  its
   intention to audit the sales tax records of the Company for  business
   done in such tax jurisdiction.  The Company does not believe that the
   results of such audit  will have a material  impact on the  financial
   position of the Company.

   On May 22,  1998, the Company  received a letter  from the  Recording
   Industry Association of  America, Inc.  (RIAA) alleging  that it  was
   illegally duplicating sound recordings of 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.

   Following receipt of the letter, the Company and its counsel met with
   RIAA's counsel on June 30,  1998.  At this  meeting, the RIAA made  a
   demand for $3 million to settle  the dispute.  RIAA was advised  that
   the Company's  financial  position  could not  support  such  a  cash
   settlement.

   On July 14, 1998  the Company entered into  a Tolling Agreement  with
   the RIAA.   On  July 24,  1998, it  formally responded  to the  RIAA.
   Since then, Disctronics, one of  the companies that manufactures  CDs
   for the Company's GoldDisc line, contacted the Company and advised it
   that Disctronics  had been  contacted by  the RIAA  and told  not  to
   duplicate any  sound recordings  in the  GoldDisc Series  unless  the
   Company could supply written license agreements.

   By letter dated  August 4,  1998, RIAA  advised the  Company that  it
   would bring suit unless a  meaningful settlement offer was  proffered
   by the  Company by  August  10, 1998.    In September  mediation  was
   undertaken with no settlement resulting.

   In October 1998, the Company filed suit for declaratory judgment  and
   tortuous interference  with respect  to Disctronics.   The  suit  was
   later dismissed without prejudice by agreement.

   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.

   In management's opinion the likelihood of an unfavorable outcome  and
   an estimate of the  amount or range of  any potential loss cannot  be
   determined.  However, the Company has recorded a reserve for possible
   loss of $385,000 as of September 30, 1998 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.
<PAGE>
   8.  INCOME TAXES

   Differences between the  statutory federal  income tax  rate and  the
   effective rate for the years ended  September 30, 1998, 1997 and 1996
   are as follows:

                                                     1998      1997      1996

        Income tax provision at statutory rate      (35.0%)   (35.0%)   (35.0%)

        Effect of graduated tax rates                 1.0       1.0       1.0
                                                      
        Operating losses with no current tax         34.0      32.5      27.8
              benefit
        Change in beginning of the year valuation
              allowance                              19.71       -         -

        Other                                          -        1.5       1.5

                                                     19.71     (0.0%)    (4.7%)

   The Company  has net  operating loss  carryforwards of  approximately
   $1,497,000 available to offset future taxable income expiring in 2008
   through 2011.   A valuation allowance  of approximately $846,000  has
   been provided to reduce the net deferred tax asset to zero because it
   is likely that the  tax asset will not  be realized.  Realization  is
   dependent on generating sufficient taxable income prior to expiration
   of the loss carryforwards.  The amount of the deferred tax asset  has
   been reduced to zero due to the Company experiencing four consecutive
   year losses.   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.

   Additionally, in conjunction with the Alternative Minimum Tax ("AMT")
   rules, the Company  has available AMT  carryforwards for tax purposes
   of approximately $23,000,  which may be  used indefinitely to  reduce
   regular federal income taxes.


   The components of the net deferred income tax asset at September  30,
   1998 and 1997 are as follows:

                                                          1998           1997
          Bad debt                                     $ 80,699       $ 87,500
          Depreciable assets                             (3,323)       (26,400)
          Inventory valuation allowance                 116,600        116,600
          Net operating loss carryforwards              521,411        450,100
          Provision for settlement of RIAA dispute      130,900           -
          Other                                            -            (1,100)

          Total deferred tax asset                      846,287        626,700
          Valuation allowance                           846,287        498,570

          Net deferred tax asset                       $   -          $128,130

<PAGE>
  
   The components of the income tax expense (benefit) are as follows:
<TABLE>
                                                         1998          1997         1996
          <S>                                             <C>           <C>          <C>
        Current                                       $    -        $   -        $   -
        Deferred                                           -            -          (34,313)
        Change in beginning of the year balance of
              the valuation for deferred tax assets
              allocated to income tax expense           128,130         -            -

                                                      $ 128,130     $   -        $ (34,313)
</TABLE>
    
   No income tax payments were necessary  in fiscal 1998, 1997 and  1996
   due to  the  Company's net  operating  loss position.    The  Company
   received a  $129,000  income  tax refund  during  1996,  from  a  net
   operating loss carryback to fiscal year 1994.

