<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                            ------------------------

                                  FORM 10-QSB

(MARK ONE)

  /X/    Quarterly Report pursuant to Section 13 or 15(d) of the
         Securities Exchange Act of 1934 for the quarterly period ended
         June 30, 1999

                                       or

  / /    Transition Report pursuant to Section 13 or 15(d) of the
         Securities Exchange Act of 1934 for the transition period from to

                         Commission file number 1-14697

                            ------------------------

                                AUDIOHIGHWAY.COM

       (Exact Name of small business issuer as Specified in its Charter)

                 California                            77-0377306
      (State or other jurisdiction of                 (IRS Employer
       incorporation or organization)              Identification No.)

             20600 Mariani Ave.                           95014
               Cupertino, CA                           (Zip Code)
  (Address of principal executive offices)

                                 (408) 255-5301
              (Registrant's telephone number, including area code)

                            ------------------------

    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Act of 1934
during the preceding 12 months (or for such shorter periods 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 / /

    Indicate the number of shares outstanding of each of the issuer's classes of
common stock of the latest practicable date.

<TABLE>
<CAPTION>
                     Outstanding
                         at
      Class         June 30, 1999
------------------  -------------
<S>                 <C>
Shares of Common      5,565,641
Stock, no par
value
</TABLE>
<PAGE>
Part I--Financial Information

Item 1: Financial Statements

                                AUDIOHIGHWAY.COM

                            CONDENSED BALANCE SHEETS

                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                           JUNE 30,   DECEMBER 31,
                                         ASSETS                                              1999         1998
----------------------------------------------------------------------------------------  ----------  ------------
                                                                                          (UNAUDITED)
<S>                                                                                       <C>         <C>
Current assets:
  Cash and cash equivalents.............................................................  $   19,542   $   13,007
  Accounts receivable...................................................................         248           80
  Other assets..........................................................................         668           47
                                                                                          ----------  ------------
    Total current assets................................................................      20,458       13,134
Property and equipment, net.............................................................         583          333
Other assets, net.......................................................................         750            0
                                                                                          ----------  ------------
                                                                                          $   21,791   $   13,467
                                                                                          ----------  ------------
                                                                                          ----------  ------------
</TABLE>

<TABLE>
<CAPTION>
                          LIABILITIES AND STOCKHOLDERS' EQUITY
----------------------------------------------------------------------------------------
<S>                                                                                       <C>         <C>
Current liabilities:
  Current maturities of long term debt..................................................  $      262   $      952
  Accounts payable......................................................................         508        1,128
  Accrued expenses and other current liabilities........................................         445          204
                                                                                          ----------  ------------
    Total current liabilities...........................................................       1,215        2,284

Long term debt..........................................................................         241          376
Stockholders' equity:
  Preferred Stock, no par value; 5,000,000 shares authorized; none outstanding..........           0            0
  Common Stock, no par value; 50,000,000 shares authorized; 5,565,641 outstanding at
    June 30, 1999 and 4,103,643 at December 31, 1998....................................      32,641       19,130
  Additional paid-in capital............................................................       4,194        4,194
  Accumulated deficit...................................................................     (16,500)     (12,517)
                                                                                          ----------  ------------
    Total stockholders' equity..........................................................      20,335       10,807
                                                                                          ----------  ------------
                                                                                          $   21,791   $   13,467
                                                                                          ----------  ------------
                                                                                          ----------  ------------
</TABLE>

                  See Notes to Condensed Financial Statements

                                       2
<PAGE>
                                AUDIOHIGHWAY.COM

                       CONDENSED STATEMENT OF OPERATIONS

                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                        SIX MONTHS               THREE MONTHS
                                                                          ENDED                     ENDED
                                                                         JUNE 30,                  JUNE 30,
                                                                 ------------------------  ------------------------
                                                                     1999         1998         1999         1998
                                                                 -------------  ---------  -------------  ---------
                                                                       (UNAUDITED)               (UNAUDITED)
<S>                                                              <C>            <C>        <C>            <C>
Net revenues...................................................  $         414  $      52  $         249  $      10
Costs and expenses:
  Operating and development....................................          1,444        439            746        232
  Sales and marketing..........................................          1,951        604          1,009        266
  General and administrative...................................            705        272            344        211
                                                                 -------------  ---------  -------------  ---------
    Total cost and expenses....................................          4,100      1,315          2,099        709
Loss from operations...........................................         (3,686)    (1,263)        (1,850)      (699)
Other income (expenses):
  Interest income (expense)....................................           (295)      (403)           123       (267)
  Other........................................................             (2)         0              0          0
                                                                 -------------  ---------  -------------  ---------
    Net loss...................................................  $      (3,983) $  (1,666) $      (1,727) $    (966)
                                                                 -------------  ---------  -------------  ---------
                                                                 -------------  ---------  -------------  ---------
Basic and diluted net loss per share...........................  $       (0.79) $   (1.67) $       (0.32) $   (0.97)
Shares used in computing basic and diluted net loss per
  share........................................................          5,053      1,001          5,474        999
</TABLE>

                  See Notes to Condensed Financial Statements

                                       3
<PAGE>
Item 1: Financial Statements (Continued)

                                AUDIOHIGHWAY.COM

                       CONDENSED STATEMENTS OF CASH FLOWS

                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                       SIX MONTHS     SIX MONTHS
                                                                                       ENDED JUNE     ENDED JUNE
                                                                                        30, 1999       30, 1998
                                                                                      -------------  -------------
<S>                                                                                   <C>            <C>
                                                                                       (UNAUDITED)    (UNAUDITED)
Net cash used in operating activities...............................................   $    (6,310)    $  (1,217)
                                                                                      -------------  -------------

Cash flows from investing activities:
  Acquisition of property and equipment.............................................          (331)          (27)
  Acquisition of business...........................................................          (200)            0
                                                                                      -------------  -------------
    Net cash used in investing activities...........................................          (531)           27

