<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 MARCH 31, 2000
</TABLE>

                                       OR

<TABLE>
<C>        <S>
   / /     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.                    95014
          CUPERTINO, CA                        (Zip Code)
 (Address of principal executive
            offices)
</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 period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/  No / /

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

<TABLE>
<CAPTION>
                          OUTSTANDING
                         AT APRIL 30,
    CLASS                    2000
-------------            -------------
<S>                      <C>
Common Stock,
no par value               6,416,531
</TABLE>

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
                                AUDIOHIGHWAY.COM
                                  FORM 10-QSB
                      FOR THE QUARTER ENDED MARCH 31, 2000

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                PAGE
                                                              --------
<S>                                                           <C>
PART 1 -- FINANCIAL INFORMATION

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

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

    Condensed Statements of Operations -- Three Months Ended
     March 31, 2000 and 1999................................      4

    Condensed Statements of Cash Flows -- Three Months Ended
     March 31, 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

Item 1. Legal Proceedings...................................     16

Item 2. Changes in Securities and Use of Proceeds...........     16

Item 3. Defaults Upon Senior Securities.....................     16

Item 4. Submission of Matters to a Vote of Security
  Holders...................................................     16

Item 5. Other Information...................................     16

Item 6. Exhibits and Reports on Form 8-K....................     16

Signatures..................................................     17
</TABLE>

                                       2
<PAGE>
                        PART I -- FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

                                AUDIOHIGHWAY.COM
                            CONDENSED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                              MARCH 31,   DECEMBER 31,
                                                                2000          1999
                                                              ---------   ------------
                                                                    (UNAUDITED)
<S>                                                           <C>         <C>
                                        ASSETS
Current assets:
  Cash and cash equivalents.................................  $  5,331      $  3,628
  Investments...............................................     3,012         9,524
  Accounts receivable, net..................................       321           212
  Other assets..............................................       237           376
                                                              --------      --------
    Total current assets....................................     8,901        13,740
Property and equipment, net.................................     1,262         1,048
Other assets, net...........................................     1,036         1,007
                                                              --------      --------
                                                              $ 11,199      $ 15,795
                                                              ========      ========

                         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Current maturities of long term debt......................  $    312      $    487
  Accounts payable..........................................       832         1,770
  Accrued expenses and other current liabilities............       358         1,260
                                                              --------      --------
    Total current liabilities...............................     1,502         3,517
Long term debt..............................................       150           111
Stockholders' equity
  Preferred Stock, no par value; 5,000 shares authorized;
    none outstanding........................................         0             0
  Common Stock, no par value; 50,000 shares authorized;
    6,380 and 5,746 outstanding, respectively...............    34,593        33,162
  Additional paid-in capital................................     4,387         4,194
  Notes receivable due from stockholders....................      (237)           --
  Accumulated deficit.......................................   (29,196)      (25,189)
                                                              --------      --------
    Total stockholders' equity..............................     9,547        12,167
                                                              --------      --------
                                                              $ 11,199      $ 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
                                                                ENDED MARCH 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
                                                                  (UNAUDITED)
<S>                                                           <C>        <C>
Net revenues................................................  $   868    $   165
Costs and expenses:
  Costs of products sold through e-commerce.................      644        117
  Operating and development.................................    1,014        698
  Sales and marketing.......................................    2,661        825
  General and administrative................................      567        361
                                                              -------    -------
    Total costs and expenses................................    4,886      2,001
Loss from operations........................................   (4,018)    (1,836)
Other income (expenses):
  Interest (expense) income, net............................       11       (418)
  Other.....................................................        0         (2)
                                                              -------    -------
    Net loss................................................  $(4,007)   $(2,256)
                                                              =======    =======
Basic and diluted net loss per share........................  $ (0.65)   $ (0.49)
Shares used in computing basic and diluted net loss per
  share.....................................................    6,119      4,627
</TABLE>

                  See Notes to Condensed Financial Statements

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

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                   MARCH 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
                                                                  (UNAUDITED)
<S>                                                           <C>        <C>
Net cash used in operating activities.......................  $(4,545)   $(1,769)
                                                              -------    -------
Cash flows from investing activities:
  Proceeds on maturity of held-to-maturity investments......    6,500          0
  Acquisition of property and equipment.....................     (290)      (166)
  Acquisition of business...................................        0       (200)
  Issuance of note receivable...............................     (150)      (200)
                                                              -------    -------
    Net cash provided by (used in) investing activities.....    6,060       (366)

