<PAGE>
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                  FORM 10-QSB

(MARK ONE)

<TABLE>
<C>        <S>
   /X/     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
           ENDED SEPTEMBER 30, 2000
                                  OR
   / /     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
           FROM -------------- TO --------------
</TABLE>

                         COMMISSION FILE NUMBER 1-14697

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

                                AUDIOHIGHWAY.COM
       (Exact name of small business issuer as specified in its charter)

<TABLE>
<S>                                            <C>
                 CALIFORNIA                                     77-0377306
--------------------------------------------   --------------------------------------------
       (State or other jurisdiction of                         (IRS Employer
       incorporation or organization)                       Identification No.)

          20300 STEVENS CREEK BLVD.
                CUPERTINO, CA                                      95014
--------------------------------------------   --------------------------------------------
  (Address of principal executive offices)                      (Zip Code)
</TABLE>

                                 (408) 861-4000
              (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.

<TABLE>
<S>                                            <C>
                    Yes X                                           No
</TABLE>

    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                                   SEPTEMBER 30, 2000
                    -----                                   ------------------
<S>                                            <C>
    Shares of Common Stock, no par value                         6,526,044
</TABLE>

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
                                AUDIOHIGHWAY.COM
                                  FORM 10-QSB
                    FOR THE QUARTER ENDED SEPTEMBER 30, 2000

                               TABLE OF CONTENTS

<TABLE>
<S>                                                           <C>
PART 1. FINANCIAL INFORMATION...............................    3

Item 1. Financial Statements................................    3

  Condensed Balance Sheets--September 30, 2000 and
    December 31, 1999.......................................    3

  Condensed Statements of Operations--Three Months and Nine
    Months Ended September 30, 2000 and 1999................    4

  Condensed Statements of Cash Flows--Nine Months Ended
    September 30, 2000 and 1999.............................    5

  Notes to Condensed Financial Statements...................    6

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.........................    7

PART II. OTHER INFORMATION..................................   17

Item 1. Legal Proceedings...................................   17

Item 2. Changes in Securities and Use of Proceeds...........   17

Item 3. Defaults Upon Senior Securities.....................   17

Item 4. Submission of Matters to a Vote of Security
Holders.....................................................   17

Item 5. Other Information...................................   17

Item 6. Exhibits and Reports on Form 8-K....................   17

Signatures..................................................   18
</TABLE>

                                       2
<PAGE>
                         PART I--FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

                                AUDIOHIGHWAY.COM
                            CONDENSED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                              SEPTEMBER 30,   DECEMBER 31,
                                                                  2000            1999
                                                              -------------   ------------
                                                               (UNAUDITED)
<S>                                                           <C>             <C>
                           ASSETS
Current assets:
  Cash and cash equivalents.................................    $    164        $   3,628
  Investments...............................................         577            9,524
  Accounts receivable, net..................................         427              212
  Inventories...............................................         486               --
  Other assets..............................................         254              376
                                                                --------        ---------
    Total current assets....................................       1,908           13,740
Property and equipment, net.................................       1,143            1,048
Other assets, net...........................................         738            1,007
                                                                --------        ---------
                                                                $  3,789        $  15,795
                                                                ========        =========

            LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current maturities of long term debt......................    $    206        $     487
  Accounts payable..........................................       1,246            1,770
  Accrued expenses and other current liabilities............         293            1,260
                                                                --------        ---------
    Total current liabilities...............................       1,745            3,517

Long term debt..............................................         129              111

Stockholders' equity:
  Preferred Stock, no par value; 5,000 shares authorized;
    none outstanding........................................          --               --
  Common Stock, no par value; 50,000 shares authorized;
    6,526 and 5,746 outstanding, respectively...............      34,717           33,162
  Additional paid-in capital................................       4,656            4,194
  Notes receivable due from stockholders....................        (238)              --
  Accumulated deficit.......................................     (37,220)         (25,189)
                                                                --------        ---------
    Total stockholders' equity..............................       1,915           12,167
                                                                --------        ---------
                                                                $  3,789        $  15,795
                                                                ========        =========
</TABLE>