Cash flows from financing activities:
  Proceeds from (repayment of) long term debt.......................................          (135)        1,475
  Proceeds from issuance of common stock............................................        13,511             0
                                                                                      -------------  -------------
    Net cash provided by financing activities.......................................        13,376         1,475
                                                                                      -------------  -------------
      Net change in cash and cash equivalents.......................................         6,535           231
Cash and cash equivalents at beginning of period....................................        13,007             5
                                                                                      -------------  -------------
Cash and cash equivalents at end of period..........................................   $    19,542     $     236
                                                                                      -------------  -------------
                                                                                      -------------  -------------
</TABLE>

                  See Notes to Condensed Financial Statements

                                       4
<PAGE>
                                AUDIOHIGHWAY.COM

                    NOTES TO CONDENSED FINANCIAL STATEMENTS

                                 JUNE 30, 1999

NOTE 1 -- THE COMPANY AND BASIS OF PRESENTATION

    audiohighway.com (the "Company") is a global Internet media company that
offers a library of pre-recorded audio content via the World Wide Web (the
"Web"). The accompanying unaudited condensed financial statements reflect all
adjustments that, in the opinion of management, are necessary for a fair
presentation of the results for the periods shown. The results of operations for
such periods are not necessarily indicative of the results expected for a full
year or for any future period. These financial statements should be read in
conjunction with the financial statements and related notes incorporated by
reference in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1998. Certain prior period balances have been reclassified to
conform to current period presentation.

NOTE 2 -- ACQUISITION OF MASS MUSIC

    Effective January 1, 1999, the Company completed the acquisition of
substantially all the assets of Mass Music, Inc., which markets and sells music
products through its Internet site. The acquisition was accounted for as a
purchase in accordance with APB Opinion No. 16. Under the purchase method of
accounting, the purchase price is allocated to the assets acquired and
liabilities assumed based on their estimated fair values at the date of the
acquisition. Results of operations for Mass Music have been included with those
of the Company for periods subsequent to the date of acquisition. The total
purchase price of the acquisition was $1,000,000, $200,000 in cash and a payable
in the amount of $800,000. In April 1999, the Company converted the payable into
36,478 shares of the Company's Common Stock. The purchase price was allocated to
the assets acquired based on their estimated fair values as follows:

<TABLE>
<S>                                                               <C>
Customer lists..................................................  $ 873,516
Software operating systems......................................    102,000
Other...........................................................     24,484
                                                                  ---------
                                                                  $1,000,000
                                                                  ---------
                                                                  ---------
</TABLE>

    Customer lists and other intangible assets will be amortized on a straight
line basis over a period of two years. Amortization expense for the six and
three months ended June 30, 1999 was $250,000, and $125,000, respectively.

NOTE 3 -- EARNINGS (LOSS) PER SHARE

    Earnings (loss) per share is based on the weighted average number of common
and equivalent shares outstanding during the period. Basic net earnings (loss)
per share is computed by dividing the net earnings (loss) by the number of
weighted average common shares outstanding. Diluted earnings per share reflects
potential dilution from outstanding stock options and warrants using the
treasury stock method and convertible debt using the if-converted method.
Equivalent shares are excluded from the diluted earnings per share calculation
in loss periods.

NOTE 4 -- EXERCISE OF COMMON STOCK PURCHASE WARRANTS

    During the second quarter of 1999, certain of the Common Stock Purchase
Warrants issued in connection with the Company's various rounds of debt
financing prior to its December 1998 IPO were exercised by the holders thereof.
As a result, a total of approximately 178,962 warrants were exercised during the
three month period ended June 30, 1999, which resulted in gross proceeds to the
Company of approximately $670,000. As of June 30, 1999, the Company had cash and
cash equivalents of $19,542,000 and working capital of $19,243,000.

                                       5
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

    The following discussion and analysis provides information that the
Company's management believes is relevant to an assessment and understanding of
the Company's results of operations and financial condition for the three and
six month periods ended June 30, 1999 and 1998. The following discussion should
be read in conjunction with the Financial Statements and Notes thereto appearing
elsewhere in this Report on Form 10-QSB and in conjunction with the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1998. Some of the
information in this Report contains forward-looking statements which involve
substantial risks and uncertainties. These statements can be identified by
forward-looking words such as "may," "will," "expect," "anticipate," "believe,"
"estimate" and "continue" or similar words. Investors should read statements
that contain these or similar words carefully because they (i) discuss
management expectations about the Company's future performance; (ii) contain
projections of the Company's future operating results or of the Company's future
financial condition or; (iii) state other "forward-looking" information. The
Company believes it is important to communicate its expectations to its
investors. There may be events in the future, however, that the Company is not
accurately able to predict or over which it has no control. The risk factors
discussed in "Business Risks," later in this Report, as well as any cautionary
language in this Report, provide examples of risks, uncertainties and events
that may cause the Company's actual results to differ materially from the
expectations described in the forward-looking statements. Additional risks will
be described from time to time in the Company's other filings with the SEC.
Investors should be aware that the occurrence of any of the events described in
the risk factors and elsewhere in this Report and in the Company's other
periodic SEC filings could have a material and adverse effect on its business,
results of operations and financial condition.

GENERAL

    The Company offers a proprietary information and entertainment service that
enables its users to download and play back selected audio content from the
Internet (the "AudioCast System"). The AudioCast System consists of (i)
proprietary client/server software developed by the Company that is specifically
adapted to transmit audio data over the Internet, (ii) proprietary application
software, known as AudioWiz, which is provided free of charge to the customer
and which allows him or her to download and play back audio selections and (iii)
a growing library of audio content that ranges from audio books to sports
updates and music.

    The Company believes that what differentiates the AudioCast System from
other Internet-based information services is its focus on audio content versus
text, the downloading of audio content as digital files available for later use
and its emphasis on portability. The Company's system provides users with a
simple, easy to use method of selecting a diverse range of audio content from a
single Web site and the ability to listen to such programming in almost any
environment.

    During the period from the Company's inception in June 1994 until November
1997, the Company had no revenues and its operating activities related primarily
to the research and development efforts and initial planning and development of
the Company's Web site and operations. During 1997, the Company generated
minimal revenues from Web-based advertising, and the Company's operating
activities related to the continued development of its proprietary software,
building market awareness and the launch and continued enhancement of its Web
site. Throughout the Company's existence, it has expended significant resources
in the research and development of its technology and the aggregation of content
by obtaining Internet broadcasting rights to audio programming.

