AUDIO BOOK CLUB INC, 424B4, 1997-10-23

AUDIO BOOK CLUB INC
424B4, 1997-10-23
CATALOG & MAIL-ORDER HOUSES

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<PAGE>
Filed Pursuant To Rule 424B4
Registration No. 333-30665

2,300,000 Shares

LOGO

Common Stock

Prior to this offering (the "Offering") there has been no public market
for the common stock ("Common Stock") of Audio Book Club, Inc. (the "Company")
and there can be no assurance that such a market will develop or, if developed,
that it will be sustained. See "Underwriting" with respect to the method used
in determining the initial public offering price. The Common Stock has been
approved for listing on the American Stock Exchange under the symbol "KLB."
---------------------
The Securities offered hereby involve a high degree of risk and immediate
substantial dilution. See "Risk Factors" commencing on page 7 and "Dilution" on
page 16.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

================================================================================

Price Underwriting Proceeds
to Discounts and to
Public Commissions(1) Company(2)
- --------------------------------------------------------------------------------
Per Share ...... $ 10.00 $ .80 $ 9.20
- --------------------------------------------------------------------------------
Total (3) ...... $23,000,000 $1,840,000 $21,160,000

================================================================================

(1) The Company has agreed to pay to L.H. Friend, Weinress, Frankson & Presson,
Inc. as representative (the "Representative") of the several underwriters
(the "Underwriters") a nonaccountable expense allowance and to sell to the
Representative, for nominal consideration, warrants (the "Representative's
Warrants") to purchase up to 230,000 shares of Common Stock at an exercise
price of $16.50 per share. The Company has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting the expenses of this Offering payable by the Company
estimated at $1,192,500, which includes the Representative's
nonaccountable expense allowance.

(3) A minority shareholder of the Company (the "Selling Shareholder") and the
Company have granted to the Underwriters a 45-day option to purchase up to
110,000 and 235,000 additional shares of Common Stock, respectively, to
cover over-allotments. If this option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions, Proceeds to
Company and Proceeds to Selling Shareholder are estimated to be
$26,450,000, $2,116,000, $23,322,000 and $1,012,000, respectively. The
Company will not receive any of the proceeds from the sale of the shares
of Common Stock by the Selling Shareholder and the Selling Shareholder
will pay to the Representative the underwriting discounts and commissions
and nonaccountable expense allowance relating to the sale of such shares
of Common Stock. See "Underwriting."
---------------------
The securities are being offered by the Underwriters, subject to prior
sales when, as, and if delivered to and accepted by the Underwriters and
subject to approval of certain legal matters by their counsel and subject to
certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify the Offering and to reject any order in whole or part. It is
expected that delivery of the securities offered hereby will be made against
payment at the offices of the Representative at 3333 Michelson Drive, Suite
650, in Irvine, California 92612, on or about October 27, 1997.
---------------------
L.H. Friend, Weinress, Frankson & Presson, Inc.

The date of this Prospectus is October 22, 1997
<PAGE>

---------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS,
ON THE AMERICAN STOCK EXCHANGE OR OTHERWISE, WHICH STABILIZE, MAINTAIN OR
OTHERWISE AFFECT THE MARKET PRICE OF THE COMMON STOCK. SPECIFICALLY, THE
UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING AND MAY BID FOR AND
PURCHASE SHARES OF COMMON STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by reference to the
more detailed information and financial statements, including the notes
thereto, appearing elsewhere in this Prospectus. Each prospective investor is
urged to read this Prospectus in its entirety. Unless otherwise indicated,
Audio Book Club, Inc. is referred to as the "Company." Except as otherwise
noted, all share and per share data and information in this Prospectus (i)
gives retroactive effect to a 16,282-for-1 split of the Common Stock effected
immediately prior to the date of this Prospectus and (ii) assumes no exercise
of the Underwriters' over-allotment option. Investors should carefully consider
the information set forth under the heading "Risk Factors." This Prospectus
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results may differ materially from the results discussed in
the forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those discussed in "Risk Factors."

The Company

The Company is a direct marketer of audio books through Audio Book Club, a
membership club which markets and sells audio books by mail order and via the
Internet. As of June 30, 1997, Audio Book Club's total member file consisted of
219,222 names, compared to 154,653 and 64,398 names as of December 31, 1996 and
1995, respectively. The Company's total member file has increased by
approximately 240% since January 1, 1996.

The Company believes that consumers of audio books include those who
purchase printed books, as well as those who do not have time to read, as they
can be listened to while engaging in other activities, such as driving, walking
or exercising, and can be used by consumers who have difficulty reading. The
Company also believes that audio books offer exceptional entertainment value
because they can be enjoyed while relaxing at home in the same manner that a
person would watch television or listen to the radio.

Audio books were first introduced in 1985 and, according to the Audio
Publishers Association (the "APA"), sales of audio books increased to
approximately $1.5 billion in 1995 from industry estimated sales of $250
million in 1988. According to a study conducted by the APA in 1995,
approximately 11.3 million American households listen to audio books.
Bookstores, however, typically devote limited shelf space to audio books and
carry only a limited number of the 68,000 or more published audio book titles.
The Company believes that it is positioned to capitalize on opportunities in
the emerging and expanding markets for audio books because of its early
entrance into, and knowledge of, the audio book club industry, established
membership base and Internet web site, knowledge of and expertise in utilizing
mailing lists to target direct mail campaigns, selection of available audio
book titles, established relationships with major audio book publishers and
emphasis on providing friendly, efficient customer service.

Since its inception, the Company has engaged in an aggressive membership
recruitment program to establish a core Audio Book Club member base and
continually expand such member base. The Company has acquired Audio Book Club
members primarily through direct mailings of member solicitation packages,
online computer service and Internet advertising, advertisements in magazines,
newspapers and other publications and package insert programs. In March 1995,
the Company established an Internet web site which offers visitors to the web
site the opportunity to join Audio Book Club, execute club transactions online
(if a member), utilize the site's search engine to locate any of the site's
audio book selections and

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sample audio clips of many of the site's selections. The Company believes that
it offers one of the most comprehensive libraries of audio book titles, as
members may order virtually any of the 68,000 published titles in existence
through the Company's Internet web site or "special order" service.

Audio Book Club entices prospective members to join the club by typically
offering four audio books at a low introductory price ($.99 or less) and
obtaining the members' commitment to purchase a minimum number of additional
audio books (typically four) at Audio Book Club's regular prices. Audio Book
Club members receive approximately 17 member mailings each year, which include
high-quality, full color catalogs and other inserts which highlight special
titles or offers. Audio Book Club member mailings offer approximately 500
titles, including a "featured selection" which is usually one of the most
popular titles at the time of mailing; "alternate selections" which are best
selling and other current popular titles; and "backlist selections" which are
long-standing titles that have continuously sold well. Audio Book Club operates
as a negative option mail order club, as members automatically receive the
featured selection, unless the member indicates a different selection or
selects not to order that audio book at such time.

The Company's strategy is to establish Audio Book Club as the largest and
most convenient supplier of audio books by mail and via the Internet. Key
elements of the Company's strategy include:

o Expand Member Base. The Company believes that it has established a core
Audio Book Club member base which it intends to continue to expand,
primarily through direct mail campaigns and increased Internet web site
and online computer service marketing and advertising.

o Optimize Member Acquisition Marketing Activities. The Company intends to
continue to analyze its database of results obtained from direct mail
campaigns and from print and other advertising, as well as Internet
marketing, to increase response rates and reduce per member acquisition
costs.

o Maximize Per Member Revenues. The Company intends to continue to analyze
the purchasing habits of its members to maximize sales and extend
membership lifecycles, including by targeting members with
subject-specific interests.

o Cost Containment. The Company continuously seeks to reduce its costs of
doing business, including the costs associated with member acquisition,
catalog mailings and products.

o International Expansion. The Company's long-term objectives include
expanding Audio Book Club internationally into English-speaking
countries such as Canada and the United Kingdom, as well as into other
countries with large English-speaking populations.

Since inception, the Company has incurred significant losses in connection
with establishing and expanding Audio Book Club's core member base. As a result
of the expanded member base, the Company's net sales increased approximately
112.5% for the year ended December 31, 1996 as compared to the prior year and
approximately 56.2% for the six months ended June 30, 1997 as compared to the
prior comparable period. During the years ended December 31, 1995 and 1996 and
the six months ended June 30, 1997, the Company incurred losses of $3,396,383,
$6,461,269 and $1,167,878, respectively, and had an accumulated deficit of
$12,720,955 at June 30, 1997. The Company expects to incur significant
expenditures in connection with its expansion strategy (including costs
associated with new member recruitment advertising, member retention programs
and expansion and maintenance of its Interet web site) which will result in
losses until such time as the Company is able to further increase its
membership base revenue and generate sufficient secondary sources of revenue to
support its operations. There can be no assurance that the Company's current
business strategy will enable it to achieve profitable operations.

The Company was founded by Norton Herrick who, through his wholly-owned
affiliates, has owned and managed income producing properties, including office
buildings, shopping centers and multi-family apartment complexes, and has
completed transactions with respect to approximately 250 income producing
properties valued at an aggregate of approximately $2 billion. The Company was
incorporated under the laws of the State of Florida in August 1993. The
Company's principal executive offices are located at 2295 Corporate Boulevard,
N.W., Suite 222, Boca Raton, Florida 33431 and its telephone number is (561)

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241-1426. The Company also has executive offices located at 20 Community Place,
Morristown, New Jersey 07960. The Company's Internet web site is located at
http://www.audiobookclub.com. Information contained in the Company's web site
shall not be deemed to be part of this Prospectus.

The Offering
Common Stock offered by the
Company ............... 2,300,000 shares(1)
Common Stock to be outstanding
after this Offering ... 6,153,920 shares(1)(2)
Use of proceeds ......... For the repayment of indebtedness; membership
recruitment advertising; Internet web site
marketing and development; and the balance for
working capital and general corporate purposes.
See "Use of Proceeds."
AMEX symbol ............ "KLB"
- ------------
(1) Assumes no exercise of the Representative's over-allotment option. See
"Underwriting."

(2) Includes 597,520 shares of Common Stock to be issued immediately prior to
the consummation of this Offering upon the conversion of certain
outstanding indebtedness. Does not include: (i) 750,000 shares of Common
Stock reserved for issuance upon exercise of options available for grant
under the Company's 1997 Stock Option Plan (the "Option Plan"), including
50,000 shares of Common Stock reserved for issuance upon exercise of
options granted under the Option Plan and (ii) 230,000 shares of Common
Stock reserved for issuance upon exercise of the Representative's
Warrants. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Management -- 1997 Stock Option Plan,"
"Description of Securities" and "Certain Transactions."

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Summary Financial Information

The summary financial information presented below under the captions
"Summary Statement of Operations Data" and "Summary Balance Sheet Data" as of
December 31, 1996 and for the years ended December 31, 1994, 1995 and 1996, are
derived from the financial statements of the Company, which financial
statements have been audited by KPMG Peat Marwick LLP, independent certified
public accountants. The financial statements as of December 31, 1996 and for
each of the years in the two year period ended December 31, 1996, and the
report thereon, are included elsewhere in this Prospectus.

The unaudited summary financial information presented below under the
captions "Summary Statement of Operations Data" and "Summary Balance Sheet
Data" as of June 30, 1997 and for the six months ended June 30, 1996 and 1997,
are derived from the unaudited financial statements of the Company, to which
KPMG Peat Marwick LLP has reported that it has applied limited procedures in
accordance with professional standards for a review of such information. The
unaudited financial statements as of June 30, 1997, and for the six month
periods ended June 30, 1996 and 1997, and the review report thereon, are
included elsewhere in this Prospectus.

Summary Statement of Operations Data:

Summary Balance Sheet Data:

<TABLE>
<CAPTION>
As of
December 31, 1996 As of June 30, 1997 (Unaudited)
------------------- ------------------------------------------------------
Actual Pro Forma(2) As Adjusted(2)(4)
---------------- -------------- ------------------
<S> <C> <C> <C> <C>
Working capital (deficit) ............... $ 139,145 $ (5,583,356) $(3,383,356) $13,609,144
Total assets ........................... 1,800,089 3,380,271 3,380,271 14,279,438
Total liabilities ..................... 13,121,641 15,622,875 9,647,675 647,675
Shareholders' equity (deficiency) ...... (11,321,552) (12,242,604) (6,267,404) 13,631,763
</TABLE>

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(1) Based on pro forma weighted average number of shares outstanding.
(2) Gives effect to (i) the issuance of 597,520 shares of Common Stock
immediately prior to the consummation of this Offering to N. Herrick
Irrevocable ABC Trust of which Norton Herrick, Chairman of the Board and
Chief Executive Officer of the Company, is the sole beneficiary and Howard
Herrick, Executive Vice President and a director of the Company, is the sole
trustee, upon conversion of $5,975,200 of indebtedness and (ii) the
incurrence of an additional $2,200,000 net amount of long-term indebtedness
in August and September 1997, the proceeds of which are being used to pay
accounts payable (the "Pro Forma Adjustments"). See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity
and Capital Resources" and "Certain Transactions."
(3) Consists of all members acquired by the Company, including active and
inactive members. See "Business -- Audio Book Club -- Members."
(4) Gives effect to the sale of the 2,300,000 shares of Common Stock offered
hereby and the application of the estimated net proceeds therefrom,
including the repayment of approximately $9,060,000 of indebtedness
(including accrued interest thereon). See "Use of Proceeds."