                  See notes to Condensed Financial Statements

                                       3
<PAGE>
                                AUDIOHIGHWAY.COM
                       CONDENSED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                   THREE MONTHS
                                                           NINE MONTHS ENDED           ENDED
                                                             SEPTEMBER 30,         SEPTEMBER 30,
                                                          -------------------   -------------------
                                                            2000       1999       2000       1999
                                                          --------   --------   --------   --------
                                                              (UNAUDITED)           (UNAUDITED)
<S>                                                       <C>        <C>        <C>        <C>
Net revenues............................................  $  1,980   $ 1,027    $   483    $   613

Costs and expenses:
  Cost of products sold through e-commerce..............     1,149        --        201         --
  Operating and development.............................     3,528     2,780        848      1,336
  Sales and marketing...................................     7,351     3,635      1,889      1,684
  General and administrative............................     2,051     1,275        818        570
                                                          --------   -------    -------    -------
    Total costs and expenses............................    14,079     7,690      3,756      3,590

Loss from operations....................................   (12,099)   (6,663)    (3,273)    (2,977)

Other income (expenses):
  Interest (expense) income, net........................        68      (149)        28        146
  Other.................................................        --        (2)        --         --
                                                          --------   -------    -------    -------

    Net loss............................................  $(12,031)  $(6,814)   $(3,245)   $(2,831)
                                                          ========   =======    =======    =======

Basic and diluted net loss per share....................  $  (1.85)  $ (1.30)   $ (0.51)   $ (0.50)
                                                          ========   =======    =======    =======

Shares used in computing basic and diluted net loss per
  share.................................................     6,520     5,247      6,356      5,629
                                                          ========   =======    =======    =======
</TABLE>

                  See notes to Condensed Financial Statements

                                       4
<PAGE>
                                AUDIOHIGHWAY.COM
                       CONDENSED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               NINE MONTHS ENDED
                                                                 SEPTEMBER 30,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
                                                                  (UNAUDITED)
<S>                                                           <C>        <C>
Net cash used in operating activities.......................   (13,501)   (9,182)

Cash flows from investing activities:
  Proceeds on maturity of held-to-maturity investments......     8,947        --
  Acquisition of property and equipment.....................      (341)     (528)
  Acquisition of business...................................        --      (200)
  Repayment of note receivable..............................       107        --
                                                              --------   -------
    Net cash provided by (used in) investing activities.....     8,713      (728)

Cash flows from financing activities:
  Proceeds from (repayment of) long term debt...............       269      (135)
  Proceeds from issuance of common stock....................     1,055    13,785
                                                              --------   -------
    Net cash provided by financing activities...............     1,324    13,650
                                                              --------   -------

    Net change in cash and cash equivalents.................    (3,464)    3,740

Cash and cash equivalents at beginning of period............     3,628    13,007
                                                              --------   -------

Cash and cash equivalents at end of period..................  $    164   $16,747
                                                              ========   =======

Supplemental disclosure of non-cash investing and financing
  activities
  Conversion of debt and accrued interest into common
    stock...................................................  $    532   $    --
                                                              ========   =======
  Exercise of warrants for notes............................  $    237   $    --
                                                              ========   =======
</TABLE>

                  See notes to Condensed Financial Statements

                                       5
<PAGE>
                                AUDIOHIGHWAY.COM
                    NOTES TO CONDENSED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2000

NOTE 1--THE COMPANY AND BASIS OF PRESENTATION

    audiohighway.com (the "Company") is a global Internet media company that
offers a library of 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 contained in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1999. Certain prior period
balances have been reclassified to conform to current period presentation.

NOTE 2--LOSS PER SHARE

    Basic net loss per share is computed by dividing the net loss by the number
of weighted average common shares outstanding. Diluted loss per share reflects
potential dilution from outstanding stock options and warrants using the
treasury stock method and convertible debt using the if-converted method.
Potentially dilutive securities have been excluded from the diluted loss per
share calculation at September 30, 2000 as the inclusion would be anti-dilutive
as follows:

<TABLE>
<CAPTION>

<S>                                                           <C>
Warrants and options........................................  2,605,574
Convertible debt............................................     46,513
                                                              ---------
                                                              2,652,087
                                                              =========
</TABLE>