    The Company's revenues are derived principally from electronic commerce
("e-commerce"), banner advertisements, channel sponsorships and the sale of
audio commercials included in its downloaded or streamed audio programming, all
on short-term contracts. Advertising revenues are recognized in the period in
which the advertisement is delivered, provided that collection of the resulting
receivable is

                                       6
<PAGE>
probable. For each hour of downloaded content, the Company can distribute up to
six minutes of audio commercials. The audio selections, which include audio
advertisements, are free of charge to the user. In the first quarter of 1999,
the Company began generating revenues from e-commerce.

    Effective as of the first quarter of 1999, the Company acquired
substantially all of the assets of Mass Music, Inc., a company engaged in the
sale of music CD's and videos through the Web site located at massmusic.com.
During the first quarter, the Company also launched "audioshop," the e-commerce
portion of the audiohighway.com Web site. Nearly all of the Company's e-commerce
revenue during the first quarter of 1999 came from Audioshop and sales at
massmusic.com.

    In the future, the Company anticipates that it may generate additional
revenue streams through ad-free program charges and charges for premium content
and e-commerce. However, the extent and timing of developing such additional
revenue sources is not currently known, and there is no assurance that the
Company will in fact generate revenues from all or any of these potential
sources at any time in the future.

    The amount of advertising revenue that the Company can generate is directly
related to a number of factors, including the volume of advertisers, the rates
charged for the various types of advertising, the number of users who visit the
Company's Web site and the amount of audio content downloaded or streamed. To
date, the Company has generated a minimal amount of advertising revenue, in part
due to excess advertisement "inventory" resulting from the fact the Company has
attracted more customers than advertisements to match with its audio content.
The Company expects to use a significant portion its assets to expand sales and
marketing and thereby expects to rapidly expand its advertising inventory. There
is no assurance, however, that the Company will successfully increase revenues
or achieve profitability.

    The Company has signed agreements with major media companies to provide a
wide selection of audio content such as news, books, self improvement programs,
magazine articles, radio and television programs and movie reviews. The Company
stores audio content on its Web site and is continually adding content to its
audio library. The cost of this content to the Company is, for the most part,
directly proportional to the duration of downloaded content. Certain of the
content is purchased on a flat fee basis.

    The Company has incurred significant losses since its inception. As of June
30, 1999, the Company had an accumulated deficit of approximately $16,500,000
and is continuing to operate at a loss. The Company believes that its success
will depend largely on its ability to attract users to its Web site, expand e-
commerce activity, obtain advertising contracts and secure additional audio
content of interest to users. Accordingly, the Company intends to invest heavily
in sales and marketing, content acquisition and continued research and
development efforts.

    In view of the rapidly evolving nature of the Company's business and its
limited operating history, the Company believes that period-to-period
comparisons of its revenues and operating results, including its gross profit
margin and operating expenses as a percentage of total net revenues, are not
necessarily meaningful and should not be relied upon as indications of future
performance.

PLAN OF OPERATIONS

    The Company intends to use the net proceeds of its December 1998 IPO to
expand and improve its AudioCast System. The Company expects expenditures to
increase very substantially across all expense categories as it seeks to
increase its advertising inventory, expand its digital audio content library and
upgrade its Web site. The Company expects the most significant expense increases
will occur in sales and marketing and research and development.

                                       7
<PAGE>
RESULTS OF OPERATIONS

    SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THE SIX MONTHS ENDED JUNE 30,
1998

    Net revenues were $414,000 for the six months ended June 30, 1999, as
compared to $52,000 for the same period in 1998. Revenues generated in 1998 were
primarily from advertising sales. Revenues for the first half of 1999 were
attributed to increased revenue sharing opportunities, advertising sales on the
Company's home page and e-commerce sales including revenues generated by the
Audioshop and the Company's Mass Music web site.

    Operating and development expenses were $1,444,000 for the six months ended
June 30, 1999, up 228% from $439,000 for the same period in 1998. This increase
was primarily the result of increased payroll expenses associated with increased
staffing, data communications expenses, costs to produce and maintain the
Company's Web site, use of consulting engineers, the cost of products
distributed via e-commerce and amortization of certain of the assets acquired
from Mass Music, Inc. The Company employs outside consulting engineers to
facilitate a portion of its development effort.

    Selling and marketing expenses were $1,951,000 for the six months ended June
30, 1999, up 223% from $604,000 for the same period in 1998. This increase is
primarily attributable to the increased payroll expenses associated with
additional sales and marketing staff, as well as increased expenses for public
relations, investor relations, and advertising and marketing expenses associated
with promoting the Company's web sites. The Company expects selling and
marketing expenses to continue to increase substantially in future periods as
the Company promotes its Web site.

    General and administrative expenses ("G&A") were $705,000 for the six months
ended June 30, 1999, up 159% compared to G&A expenses of $272,000 for the same
period in 1998. This increase was primarily the result of increased staffing
costs, accounting fees, legal fees and expenses incurred in connection with
transactions and public company compliance.

    The operating loss was $3,686,000 for the six months ended June 30, 1999
compared to an operating loss for the same period in 1998 of $1,263,000, an
increase of approximately 191%. As noted above, the increased loss was primarily
the result of increased expenditures in the sales and marketing, and operating
and development areas.

    Net interest expense decreased approximately 27% to $295,000 during the six
months ended June 30, 1999 from $403,000 in the same period in 1998. This was
primarily the result of retiring a substantial portion of the outstanding debt
on the Company's books and interest earned on cash balances. The net carrying
value of outstanding debt at June 30, 1999 was $503,000 compared to $1,328,000
on December 31, 1998.

    As a result of the factors described above, for the six months ended June
30, 1999, the Company incurred a net loss of $3,983,000 compared to a net loss
of $1,666,000 for the same period in 1998.

    The Company has no current tax liability and management has determined that
the realization of its deferred tax assets is not probable. As such, the Company
has provided a full valuation allowance against its deferred tax assets.

                                       8
<PAGE>
RESULTS OF OPERATIONS

    THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1998

    Net revenues were $249,000 for the three months ended June 30, 1999,
compared to $10,000 for the same period in 1998. Revenues generated in 1998 were
primarily from advertising sales. Revenues in the second quarter of 1999 were
attributed to increased advertising sales and e-commerce, including revenues
generated by the Audioshop and the Company's Mass Music web site.