6
<PAGE>

RISK FACTORS

An investment in the securities offered hereby is speculative in nature
and involves a high degree of risk. In addition to the other information
contained in this Prospectus, the following factors should be considered
carefully in evaluating the Company and its business before purchasing the
securities offered hereby. This Prospectus contains, in addition to historical
information, forward-looking statements that involve risks and uncertainties.
The Company's actual results may differ materially from the results discussed
in the forward-looking statements. Factors that might cause or contribute to
such difference include, but are not limited to, those discussed below, as well
as those discussed in this Prospectus.

Limited Operating History; Significant and Increasing Losses. The Company
commenced operations of Audio Book Club in January 1994 and undertook its first
direct mail campaign in August 1994. Accordingly, the Company has a limited
operating history upon which an evaluation of its prospects and future
performance can be made. Such prospects must be considered in light of the
risks, expenses and difficulties frequently encountered in the operation and
expansion of a new business in an evolving industry characterized by intense
competition. Since inception, primarily in connection with establishing a
member base, the Company has incurred significant losses, including losses of
$3,396,383, $6,461,269 and $1,167,878 during the years ended December 31, 1995
and 1996 and the six months ended June 30, 1997, respectively, and had an
accumulated deficit of $12,720,955 at June 30, 1997. The Company anticipates
that it will incur a loss during the current fiscal year. The Company expects
to incur significant expenditures in connection with its expansion strategy
(including costs associated with new member recruitment advertising and
expansion and maintenance of its Internet web site) which will result in losses
until such time as the Company is able to further increase its membership base
revenue and generate sufficient secondary sources of revenue to support its
operations. There can be no assurance that the Company's current business
strategy will enable it to achieve profitable operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Financial Statements.

Significant Capital Requirements; Dependence on Offering Proceeds to
Implement Business Plan; Possible Need for Additional Financing. The Company's
capital requirements have been and will continue to be significant due to,
among other things, costs associated with direct mail campaigns, other new
member recruitment advertising, member retention programs and building,
expanding and maintaining an Internet web site. The Company's cash requirements
have exceeded cash flow from operations and, at June 30, 1997, the Company had
a working capital deficit of $5,583,356. As a result, the Company has been
substantially dependent upon loans from its shareholders (in the aggregate
amount of $12,775,200 since inception) to establish Audio Book Club's member
base and to finance its operations, including its working capital requirements.
The Company is dependent upon the proceeds of this Offering to implement its
business plan and finance its working capital requirements. Based on the
Company's currently proposed plans and assumptions relating to the
implementation of its business plan (including the timing and success of its
direct marketing and other membership recruitment advertising, as well as the
availability and terms of attractive acquisition opportunities), the Company
anticipates that the net proceeds of this Offering will be sufficient to
satisfy its contemplated cash requirements for at least twelve months following
the consummation of this Offering. In the event that the Company's plans change
or its assumptions prove to be inaccurate (due to unanticipated expenses,
difficulties, delays or otherwise) or the proceeds of this Offering otherwise
prove to be insufficient to fund the implementation of the Company's business
plan and working capital requirements, the Company could be required to seek
additional financing. The Company has no current arrangements with respect to,
or potential sources of, additional financing and, following the consummation
of this Offering, it is not anticipated that existing shareholders will provide
any portion of the Company's future financing requirements. There can be no
assurance that any additional financing will be available to the Company when
needed, on commercially reasonable terms, or at all. Any inability to obtain
additional financing when needed would have a material adverse effect on the
Company, including the curtailment of its member recruitment activities. See
"Use of Proceeds" and "Management's Discussion and Analysis of Financial
Conditions and Results of Operations -- Liquidity and Capital Resources."

Proposed Expansion; Risks Relating to Possible Expansion or
Acquisitions. The Company intends to actively pursue a strategy of continued
growth. The Company's proposed expansion will be dependent on, among other
factors, the success of the Company's member recruitment advertising; consumer
acceptance of new products; and the Company's ability to identify suitable
acquisition candidates and integrate any acquired business into its operations,
hire and retain skilled management, marketing, industry, customer service and
other

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personnel and successfully manage growth (including monitoring operations,
cutting costs and maintaining effective quality and service controls). The
Company may seek to expand its operations by acquiring companies in businesses
which the Company believes will complement or enhance its business. While the
Company has from time to time evaluated possible acquisition opportunities, as
of the date of this Prospectus, the Company is not a party to any agreement,
commitment, arrangement or understanding with respect to any acquisition. The
Company has not established any minimum criteria for any acquisition and
Management will have complete discretion in determining the terms of any such
acquisition. Consequently, there is no basis for the investors in this Offering
to evaluate the specific merits or risks of any potential acquisitions that the
Company may undertake. There can be no assurance that the Company will be able
to ultimately effect any acquisition or successfully integrate any acquired
business into its operations. Under Florida law, various forms of business
combinations can be effected without shareholder approval and, accordingly,
investors in this Offering will, in all likelihood, neither receive nor
otherwise have the opportunity to evaluate any financial or other information
which may be made available to the Company in connection with any acquisition
and must rely entirely on the ability of Management in selecting, structuring
and consummating acquisitions that are consistent with the Company's business
plan. Moreover, the Company may issue equity securities in connection with an
acquisition which would result in dilution to the Company's then-existing
shareholders. There can be no assurance that the Company will be able to
successfully expand its operations. See "Use of Proceeds" and "Business --
Strategy."

Risks Relating to Member Recruitment Strategy. The Company's member
recruitment advertising efforts have been and will continue to consist
primarily of direct mail campaigns. The success of direct mail campaigns is
subject to a high degree of risk and uncertainties, including the ability to
target the type of persons which the Company believes are likely to join Audio
Book Club. Although the Company has experience utilizing mailing lists to
efficiently target the Company's direct mail campaigns and the Company intends
to increase the number of prospective members to which member solicitation
packages will be mailed, there can be no assurance that the Company will
achieve improved response rates or be able to reduce its per member acquisition
costs. There also can be no assurance that the Company's member recruitment
efforts will result in a substantially increased membership base. See "Business
- -- Strategy" and "-- Membership Acquisition."

Niche Market; Changing Consumer Preferences. Although audio books have
been marketed to the public for approximately 12 years and the market for audio
books has expanded rapidly, the market for audio books is still evolving and is
currently a niche market. The sale of audio books through mail order clubs is
an emerging retail concept. As is typically the case for products in an
evolving industry, the ultimate level of demand and market acceptance for audio
books is subject to a high degree of uncertainty. There can be no assurance
that the market for audio books will continue to grow at the current rate or
that growth trends will not be reversed. A decline in the popularity of audio
books generally could adversely affect the Company's business and prospects.
The audio book market is characterized by continuous introductions of new
titles and is subject to changing consumer preferences, which may adversely
affect the Company's ability to plan for catalog offerings, anticipate order
lead time and accurately assess inventory requirements. While the Company
evaluates many factors to anticipate the popularity and life cycle of selected
titles, the ultimate level of demand for specific audio book titles is subject
to a high level of uncertainty. Moreover, sales of a specific audio book title
typically decline rapidly after the first few months of release. Any
unanticipated decline in popularity of selected titles could result in excess
inventory or require the Company to sell such inventory at a reduced price. The
Company's success will be largely dependent upon its ability to anticipate and
respond to these and other factors affecting the industry, such as economic
factors affecting discretionary consumer spending, changes in consumer
demographics and the availability of other forms of entertainment. Failure to
respond to such factors in a timely manner could have an adverse affect on the
Company's operating results. See "Business -- Audio Book Industry Overview."

Benefits to Related Parties. The Company intends to use approximately
$9,060,000 of the proceeds of this Offering to repay indebtedness owed to Bank
of America National Trust and Savings Association (the "Bank"). Effective only
upon failure by the Company to repay indebtedness owed to the Bank at maturity,
Norton Herrick provided to the Bank a guarantee of the Company's payment
obligations under the $6,000,000 loan from the Bank and an additional
$3,000,000 of working capital loans from the Bank, and the shares of Common
Stock held by N. Herrick Irrevocable ABC Trust (of which Norton Herrick is the
sole beneficiary and Howard Herrick is the sole trustee) (the "N. Herrick
Trust") were pledged to the Bank to secure the Company's obligations under the
$6,000,000 loan. Accordingly, Mr. Herrick will receive a benefit as a result of
the elimination of his liability

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exposure and the release of the shares pledged as security to the Bank. Upon
the consummation of this Offering, the Company will issue to the N. Herrick
Trust 597,520 shares of Common Stock upon the conversion of $5,975,200 of
outstanding indebtedness. In addition, to the extent cash flow is insufficient
for such purpose, the Company will use a portion of the proceeds allocated to
working capital to pay the salaries of its executive officers (including Norton
Herrick, Michael Herrick and Howard Herrick), estimated to aggregate
approximately $490,000 over the twelve months following consummation of this
Offering. See "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources," "Management -- Employment Agreements" and "Certain Transactions."

Dependence on Third-Party Service Providers. The Company has entered into
a two-year agreement with National Fulfillment Services, Inc. ("NFS") to
provide order processing, billing and data processing services to the Company
and perform customer service functions, as well as a two-year agreement with
R.R. Donnelly & Sons Company ("Donnelly") to provide warehousing and
distribution services for the Company. The Company is dependent upon NFS and
Donnelly to process and deliver orders on a timely basis and upon NFS to
provide friendly, efficient customer service and to timely process and collect
and accurately report customer payments to avoid delays in collection. Failure
by either of such service providers to perform its services in accordance with
the Company's requirements could result in adverse member perception of Audio
Book Club or delay collections of receivables, either of which could have a
material adverse effect on the Company. Although the Company believes that its
relationship with NFS and Donnelly are satisfactory and that alternate sources
for such services are readily available, the unavailability or interruption of
services from either of such providers would result in a material interruption
of the Company's operations. See "Business -- Fulfillment, Warehousing and
Distribution."

Risks Relating to Operation of a Web Site and Advertising on the Internet
and Online Computer Services. Key elements of the Company's business plan are
to expand its Internet web site and increase Internet and online computer
service advertising. Accordingly, the satisfactory performance, reliability and
availability of the Company's web site, transaction-processing systems and
network infrastructure are critical to the Company's reputation and its ability
to attract visitors to its web site and maintain adequate customer service
levels. Because the Company anticipates that revenues will become partially
dependent on the number of visitors who shop on its web site and the volume of
orders it fulfills, any system interruptions that result in the unavailability
of the Company's web site or reduced order fulfillment performance would reduce
the volume of audio books sold and could adversely affect consumer perception
of Audio Book Club and the Company's web site, either of which could have a
material adverse effect on the Company. Rapid growth in the use of and interest
in the Internet and online computer services is a recent phenomenon, and there
can be no assurance that acceptance and use will continue to develop or that a
sufficiently broad base of consumers will adopt, and continue to use, the
Internet and online computer services as a medium of commerce. See "Business --
Strategy" and "-- Member Acquisition."

Member Attrition. The Company's operating results are and will continue to
be significantly affected by member attrition. Once a member has satisfied his
or her commitment to purchase four audio books at regular prices, the member
has no further commitment to the club. Moreover, the Company incurs significant
upfront expenditures in connection with acquiring new members, including the
costs associated with member recruitment advertising and mailings of member
welcome packages, as well as the costs of supplying the audio books ordered at
Audio Book Club's low introductory price (which is significantly below the
Company's cost). A member may not honor his or her commitment or membership may
be terminated by the Company for several reasons, including failure to pay for
purchases or excessive returns or cancelled orders. The member attrition rate
for mail order clubs is typically high and, the Company believes that Audio
Book Club's member attrition rate has been typical of the negative option mail
order industry. Any significant increase in member attrition could have a
material adverse effect on the Company. There can be no assurance that the
Company will be able to recoup its costs associated with new members. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Dependence Upon Supply of Audio Books. The Company is dependent upon the
continued supply of audio books to offer to Audio Book Club members through its
catalogs and over the Internet. Many of the Company's license agreements with
audio book publishers are short-term, non-exclusive agreements, typically one
or two

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years in length, and certain of such agreements expire over the next several
months, unless renewed. To the extent that audio book publishers seek to offer
selected titles on an exclusive basis (for mail order businesses, clubs or
otherwise), the Company anticipates that it will be required to bid for the
rights to such titles which could significantly increase the cost to obtain the
rights to any such titles. Moreover, if the Company is unsuccessful in bidding
for any such title, Audio Book Club could be unable to offer such title to its
members. The Company's success will be dependent upon its ability to renew
existing license and supply arrangements with respect to audio book publishers'
libraries and to enter into additional arrangements for the supply of new audio
book titles. Failure to obtain the rights to audio book libraries or selected
audio book titles, on commercially reasonable terms, or at all, could have a
material adverse effect on the Company's business and prospects. See "Business
- -- Audio Book Supply."

Competition. The audio book and mail order club industries are intensely
competitive and highly fragmented. The Company competes with existing audio
book clubs for prospective members. The Company is currently aware of two other
negative option audio book clubs. The Company also competes with all other
outlets through which audio books are offered, including bookstores, audio
bookstores (which primarily rent and, to a lesser extent, sell only audio
books), retail establishments such as supermarkets, convenience stores, video
rental stores and wholesale clubs (e.g. Costco), and mail order companies which
offer audio books for rental and sale through their catalogs. Some of these
competitors are well-established companies which have greater financial,
marketing, distribution, personnel and other resources than the Company, with
the financial resources necessary to enable them to withstand substantial price
competition or downturns in the market for audio books. In addition, the
Company competes with mail order clubs and catalogs and other direct marketers
that offer products with similar entertainment value as audio books, such as
music cassettes and compact discs, printed books and videos, for discretionary
consumer spending. Moreover, since the audio book club industry does not have
any substantial barriers to competition, other marketers of audio books may
seek to establish audio book clubs and operators of other clubs may seek to
expand their product line by adding audio books. Any increase in competition
could result in increased price competition. There can be no assurance that the
Company will be able to compete successfully. See "Business -- Competition."