Cash flows from financing activities:
  Repayment of long term debt...............................      (32)    (1,491)
  Proceeds from issuance of common stock....................      220     12,041
                                                              -------    -------
    Net cash provided by financing activities...............      188     10,550
                                                              -------    -------
      Net change in cash and cash equivalents...............    1,703      8,415
Cash and cash equivalents at beginning of period............    3,628     13,007
                                                              -------    -------
Cash and cash equivalents at end of period..................  $ 5,331    $21,422
                                                              =======    =======
Supplemental disclosure of non-cash investing and financing
  activities:
  Conversion of debt and accrued interest into common
    stock...................................................  $   412    $    --
                                                              =======    =======
  Issuance of notes to stockholders in lieu of payments for
    warrant exercises.......................................  $   237    $    --
                                                              =======    =======
</TABLE>

                  See Notes to Condensed Financial Statements

                                       5
<PAGE>
                                AUDIOHIGHWAY.COM
                    NOTES TO CONDENSED FINANCIAL STATEMENTS
                                 MARCH 31, 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 incorporated by reference 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 -- EARNINGS (LOSS) PER SHARE

    Earnings (loss) per share is based on the weighted average number of common
and common equivalent shares outstanding during the period. Common equivalents
include stock options and warrants and convertible debt. 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 (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. A
total of 1,320,838 options and warrants were excluded from the diluted earnings
per share calculation, as their inclusion would be anti-dilutive.

                                       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 quarterly
periods ended March 31, 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; (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 converting this user traffic to
advertising and e-commerce revenue.

    The Company accelerated this momentum during the first quarter 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 capabilities, scheduled for launch during the second
quarter of 2000. These efforts have resulted in increased traffic to
audiohighway.com which the Company hopes will in turn increase future revenues.

                                       7
<PAGE>
RESULTS OF OPERATIONS

    THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE THREE MONTHS ENDED MARCH
     31, 1999

    Net revenues were $868,000 for the three months ended March 31, 2000 (the
"2000 Quarter"), as compared to $165,000 for the same period in 1999 (the "1999
Quarter"). Company revenues are comprised of two major components; e-commerce
sales including revenues generated by the Company's Mass Music and Audioshop Web
sites, and advertising sales. E-commerce sales increased to $565,000 for the
2000 Quarter compared to $132,000 for the 1999 Quarter primarily due to
increased promotional activity. Advertising sales increased to $303,000 for the
2000 Quarter compared to $33,000 for the 1999 Quarter primarily due to increased
traffic.

    Cost of products sold through e-commerce exceeded revenue by $79,000 for the
three months ended March 31, 2000. This was primarily attributable to aggressive
pricing to meet competition and to increase market share and high fulfillment
costs.

    Operating and development expenses were $1,014,000 for the three months
ended March 31, 2000, up 45% from $698,000 for the 1999 Quarter. 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 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.

    Sales and marketing expenses were $2,661,000 for the three months ended
March 31, 2000, up 223% from $825,000 for the same period in 1999. This increase
is primarily attributable to the increased advertising and marketing expenses
associated with promoting the Company's Web sites, increased payroll expenses
associated with additional sales and marketing staff. The Company expects sales
and marketing expenses to continue to increase substantially in future periods
as the Company promotes its Web sites.

    General and administrative expenses ("G&A") were $567,000 for the three
months ended March 31, 2000, up 57% compared to G&A expenses of $361,000 for the
1999 Quarter. This increase was primarily the result of increased staffing
costs, accounting fees, legal fees and expenses incurred in connection with
public company compliance.

    The operating loss was $4,018,000 for the three months ended March 31, 2000
compared to an operating loss for the same period in 1999 of $1,836,000, an
increase of approximately 118%. As noted above, the increased loss was primarily
the result of increased expenditures in the sales and marketing, and operating
and development areas, offset by the $703,000 increase in revenue. The increased
operating loss was anticipated in light of the need to substantially increase
expenditures to expand the Company's business and its brand identity.

INTEREST INCOME

    There was net interest income of $11,000 during the three months ended
March 31, 2000 compared to net interest expense of $418,000 in the 1999 Quarter.
This was primarily the result of retiring a substantial portion of the
outstanding debt along with amortizing debt discounts through March 31, 1999.

    As a result of the factors described above, for the three months ended
March 31, 2000, the Company incurred a net loss of $4,007,000 compared to a net
loss of $2,256,000 for the same period in 1999, an increase of approximately
78%.