    Operating and development expenses were $746,000 for the three months ended
June 30, 1999, up 221% from $232,000 for the same period in 1998. This increase
was primarily the result of increased payroll expenses associated with increased
staffing, data communications expenses, costs to produce and maintain the
Company's Web site, use of consulting engineers, the cost of products
distributed via e-commerce and amortization of certain of the assets acquired
from Mass Music, Inc. The Company employs outside consulting engineers to
facilitate a portion of its development effort.

    Selling and marketing expenses were $1,009,000 for the three months ended
June 30, 1999, up 279% from $266,000 for the same period in 1998. This increase
is primarily attributable to the increased payroll expenses associated with
additional sales and marketing staff, as well as increased expenses for public
relations, investor relations and advertising. The Company expects selling and
marketing expenses to continue to increase substantially in future periods as
the Company promotes its Web site.

    General and administrative expenses ("G&A") were $344,000 for the three
months ended June 30, 1999, up 63% compared to G&A expenses of $211,000 for the
same period in 1998. This increase was primarily the result of increased costs
in accounting fees, legal fees and expenses incurred in connection with
transactions and public company compliance.

    The operating loss was $1,850,000 for the three months ended June 30, 1999
compared to an operating loss for the same period in 1998 of $699,000, an
increase of approximately 164%. As noted above, the increased loss was primarily
the result of increased expenditures.

    During the three months ended June 30, 1999, the Company had net interest
income of $123,000 compared to an interest expense of $267,000 for the same
period in 1998. This was primarily the result of amortizing the fair value
attributed to warrants issued in connection with outstanding debt over the life
of the related debt, retiring a substantial portion of that debt in the first
half of 1999 and interest earned on cash balances. The net carrying value of
outstanding debt at June 30, 1999 was $503,000 compared to $1,373,000 at June
30, 1998.

    As a result of the factors described above, for the three months ended June
30, 1999, the Company incurred a net loss of $1,727,000 compared to a net loss
of $966,000 for the same period in 1998.

LIQUIDITY AND CAPITAL RESOURCES

    The Company has financed its operations since inception almost entirely from
the sale of equity and debt securities, supplemented with a bank line of credit.
In December 1998, it completed its initial public offering of securities, in
which it sold an aggregate of 2,530,000 units consisting of Common Stock and
redeemable Common Stock Purchase Warrants (the "Units"), at an initial public
offering price of $6.50 per Unit. The offering netted the Company approximately
$14,052,000 after deducting expenses related to the offering. In January 1999,
the conditions for redemption set forth in the Common Stock Purchase Warrants
were satisfied and the Company redeemed its outstanding public warrants as of
February 22, 1999. As a result, a total of approximately 1,269,000 warrants were
exercised, which resulted in gross proceeds to the Company of approximately
$12,374,000. The Company paid approximately $315,000 to holders of Warrants who
chose not to redeem during the 30-day redemption period. During the second
quarter of 1999, certain of the Common Stock Purchase Warrants issued in
connection with the Company's various rounds of debt financing prior to its
December 1998 IPO were exercised by the holders thereof. As

                                       9
<PAGE>
a result, a total of approximately 178,962 warrants were exercised during the
three month period ended June 30, 1999, which resulted in gross proceeds to the
Company of approximately $670,000. As of June 30, 1999, the Company had cash and
cash equivalents of $19,542,000 and working capital of $19,243,000. The Company
currently is financing its daily operations primarily through the application of
the net proceeds from the IPO and its subsequent warrant call.

    The Company has issued subordinated convertible promissory notes bearing
interest at 8% to 10% and convertible into Common Stock at rates ranging from
$3.00 to $14.39 per share, as well as other non-convertible debt at rates from
8% to 15%. During 1998, the Company converted $2,466,000 of debt and accrued
interest of $264,000, including debt converted at the close of the Company's
IPO, into 626,384 shares of Common Stock. The remaining debt is all due on or
before the year 2000.

    The Company believes that its current financial resources will be sufficient
to fund its operations for at least the next 12 months and that, during that
period, it will not be necessary for the Company to raise additional funds to
meet the expenditures required for operating its business. However, there can be
no assurance that presently unforeseen events may result in the Company
determining to raise additional funds.

    The Company will make significant ongoing investments in research and
development for future generation products and services. It also expects to have
significant expenditures in sales and marketing and further content acquisition
in order to attract customers to its Web site. There is no assurance that the
Company's analysis of its capital requirements will be accurate, particularly in
light of the fact that it is entering a new business in a new market.

    The Company's future expenditures and capital requirements will depend on a
number of factors including the development and implementation of next
generation technologies, technological developments on the Internet and the
regulatory and competitive environment for Internet based products and services.

NET OPERATING LOSS CARRYFORWARDS

    At December 31, 1998, the Company fully provided against its deferred tax
assets. The Company believes sufficient uncertainty exists regarding the
realizability of the deferred tax assets such that a full valuation allowance is
required. At December 31, 1998, the Company had approximately $10,150,000 of
federal net operating loss carryforwards for tax reporting purposes available to
offset future taxable income; such carryforwards will expire beginning in 2009.
Additionally, the Company has approximately $5,301,000 of California net
operating loss carryforwards for tax reporting purposes which will expire
beginning in 1999.

    The Tax Reform Act of 1986 imposes limitations on the use of net operating
loss carryforwards if certain stock ownership changes have occurred or could
occur in the future. The sale of the Units sold in the Company's December 1998
IPO constituted such a change in ownership and utilization of the Company's net
operating loss carryforwards may be limited.

YEAR 2000 COMPLIANCE

    There are issues associated with the programming code in existing computer
systems as the Year 2000 approaches. The "Year 2000 problem" is pervasive and
complex, as virtually every computer operation will be affected in some way by
the rollover of the two digit year value to 00. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail. The Company has evaluated its current systems, purchased necessary
upgrades and believes that its current hardware and software is Year 2000
compliant. Similarly, the Company believes that the products and services it
offers to its customers are not affected by the Year 2000 problem. The Company
has evaluated the potential impact on it of a Year 2000 problem on the part of
its important third party vendors and has found none. The

                                       10
<PAGE>
Company plans to continue to evaluate its systems and those of its important
vendors in an effort to minimize the effects of a Year 2000 problem. The Company
does not anticipate that the Year 2000 problem will have a material impact on
its business or operations.