Product Returns. The book and mail order club industries generally, and
the audio book industry specifically, have historically experienced high
product return rates. The Company's policy is to accept promptly made returns
of damaged products and, in order to maintain favorable customer relations, the
Company generally accepts returns of unopened products. At the time a member
orders an audio book, the Company establishes a reserve for future returns
based upon historical return rates and an evaluation of current return trends.
The Company has recently experienced a product return rate of approximately
22.0%. Product returns which significantly exceed the Company's reserves would
adversely affect the Company's operating results. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business --
Audio Book Club -- Customer Service."

Collection and Credit Risks. The Company is subject to all of the risks
associated with selling products on credit, including, delays in collection or
uncollectibility of accounts receivable. The Company's accounts receivable
(less allowances for sales returns and doubtful accounts) have historically
increased from period to period and are expected to increase as a result of the
anticipated expansion of Audio Book Club's membership base. As of June 30,
1997, the Company's allowances for sales returns and doubtful accounts were
$643,718, which the Company believes is currently adequate for the size and
nature of its receivables. Nevertheless, delays in collection or
uncollectibility of accounts receivable could have a material adverse effect on
the Company's liquidity and working capital position and could require the
Company to increase its allowance for doubtful accounts. Furthermore, as the
Company seeks to expand Audio Book Club's membership base, the Company will be
required to continually evaluate and assess the credit worthiness of new
members. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

Costs of Postage and Shipping. Postage and shipping are significant
expenses in the operation of the Company's business. As is customary in the
mail order industry, the Company passes on the costs of order fulfillment
directly to the member but does not directly pass on the costs of its member
mailings and member solicitation packages. During the year ended December 31,
1996, the Company incurred approximately $2,055,000 on postage expenses, of
which approximately 73.9% was attributable to such member mailings and

10
<PAGE>

member solicitation packages. Any unanticipated increase in postal rates will
have an adverse effect on the Company's operating results to the extent that
the Company is unable to offset such increases by raising its prices or by
implementing more efficient mailing, delivery and order fulfillment methods.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Uncertainty of Protection of Proprietary Information. The Company believes
that its service marks have significant value and are important to the
marketing of Audio Book Club. There can be no assurance, however, that the
Company's marks do not or will not violate the proprietary rights of others or
that the Company's marks would be upheld, or that the Company would not be
prevented from using its marks, if challenged, any of which could have an
adverse effect on the Company. In addition, the Company relies on trade secrets
and proprietary know-how, and employs various methods, to protect its ideas,
concepts and membership database. However, such methods may not afford complete
protection and there can be no assurance that others will not independently
develop similar know-how or obtain access to the Company's know-how, ideas,
concepts and membership database. Although the Company typically obtains
confidentiality agreements with its executive officers, employees, list
managers and appropriate consultants and service suppliers, there can be no
assurance that such agreements will be obtained or, if obtained will adequately
protect the Company's trade secrets. In the event competitors independently
develop or otherwise obtain access to the Company's know-how, concepts, trade
secrets or membership database, the Company may be adversely affected. See
"Business -- Trademarks and Other Intellectual Property."

Fluctuations in Operating Results. The Company's operating results vary
from period to period as a result of purchasing patterns of members, the
timing, cost, magnitude and success of direct mail campaigns and other member
recruitment advertising, member attrition, timing and popularity of new audio
book releases and product returns. Unanticipated events, including delays in
securing adequate supply of popular audio book titles at the time of peak
sales, delays in direct mailing or significant decreases in sales, particularly
during peak sales periods, could result in losses which would not be easily
reversed before the following year. There can be no assurance that the
foregoing will not result in significant fluctuations in operating results in
the future. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Quarterly Fluctuations."

Dependence Upon Key Personnel. The success of the Company will be largely
dependent upon the efforts of Norton Herrick, Chairman of the Board and Chief
Executive Officer of the Company, and Michael Herrick, Chief Operating Officer
and Vice Chairman of the Board of the Company. Although the Company has entered
into employment agreements with each of such officers, the loss of the services
of either such officer or other key personnel would have a material adverse
effect on the Company's business and prospects. The Company does not maintain
keyman insurance on the lives of Norton Herrick, Michael Herrick or any other
officer of the Company. The success of the Company will also be dependent on
its ability to attract and retain experienced management and industry
personnel. The Company faces considerable competition from other mail order
clubs and direct marketing companies for such personnel, many of which have
significantly greater resources than the Company. There can be no assurance
that the Company will be able to attract and retain such personnel and the
inability to do so could have a material adverse effect on the Company. See
"Management."

Certain Relationships with Affiliates; Conflicts of Interest. The Company
has from time to time relied on and benefitted from its relationships with
certain affiliates. The Company has received loans from Norton Herrick, Michael
Herrick and Howard Herrick directly and indirectly, in aggregate amounts of
$11,975,200, $400,000 and $400,000, respectively. In addition, the Company
shares office space with entities affiliated with officers of the Company and
has relied on entities affiliated with Norton Herrick for the provision of
certain accounting, administrative and general office services and to obtain
general business insurance. Norton Herrick is actively involved in the
management and operation of several business and is only required to devote as
much time to the Company's business and affairs as he deems necessary to
perform his duties. Accordingly, Mr. Herrick may have a conflict of interest in
the allocation of his business time. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Management" and "Certain
Transactions."

11
<PAGE>

Control by The Herrick Family. Upon the consummation of this Offering,
Norton Herrick, Michael Herrick and Howard Herrick will, in the aggregate,
beneficially own approximately 60.0% of the outstanding Common Stock of the
Company. Accordingly, such persons will be able to control the Company and
generally direct the Company's affairs, including electing a majority of the
Company's directors and causing an increase in the Company's authorized capital
or the dissolution, merger, or sale of the Company or substantially all of its
assets. See "Principal Shareholders."

Broad Discretion in Application of Proceeds. Approximately $4,807,500
(24.1%) of the estimated aggregate net proceeds from this Offering has been
allocated to the Company's working capital and general corporate purposes.
Accordingly, the Company will have broad discretion as to the application of
such proceeds. See "Use of Proceeds."

Classified Board of Directors; Possible Adverse Effects of Authorization
of Preferred Stock. The Company's By-laws divide the Board of Directors into
three classes, serving staggered three-year terms. The staggered Board of
Directors may make it more difficult for a third party to acquire, or may
discourage acquisition bids for, the Company. In addition, the Company's
Articles of Incorporation authorize the Company's Board of Directors to issue
up to 5,000,000 shares of "blank check" preferred stock (the "Preferred Stock")
without shareholder approval, in one or more series and to fix the dividend
rights, terms, conversion rights, voting rights, redemption rights and terms,
liquidation preferences, and any other rights, preferences, privileges, and
restrictions applicable to each new series of Preferred Stock. The issuance of
shares of Preferred Stock in the future could, among other results, adversely
affect the voting power of the holders of Common Stock and, under certain
circumstances, could make it difficult for a third party to gain control of the
Company, prevent or substantially delay a change in control, discourage bids
for the Common Stock at a premium, or otherwise adversely affect the market
price of the Common Stock. Although the Company has no current plans to issue
any shares of Preferred Stock or designate new series of Preferred Stock, there
can be no assurance that the Board will not decide to do so in the future. See
"Management" and "Description of Securities -- Capital Stock -- Preferred
Stock."

No Dividends. The Company has never paid any dividends on its Common Stock
and does not anticipate paying cash dividends in the foreseeable future. The
Company currently intends to retain all earnings for use in connection with the
expansion of its business and for general corporate purposes. The declaration
and payment of future dividends, if any, will be at the sole discretion of the
Company's Board of Directors and will depend upon the Company's profitability,
financial condition, cash requirements, future prospects, and other factors
deemed relevant by the Board of Directors. See "Dividend Policy" and
"Description of Securities -- Capital Stock."

Limitation of Liability of Directors and Officers. The Company's Articles
of Incorporation include provisions to eliminate, to the full extent permitted
by Florida Business Corporation Act (the "Florida Act") as in effect from time
to time, the personal liability of directors of the Company for monetary
damages arising from a breach of their fiduciary duties as directors. The
Articles of Incorporation also include provisions to the effect that the
Company shall, to the maximum extent permitted from time to time under the law
of the State of Florida, indemnify, and upon request shall advance expenses to
any director or officer to the extent that such indemnification and advancement
of expense is permitted under such law, as it may from time to time be in
effect. See "Management -- Exculpatory Provisions and Indemnification Matters."

Dilution. This Offering involves an immediate and substantial dilution of
$7.78 per share (or 77.8%) between the adjusted net tangible book value per
share of Common Stock after this Offering and the initial public offering price
per share of Common Stock in this Offering. See "Dilution."

Shares Eligible for Future Sale. Upon consummation of this Offering, the
Company will have 6,153,920 shares of Common Stock outstanding, of which the
2,300,000 shares of Common Stock offered hereby will be freely tradable without
restriction or further registration under the Securities Act of 1933, as
amended (the "Securities Act"). All of the remaining 3,853,920 shares of Common
Stock outstanding are "restricted securities," as that term is defined under
Rule 144 promulgated under the Securities Act and 3,093,580 of such restricted
shares will become eligible for sale, under Rule 144, commencing 90 days
following the date of this Prospectus, subject to the contractual restrictions
described forth below. All of the Company's current officers, directors and
security holders have agreed with the Representative not to sell any securities
of the Company for a period of 13 months from the date of this Prospectus
without the Representative's prior written consent. The Company has granted
certain demand and "piggy-back" registration rights to the Representative with
respect to

12
<PAGE>

the shares of Common Stock issuable upon exercise of the Representative's
Warrants. No prediction can be made as to the effect, if any, that sales of
shares of Common Stock or even the availability of such shares for sale will
have on the market prices prevailing from time to time. The possibility that
substantial amounts of Common Stock may be sold in the public market may
adversely affect the prevailing market price for the Common Stock and could
impair the Company's ability to raise capital through the sale of its equity
securities. See "Shares Eligible for Future Sale" and "Underwriting."

No Assurance of Public Market; Arbitrary Determination of Offering Prices;
Possible Volatility of Market Price of Common Stock. Prior to this Offering,
there has been no public trading market for the Common Stock. There can be no
assurance that a regular trading market for the Common Stock will develop after
this Offering or that, if developed, will be sustained. Moreover, the initial
public offering price of the Common Stock has been determined by negotiations
between the Company and the Underwriters and, as such, is arbitrary in that it
does not necessarily bear any relationship to the assets, book value or
potential earnings of the Company or any other recognized criteria of value and
may not be indicative of the prices that may prevail in the public market. The
market price of the Common Stock following this Offering may be highly
volatile, as has been the case with the securities of other emerging companies.
Factors such as the Company's operating results, announcements by the Company
or its competitors and various factors affecting the audio book industry
generally may have a significant impact on the market price of the Common
Stock. In addition, in recent years, the stock market has experienced a high
level of price and volume volatility and market prices for the stock of many
companies have experienced wide price fluctuations which have not necessarily
been related to the operating performance of such companies. See
"Underwriting."

Continuing Influence of the Underwriters on the Company. The Company has
agreed that, if it is requested to do so by the Representative, it will use its
best efforts, for a period of three years from the date of this Prospectus, to
elect a designee of the Representative as a director of the Company, or, at the
Representative's option, as a non-voting advisor to the Company's Board of
Directors. Additionally, the Company will have certain other ongoing
contractual obligations to the Representative and the other Underwriters
following the consummation of this Offering and the Company has granted to the
Representative the Representative's Warrants to purchase up to 230,000 shares
of Common Stock. As a result, the Underwriters may have a continuing influence
on the Company. See "Underwriting."

Limited Experience of the Representative. Although the Representative has
co-managed over fifty public offerings, it has not served as the sole managing
underwriter of a public offering. However, the senior officer of the
Representative overseeing this Offering has served as the lead investment
banker for more than one hundred registered public offerings over the last
twenty five years. There can be no assurance that the Representative's lack of
public offering experience will not affect the proposed public offering of
Common Stock and subsequent development of a trading market, if any. See
"Underwriting."

Possible Delisting of Securities from the American Stock Exchange; Risks
Relating to Penny Stocks. The Company's Common Stock will be listed on The
American Stock Exchange ("AMEX") upon the completion of this Offering. In order
to continue to be listed on AMEX, however, the Company must maintain
shareholders' equity of $2,000,000 if the Company has had losses in two of its
three most recent years (or $4,000,000 if the Company has had losses in its
three most recent years). In addition, continued inclusion requires the market
value of the public float to be at least $1,000,000. The failure to meet these
maintenance criteria in the future may result in the delisting of the Company's
securities from AMEX, and, inasmuch as the Company would under such
circumstances not qualify for initial inclusion in the Nasdaq SmallCap Market,
trading, if any, in the Company's securities would thereafter be conducted in
the non-Nasdaq over-the-counter market. As a result of such delisting, an
investor could find it more difficult to dispose of, or to obtain accurate
quotations as to the market value of, the Company's securities.