                                       6
<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
nine month periods ended September 30, 2000 and 1999. 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, 1999.
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
(1) discuss our expectations about the Company's future performance;
(2) contain projections of the Company's future operating results or of the
Company's future financial condition; and (3) 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

    audiohighway.com ("audiohighway" or the "Company") is an online information
and entertainment company which has developed a large and diverse library of
audio content available free to the public on the Internet. The Company is
implementing a second-generation business model that combines compelling content
and e-commerce into an integrated Web platform. Management believes this
multi-faceted approach will allow audiohighway to generate user traffic on a
cost-effective basis, and convert that traffic into a future profitable revenue
stream. Furthermore, management believes that its branding efforts will make its
Web site an important destination for accessing and consuming audio and video on
the Internet.

    The Company facilitates consumption of video and audio in one of three ways:
(1) a pre-programmed "channel" format, which offers convenient access to a broad
range of content; (2) individual selection, which allows users to browse through
the content library and listen to their personally-selected choices; and
(3) the Company's My JukeBox product, which allows users to "roll their own"
digital audio/video programming via an easy point-and-click management system.

    Using these methods of content distribution, the Company is executing a
strategy whereby it attracts user traffic through compelling content, maximizes
user retention and visit frequency by offering registered users value-added
member services including MP3-enabled e-mail, Internet voice mail and free Web
sites. The Company's business plan contemplates leveraging this user traffic in
a manner that gives opportunities to increase advertising and e-commerce
revenue.

    The Company accelerated this momentum during the first half of 2000 with a
number of major initiatives, including the development of new content
relationships, the introduction of additional member services and a complete
upgrade of its e-commerce Web site, Mass Merchandise. These efforts have
resulted in increased traffic to audiohighway.com, which the Company hopes will,
in turn, increase future revenues. However, the Company requires additional
capital in order to fund its operations, the sources of which are currently
uncertain.

                                       7
<PAGE>
RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE NINE MONTHS ENDED
  SEPTEMBER 30, 1999

    Net revenues were $1,980,000 for the nine months ended September 30, 2000,
as compared to $1,027,000 for the same period in 1999, an increase of 92%. Net
revenues generated in 1999 were attributable to e-commerce and advertising
sales. Net revenues for the comparable period of 2000 were attributable to
advertising sales on the Company's Web sites, e-commerce sales, including
revenues generated by the Company's new Mass Merchandise Web site and increased
revenue sharing opportunities.

    Operating and development expenses were $3,528,000 for the nine months ended
September 30, 2000, up 27% from $2,780,000 for the same period in 1999. 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 sites, use of consulting engineers and amortization of certain
of the assets acquired from Mass Music, Inc. in March 1999. The Company employs
outside consulting engineers to facilitate a portion of its development effort.

    Sales and marketing expenses were $7,351,000 for the nine months ended
September 30, 2000, up 102% from $3,635,000 for the same period in 1999. This
increase is primarily attributable to increased expenses for advertising and
marketing associated with promoting the Company's Web sites and increased
payroll expenses associated with additional sales and marketing staff. The
Company expects sales and marketing expenses to decline in future periods as the
Company attempts to conserve cash.

    General and administrative expenses ("G&A") were $2,051,000 for the nine
months ended September 30, 2000, up 61% compared to G&A expenses of $1,275,000
for the same period in 1999. 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 $12,099,000 for the nine months ended September 30,
2000 compared to an operating loss for the same period in 1999 of $6,663,000, an
increase of approximately 82%. As noted above, the increased loss was primarily
the result of increased expenditures in the sales and marketing and operating
and development areas.

    The Company recognized interest income of approximately $68,000 during the
nine months ended September 30, 2000 compared to interest expense of $149,000 in
the same period in 1999. This was primarily the result of retiring a substantial
portion of the outstanding debt on the Company's books. The net carrying value
of outstanding debt, excluding capital equipment leases, at September 30, 2000
was $129,000 compared to $111,000 on December 31, 1999.

    As a result of the factors described above, for the nine months ended
September 30, 2000, the Company incurred a net loss of $12,031,000 compared to a
net loss of $6,814,000 for the same period in 1999.

    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.

THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE THREE MONTHS ENDED
  SEPTEMBER 30, 1999

    Net revenues were $483,000 for the three months ended September 30, 2000
compared to $613,000 for the same period in 1999, a decrease of 21%. Net
revenues generated in 1999 were primarily from e-commerce and advertising sales.
Net revenues in the 2000 quarter were attributed to advertising sales and
e-commerce, including net revenues generated by the Mass Merchandise Web site.
The decrease in net revenues in the 2000 quarter was primarily attributable to
refocusing e-commerce sales to higher margin products and a decline in demand
for advertising.

                                       8
<PAGE>
    Operating and development expenses were $848,000 for the three months ended
September 30, 2000, down 37% from $1,336,000 for the same period in 1999. In the
1999 period, there was an increase in payroll expenses associated with increased
staffing, data communications expenses, costs to produce and maintain the
Company's Web sites use of consulting engineers and amortization of certain of
the assets acquired from Mass Music, Inc. In the 2000 quarter, the Company
eliminated many outside consulting engineers and reduced staffing.

    Sales and marketing expenses were $1,889,000 for the three months ended
September 30, 2000, up 12% from $1,684,000 for the same period in 1999. This
increase is primarily attributable to increased sales and marketing expenses and
increased payroll expenses associated with additional sales and marketing staff.
The Company expects sales and marketing expenses to decline in future periods as
the Company attempts to conserve cash.

    General and administrative expenses ("G&A") were $818,000 for the three
months ended September 30, 2000, up 44% compared to G&A expenses of $570,000 for
the same period in 1999. This increase was primarily the result of increased
costs in accounting fees, legal fees and expenses incurred in connection with
transactions.

    The operating loss was $3,273,000 for the three months ended September 30,
2000 compared to an operating loss for the same period in 1999 of $2,977,000, an
increase of approximately 10%. As noted above, the increased loss was primarily
the result of increased expenses, as well as a decrease in net revenues.

    During the three months ended September 30, 2000, the Company had net
interest income of $28,000 compared to net interest income of $146,000 for the
same period in 1999. This was primarily the result of lower investment balances
and lower amortization of debt discount during the period.

    As a result of the factors described above, for the three months ended
September 30, 2000, the Company incurred a net loss of $3,245,000 compared to a
net loss of $2,831,000 for the same period in 1999.

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 $333,000 to holders of Warrants who
chose not to redeem during the 30-day redemption period.

    As of September 30, 2000, the Company had $164,000 in cash and cash
equivalents and investments of $577,000 which was invested in high-grade
short-term debt instruments. As of September 30, 2000, the Company had $163,000
in working capital.

    As of September 30, 2000, the Company used $13,501,000 in operating
activities compared to $9,182,000 in 1999. This increase was largely due to the
significantly increased net loss in 2000, but also reflected increased uses of
cash in most aspects of operating activities, other than Common Stock issued for
services, which were larger in 1999. Also, $8,713,000 was provided by investing
activities in the first nine months of 2000. In contrast, $728,000 was used in
investing activities during the same period in 1999. The most significant
portion of the 2000 increase was from the proceeds realized upon

                                       9
<PAGE>
the sale of investment securities. Net cash provided by financing activities
decreased in the first nine months of 2000, from $13,650,000 in 1999 to
$1,324,000 in 2000, primarily because the net proceeds of the Company's warrant
call were received in 1999, while no significant financing activity occurred in
the 2000 period. During the second quarter of 1999, the Company paid $200,000 in
connection with the purchase of substantially all of the assets of Mass Music.
The $1,324,000 received in 2000 was primarily the result of the exercise of
warrants.

    The Company's current financial resources will not be sufficient to fund its
operations for the next 12 months. During that period, it will be necessary for
the Company to raise additional funds to meet the expenditures required for
operating its business. Since the Company's cash balances and cash generated
from operations are insufficient to satisfy its liquidity requirements, the
Company is seeking to raise such additional funds through private equity or debt
financings. If additional funds are raised through the issuance of debt
securities or convertible preferred stock, these securities could have certain
rights, preferences, and privileges senior to holders of Common Stock, and the
terms of such debt or preferred equity could impose restrictions on the
Company's operations. The sale of additional equity or debt securities would
result in additional dilution to the Company's shareholders. Additional
financing may not be available at all and, if available, such financing may not
be obtainable on terms favorable to the Company. If the Company is unable to
obtain this additional financing, it will be required to reduce the scope of its
planned development and marketing efforts, which could seriously harm its
business.