    The Company is unable to determine at this time whether these or other year
2000 failures will occur and will have a material impact on our business,
results of operations, or financial condition. This inability is particularly
due to the potential scope of the year 2000 problem and the inability to assure
the readiness of external service providers, including utilities, government
entities and other vendors. The Company has not developed, and has no current
plans to develop in the near future, a contingency plan to deal with the effects
of this worst case scenario.

BUSINESS RISKS

    The future operating results of the Company are highly uncertain, and the
following factors should be carefully reviewed in addition to the other
information contained in this report on Form 10-QSB and in other public
disclosures of the Company.

    HISTORY OF LOSSES AND ANTICIPATION OF FUTURE LOSSES.  The Company was
incorporated in June 1994 to deliver free, personalized audio via the Internet
and was in the development stage until the fourth quarter of 1997. The Company
first recognized revenues in November 1997 and has recorded net losses each year
since its inception. At June 30, 1999 the Company had an accumulated a deficit
of approximately $16,500,000. Accordingly, the Company has a limited operating
history on which to base an evaluation of its business and prospects. The
Company and its prospects must be considered in light of the early stage of
development, particularly companies in new and rapidly evolving markets such as
the market for Internet content, electronic commerce ("e-commerce") and
advertising. To achieve and sustain profitability, the Company must, among other
things, (i) provide diverse content of interest to Internet users, (ii)
effectively develop new and maintain existing relationships with advertisers,
advertising agencies and content providers, (iii) continue to develop and
upgrade its technology and network infrastructure; (iv) respond to competitive
developments, (v) successfully introduce enhancements to its existing products
and services to address new technology standards and developments on the
Internet, and (vi) attract, retain and motivate qualified personnel. The
Company's operating results are also dependent on factors outside the control of
the Company, such as the availability of desirable content. There can be no
assurance that the Company will be successful in addressing these risks and the
failure to do so would have a material adverse effect on the Company's business,
results of operations and financial condition. Additionally, the limited
operating history of the Company makes the prediction of future operating
results difficult or impossible, and there can be no assurance that the
Company's revenues will increase or even continue at their current level or
generate sufficient cash from operations in future periods. The Company expects
to continue to incur significant losses on a quarterly and annual basis for the
foreseeable future. For these and other reasons, there is no assurance that the
Company will ever achieve profitability or, if profitability is achieved, that
it can be sustained.

    LIMITED OPERATING HISTORY; UNPREDICTABILITY OF FUTURE REVENUES; POTENTIAL
FLUCTUATIONS IN QUARTERLY RESULTS.  The Company has been out of the development
stage only since the fourth quarter of 1997. Because of the Company's limited
operating history and the emerging nature of the markets in which it competes,
the Company is unable to forecast accurately its revenues. Additionally, the
long-term acceptance of Web-based advertising is as yet uncertain. The Company
currently intends to increase substantially its operating expenses in order to,
among other things, (i) expand its distribution network capacity, (ii) fund
increased sales and marketing activities, (iii) acquire additional content, (iv)
develop and upgrade technology and (v) purchase equipment for its operations.
The Company's expense levels are based, in part, on its expectations with regard
to future revenues, and to a large extent such expenses are fixed, particularly
in the short term. To the extent the Company is unsuccessful in increasing its
revenues, the Company may be unable to appropriately adjust spending in a timely
manner to compensate for any unexpected revenue shortfall or will have to reduce
its operating expenses, causing it to forego potential

                                       11
<PAGE>
revenue generating activities, either of which could cause a material adverse
effect in the Company's business, results of operations and financial condition.

    The Company's quarterly operating results may fluctuate significantly in the
future as a result of a variety of factors, many of which are outside the
Company's control. Factors that may affect the Company's quarterly operating
results include (i) the cost of acquiring and the availability of content, (ii)
demand for Internet advertising, (iii) seasonal trends in advertising
placements, (iv) the advertising cycles for, or the addition or loss of,
individual advertisers, (v) the level of traffic on the Company's Web site, (vi)
the amount and timing of capital expenditures and other costs relating to the
expansion of the Company's operations, (vii) price competition or pricing
changes in Internet advertising, (viii) the level of and seasonal trends in the
use of the Internet, (ix) technical difficulties or system downtime, (x) the
introduction of new products or services by the Company or its competitors and
(xi) general economic conditions and economic conditions specific to the
Internet, such as electronic commerce and online media. Any one of these factors
could cause the Company's revenues and operating results to vary significantly
in the future. In addition, as a strategic response to changes in the
competitive environment, the Company may from time to time make certain pricing,
service or marketing decisions or acquisitions that could cause significant
declines in the Company's quarterly operating results.

    DEPENDENCE ON CONTENT PROVIDERS; LICENSE FEES PAYABLE TO CONTENT
PROVIDERS.  The Company's future success depends in large part upon its ability
to obtain rights to and deliver content of sufficient interest to end users over
the Internet. The Company does not create its own content. Rather, the Company
relies on third party content providers, such as book publishers, news and
financial information services and music publishers for the content it makes
available to its subscribers. The Company's ability to maintain its existing
relationships with such content providers and to build new relationships with
additional content providers is critical to the success of its business.
Although many of the Company's agreements with third party content providers are
for an initial term of one year, with automatic renewal unless cancelled, the
content providers may choose to terminate such agreements prior to the
expiration of their terms. The Company's inability to secure licenses from
content providers or the termination of a significant number of content provider
agreements would decrease the availability of content that the Company can offer
users. This may result in decreased traffic on the Company's Web site and, as a
result, decreased advertising revenue, which could have a material adverse
effect on the Company's business, results of operations and financial condition.

    The Company's agreements with most of its content providers are
nonexclusive, and many of the Company's competitors offer, or could offer,
content that is similar to or the same as that obtained by the Company from such
nonexclusive content providers. Such direct competition could have a material
adverse effect on the Company's business, results of operations and financial
condition.