Although the Company anticipates that its securities will be listed for
trading on AMEX, if the Common Stock were to become delisted from trading on
AMEX and the trading price of the Common Stock were to fall below $5.00 per
share on the date the Company's securities were delisted, trading in such
securities would also be subject to the requirements of certain rules
promulgated under the Exchange Act, which require additional disclosure by
broker-dealers in connection with any trades involving a stock defined as a
penny stock (generally, any equity security that is not listed on AMEX, another
national security exchange or The Nasdaq Stock Market, Inc. and has a market
price of less than $5.00 per share, subject to certain exceptions). Such rules
require the delivery, prior to any penny stock transaction, of a disclosure
schedule explaining the penny stock market

13
<PAGE>

and the risks associated therewith, and impose various sales practice
requirements on broker-dealers who sell penny stocks to persons other than
established customers and accredited investors (generally institutions). For
these types of transactions, the broker-dealer must make a special suitability
determination for the purchaser and have received the purchaser's written
consent to the transaction prior to sale. The additional burdens imposed upon
broker-dealers by such requirements may discourage broker-dealers from
effecting transactions in the Company's securities, which could severely limit
the market price and liquidity of such securities and the ability of purchasers
in this offering to sell their securities of the Company in the secondary
market.

14
<PAGE>

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the
2,300,000 shares of Common Stock offered hereby are estimated to be $19,967,500
($22,064,875, if the Underwriters' over-allotment option is exercised in full).
The Company intends to apply the net proceeds approximately as follows:

<TABLE>
<CAPTION>
Approximate
Approximate Percentage of
Application of Proceeds Dollar Amount Dollar Amount
- ----------------------- --------------- --------------
<S> <C> <C>
Repayment of indebtedness(1) ........................... $ 9,060,000 45.4%
Membership recruitment advertising(2) .................. 4,600,000 23.0
Internet web site marketing and development(3) ......... 1,500,000 7.5
Working capital and general corporate purposes(4) ...... 4,807,500 24.1
------------ ------
Total ................................................ $19,967,500 100.0%
============ ======
</TABLE>

- ------------
(1) Represents the repayment of $9,000,000 aggregate principal amount of loans
from Bank of America National Trust and Savings Association (the "Bank"),
plus accrued interest thereon. The loans bear interest at the Bank's
reference rate from time to time (8 1/2% as of September 1, 1997) minus
1/2%. The $6,000,000 loan is due May 7, 1998 and the $3,000,000 working
capital loans are due October 31, 1998. The Company used the proceeds of
the Bank loan to repay a portion of its outstanding indebtedness to N.
Herrick Irrevocable ABC Trust of which Norton Herrick, Chairman of the
Board and Chief Executive Officer of the Company, is the sole beneficiary
and Howard Herrick, Executive Vice President and a director of the
Company, is the sole trustee. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Certain Transactions."

(2) Represents estimated costs associated with (i) conducting direct mail
campaigns, including the costs of designing, printing and mailing member
solicitation packages, (ii) designing and placing advertisements in
newspapers, magazines and other publications, (iii) limited testing of
other forms of advertising, including radio and package insert programs,
and (iv) public relations efforts. See "Business -- Strategy" and "--
Member Acquisition."

(3) Represents estimated costs associated with increasing online computer
service and Internet marketing and advertisting, expanding and maintaining
the Company's Internet web site and increasing the number of audio book
titles to select and audio clips to preview online. See "Business --
Member Acquisition."

(4) Includes costs of general corporate overhead and maintaining inventory and
may, to the extent cash flow from operations is insufficient, be used for
the payment of the salaries of executive officers, estimated to aggregate
approximately $490,000 over the twelve months following the consummation
of this Offering. See "Management."

If the Underwriters exercise the over-allotment option in full, the
Company will receive additional net proceeds of $2,097,375 from the sale of the
235,000 shares by the Company, which will also be added to working capital. The
Company will not receive any of the net proceeds from the sale of shares by the
Selling Shareholder. See "Underwriting."

The allocation of the net proceeds from this Offering represents the
Company's best estimate based upon its currently proposed plans and assumptions
relating to its operations and certain assumptions regarding general economic
conditions. If any of these factors change, the Company may find it necessary
or advisable to reallocate a portion of the proceeds within the above-described
categories.

The Company may, if and when opportunities arise, use a portion of the
proceeds of this Offering allocated to working capital, together with the
issuance of debt or equity securities, to expand its operations by acquiring
companies in businesses which the Company believes will complement or enhance
its business. While the Company has from time to time evaluated possible
acquisition opportunities, as of the date of this Prospectus, the Company is
not a party to any agreement, commitment, arrangement or understanding with
respect to any acquisition. The Company has not established any minimum
criteria for any acquisition and Management will have complete discretion in
determining the terms of any such acquisition.

15
<PAGE>

Based on the Company's currently proposed plans and assumptions relating
to the implementation of its business plan (including the timing and success of
its direct marketing and other new membership recruitment advertising, member
retention programs, as well as the availability and terms of attractive
acquisition opportunities), the Company anticipates that the net proceeds of
this Offering will be sufficient to satisfy its contemplated cash requirements
for at least twelve months following the consummation of this Offering. In the
event that the Company's plans change or its assumptions prove to be inaccurate
(due to unanticipated expenses, difficulties, delays or otherwise) or the
proceeds of this Offering otherwise prove to be insufficient to fund the
implementation of the Company's business plan and working capital requirements,
the Company could be required to seek additional financing. The Company has no
current arrangements with respect to, or potential sources of, additional
financing and, following the consummation of this Offering, it is not
anticipated that existing shareholders will provide any portion of the
Company's future financing requirements. There can be no assurance that any
additional financing will be available to the Company when needed, on
commercially reasonable terms, or at all.

Proceeds not immediately required for the purposes described above will be
invested principally in United States government securities, short-term
certificates of deposit, money market funds or other short-term interest
bearing investments.

DILUTION

As of June 30, 1997, the net tangible book value of the Company was
$(12,335,937) or $(3.79) per share of Common Stock. "Net tangible book value
per share" represents the book value of the Company's tangible assets less the
amount of its liabilities, divided by the number of shares of Common Stock
outstanding. After giving effect to the Pro Forma Adjustments (see footnote 2
of "Prospectus Summary -- Summary Financial Information"), the pro forma net
tangible book value of the Company as of June 30, 1997 would have been
$(6,360,737) or $(1.65) per share. Upon the consummation of this Offering,
including the anticipated application of the net proceeds of this Offering,
6,153,920 shares of Common Stock will be outstanding with an adjusted net
tangible book value of $13,631,763 or $2.22 per share. As a result of this
Offering, there will be an immediate dilution to new investors of approximately
$7.78 per share. "Dilution" represents the difference between the price per
share paid by new investors in this Offering and the adjusted net tangible book
value per share of June 30, 1997, after giving effect to this Offering. The
following table illustrates this dilution:

<TABLE>
<S> <C> <C>
Initial public offering price per share ........................ $10.00
Net tangible book value before Pro Forma Adjustments ......... $ (3.79)
Increase attributable to Pro Forma Adjustments ............... 2.14
--------
Pro forma net tangible book value before this Offering ...... (1.65)
Increase attributable to this Offering ..................... 3.87
--------
Adjusted net tangible book value after this Offering ............ 2.22
--------
Dilution to investors in this Offering ........................ $ 7.78
========
</TABLE>

The following table summarizes, as of the consummation of this Offering,
the differences between the effective cash contributions paid by the existing
shareholders of the Company and the new investors with respect to the number of
shares purchased from the Company, the total consideration paid, and the
average price per share.

Shares Purchased Total Consideration Average
----------------------- ------------------------- Price
Number Percent Amount Percent Per Share
----------- --------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Existing shareholders ...... 3,853,920 62.6% $ 5,975,400 20.6% $ 1.55
New investors ............... 2,300,000 37.4 23,000,000 79.4 10.00
--------- ------ ------------ ------
Total ..................... 6,153,920 100.0% $28,975,400 100.0%
========= ====== ============ ======
</TABLE>

The above table assumes no exercise of the Underwriters' over-allotment option.
If such option is exercised in full, the new investors will have paid
$26,450,000 for 2,645,000 shares of Common Stock, representing 81.6% of the
total consideration for 41.4% of the total number of shares of Common Stock
outstanding.

16
<PAGE>

DIVIDEND POLICY

The Company has never paid any dividends on its Common Stock, and the
Board of Directors of the Company does not intend to declare or pay any
dividends on its Common Stock in the foreseeable future. The Board of Directors
currently intends to retain all available earnings (if any) generated by the
Company's operations for the development and growth of its business. The
declaration in the future of any cash or stock dividends on the Common Stock
will be at the discretion of the Board of Directors and will depend upon a
variety of factors, including the earnings, capital requirements and financial
position of the Company and general economic conditions at the time in
question. Moreover, the payment of cash dividends on the Common Stock in the
future could be further limited or prohibited by the terms of financing
agreements that may be entered into by the Company (e.g., a bank line of credit
or an agreement relating to the issuance of other debt securities of the
Company) or by the terms of any Preferred Stock that may be issued and then
outstanding.

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
June 30, 1997, (i) on an actual basis, (ii) on a pro forma basis, giving effect
to the Pro Forma Adjustments (see footnote 2 of "Prospectus Summary -- Summary
Financial Information"), and (iii) as adjusted to give effect to the sale of
the 2,300,000 shares of Common Stock offered hereby and the anticipated
application of the estimated net proceeds therefrom:

<TABLE>
<CAPTION>
June 30, 1997
------------------------------------------------------
Actual Pro Forma As Adjusted
---------------- ---------------- ----------------
<S> <C> <C> <C>
Short-term bank debt ....................................... $ 6,000,000 $ 6,000,000 $ 0
============= ============= =============
Notes payable ................................................ $ 6,775,200 $ 3,000,000 $ 0
------------- ------------- -------------
Shareholders' equity (deficiency):
Preferred Stock, no par value, 5,000,000 shares authorized;
no shares issued and outstanding ........................... -- -- --
Common Stock, no par value, 25,000,000 authorized,
3,256,400 shares issued and outstanding (actual),
3,853,920 shares issued and outstanding (pro forma),
6,153,920 shares issued and outstanding (as adjusted) ...... 200 5,975,400 25,942,900
Contributed capital .......................................... 478,151 478,151 478,151
Accumulated deficit ....................................... (12,720,955) (12,720,955) (12,789,288)
------------- ------------- -------------
Total shareholders' equity (deficiency) .................. (12,242,604) (6,267,404) 13,631,763
------------- ------------- -------------
Total capitalization ................................. $ (5,467,404) $ (3,267,404) $ 13,631,763
============= ============= =============
</TABLE>

17
<PAGE>

SELECTED FINANCIAL DATA

The selected financial data presented below under the captions "Selected
Statement of Operations Data" and "Selected Balance Sheet Data" as of December
31, 1996 and for the years ended December 31, 1994, 1995 and 1996, are derived
from the financial statements of the Company, which financial statements have
been audited by KPMG Peat Marwick LLP, independent certified public
accountants. The financial statements as of December 31, 1996 and for each of
the years in the two year period ended December 31, 1996, and the report
thereon, are included elsewhere in this Prospectus.

The selected unaudited financial information presented below under the
captions "Selected Statement of Operations Data" and "Selected Balance Sheet
Data" as of June 30, 1997 and for the six months ended June 30, 1996 and 1997,
are derived from the unaudited financial statements of the Company, to which
KPMG Peat Marwick LLP has reported that it has applied limited procedures in
accordance with professional standards for a review of such information. The
unaudited financial statements as of June 30, 1997, and for the six month
periods ended June 30, 1996 and 1997, and the review report thereon, are
included elsewhere in this Prospectus.

The selected financial data set forth below is qualified by reference to
and should be read in conjunction with the Company's financial statements,
related notes and other financial information contained in this Prospectus, as
well as "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

Selected Statement of Operations Data:

<TABLE>
<CAPTION>
Years Ended Six Months
December 31, Ended June 30,
------------------------------------------------ --------------------------------
1994 1995 1996 1996 1997
-------------- --------------- --------------- --------------- ---------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Gross sales ........................... $ 337,347 $ 3,406,395 $ 8,343,304 $ 4,224,659 $ 6,499,331
Returns, discounts and allowances ...... 87,762 770,980 2,743,221 965,201 1,409,289
Net sales .............................. 249,585 2,635,415 5,600,083 3,259,458 5,090,042
Cost of sales ........................... 388,011 2,145,898 4,327,344 2,328,224 2,810,548
Gross profit (loss) ..................... (138,426) 489,517 1,272,739 931,234 2,279,494
Advertising and promotion expense
(for acquisition and retention of
members) .............................. 972,517 2,670,650 5,469,761 2,486,834 2,249,737
General and administrative expense ....... 367,652 1,094,973 1,948,821 801,400 725,777
Interest expense, net .................. 3,794 3,947 211,140 56,994 314,645
Net loss .............................. (1,597,800) (3,396,383) (6,461,269) (2,495,519) (1,167,878)
Pro forma net loss per share(1) ......... (1.68) (.30)
Pro forma weighted average number
of shares outstanding(1) ............... 3,853,920 3,853,920
Other Data:
Total member file(2) ..................... 12,072 64,398 154,653 120,713 219,222
</TABLE>

Selected Balance Sheet Data:

<TABLE>
<CAPTION>
As of June 30, 1997 (Unaudited)
As of ----------------------------------------------------
December 31, 1996 Actual Pro Forma(1) As Adjusted(1)(3)
------------------- ---------------- -------------- ------------------
<S> <C> <C> <C> <C>
Working capital (deficit) ............ $ 139,145 $ (5,583,356) $(3,383,356) $13,609,144
Total assets ........................ 1,800,089 3,380,271 3,380,271 14,279,438
Total liabilities .................. 13,121,641 15,622,875 9,647,675 647,675
Shareholders' equity (deficiency) ... (11,321,552) (12,242,604) (6,267,404) 13,631,763
</TABLE>

- ------------
(1) Adjusted to give effect to the Pro Forma Adjustments (see footnote 2 of
"Prospectus Summary -- Summary Financial Information"). See "Management's
Discussion and Analysis and Results of Operations -- Liquidation Capital
Resources" and "Certain Transactions."
(2) Consists of all members acquired by the Company, including active and
inactive members. See "Business -- Audio Book Club -- Members."
(3) Gives effect to the sale of the 2,300,000 shares of Common Stock offered
hereby, and the application of the estimated net proceeds therefrom,
including the repayment of approximately $9,060,000 of indebtedness
including accrued interest thereon.