   9.  EARNINGS PER SHARE

   In February, 1997, FASB  issued SFAS No.  128, "Earnings per  Share",
   effective for periods ending after December 15, 1997.  Basic earnings
   per share are  calculated on the  weighted average  number of  common
   shares outstanding during each period.  All prior period earnings per
   share amounts have  been restated in  accordance with  SFAS No.  128.
   Diluted earnings per  share are not  materially different than  basic
   earnings per share.

      The following table provides a reconciliation between basic and
      diluted earnings per share, in accordance with SFAS No. 128:
<TABLE>
                                                                Fiscal Year Ended
                                                                   September 30
                                                             1998                1997
              <S>                                             <C>                  <C>
      Net Loss                                           $   (778,052)      $    (827,345)
      Weighted Average Number of Shares Outstanding
            Basic                                           2,483,193           2,496,210
            Dilutive effect of common stock equivalents         -                   -
            Diluted                                         2,483,193           2,496,210

      Earnings Per Share:
            Basic and Diluted Loss                       $      (0.31)      $       (0.33)

</TABLE>
<PAGE>
   10.  ROYALTY AND SALES REPRESENTATION AGREEMENTS

   The Company has  certain distribution  arrangements with  independent
   sales agents worldwide.   Fees included  in commission expense  under
   these arrangements were $804,000, $929,000 and $989,000 in 1998, 1997
   and 1996, respectively.

   11.  STOCKHOLDERS'  EQUITY

   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 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.

   The option price of outstanding  Nonqualified Stock Options is  $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.
<PAGE>
   Option information for the fiscal years ended September 30, 1998 and 1997:
   

<TABLE>                                                                          Weighted 
                                                  Number of        Price      Average Price
                                                    Shares        Per Share      Per Share
                     <S>                              <C>            <C>             <C>                   Per Share
      Options outstanding at September 30, 1995    210,000     $1.125 - $2.50      1.2238
         Granted                                    55,000     $1.0625 - $1.20     1.0573
         Exercised                                    -
         Forfeited                                 (30,000)         $1.20          1.2000
      Options outstanding at September 30, 1996    235,000     $1.0625 - $2.50     1.1690
         Granted                                    25,000          $.625          0.6250
         Exercised                                    -               -
         Forfeited                                 (60,000)    $.625 - $1.125      1.0573
      Options outstanding at September 30, 1997    200,000     $1.0625 - $2.50     1.1345
         Granted                                    15,000          $.355          0.3550
         Exercised                                    -               -
         Forfeited                                 (10,000)         $.625          0.6250
      Options outstanding at September 30, 1998    205,000      $.355 - $2.50      1.1023

      Options exercisable at September 30, 1998    134,125      $.355 - $2.50      1.1632
</TABLE>

   The weighted average remaining contractual life of the stock  options
   outstanding at September 30, 1998 is 6.4 years.

   At September 30, 1998  the Company has reserved  a total of   250,000
   shares of common stock for exercise of stock options.

   The Company applies APB Opinion No. 25, "Accounting for Stock  Issued
   to Employees"  in accounting  for its  stock option  and award  plan.
   During 1998 and 1997, 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 under this  plan.   For the  fiscal years  ended 1998  and
   1997, the net 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 $779,379 and $834,845,
   respectively and would have resulted in no difference in reported net
   loss per share.

   The estimated  weighted  average grant  date  fair value  of  options
   granted during fiscal years 1998 and 1997 were $.2110 and $.3252  per
   share, respectively.  For purposes of determining fair value of  each
   option, the Company used the minimum value method using the following
   assumptions:

                                    1998       1997

        Risk-free interest rate     5.34 %     6.75 %

        Expected life  (years)       10          9
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