    License fees payable to content providers and other licensing agencies may
increase as the Company continues to accumulate content and as competition for
such content increases. There is no assurance that the Company's content
providers and other licensing agencies will enter into prospective agreements
with the Company on the same or similar terms as those currently in effect or on
terms acceptable to the Company if no agreement is in effect. If the Company is
required to pay increased licensing fees, such increased payments could have a
material adverse effect on the Company's business, results of operations and
financial condition.

    UNCERTAIN ACCEPTANCE OF THE INTERNET AS AN ADVERTISING MEDIUM.  The market
for Internet advertising has only recently begun to develop, is rapidly evolving
and is characterized by an increasing number of market entrants. As is typical
in the case of a new and rapidly evolving industry, demand and market acceptance
for recently introduced products and services are subject to a high level of
uncertainty. The Company's ability to generate advertising revenue will depend
on, among other factors, (i) the continued development of the Internet as an
advertising medium, (ii) pricing of advertising on other Web sites, (iii) the
amount of traffic on the Company's Web site, (iv) the Company's ability to
achieve and

                                       12
<PAGE>
demonstrate user and member demographic characteristics that are attractive to
advertisers, (v) the development and expansion of the Company's advertising
sales force and (vi) the establishment and maintenance of desirable advertising
sales agency relationships. Most potential advertisers and their advertising
agencies have only limited experience with the Internet as an advertising medium
and have not historically devoted a significant portion of their advertising
expenditures to Web-based advertising. There is no assurance that advertisers or
advertising agencies will be persuaded to allocate or continue to allocate
portions of their budgets to Web-based advertising or, if so persuaded, that
they will find such advertising to be effective for promoting their products and
services relative to traditional print and broadcast media. No standards have
yet been widely accepted for the measurement of the effectiveness of Web-based
advertising, and there can be no assurance that such standards will develop
sufficiently to enable Web-based advertising to become a significant advertising
medium. Acceptance of the Internet among advertisers and advertising agencies
will also depend, to a large extent, on the level of use of the Internet by
consumers and upon growth in the commercial use of the Internet. If widespread
commercial use of the Internet does not develop, or if the Internet does not
develop as an effective and measurable medium for advertising, the Company's
business, results of operations and financial condition could be materially
adversely affected.

    MANAGEMENT OF GROWTH.  The Company anticipates that significant expansion of
its operations will be required in order to address potential market
opportunities. The Company expects that it will need to increase its personnel
significantly in the near future. The anticipated substantial growth is expected
to place a significant strain on its managerial, operational and financial
resources and systems. To manage its growth, the Company must implement, improve
and effectively use its operational, management, marketing and financial systems
and train and manage its employees. There can be no assurance that the Company
will be able to manage effectively the expansion of its operations or that the
Company's current personnel, systems, procedures and controls will be adequate
to support the Company's operations. Any failure of management to manage
effectively the Company's growth could have a material adverse effect on the
Company's business, results of operations and financial condition.

    RISK OF SYSTEM FAILURE, DELAYS AND INADEQUACY; SINGLE SITE.  The
performance, reliability and availability of the Company's Web site and network
infrastructure are critical to its reputation and ability to attract and retain
users, advertisers and content providers. The Company's network infrastructure
is located at a single, leased facility in Cupertino, California. The Company's
systems and operations are vulnerable to damage or interruption from fire,
flood, earthquakes, power loss, telecommunications failure, Internet breakdowns,
break-ins and similar events. The Company does not presently have redundant
facilities or systems or a formal disaster recovery plan and does not carry
sufficient business interruption insurance to compensate it for losses that may
occur. Services based on sophisticated software and computer systems often
encounter development delays and the underlying software may contain undetected
errors that could cause system failures when introduced. Any system error or
failure that causes interruption in availability of content or an increase in
response time could result in a loss of potential or existing business services
customers, users, advertisers or content providers and, if sustained or
repeated, could reduce the attractiveness of the Company's Web site to such
entities or individuals. In addition, because the Company's Web advertising
revenues are directly related to the number of advertisements delivered by the
Company to users, system interruptions that result in the unavailability of the
Company's Web site or slower response times for users would reduce the number of
advertisements delivered and reduce revenues.

    A sudden and significant increase in traffic on the Company's Web site could
strain the capacity of the software, hardware and telecommunications systems
deployed or used by the Company, which could lead to slower response times or
system failures. The Company's operations also are, in part, dependent upon
receipt of timely feeds from certain of its content providers, and any failure
or delay in the transmission or receipt of such feeds, whether due to system
failure of the Company, its content providers, satellites or otherwise, could
disrupt the Company's operations. The Company is also dependent upon Web
browsers,

                                       13
<PAGE>
Internet Service Providers ("ISPs") and online service providers ("OSPs") to
provide Internet users access to the Company's Web site. Users may experience
difficulties accessing or using the Company's Web site due to system failures or
delays unrelated to the Company's systems. These difficulties may result in
intermittent interruption in programming. Any sustained failure or delay could
reduce the attractiveness of the Company's Web site to users, advertisers and
content providers. The occurrence of any of the foregoing events could have a
material adverse effect on the Company's business, results of operations and
financial condition.

    SECURITY RISKS.  Despite the implementation of security measures, the
Company's networks may be vulnerable to unauthorized access, computer viruses
and other disruptive problems. A party who is able to circumvent security
measures could misappropriate proprietary information or cause interruptions in
the Company's Internet operations. ISPs and OSPs have in the past experienced,
and may in the future experience, interruptions in service as a result of the
accidental or intentional actions of Internet users, current and former
employees or others. The Company may be required to expend significant capital
or other resources to protect against the threat of security breaches or to
alleviate problems caused by such breaches. Although the Company intends to
continue to implement industry-standard security measures, there can be no
assurance that measures implemented by the Company will not be circumvented in
the future. Eliminating computer viruses and alleviating other security problems
may require interruptions, delays or cessation of service to users accessing the
Company's Web sites, which could have a material adverse effect on the Company's
business, results of operations and financial condition.