18
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company commenced operations of Audio Book Club in January 1994 and
undertook its first direct mail campaign in August 1994. As of June 30, 1997,
the Company's total member file consisted of 219,222 names, compared to 154,653
and 64,398 names as of December 31, 1996 and 1995, respectively. The Company's
total member file has increased by approximately 240% since January 1, 1996.
The total member file consists of all members acquired by the Company,
including active and inactive members.

Through June 30, 1997, the Company had spent an aggregate of $11,401,915
on advertising and promotion for acquisition and retention of members,
including $2,670,650, $5,469,761 and $2,249,737 during the years ended December
31, 1995 and 1996 and six months ended June 30, 1997, respectively.

Since inception, the Company has generated limited revenues and incurred
significant losses, including losses of $3,396,383, $6,461,269 and $1,167,878
for the years ended December 31, 1995 and 1996 and six months ended June 30,
1997, respectively, and had an accumulated deficit of $12,720,955 at June 30,
1997. The Company anticipates that it will incur a loss during the current
fiscal year. There can be no assurance that the Company's current business
strategy will enable it to achieve profitable operations.

The Company recognizes sales revenues (gross sales) upon shipment of
products, at which time customers are billed for the products ordered. Revenues
consist primarily of catalog sales of audio books to members at regular club
price plus shipping and handling less applicable discounts, and to a lesser
extent, revenues from new member enrollments. New member enrollment revenues
represent the low introductory price (typically four audio books for $.99 or
less) plus shipping and handling at which the Company offers the introductory
audio books as an enticement for new members to join Audio Book Club.

The Company records returns, discounts and allowances each period in an
amount equal to actual returns plus an estimated allowance for additional
returns for sales made during such period. The estimated allowance is based on
historical return rates. Cost of sales includes the cost of audio books and
product, shipping, mailing and fulfillment costs. The cost of sales of the
introductory audio books exceeds new member enrollment revenues from such
introductory offer. The Company's gross profit margin increases as catalog
sales of audio books to members account for a greater percentage of sales.

Accounts receivable are recorded net of allowances for sales returns and
doubtful accounts. The allowance for future sales returns is based upon
historical experience and an evaluation of current return trends. The allowance
for doubtful accounts is based upon historical experience. The Company's
allowances for sales returns and doubtful accounts were $666,262 and $165,407,
respectively, as of December 31, 1996 and $486,005 and $157,713 as of June 30,
1997.

Results of Operations

The following table sets forth certain historical financial data for the
Company as a percentage of net sales:

Year Ended December 31, Six Months Ended June 30,
------------------------- ------------------------
1995 1996 1996 1997
----------- ----------- -------- ----------
<S> <C> <C> <C> <C>
Net sales .................................... 100.0% 100.0% 100.0% 100.0%
======= ======= ====== ======
Cost of sales .............................. 81.4% 77.3% 71.4% 55.2%
Gross profit ................................. 18.6 22.7 28.6 44.8
Advertising and promotion expense (for
acquisition and retention of members) ...... 101.3 97.7 76.3 44.2
General and administrative expense ......... 41.5 34.8 24.6 14.3
Interest expense ........................... 0.1 3.8 1.7 6.2
Net loss .................................... (128.9) (115.4) (76.6) (22.9)
</TABLE>

19
<PAGE>

Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996.

Gross sales for the six months ended June 30, 1997 were $6,499,331, an
increase of $2,274,672 or 53.8%, as compared to $4,224,659 for the prior
comparable period. Such increase in gross sales was primarily attributable to
increased sales of audio books resulting from expansion of Audio Book Club's
membership base.

Returns, discounts and allowances for the six months ended June 30, 1997
were $1,409,289, or 21.7% of gross sales, as compared to $965,201, or 22.8% of
gross sales for the prior comparable period.

Net sales for the six months ended June 30, 1997 were $5,090,042, an
increase of $1,830,584 or 56.2%, as compared to $3,259,458 for the prior
comparable period. The increase in net sales was primarily attributable to
expansion of Audio Book Club's membership base.

Cost of sales for the six months ended June 30, 1997 were $2,810,548, an
increase of $482,324, as compared to $2,328,224 for the prior comparable
period. The increase in cost of sales was primarily attributable to the
substantial increase in net sales of audio books which was partially offset by
lower product unit costs, more favorable licensing arrangements and decreased
shipping and fulfillment costs.

Gross profit for the six months ended June 30, 1997 was $2,279,494, or
44.8% of net sales, as compared to $931,234, or 28.6% of net sales, for the
prior comparable period. The improvement in gross profit margin was
attributable to a larger percentage of the Company's net sales from catalog
sales of audio books to members as opposed to revenues from introductory sales
of audio books in connection with new member enrollments. The product unit cost
exceeds the enrollment revenues from the sale of introductory units.

Advertising and promotion expenses (for acquisition and retention of
members) for the six months ended June 30, 1997 were $2,249,737, a decrease of
$237,097, as compared to $2,486,834 for the prior comparable period. Such
decrease was primarily due to the timing of the Company's first significant
direct mail campaign of each year. The Company commenced its first 1996 direct
mail campaign in January 1996 whereas it commenced a similar mail campaign in
December 1996 (as opposed to January 1997). As a result, during the six months
ended June 30, 1997, the Company conducted two significant direct mail
campaigns as opposed to three significant direct mail campaigns during the
prior comparable period. The decrease was also attributable to the lower per
piece mailing costs of member solicitation packages and member mailings which
was partially offset by the increased expense associated with advertising and
promotion activities to a larger membership basis. See "--Quarterly
Fluctuations."

General and administrative expenses for the six months ended June 30, 1997
were $725,777 or 14.3% of net sales, as compared to $801,400 or 24.6% of net
sales for the prior comparable period. Such expenses decreased as a percentage
of net sales, because the Company had previously established a corporate
infrastructure capable of supporting operations in excess of its then-current
level of operations. Additionally, the Company was able to replace certain of
its support staff with lower salaried personnel.

Professional fees for the six months ended June 30, 1997 were $152,535, an
increase of $73,051, as compared to $79,484 for the prior comparable period.
Depreciation and amortization expenses for the six months ended June 30, 1997
was $4,678, as compared to $2,041 for the prior comparable period. Net interest
expense for the six months ended June 30, 1997 was $314,645, as compared to net
interest expense of $56,994 for the prior comparable period. The increase in
net interest expense was attributable to increased borrowings.

The net loss for the six months ended June 30, 1997 decreased to
$1,167,878, as compared to a net loss of $2,495,519 for the prior comparable
period, primarily as a result of an improved gross profit margin resulting from
a higher percentage of continuing member revenue as compared to revenue from
new member enrollments, and the decrease of advertising and promotion and
general and administrative expenses as a percentage of net sales.

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995.

Gross Sales for the year ended December 31, 1996 were $8,343,304, an
increase of $4,936,909 or 144.9%, as compared to $3,406,395 for the year ended
December 31, 1995. Such increase in gross sales was primarily attributable to
increased sales of audio books resulting from expansion of Audio Book Club's
membership base.

Returns, discounts and allowances for the year ended December 31, 1996
were $2,743,221, or 32.9% of gross sales, as compared to $770,980 or 22.6% of
gross sales for the year ended December 31, 1995. The increase in returns,
discounts and allowances was primarily the result of an increase in sales of
audio books. The

20
<PAGE>

increase as a percentage of sales is due primarily to product shipments
resulting from an unsuccessful test telemarketing campaign during the year
ended December 31, 1996 and, to a lesser extent, from an increase in returns of
the featured selection resulting from the increased number of member mailings
during the fourth fiscal quarter of 1996.

Net sales for the year ended December 31, 1996 were $5,600,083, an
increase of $2,964,668 or 112.5%, as compared to $2,635,415 for the year ended
December 31, 1995. The increase in net sales was primarily attributable to
expansion of Audio Book Club's membership base and increased new member
enrollment revenue. The number of Audio Book Club's active members
approximately doubled during 1996, as compared to the number of active members
as of December 31, 1995.

Cost of sales for the year ended December 31, 1996 were $4,327,344, an
increase of $2,181,446 or 101.7%, as compared to $2,145,898 for the year ended
December 31, 1995, primarily as a result of increased net sales. Cost of sales
includes product and fulfillment costs.

Gross profit for the year ended December 31, 1996 was $1,272,739, or 22.7%
of net sales, as compared to $489,517, or 18.6% of net sales for the year ended
December 31, 1995. The increase in gross profit as a percentage of net sales
was attributable to improved economies of scale resulting in decreased product,
shipping and fulfillment costs and, to a lesser extent, a larger percentage of
the Company's net sales being derived from catalog sales of audio books to
members as opposed to revenues from introductory sales of audio books in
connection with new member enrollments.

Advertising and promotion expenses (for acquisition and retention of
members) for the year ended December 31, 1996 was $5,469,761, an increase of
$2,799,111 or 104.8%, as compared to $2,670,650 for the year ended December 31,
1995. Such increase was primarily attributable to increased membership
recruitment efforts relating to larger direct marketing campaigns and increased
expenses incurred in connection with member mailings to Audio Book Club's
increased membership base.

General and administrative expenses for the year ended December 31, 1996
were $1,948,821, or 34.8% of net sales, as compared to $1,094,973, or 41.5% of
net sales for the year ended December 31, 1995. During 1995, the Company
established a corporate infrastructure capable of supporting operations in
excess of its then-current level of operations. As a result, the Company was
not required to hire additional personnel and incur additional administrative
expenses commensurate with its increased level of operations. Accordingly,
general and administrative expenses declined as a percentage of net sales.

Professional fees for the year ended December 31, 1996 were $99,093, as
compared to $113,997 for the year ended December 31, 1995. Depreciation and
amortization expense for the year ended December 31, 1996 was $5,193, as
compared to $2,333 for the year ended December 31, 1995. Net interest expense
for the year ended December 31, 1996 was $211,140, as compared to $3,947 for
the year ended December 31, 1995. The increase in net interest expense was
attributable to increased borrowings.

Primarily as a result of the Company's increased efforts to expand Audio
Book Club's membership base, the net loss for the year ended December 31, 1996
increased to $6,461,269, as compared to $3,396,383 for the year ended December
31, 1995.

Liquidity and Capital Resources

The Company's capital requirements have been and will continue to be
significant due to, among other things, costs associated with direct mail
campaigns, other new member recruitment advertising and building, expanding and
maintaining an Internet web site. The Company's cash requirements have exceeded
cash flows from operations and, at June 30, 1997, the Company had a working
capital deficit of $5,583,356. As a result, the Company has been substantially
dependent upon loans from its shareholders to establish Audio Book Club's
member base and to finance its operations, including its working capital
requirements.

Since inception, the Company has borrowed an aggregate of $12,775,200 from
its shareholders, including $4,105,000, $5,575,200 and $1,295,000 during the
years ended December 31, 1995, and 1996 and the six months ended June 30, 1997,
respectively. The Company repaid an aggregate of $6,000,000 and $800,000 of
such loans in May and September 1997, respectively. See "Certain Transactions."

21
<PAGE>

In May 1997, the Company borrowed $6,000,000 from Bank of America National
Trust and Savings Association (the "Bank") pursuant to a credit agreement. In
August and September 1997, the Company borrowed an additional $3,000,000 from
the Bank. The loans bear interest (payable monthly) at the Bank's reference
rate from time to time (8 1/2% as of September 1, 1997) minus 1/2%. The
$6,000,000 loan is due May 7, 1998 and the $3,000,000 working capital loans are
due October 31, 1998, in each case, unless extended by the Bank. The shares of
Common Stock held by the N. Herrick Trust were pledged to the Bank as security
for the $6,000,000 loan and, in the event the Company fails to repay the loans
at maturity, the personal guarantee of Norton Herrick to the Bank will become
effective. The Company used the proceeds of the $6,000,000 loan from the Bank
to repay a portion of the outstanding indebtedness owed to the N. Herrick
Trust. The Company is using the proceeds of the $3,000,000 of working capital
loans from the Bank to pay accounts payable. The Company intends to use a
portion of this Offering to repay the $9,000,000 aggregate principal amount of
loans from the Bank, plus accrued interest thereon. See "Certain Transactions."

Immediately prior to the consummation of this Offering, the N. Herrick
Trust is converting the outstanding $5,975,200 of indebtedness owed to the N.
Herrick Trust under the loan agreement into 597,520 shares of Common Stock at a
price per share equal to the initial offering price of the Common Stock. See
"Certain Transactions."