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

                                       8
<PAGE>
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 March 31, 2000,
the Company had $8,343,000 in cash and cash equivalents and investments,
$3,012,000 of which was invested in high grade short-term debt instruments. As
of March 31, 2000, the Company had $7,399,000 in working capital. The Company
currently is financing its daily operations primarily through the application of
the net proceeds from the IPO and its subsequent warrant call.

    During the three months ended March 31, 2000, the Company used $4,545,000 in
operating activities compared to $1,769,000 in 1999. This increase was largely
due to the significantly increased net loss in 2000. Also, $6,060,000 was
provided by investing activities in the first quarter of 2000 primarily from the
proceeds of held-to-maturity investments. By comparison, $366,000 was used in
investing activities in the 1999 Quarter. Net cash provided by financing
activities decreased in the 2000 Quarter, from $10,550,000 in 1999 to $188,000
in 2000, primarily because the net proceeds of the Company's warrant call were
received in 1999. The $188,000 received in 2000 was primarily the result of the
exercise of warrants.

    The Company believes that its current financial resources will be sufficient
to fund its operations for at least the next 12 months. However, during that
period, it may become necessary for the Company to raise additional funds to
meet the expenditures required for operating its business. There can be no
assurance that presently unforeseen events may result in the Company determining
to raise additional funds. If the Company's cash balances and cash generated
from operations is insufficient to satisfy its liquidity requirements, the
Company may seek to raise such additional funds through public or private equity
or debt financings. If additional funds are raised through the issuance of debt
securities, these securities could have certain rights, preferences, and
privileges senior to holders of Common Stock, and the terms of such debt could
impose restrictions on the Company's operations. The sale of additional equity
or debt securities could 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 may be
required to reduce the scope of its planned development and marketing efforts,
which could seriously harm its business.

    The Company intends to 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, 1999, 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, 1999, the Company had approximately $21,899,000 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

                                       9
<PAGE>
$10,335,000 of California net operating loss carryforwards for tax reporting
purposes which will expire beginning in 2000.

    The Tax Reform Act of 1986 imposes limitations on the use of net operating
loss carryforwards in the event of certain stock ownership changes. The sale of
the Units sold in the Company's December 1998 IPO constituted such a change in
ownership and therefore, utilization of the Company's net operating loss
carryforwards may be limited.

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.

    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 March 31, 2000 the Company had an
accumulated deficit of approximately $29,196,000. 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, 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) 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.  Because of the Company's limited operating
history and the emerging and evolving 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 and e-commerce
is as yet uncertain. The Company currently intends to continue 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 additional 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 revenue generating
activities, either of which

                                       10
<PAGE>
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)
price competition in the e-commerce arena, (iii) demand for Internet
advertising, (iv) seasonal trends in advertising placements, (v) seasonal trends
in the markets for the products offered on the Company's e-commerce sites, (vi)
the advertising cycles for, or the addition or loss of, individual advertisers,
(vii) the level of traffic on the Company's Web site, (viii) the amount and
timing of capital expenditures and other costs relating to the expansion of the
Company's operations, (ix) price competition or pricing changes in Internet
advertising, (x) the level of and seasonal trends in the use of the Internet,
(xi) technical difficulties or system downtime, (xii) the introduction of new
products or services by the Company or its competitors and (xiii) 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 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
users with demographic characteristics that are attractive to potential

                                       11
<PAGE>
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.

    MANAGEMENT OF GROWTH.  The Company anticipates that continued 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.  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 Santa Clara, 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 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,

                                       12
<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, hackers, computer
viruses and other disruptive problems. The Company's primary Web site did suffer
a brief denial of service interruption on one occasion in 1999. Although the
Company did not suffer any material adverse effects from this incident, 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.  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 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 CDs, videos, DVDs, 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 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

                                       13
<PAGE>
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.

    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 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 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.

                                       14
<PAGE>
    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.

                                       15
<PAGE>
                          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.

    None.

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

    27.1  Financial Data Schedule

    b. Reports on Form 8-K during the quarter ended March 31, 2000:

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

                                       16
<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

                                                       By:            /s/ NATHAN M. SCHULHOF
                                                            -----------------------------------------
                                                                        Nathan M. Schulhof
Date: May 12, 2000                                                   CHIEF EXECUTIVE OFFICER

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

                                       17
<PAGE>
                                 EXHIBIT INDEX

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