    DEPENDENCE ON SHORT-TERM ADVERTISING CONTRACTS.  A substantial portion of
the Company's Web advertising revenues are derived from short-term contracts.
Consequently, many of the Company's advertising customers can cease advertising
on the Company's Web site quickly and without penalty, thereby increasing the
Company's exposure to competitive pressures. There is no assurance that the
Company's current advertisers will continue to purchase advertisements or that
the Company will be able to secure new advertising contracts from existing or
future customers at attractive rates or at all. Any failure of the Company to
achieve sufficient advertising revenue could have a material adverse effect on
the Company's business, results of operations and financial condition.

    COMPETITION.  The market for e-commerce, information services and
entertainment on the Internet and otherwise is highly competitive, and the
Company expects that competition will continue to intensify. The Company
competes with (i) other Web sites and Internet broadcasters to acquire and
provide content to attract users, (ii) online services, other Web site operators
and advertising networks, as well as traditional media such as television, radio
and print, for a share of advertisers' total advertising budgets, (iii) local
radio and television stations and national radio and television networks for
sales of advertising spots and (iv) other e-commerce enabled Web sites for
on-line customers. There is no assurance that the Company will be able to
compete successfully or that the competitive pressures faced by the Company,
including those described below, will not have a material adverse effect on the
Company's business, results of operations and financial condition.

    The Company also competes with online services, other Web site operators and
advertising networks, as well as traditional media such as television, radio and
print for a share of advertisers' total advertising budgets. The Company
believes that the principal competitive factors for attracting advertisers
include the number of users accessing the Company's Web site, the demographics
of the Company's users, the Company's ability to deliver focused advertising and
interactivity through its Web site and the overall cost-effectiveness and value
of advertising offered by the Company. There is intense competition for the sale
of advertising on high-traffic Web sites, which has resulted in a wide range of
rates quoted by different vendors for a variety of advertising services, making
it difficult to project levels of Internet advertising that will be realized
generally or by any specific company. Any competition for advertisers among
present and future Web sites, as well as competition with other traditional
media for advertising placements, could result in significant price competition.
The Company believes that the number of companies selling Web-

                                       14
<PAGE>
based advertising and the available inventory of advertising space have recently
increased substantially. Accordingly, the Company may face increased pricing
pressure for the sale of advertisements. Reduction in the Company's Web
advertising revenues would have a material adverse effect on the Company's
business, results of operations and financial condition.

    Many of the Company's competitors and potential competitors have greater
financial, sales and other resources than the Company. There is no assurance
that the Company's business strategy will be successful, or that the Company
will gain a market share or customer base that will be sufficient to justify
continued operations.

    PRODUCT DEVELOPMENT AND TECHNOLOGICAL OBSOLESCENCE.  The market for Internet
information delivery is characterized by extensive research and development and
rapid technological change, frequent new product introductions and technological
innovation, resulting in short product life cycles, and evolving industry
standards. Development by others of new or improved products, processes or
technology may render the Company's products and services less competitive or
obsolete. The emerging character of these products and services and their rapid
evolution will require the Company to effectively use leading technologies,
continue to develop its technological expertise, enhance its current services
and continue to improve the performance, features and reliability of its network
infrastructure. Changes in network infrastructure, transmission and content
delivery methods and underlying software platforms and the emergence of new
technologies could dramatically change the structure and competitive dynamic of
the market for the Company's products and services. There is no assurance that
the Company will be successful in responding quickly, cost effectively and
sufficiently to these or other such developments. In addition, the widespread
adoption of new Internet technologies or standards could require substantial
expenditures by the Company to modify or adapt its Web site and services. A
failure by the Company to rapidly respond to technological developments could
have a material adverse effect on the Company's business, results of operations
and financial condition.

    DEPENDENCE ON CONTINUED GROWTH IN USE OF THE INTERNET.  Rapid growth in use
of and interest in the Internet is a recent phenomenon and there can be no
assurance that acceptance and use of the Internet will continue to develop or
that a sufficient base of users will emerge to support the Company's business.
Because global commerce and on-line exchange of information on the Internet is
new and evolving, it is difficult to predict with any assurance whether the
Internet will prove to be a viable commercial marketplace. Future revenues of
the Company will depend largely on the widespread acceptance and use of the
Internet as a source of multimedia information and entertainment and as a
vehicle for commerce in goods and services. The Internet may not be accepted as
a viable commercial medium for broadcasting multimedia content, if at all, for a
number of reasons, including (i) potentially inadequate development of the
necessary infrastructure, (ii) inadequate development of enabling technologies,
(iii) lack of acceptance of the Internet as a medium for distributing content
and (iv) inadequate commercial support for Web-based advertising. To the extent
that the Internet continues to experience an increase in users, an increase in
frequency of use or an increase in the bandwidth requirements of users, there
can be no assurance that the Internet infrastructure will be able to support the
demands placed upon it, specifically the demands of delivering high-quality
video content. Furthermore, user experiences on the Internet are affected by
access speed. There is no assurance that broadband access technologies and cable
modems will become widely adopted. In addition, the Internet could lose its
viability as a commercial medium due to delays in the development or adoption of
new standards and protocols required to handle increased levels of Internet
activity, or due to increased government regulation. Changes in or insufficient
availability of telecommunications services to support the Internet also could
result in unacceptable response times and could adversely affect use of the
Internet generally and of the Company's Web site in particular. If use of the
Internet does not continue to grow or grows more slowly than expected, or if the
Internet infrastructure does not effectively support the growth that may occur,
the Company's business, results of operations and financial condition could be
materially adversely affected.

                                       15
<PAGE>
    DEPENDENCE UPON KEY PERSONNEL.  The Company's success depends, to a
significant extent, upon a number of key employees and consultants. The loss of
the services of one or more of these employees or consultants could have a
material adverse effect on the business of the Company.

    GOVERNMENT REGULATION AND LEGAL UNCERTAINTY.  Although there are currently
few laws and regulations directly applicable to the Internet, it is likely that
new laws and regulations will be adopted in the United States and elsewhere
covering issues such as music licensing, broadcast license fees, copyrights,
privacy, pricing, sales taxes and characteristics and quality of Internet
services. The adoption of restrictive laws or regulations could slow Internet
growth or expose the Company to significant liabilities associated with content
available on its Web site. The application of existing laws and regulations
governing Internet issues such as property ownership, libel and personal privacy
is also subject to substantial uncertainty. There can be no assurance that
current or new laws and regulations, or the application of existing laws and
regulations (including laws and regulations governing issues such as property
ownership, content, taxation, defamation and personal injury), will not expose
the Company to significant liabilities, significantly slow Internet growth or
otherwise cause a material adverse effect on the Company's business, results of
operations or financial condition.