During the six months ended June 30, 1997, the Company's cash increased by
$21,999, as the Company used net cash of $1,171,874 and $6,127 for operating
and investing activities, respectively, and had cash provided by financing
activities of $1,200,000. Net cash used in operating activities primarily
consisted of a net loss of $1,167,878 and increases in accounts receivable and
inventory of $1,198,356 and $259,603, respectively, which were partially offset
by an increase in accounts payable and accrued expenses of $1,206,234. Net cash
used in investing activities consisted of the acquisition of fixed assets. Net
cash provided by financing activities primarily consisted of loans from the N.
Herrick Trust, Howard Herrick and the M.E.H. Trust which were partially offset
by the incurrence of deferred offering costs.

During the year ended December 31, 1996, the Company's cash decreased by
$48,121, as the Company used net cash of $5,616,258 and $7,063 in operating and
investing activities, respectively, and had cash provided by financing
activities of $5,575,200. Net cash used in operating activities primarily
consisted of the net loss of $6,461,269, an increase in inventory of $383,689
and an increase in royalty advances of $235,440, which were partially offset by
an increase in accounts payable and accrued expenses of $1,170,140. Net cash
used in investing activities consisted of the acquisition of fixed assets. Net
cash provided by financing activities consisted of loans from the N. Herrick
Trust.

The Company entered into three-year employment agreements with Michael
Herrick and Howard Herrick, a two-year employment agreement with Norton Herrick
and a one-year employment agreement with Jesse Faber, President of the Company.
The Company's aggregate committments under such employment agreements are
$490,000, $350,000 and $250,000 during the first, second and third years
following this Offering, respectively.

The Company is dependent upon the proceeds of this Offering to implement
its business plan and finance its working capital requirements. Based on the
Company's currently proposed plans and assumptions relating to the
implementation of its business plans (including the timing and success of its
direct marketing and other new membership recruitment advertising, as well as
the availability and terms of attractive acquisition opportunities), the
Company anticipates that the net proceeds of this Offering will be sufficient
to satisfy its contemplated cash requirements for at least twelve months
following the consummation of this Offering. In the event that the Company's
plans change or its assumptions prove to be inaccurate (due to unanticipated
expenses, difficulties, delays or otherwise) or the proceeds of this Offering
otherwise prove to be insufficient to fund the implementation of the Company's
business plans and working capital requirements, the Company could be required
to seek additional financing. The Company has no current arrangements with
respect to, or potential sources of, additional financing and it is not
anticipated that existing shareholders will provide any portion of the
Company's future financing requirements. There can be no assurance that any
additional financing will be available to the Company when needed, on
commercially reasonable terms, or at all.

22
<PAGE>

Quarterly Fluctuations

The Company's operating results vary from period to period as a result of
purchasing patterns of members, the timing, costs, magnitude and success of
direct mail campaigns and other new member recruitment advertising, member
attrition, the timing and popularity of new audio book releases and product
returns.

In prior years, the Company has conducted a significant direct mail
campaign at either the end of the fourth fiscal quarter or the beginning of the
following first fiscal quarter. The timing of new member enrollment varies
depending upon the timing, magnitude and success of new member recruitment
advertising, particularly direct mail campaigns. The Company typically
experiences increased new member enrollment shortly following direct mail
campaigns. As a result, new member enrollment revenues increase as a percentage
of net sales shortly following significant direct mail campaigns. In fiscal
years in which the Company conducts a significant direct mail campaign at the
end of the fourth quarter, the Company's operating results will be adversely
affected because it will incur increased member acquisition expenses but will
not generate any corresponding revenues from such campaign until the following
fiscal year.

23
<PAGE>

BUSINESS

The Company is a direct marketer of audio books through Audio Book Club, a
membership club which markets and sells audio books by mail and via the
Internet. As of June 30, 1997, Audio Book Club's total member file consisted of
219,222 names, compared to 154,653 and 64,398 names as of December 31, 1996 and
1995, respectively. The Company's total member file has increased by
approximately 240% since January 1, 1996. The total member file consists of all
members acquired by the Company, including active and inactive members.

Since its inception, the Company has engaged in an aggressive membership
recruitment program to establish a core Audio Book Club member base and to
continually expand such member base. The Company has acquired Audio Book Club
members primarily through direct mailings of member solicitation packages,
online computer service and Internet advertising, advertisements in magazines,
newspapers and other publications and package insert programs. In March 1995,
the Company established an Internet web site which offers visitors to the web
site the opportunity to join Audio Book Club, execute club transactions online
(if a member), utilize the site's search engine to locate any of the site's
audio book selections and sample audio clips of many of the site's selections.
The Company believes that it offers one of the most comprehensive libraries of
audio book titles, as members may order virtually any of the 68,000 published
titles in existence through the Company's Internet web site or "special order"
service.

Audio Book Industry Overview

Audio books are literary works or other printed materials read by the
author, a reader or a celebrity actor or an ensemble of readers or actors and
recorded primarily on audio cassette and, to a lesser extent, on compact disc.
Most hardcover books printed today are released simultaneously as audio books
and audio book versions of other popular books are released from time to time,
in either an author-approved abridged version or an unabridged version. An
abridged audio book is a condensed version of the printed book, typically
recorded on two to six audio cassettes and three to six hours in length. An
unabridged audio book is a word-for-word version of the printed book, typically
recorded on six to twelve audio cassettes and six to twelve hours in length.
Audio book publishers have traditionally focused their efforts on publishing
abridged audio books because they can be offered at lower prices than
unabridged versions and, therefore, can be more competitive with printed books
and other forms of audio cassette entertainment, such as music cassettes.

Audio books were first introduced in 1985 and, according to the Audio
Publishers Association (the "APA"), sales of audio books increased to
approximately $1.5 billion in 1995 from industry estimates of $250 million in
1988. Sales of audio books increased approximately 11.6% during 1996, compared
to an increase in printed book sales of 1% during 1996. Additionally, the APA
estimates that sales of audio books during the last fiscal quarter of 1996 and
first fiscal quarter of 1997 increased approximately 38% and 23%, respectively,
compared to the prior comparable fiscal quarters, with continued annual growth
in sales of audio books expected to be between 10% and 20%. Simba Information,
Inc., a reporter of book information statistics, forecasts sales by book clubs
(audio and print) to grow more aggressively than any other consumer book
segment.

Audio books are available in all genre categories including, fiction,
non-fiction, mystery, suspense, biography, fantasy and science fiction,
romance, spiritual, religion, humor, children's, business, self-improvement and
motivational. An industry source estimates that there were approximately 68,000
audio book titles in existence as of January 1997, as compared to 11,500 titles
in 1985, with approximately 7,500 titles published in 1996.

When audio books were first introduced, they were available almost
exclusively in libraries. Currently, bookstores account for the largest
percentage of retail audio book sales, selling approximately 47% of audio

24
<PAGE>

books in 1995 according to the APA. Bookstores, however, typically devote
limited shelf space to audio books. A survey conducted by Publishers Weekly in
1994 indicates that bookstores devote only an average of 71 square feet to
audio books. Because of shelf space limitations, bookstores carry only a
limited number of the approximately 68,000 published audio book titles.

Over the last several years, audio book stores, which rent and, to a
lesser extent, primarily sell only audio books, have opened. Audio books are
also offered on a limited basis in other retail establishments such as
convenience stores, video rental stores and wholesale clubs (e.g. Costco), as
well as by several mail order companies which offer audio books for rental and
sale through their catalogs. Audio books are also currently offered through the
limited number of recently established audio book member clubs, such as Audio
Book Club.

The Company believes that it is positioned to capitalize on opportunities
in the emerging and expanding markets for audio books because of its early
entrance into, and knowledge of, the audio book club industry, established
membership base and Internet web site, knowledge of and experience in utilizing
mailing lists to target direct mail campaigns, selection of available audio
book titles, established relationships with major audio book publishers and
emphasis on providing friendly, efficient customer service.

Strategy

The Company's strategy is to establish Audio Book Club as the largest and
most convenient supplier of audio books by mail and via the Internet. Key
elements of the Company's strategy include:

o Expand Member Base. The Company believes that it has established a core
Audio Book Club member base which it intends to continue to expand. The
Company anticipates that its advertising activities will continue to
consist primarily of direct mailings of member solicitation packages to
prospective members whose names were obtained from third-party mailing
lists. In addition, the Company intends to increase its direct mail and
Internet web site and online computer service marketing and advertising
activities. The Company also intends to continue to test other forms of
advertising, including various magazine, newspaper and other print media,
radio and package insert programs. See "--Membership Acquisition."

o Optimize Member Acquisition Marketing Activities. The Company intends to
continue to analyze its database of results obtained from direct mail
campaigns (including the results obtained from each mailing list utilized)
and from print and other advertising, as well as Internet marketing. The
Company maintains a database of information regarding each advertising
campaign, including each third-party mailing list that was utilized in the
campaign, the quantity of names to which the promotional mailings were
sent, the response rate and the per member acquisition cost. The Company
believes that its emphasis on database management improves its ability to
efficiently target advertising campaigns, thereby obtaining increased
response rates and lower per member acquisition costs.

o Maximize Per Member Revenues. The Company intends to continue to analyze
the results of its advertising activities and the purchasing habits of its
members to maximize sales to members and extend membership lifecycles. The
Company maintains a database of information on each name in its member
file, including number and genre of titles ordered, payment history, the
advertising campaign from which the member joined and a lifetime value
analysis. The Company believes that such analyses and evaluations enable
the Company to efficiently target advertising to potential members who
have characteristics of persons likely to join Audio Book Club, purchase
sufficient quantities of audio books to be a profitable source for the
Company and become long-term club members. The Company also intends to
utilize such information to target and establish "niche" clubs to
capitalize on consumer demand for audio books in specific genres and audio
books by specific authors.

o Cost Containment. The Company continuously seeks to reduce its costs of
doing business, including the costs associated with member acquisition,
catalog mailings and products. The Company believes that as it expands its
membership base it will achieve increased economies of scale in connection
with member recruitment advertising, member mailings and order processing
and product fulfillment, and be able to order products and services in
larger quantities and, therefore, be able to negotiate more favorable
licensing, purchasing and manufacturing arrangements.

25
<PAGE>

o International Expansion. The Company's long-term objectives include
expanding Audio Book Club internationally into English-speaking countries
such as Canada and the United Kingdom, as well as into other countries
with large English-speaking populations.

Consistent with its business plan, the Company may also seek to expand its
operations by acquiring companies in businesses which the Company believes will
complement or enhance its business. Any decision to make an acquisition will be
based upon a variety of factors, including the purchase price and financial
terms of the transaction, the business prospects and competitive position of
and services provided and products offered by the acquisition candidate and the
extent to which any such acquisition would enhance the Company's prospects.
While the Company has from time to time evaluated possible acquisition
opportunities, as of the date of this Prospectus, the Company is not a party to
any agreement, commitment, arrangement or understanding with respect to any
acquisition.

The Company's strategy is subject to change as a result of a number of
factors, including progress or delays in the Company's expansion efforts,
success of the Company's member recruitment advertising, results of continual
test marketing, consumer acceptance of new products, the Company's ability to
identify suitable acquisition candidates and integrate any acquired businesses
into its operations and changes in market conditions, consumer buying habits
and consumer preferences. There can be no assurance that the Company will be
able to successfully implement its business strategy or otherwise expand its
operations.

Audio Book Supply

The Company has established relationships with substantially all of the
major audio book publishers, including Random House Audio Publishing, Inc.,
Bantam Doubleday Dell Audio Publishing, Simon & Schuster Audio, Harper Audio,
Time Warner Audio Books and Audio Renaissance Tapes. The Company has primarily
entered into non-exclusive agreements with selected audio book publishers
pursuant to which the publisher grants to the Company a license to duplicate
the recordings and the packaging materials relating to each audio book in such
publisher's audio book library, including audio books as to which the publisher
acquires rights during the term of the agreement. The Company also enters into
agreements pursuant to which it receives licenses to duplicate the recordings
and packaging materials relating to selected audio books. The Company believes
that its ability to enter into license agreements with publishers enables it to
reduce the costs associated with obtaining its supply of audio books.

Typically, the Company pays to the publisher a royalty for each copy it
sells and an advance on its royalty obligations in exchange for the
non-exclusive license. Such licensing agreements generally have one or two-year
terms, permit the Company to sell audio books in the Company's inventory at the
expiration of the term during a "sell-off" period and prohibit the Company from
selling an audio book prior to its release date. Most of the license agreements
permit the Company to arrange for the packaging, printing and cassette
duplication of audio books, as opposed to the publisher arranging for the
duplication. The Company, to the extent it is able to do so on favorable terms,
enters into arrangements with the publisher's recording duplicator and
packaging supplier.

In addition to entering into license agreements, the Company purchases
certain audio books from publishers' inventories at a substantial discount to
the suggested retail price. The Company from time to time also purchases
certain previously released audio books as remainder sales from publishers at a
substantial discount to wholesale prices, often below manufacturing cost.

Member Acquisition

Since its inception, the Company has engaged in an aggressive membership
recruitment program to establish a core Audio Book Club member base and
continually expand such member base. The Company has acquired Audio Book Club
members primarily through direct mailings of member solicitation packages,
online computer service and Internet advertising, advertisements in magazines,
newspapers and other publications and package insert programs. The Company
continually analyzes the results of its marketing activities in an effort to
maximize sales, extend membership lifecycles, and efficiently target its
marketing efforts to increase response rates to its advertisements and reduce
its per member acquisition costs.