    The Company's future expenditures and capital requirements will depend on a
number of factors including any possible adjustments to its business plan, 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.

                                       10
<PAGE>
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 Quarterly Report on Form 10-QSB, in its Annual
Report on Form 10-KSB for the year ended December 31, 1999, as well as in other
public disclosures of the Company. Any of the following risks could materially
and adversely affect our business, operating results and financial condition.

    NEED FOR ADDITIONAL FINANCING.  Since inception, cash used in the Company's
operations has substantially exceeded cash received from operations, and the
Company expects this trend to continue for the foreseeable future. At
September 30, 2000, the Company has working capital of $163,000 and an
accumulated deficit of $37,220,000. The amount of its cash and cash equivalents
has decreased from $3,628,000 at December 31, 1999 to $164,000 at September 30,
2000. Therefore, the Company will be required to take steps to downsize its
operations or otherwise adjust its spending if it is unable to raise needed
capital in the near future. While the Company has been diligently pursuing
various possible sources of such needed funds, it currently has no firm
commitment from any source, and therefore, there is no assurance that such
funding will be obtained. If the Company is successful in raising needed working
capital, it is likely that the terms will not be favorable to 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 increasing net
losses each year since its inception. At September 30, 2000 the Company had an
accumulated deficit of approximately $37,220,000. 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 its
current financial condition, as well as the new and rapidly evolving markets in
which the Company competes, such as Internet content, e-commerce and
advertising. Almost none of the companies in these markets have achieved
profitability and it is widely believed that many companies never will. To
achieve and sustain profitability, the Company must, among other things,
(i) raise additional working capital; (ii) provide diverse content of interest
to Internet users, (iii) effectively develop new and maintain existing
relationships with advertisers, advertising agencies and content providers,
(iv) continue to develop and upgrade its technology and network infrastructure;
(v) respond to competitive developments, (vi) successfully introduce
enhancements to its existing products and services to address new technology
standards and developments on the Internet, and (vii) 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. Furthermore, the Company's current
financial resources will not be sufficient to fund its operations for the next
12 months. Therefore, during that period, the Company will need to raise
additional funds to meet the expenditures required for operating its business.
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. Moreover, there is no assurance that the Company will not be required
to downsize its operations if additional funding is not raised when needed.

    LIMITED OPERATING HISTORY; UNPREDICTABILITY OF FUTURE REVENUES; POTENTIAL
FLUCTUATIONS IN QUARTERLY RESULTS.  Because of the Company's limited operating
history and the emerging and evolving nature of

                                       11
<PAGE>
the markets in which it competes, the Company is unable to forecast accurately
its revenues. Additionally, the long-term acceptance of Web-based advertising
and e-commerce is as yet uncertain. 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 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 Company's ability to raise needed capital, (ii) the cost
of acquiring and the availability of content, (iii) price competition in the
e-commerce arena, (iv) demand for Internet advertising, (v) seasonal trends in
advertising placements, (vi) seasonal trends in the markets for the products
offered on the Company's e-commerce sites, (vii) the advertising cycles for, or
the addition or loss of, individual advertisers, (viii) the level of traffic on
the Company's Web sites, (ix) the amount and timing of capital expenditures and
other costs relating to the expansion of the Company's operations, (x) price
competition or pricing changes in Internet advertising, (xi) the level of and
seasonal trends in the use of the Internet, (xii) technical difficulties or
system downtime, (xiii) the introduction of new products or services by the
Company or its competitors and (xiv) 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 record companies, recording
artists, 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 sites and, as a result, decreased advertising and or e-commerce
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 will
continue to increase as the Company continues to accumulate content, as Web site
traffic increases 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

                                       12
<PAGE>
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 Company's success in generating traffic from
user's with demographic characteristics that are attractive to potential
advertisers, (ii) the continued development of the Internet as an advertising
medium, (iii) pricing of advertising on other Web sites, (iv) the development
and expansion of the Company's advertising sales force and (v) the establishment
and maintenance of desirable advertising sales agency relationships. Many
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 continue to 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.