    The Company currently does not collect sales or other taxes with respect to
the sale of services or products in states and countries where the Company
believes it is not required to do so. Some states and countries have sought to
impose sales or other tax obligations on companies that engage in online
commerce within their jurisdictions. A successful assertion by one or more
states or countries that the Company should collect sales or other taxes on
products and services, or remit payment of sales or other taxes for prior
periods, could have a material adverse effect on the Company's business, results
of operations and financial condition.

    The Communications Decency Act of 1996 (the "CDA") was enacted in 1996.
Although those sections of the CDA that, among other things, proposed to impose
criminal penalties on anyone distributing "indecent" material to minors over the
Internet were held to be unconstitutional by the U.S. Supreme Court, there can
be no assurance that similar laws will not be proposed and adopted. Although the
Company does not currently distribute the types of materials that the CDA may
have deemed illegal, the nature of such similar legislation and the manner in
which it may be interpreted and enforced cannot be fully determined, and
legislation similar to the CDA could subject the Company to potential liability,
which in turn could have an adverse effect on the Company's business, financial
condition and results of operations. Such laws could also damage the growth of
the Internet generally and decrease the demand for the Company's products and
services, which could adversely affect the Company's business, results of
operations and financial condition.

    POTENTIAL LIABILITY FOR INTERNET CONTENT.  As a distributor of Internet
content, the Company faces potential liability for negligence, copyright,
patent, trademark, defamation, indecency and other claims based on the nature
and content of the materials that it makes available to Internet users. Such
claims have been brought, and sometimes successfully pressed, against Internet
content distributors. In addition, the Company could be exposed to liability
with respect to the content or unauthorized duplication or broadcast of content.
Although the Company maintains general liability insurance, the Company's
insurance may not cover potential claims of this type or may not be adequate to
indemnify the Company for all liability that may be imposed. In addition,
although the Company generally requires its content providers to indemnify the
Company for such liability, such indemnification may be inadequate. Any
imposition of liability that is not covered by insurance, is in excess of
insurance coverage or is not covered by an indemnification by a content provider
could have a material adverse effect on the Company's business, results of
operations and financial condition.

                                       16
<PAGE>
                          PART II - OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS.

           None.

ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS.

    (a) Sales of Unregistered Securities

    In April 1999, audiohighway.com issued an aggregate of 36,478 shares of its
unregistered Common Stock to Mass Music, Inc., which were shares issued upon
conversion of a payable in the amount of $800,000 given to the Company in
connection with the acquisition of substantially all of the assets of Mass
Music, Inc. The shares were issued in reliance upon the exemption from
registration provided by Section 4(2) under the Securities Act of 1933.

    Between April 1999 and June 1999, audiohighway.com issued an aggregate of
178,962 shares of its unregistered Common Stock to a total of 84 accredited
investors, all of whom exercised previously-issued warrants to purchase Common
Stock. The shares were issued at exercise prices ranging from $1.92 to $9.75, in
accordance with the terms of the warrants, resulting in gross proceeds to the
Company of approximately $670,465. The shares were issued in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act. Such
exemption was predicated on the fact that the sale was made to sophisticated,
accredited investors who were purchasing for their own account and not with a
view towards distribution of the securities acquired.

    (b) Use of Proceeds

    In December 1998, the Company completed its initial public offering of
securities, in which it sold an aggregate of 2,530,000 units consisting of
Common Stock and redeemable Common Stock Purchase Warrants (the "Units"), at an
initial public offering price of $6.50 per Unit. The offering netted the Company
approximately $14,052,000 after deducting expenses related to the offering. In
January 1999, the conditions for redemption set forth in the Common Stock
Purchase Warrants were satisfied and the Company redeemed its outstanding public
warrants as of February 22, 1999. As a result, a total of approximately
1,269,000 warrants were exercised, which resulted in additional gross proceeds
to the Company of approximately $12,374,000. The Company paid approximately
$315,000 to holders of Warrants who chose not to redeem during the 30-day
redemption period. Through June 30, 1999, approximately $3,983,000 of the
proceeds had been used in financing the Company's operating activities,
including approximately $1,951,000 used in sales and marketing and approximately
$1,444,000 used in operating and development. The Company has also used
approximately $1,858,000 to purchase assets (including approximately $250,000 to
acquire capital assets and $200,000 to acquire Mass Music, Inc.) and reduce
liabilities, including approximately $1,500,000 used to repay various debt
instruments.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES.

           None.

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

           None.

ITEM 5.    OTHER INFORMATION.

           None.

                                       17
<PAGE>
ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

       a.  Exhibits

           10.8    Asset Purchase Agreement between the Registrant and Mass
       Music, Inc. dated as of
                  January 1, 1999

           27.1    Financial Data Schedule

       b.  Reports on Form 8-K during the quarter ended June 30, 1999

           During the period covered by this report, the Company did not file
           any reports on Form 8-K.

                                       18
<PAGE>
AUDIOHIGHWAY.COM

                                   SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

<TABLE>
<S>                             <C>  <C>
                                AUDIOHIGHWAY.COM

                                By:            /s/ NATHAN M. SCHULHOF
                                     -----------------------------------------
                                                 Nathan M. Schulhof
DATE: AUGUST 13, 1999                         CHIEF EXECUTIVE OFFICER

                                By:               /s/ GREG SUTYAK
                                     -----------------------------------------
                                                    Greg Sutyak
                                              CHIEF FINANCIAL OFFICER
</TABLE>

                                       19
<PAGE>
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
    EXHIBIT
      NO.        DESCRIPTION
---------------  ------------------------------------------------------------------------------------------------
<S>              <C>
    10.8         Asset Purchase Agreement between the Registrant and Mass Music, Inc., dated as of January 1,
                 1999
    27.1         Financial Data Schedule
</TABLE>

                                       20