Direct Mail

The Company regularly engages in direct mail campaigns designed to attract
potential Audio Book Club members. The Company obtains lists of names from
various list brokers based on criteria which the Company believes have
characteristics of persons likely to join Audio Book Club, purchase sufficient
quantities of audio

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<PAGE>

books to be a profitable source for the Company and become long-term members.
The Company mails member solicitation packages to those persons it has
identified for a specific direct mail campaign. Each member solicitation
package contains a letter from Audio Book Club's editor explaining the Audio
Book Club concept and identifying the advantages of becoming a member, an
easy-to-use enrollment form for the prospective member to complete, a brochure
of audio book titles and a self-addressed, postage paid reply envelope. The
Company believes that it has identified numerous lists that have performed well
in the past and, as a result, expects that future response rates and member
acquisition costs should improve. The Company also believes that members
obtained through direct mail campaigns typically purchase more books over the
term of their membership and are better credit risks than members obtained
through other sources.

The Company intends to use a significant portion of the proceeds of this
Offering allocated to membership recruitment advertising in connection with
direct mail activities during the twelve months following the consummation of
this Offering.

Internet Web Site and Online Computer Service Advertising

In March 1995, the Company established an Internet web site which offers
visitors to the web site the opportunity to join Audio Book Club, execute club
transactions online (if a member), utilize the web site's search engine to
locate many of the web site's thousands of audio book selections and sample
audio clips of any of the web site's selections. The Company's web site also
provides additional options, such as alerting visitors when a new title of an
author or reader previously specified by the visitor is released and offering
reviews of selected titles.

The Company's web site is updated simultaneously with the Audio Book Club
catalog to add new selections and the new current featured selection, as well
as to add new audio clips to preview. The Company's web site currently has
links from numerous search engines and audio book related sites. The web site
is also linked to catalog listing sites offered by online computer and Internet
services.

Prior to June 1997, the Company did not actively market its web site and
has only recently conducted limited test marketing of its web site. The Company
intends to use a portion of the proceeds of this Offering to increase Internet
and online computer service marketing and advertising, and to expand and
maintain its Internet web site, including increasing the number of audio book
titles to select and audio clips to preview through its search engine.

Print Advertising

The Company has from time to time placed print advertisements in various
magazines and other forms of print media, including Forbes, The New Yorker,
People, Redbook and The Saturday Evening Post. Such advertisements either
contain a mail-in enrollment form with a listing of 25 to 50 audio book titles
from which to order or invite the reader to call the Company to join the club.
The Company also advertises in catalogs which feature advertisements for mail
order catalogs. The Company does not pay for the placement of an advertisement
in these catalogs, but pays a fee based on the number of inquiries each such
catalog receives for the Audio Book Club catalog.

The Company intends to continue to test various print media and analyze
and evaluate the results of such advertising to determine the print media which
helps expand its membership base while reducing per member acquisition costs.

Other Advertising Activities

The Company has in the past and will continue in the future to test other
forms of advertising, including radio and package insert programs. Package
insert advertising enables the Company to include advertisements or inserts in
mailings or product shipments made by a third party to the third party's
customers to entice them to join Audio Book Club.

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<PAGE>

Audio Book Club

Members

As of June 30, 1997, Audio Book Club's total member file consisted of
219,222 names. The total member file consists of all members to which the
Company has sent a member mailing, including currently active and inactive
members. The Company seeks to attract a financially sound and responsible
membership base. Accordingly, the Company targets its direct mail and other
advertising efforts to these types of persons. Results of the Company's
membership survey indicate that Audio Book Club members are typically
time-constrained individuals who are unable to read as much as they would like
and are concentrated in the 30 to 65-year old age group.

Audio Book Club members can enroll in the club through the mail by
responding to direct mail or print media advertisements, online through the
Company's web site or by calling or faxing the Company. Audio Book Club
typically offers new members four audio books at a low introductory price ($.99
or less). By enrolling, the member commits to purchase a minimum number of
additional audio books (typically four) at Audio Book Club's regular prices
which generally range from $10.00 to $35.00 per audio book, which the Company
believes is comparable to and competitive with audio book retailers.

Audio Book Club encourages its members to purchase audio books in addition
to satisfying their minimum purchase commitment by offering all members special
discount pricing, such as discount prices for the second or third audio book
purchased when the first is purchased at regular price and programs which
enable members to receive free audio books based on bonus points received for
prior purchases. Upon enrollment, the Company sends to the new member a
"welcome package" consisting of a membership guide with information concerning
ordering, payment, returns, cancellation, discounts and the club's bonus point
and advantage member programs; a questionnaire; a welcome letter from the club
director; and a "Member-Get-a-Member" form which enables the member to receive
free audio books for soliciting another person to join Audio Book Club.

The Company engages in list rental programs to maximize the revenue
generation potential of its membership list. As Audio Book Club's membership
base grows, the Company anticipates that its list will become more attractive
to direct marketers as a source of potential customers.

Member Mailings

Audio Book Club members receive approximately 17 member mailings each
year, including 12 monthly mailings, 4 seasonal mailings and one expanded
offering mailing. Audio Book Club monthly mailings typically include a 32-page
catalog which, together with the "more titles" insert, offers approximately 500
titles, including a "featured selection" which is usually one of the most
popular titles at the time of mailing; "alternate selections" which are best
selling and other current popular titles; and "backlist selections" which are
long-standing titles that have continuously sold well. The seasonal mailings
typically include a 24-page catalog, a portion of which is devoted to a
seasonally-related theme. The annual expanded offering mailing typically
includes a 48 to 64-page catalog which offers substantially all of the titles
in the Company's inventory. Each member mailing also includes a negative option
reply form and a "Member-Get-a-Member" form. The Company currently engages
third-party creative consultants and print shops to design the creative aspects
of and print the catalogs and related materials included in the member
mailings.

Under the negative option reply system, the member receives the featured
selection unless he or she replies by the date specified on the reply card by
returning the reply card, calling the Company with a reply, faxing a reply to
the Company or e-mailing a reply to the Company via the Company's Internet web
site with a decision not to receive such selection. Members can also use any of
such methods to order additional selections from each catalog.

The Company's Editorial Director selects which titles to feature, add to
and remove from each catalog after consideration of, among other factors, an
evaluation of the author, audio book content and production quality; the
reader; sales of the author's previous audio books and printed books; the
author's reputation; the audio book's relation to a movie, television show or
other book or audio book; as well as independent publication reviews. The
Company offers a balance between unabridged and abridged audio books to satisfy
differing member preferences. In addition, the Company emphasizes the timely
introduction of new audio book titles to its catalogs.

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<PAGE>

The Company also offers a "special order" service which enables members to
call the Company and order virtually any of the approximately 68,000 published
titles in existence, whether or not listed in the Company's member mailings.

The Company intends to continue to test market complimentary products,
such as CD-Roms, digital compact disc format books, videos, audio related
products, audio and electronic equipment, storage racks and cases and audio
music cassettes and compact discs to determine which products, if any, to add
to its product offerings. The Company from time to time offers certain of such
products to Audio Book Club members by including a promotional insert with its
member mailings.

The Company also includes inserts for products or services of
non-competing companies in product shipments to customers and member mailings
for which it receives a fee based on the number of shipments and mailings in
which the insert is included. In addition, the Company is evaluating
opportunities to enter into joint venture arrangements with non-competing
companies to offer their products or services to Audio Book Club members.

Customer Service

In order to encourage members to maintain their relationship with Audio
Book Club and to maximize the long-term value of a member, the Company seeks to
provide friendly, efficient, personalized service. The Company's goal is to
remove potential barriers to making a purchase and to make members comfortable
shopping via mail order. Audio Book Club's negative option system makes it easy
for members to receive the featured selection without having to take any
action.

The Company offers faster ordering options, including (i) placing orders
online through the Company's web site, (ii) by calling the Company with an
order on its toll-free order hotline and (iii) faxing an order to the Company.
Orders are sent fourth class mail and are typically delivered 10 to 14 days
following the receipt by the Company. For an additional fee, members can
receive faster delivery of an order either by priority delivery, which takes 3
to 5 days, or by overnight delivery.

Members are billed for their purchases at the time their orders are
delivered and are required to make payment promptly. The Company generally
allows members in good standing to order up to $50 of products on credit, which
amount may be increased if the member maintains a good credit history with the
Company.

The Company's policy is to accept returns of damaged products and, to
maintain favorable customer relations, the Company generally accepts promptly
made returns of unopened products. The Company monitors each member's account
to determine if the member has made excessive returns. The Company's policy is
to terminate a membership if the member makes three consecutive returns of
either audio books ordered or of featured selections received because the
member did not return the reply card on time.

Fulfillment, Warehousing and Distribution

In October 1996, the Company entered into an agreement with National
Fulfillment Services ("NFS") pursuant to which NFS provides to the Company
order processing and data processing services. Such services include accepting
member orders, implementation of the Company's credit policies, inventory
tracking, billing, invoicing and generating periodic reports, such as reports
of sales activity, accounts receivable, aging customer profile and marketing
effectiveness. The Company's agreement with NFS expires on October 31, 1998,
unless earlier terminated by either party upon not less than 60 days notice.

In November 1996, the Company entered into an agreement with R.R. Donnelly
& Sons Company ("Donnelly") pursuant to which Donnelly provides to the Company
warehousing and distribution services. The initial term of the Company's
agreement with Donnelly expires on October 31, 1998 and the agreement provides
for automatic three-year renewals, provided that the Company may terminate the
agreement upon notice ranging from 60 days to six months (depending upon the
amount of termination payment) and Donnelly may terminate the agreement upon
notice of not less than six months.

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<PAGE>

Customer orders are sent directly to NFS where they are processed, and
invoices are generated by NFS and sent directly to Donnelly. Donnelly locates
the ordered audio books from inventory, packs and ships the order, using the
invoice as a packing list, to the Audio Book Club member.

Competition

The audio book and mail order club industries are intensely competitive
and highly fragmented. The Company competes with existing audio book clubs for
prospective members. The Company is currently aware of two other negative
option audio book clubs, Audiobook's Direct and a club operated by Columbia
House.

The Company also competes with all other outlets through which audio books
are offered, including bookstores, audio bookstores (which rent and, to a
lesser extent, primarily sell only audio books), retail establishments such as
convenience stores, video rental stores and wholesale clubs (e.g. Costco), and
mail order companies which offer audio books for rental and sale through
catalogs. In addition, the Company also competes with mail order clubs and
catalogs and other direct marketers that offer products with similar
entertainment value as audio books, such as music cassettes and compact discs,
printed books and videos, for discretionary consumer spending.

Intellectual Property

The Company holds two United States service mark registrations and has
applied for several additional service marks relating to slogans and designs
used in its advertisements, member mailings and member solicitation packages
and service marks relating to an animated character used on the Internet. The
Company believes that its service marks have significant value and are
important to the marketing of Audio Book Club.

The Company relies on trade secrets and proprietary know-how, and employs
various methods, to protect its ideas, concepts and membership database. In
addition, the Company typically obtains confidentiality agreements with its
executives officers, employees, list managers and appropriate consultants and
service suppliers.

Properties

The Company shares office space in Boca Raton, Florida with The Herrick
Company, Inc., a company wholly-owned by Norton Herrick, Chairman of the Board,
Chief Executive Officer and beneficially a principal shareholder of the
Company, pursuant to separate leases. The Company leases 1,155 square feet of
such space pursuant to a lease agreement which expires in November 2000. The
Company's rent is $1,167 per month, and will increase to $1,307 per month in
December 1997. The Company has the option to renew the lease for three-year
periods on two occasions. The Herrick Company, Inc. has guaranteed the
Company's obligations under the Company's lease for the Florida property. The
Company also subleases 1,550 square feet of space in Morristown, New Jersey at
an annual rent of $24,000 pursuant to a sublease agreement dated as of January
1, 1995 between the Company and H. H. Realty Investors, Inc., a company
wholly-owned by Michael Herrick, Chief Operating Officer, Vice Chairman of the
Board and a director of the Company, Howard Herrick, Executive Vice President
and a director of the Company, and Evan Herrick, a son of Norton Herrick and
brother of Michael and Howard Herrick. The sublease relating to the New Jersey
property expires in December 1998, and may be extended if the master lease is
extended. H.H. Realty Investors, Inc. leases such property from an independent
third party. The Company believes that its leases are on commercially
reasonable terms.

Employees

As of September 1, 1997, the Company had 10 full-time employees and one
part-time employee, of whom five were in management and five were in
operational positions. The Company believes its employee relations to be good.
None of the Company's employees is covered by a collective bargaining
agreement.