    RISK OF SYSTEM FAILURE, DELAYS AND INADEQUACY.  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 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, hackers 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, access to e-commerce order
processing or an increase in response time could result in a loss of potential
or existing business services to customers, users, advertisers or content
providers and, if sustained or repeated, could reduce the attractiveness of the
Company's Web sites 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 sites 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 sites
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, Internet Service Providers ("ISPs") and online service providers

                                       13
<PAGE>
("OSPs") to provide Internet users access to the Company's Web sites. Users may
experience difficulties accessing or using the Company's Web sites 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 sites 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, hackers, computer
viruses and other disruptive problems. The Company's primary Web site has, on
several occasions, suffered brief denial of service interruptions. Although the
Company did not suffer any material adverse effects from these incidents, a
party who is able to circumvent security measures could misappropriate
proprietary information or cause severe 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 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.  Substantial portions 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 sites 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 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) other e-commerce Web sites for the sale of CD's, videos, DVD's, computer
products, home electronics and associated products, (iii) 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 and (iv) local radio and television stations and national radio and
television networks for sales of advertising spots. 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 and with other
e-commerce Web sites. The Company believes that the principal competitive
factors for attracting advertisers include the number of users accessing the
Company's Web sites, the demographics of the Company's users, the Company's
ability to deliver focused advertising and interactivity through its Web sites
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

                                       14
<PAGE>
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 number of companies selling Web-based advertising and the
available inventory of advertising space have recently increased substantially.
Accordingly, the Company has faced 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.

    Most 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 sites 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 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. In addition, competition
for engineers, sales and marketing personnel and other employees needed to
successfully run the Company has become increasingly intense in Silicon Valley
and compensation payable to the limited number of potential candidates has been
escalating. There is no assurance that the Company will be able to hire the
highly skilled employees it needs at the time it needs to do such hiring or that
it will be able to offer competitive compensation packages to enable the Company
to retain such employees. A failure to do so could adversely impact the
Company's ability to compete succeed in furthering its business prospects.

    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 sites. 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

                                       15
<PAGE>
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>
                                AUDIOHIGHWAY.COM

                           PART II--OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

    In August 1999, Spirit Partners, L.P. and Gaines Berland, Inc. filed suit
against the Company in the Supreme Court of the State of New York seeking
damages according to proof, punitive damages in the amount of $3,000,000,
attorneys' fees, costs and equitable relief, based on allegations of breach of
contract, negligent misrepresentation and deceptive trade practices relating to
the Company's redemption of its publicly traded warrants during February 1999.
The Company removed the case to United States District Court for the Southern
District of New York. Due to the nature of litigation generally and because the
lawsuit is at an early stage, the Company cannot estimate the total expense,
possible damages or settlement value, if any, that may ultimately be incurred in
connection with the suit, However, the Company believes the suit is wholly
without merit, intends to vigorously oppose the suit and believes that this
matter will not have a material adverse effect on the Company's results of
operations or financial condition.

ITEM 2. CHANGES IN SECURITIES.

    In July 2000, the Company issued 100,000 shares of unregistered Common Stock
to the Warner Music Group for an aggregate amount of $269,000 together with
warrants to purchase an additional 100,000 shares at $2.69 per share exercisable
for three years. The securities were issued pursuant to Section 4(2) of the
Securities Act of 1933.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

    None.

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

    None.

ITEM 5. OTHER INFORMATION.

    None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

    a. Exhibits

<TABLE>
    <S>   <C>
    27.1  Financial Data Schedule
</TABLE>

    b. Reports on Form 8-K during the quarter ended September 30, 2000:

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

                                       17
<PAGE>
                                   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

Date: November 14, 2000                      By:  /s/ NATHAN M. SCHULHOF
                                                  -------------------------------------------
                                                  Nathan M. Schulhof
                                                  CHIEF EXECUTIVE OFFICER

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

                                       18
<PAGE>
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO.                  DESCRIPTION
-----------                  -----------
<C>                          <S>
        27.1                 Financial Data Schedule
</TABLE>

                                       19