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<PAGE>

MANAGEMENT

Directors and Executive Officers

The following are the directors, director designees and executive officers
of the Company:

Name Age Position
---- ----- --------
Norton Herrick 58 Chief Executive Officer, Chairman of the Board
and Director
Michael Herrick 30 Chief Operating Officer, Vice Chairman of the
Board and Director
Jesse Faber 42 President and Director Designee
Howard Herrick 32 Executive Vice President and Director
Robert Klein 49 Chief Financial Officer and Treasurer
Roy Abrams 54 Director Designee
George Farley 59 Director Designee

Norton Herrick co-founded the Company, has been Chief Executive Officer
and Chairman of the Company since January 1996 and a director of the Company
since its inception, and was President of the Company from its inception until
January 1996. Mr. Herrick has been a private investor for over 30 years and is
currently Chairman and Chief Executive Officer of The Herrick Company, Inc., a
private investment firm he founded. Through his wholly-owned affiliates, Mr.
Herrick has owned and managed income producing properties, including office
buildings, shopping centers and multi-family apartment complexes, and has
completed transactions with respect to approximately 250 income producing
properties valued at an aggregate of approximately $2 billion. Mr. Herrick is
involved in the management of numerous entities he formed to acquire, finance,
manage and lease office, industrial and retail properties; and to acquire,
operate, manage, redevelop and sell residential rental properties. Mr. Herrick
serves on the advisory board of the Make A Wish Foundation, the advisory
committee of the National Multi Housing Council and the National Board of
Directors for People for the American Way.
Michael Herrick co-founded the Company, has been Vice Chairman of the
Board of the Company since January 1996, Chief Operating Officer of the Company
since January 1997 and director of the Company since its inception, and has
held various other offices with the Company since its inception. Since August
1993, Michael Herrick has been an officer (since January 1994, Vice President)
of the corporate general partner of a limited partnership, which limited
partnership is a principal shareholder of The Walking Company, a nationwide
retailer of comfort and walking footwear and related apparel and accessories.
Since May 1989, Mr. Herrick has been employed by The Herrick Company, Inc., and
is currently one of its Vice Presidents. Mr. Herrick is also an officer of the
corporate general partners of numerous limited partnerships which acquire,
finance, manage and lease office, industrial and retail properties; and which
acquire, operate, manage, redevelop and sell residential rental properties.
Jesse Faber has been President of the Company since October 1996 and has
agreed to serve as a director of the Company as of the consummation of this
Offering. From 1989 to October 1996, Mr. Faber was Senior Vice President and
Partner of AyerDirect, a direct response advertising agency wholly-owned by
McManus, Inc., one of the ten largest advertising and marketing agencies in the
world. From 1984 to 1989, Mr. Faber was Management Supervisor of Grey Direct, a
direct response advertising agency.
Howard Herrick co-founded the Company and has been Executive Vice
President, Editorial Director and a director of the Company since its
inception. Since August 1993, Howard Herrick has been Vice President of the
corporate general partner of a limited partnership, which limited partnership
is a principal shareholder of The Walking Company. Since 1988, Mr. Herrick has
been an officer of The Herrick Company, Inc. and is currently its President.
Mr. Herrick is also an officer of the corporate general partners of numerous
limited partnerships which acquire, finance, manage and lease office,
industrial and retail properties; and which acquire, operate, manage, redevelop
and sell residential rental properties.
Robert Klein has been Chief Financial Officer and Treasurer of the Company
on a part-time basis since January 1997. Since October 1992, Mr. Klein has been
Director of Finance and Taxation of The Herrick Company, Inc. From January 1983
to October 1992, Mr. Klein was an independent accountant and consultant and,
from 1987 through 1989, Mr. Klein was also Tax Director for Prime Motor Inns,
an operator, developer and franchisor of hotels and motels. From April 1978
through 1982, Mr. Klein was employed by Daon Corporation, a diversified real
estate company, last holding the titles of Vice President, Secretary and
Director. From 1970 through April 1978, Mr. Klein was with Arthur Andersen &
Company, an independent public accounting firm last holding the title of Tax
Manager.

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<PAGE>

The Board of Directors will appoint Jesse Faber and the following two
additional non-management directors upon the consummation of this Offering.

Roy Abrams has agreed to serve as a director the Company as of the
consummation of this Offering. Since April 1993 and from 1986 through March
1990, Mr. Abrams has owned and operated Abrams Direct Marketing, a marketing
consulting firm. From April 1990 to April 1993, Mr. Abrams was Vice President
of New Business Development of Getting to Know You, Inc., a new homeowner
welcoming service. From 1981 through 1985, Mr. Abrams was President of Margrace
Corporation, a publicly-held direct marketing company. From 1980 through 1981,
Mr. Abrams was a director of mail order marketing of Hearst Corporation, a
publishing company. From 1976 to 1979, Mr. Abrams was employed by Columbia
House, a negative option and continuity direct marketing company, most recently
as Vice President, Merchandise and Continuity Marketing. From 1975 to 1976, Mr.
Abrams was director of Mail Order Merchandise Marketing for American Express
Company.

George Farley has agreed to serve as a director of the Company as of the
consummation of this Offering. Since September 1995, Mr. Farley has been Group
Vice President of Finance/Chief Financial Officer of Twin County Grocers, Inc.,
a food distribution company. From 1974 to September 1995, Mr. Farley was a
partner of BDO Seidman, LLP, an independent public accounting firm, and, from
1962 to 1974, Mr. Farley was employed by BDO Seidman, LLP. Mr. Farley is also
currently a director of Tel-Save Holdings, Inc., Essential Resources, Inc. and
Recticon Enterprises, Inc.

Michael Herrick and Howard Herrick are sons of Norton Herrick.

The Board of Directors is classified into three classes, each with a term
of three years, with only one class of directors standing for election by the
shareholders in any year. Norton Herrick and Jesse Faber are Class I directors
and stand for re-election at the 1998 annual meeting of shareholders, Michael
Herrick and Roy Abrams are Class II directors and stand for re-election at the
1999 annual meeting of shareholders and Howard Herrick and George Farley are
Class III directors and stand for re-election at the 2000 annual meeting of
shareholders. Executive officers of the Company serve at the direction of the
Board and until their successors are duly elected and qualified. The Company is
currently seeking to retain a full-time Chief Financial Officer.

The Company reimburses directors for reasonable travel expenses incurred
in connection with their activities on behalf of the Company but does not pay
its directors any fees for Board participation.

In connection with this Offering, the Company has agreed that it will, for
a period of three years following the date of this Prospectus, upon the request
of the Representative, nominate and use its best efforts to elect a designee
(reasonably acceptable to the Company) of the Representative (which designee
may change from time to time) as a director of the Company or, at
Representative's option, appoint such designee as a non-voting advisor to the
Company's Board of Directors. The Representative has not yet exercised its
rights to designate such a person. See "Underwriting."

Key Employees

Christine A. Kelly, 34, has been Marketing Manager of the Company since
February 1997 and is responsible for coordinating, with senior management, the
Company's member acquisition and retention advertising activities. From June
1995 through January 1997, Ms. Kelly was media manager of Collier Newfield, a
publishing company. From January 1994 through June 1995, Ms. Kelly was a media
analyst for Doubleday Book and Music Clubs, Inc. From August 1988 to January
1994, Ms. Kelly was employed by Columbia House Company, most recently as
manager -- music club administration.

Tracy Lamb, 33, has been employed by the Company since May 1997 as its
list manager. From July 1996 through April 1997, Ms. Lamb was director of list
brokerage of Worlddata, a list management company. From 1990 through June 1996,
Ms. Lamb was employed by Tiger Direct, Inc., a computer equipment mail order
company, most recently as circulation manager. From 1987 to 1990, Ms. Lamb was
a media planner and buyer for McFarland & Drier, Inc.

Jeffrey P. Wittstock, 31, has been employed by the Company since May 1997
and has been responsible for analyzing the results of the Company's direct
marketing efforts. From August 1994 through April 1997, Mr. Wittstock was
continuity supervisor of QVC, Inc., an operator of a shop-at-home television
network. From

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<PAGE>

February 1992 through June 1994, Mr. Wittstock was a sales planner and analyst
for The Franklin Mint, a marketing company. From 1991 to 1992, Mr. Wittstock
was a marketing analyst for Foster Manufacturing, a subsidiary of North
American Publishing Company. From 1988 to 1991, Mr. Wittstock was an area
supervisor for RGIS, an inventory control company.

Audit Committee

The Board of Directors has established an audit committee which, upon the
consummation of this Offering, will be comprised of Messrs. Michael Herrick,
Roy Abrams and George Farley. The audit committee is responsible for making
recommendations concerning the engagement of the independent public
accountants, reviewing the plans and results of the audit engagement with the
independent public accountants, approving professional services provided by the
independent public accountants and reviewing the adequacy of the Company's
internal accounting controls.

Executive Compensation

The following table sets forth certain compensation paid by the Company
during the fiscal year ended December 31, 1996 to Norton Herrick, its Chief
Executive Officer and Chairman of the Board and each executive officer who
received compensation in excess of $100,000 during the fiscal year ended
December 31, 1996.

Summary Compensation Table

<TABLE>
<CAPTION>
Annual Compensation
------------------------------------
Other Annual
Name and Principal Position Year Salary Bonus Compensation
- --------------------------------- ------ ---------- ------- -------------
<S> <C> <C> <C> <C>
Norton Herrick
Chairman of the Board and Chief
Executive Officer ............ 1996 $ -0- $ -0- --
Howard Herrick
Executive Vice President ...... 1996 $102,000 $ -0- --
</TABLE>

The Company did not grant any options to its executive officers during the
year ended December 31, 1996.

Employment Agreements

The Company has entered into a two-year employment agreement, effective as
of the date of this Prospectus, with Norton Herrick which provides for an
annual base compensation of $100,000 and such increases and bonuses as the
Board of Directors may from time to time determine, based on criteria that it
deems appropriate at such time but which it has not yet been established. The
employment agreement does not require that Mr. Herrick devote any fixed amount
of time to the business and activities of the Company. The employment agreement
contains a provision prohibiting Mr. Herrick from, on his own behalf or on
behalf of any other person, persons, firms, partnership, corporation or
company, engaging or participating in any activities which are in direct
conflict with the interests of the Company; and from soliciting or attempting
to solicit the business or patronage of any person, firm, corporation, company
or partnership which had previously been a customer of the Company, for the
purpose of selling products and services similar to those provided by the
Company during the term of the employment agreement and for a period of two
years thereafter. There can be no assurance, however, that a court will not
enforce such provision or only partially enforce such provision. The employment
agreement also provides that if Mr. Herrick's employment is terminated under
certain circumstances, including as a result of a change in control, Mr.
Herrick will be entitled to receive severance pay equal to the greater of
$200,000 or two times the total compensation received by Mr. Herrick from the
Company during the twelve months prior to the date of termination.

The Company has entered into a three-year employment agreement, effective
as of the date of this Prospectus, with Michael Herrick which provides for an
annual base compensation of $125,000 and such increases and bonuses as the
Board of Directors may from time to time determine, based on criteria that it
deems appropriate at such time but which it has not yet been established. The
employment agreement requires Mr. Herrick to devote substantially all of his
business time to the Company's business and affairs. The employment agreement
contains a provision prohibiting Mr. Herrick from, on his own behalf or on
behalf of any other person, persons, firms, partnership, corporation or
company, engaging or participating in any activities which are in

33
<PAGE>

direct conflict with the interests of the Company; and from soliciting or
attempting to solicit the business or patronage of any person, firm,
corporation, company or partnership which had previously been a customer of the
Company, for the purpose of selling products and services similar to those
provided by the Company during the term of the employment agreement and for a
period of two years thereafter. There can be no assurance, however, that a
court will not enforce such provision or only partially enforce such provision.
The employment agreement also provides that if Mr. Herrick's employment is
terminated under certain circumstances, including as a result of a change in
control, Mr. Herrick will be entitled to receive severance pay equal to the
greater of $375,000 or three times the total compensation received by Mr.
Herrick from the Company during the twelve months prior to the date of
termination.

In May 1997, the Company entered into an employment agreement (the "May
Employment Agreement") with Jesse Faber which provides for an annual base
compensation of approximately $121,000 and a bonus of $40,000, payable $10,000
on the first day of July, August, September and October 1997, provided Mr.
Faber is employed by the Company on each such date. The May Employment
Agreement expires on October 31, 1997. In September 1997, the Company entered
into a one-year employment agreement with Mr. Faber, to be effective upon the
expiration of the May Employment Agreement which provides for an annual base
compensation of $140,000 and a bonus of $35,000, provided that he is employed
by the Company on October 31, 1998. The Company has granted to Mr. Faber
options to purchase 50,000 shares of Common Stock at an exercise price equal to
110% of the initial public offering price of the Common Stock. See "-- 1997
Stock Option Plan."

The Company has entered into a three-year employment agreement effective
as of the date of this Prospectus, with Howard Herrick which provides for an
annual base compensation of $125,000 and such increases and bonuses as the
Board of Directors may from time to time determine, based on criteria that it
deems appropriate at such time but which it has not yet been established. The
employment agreement requires Mr. Herrick to devote substantially all of his
business time to the Company's business and affairs. The employment agreement
contains a provision prohibiting Mr. Herrick from, on his own behalf or on
behalf of any other person, persons, firms, partnership, corporation or
company, engaging or participating in any activities which are in direct
conflict with the interests of the Company; and from soliciting or attempting
to solicit the business or patronage of any person, firm, corporation, company
or partnership which had previously been a customer of the Company, for the
purpose of selling products and services similar to those provided by the
Company during the term of the employment agreement and for a period of two
years thereafter. There can be no assurance, however, that a court will not
enforce such provision or only partially enforce such provision. The employment
agreement also provides that if Mr. Herrick's employment is terminated under
certain circumstances, including as a result of a change in control, Mr.
Herrick will be entitled to receive severance pay equal to the greater of
$375,000 or three times the total compensation received by the executive from
the Company during the twelve months prior to the date of termination.

1997 Stock Option Plan

In June 1997, the Company's shareholders approved a stock option plan (the
"Option Plan") pursuant to which 750,000 shares of Common Stock have been
reserved for issuance upon the exercise of options designated as either (i)
options intended to constitute incentive stock options ("ISOs") under the
Internal Revenue Code of 1986, as amended (the "Code") or (ii) nonqualified
options. ISOs may be granted under the Option Plan to officers and employees of
the Company. Non-qualified options may be granted to consultants, directors
(whether or not they are employees), employees or officers of the Company.

The purpose of the Option Plan is to encourage stock ownership by certain
directors, officers and employees of the Company and other persons instrumental
to the success of the Company. The Option Plan is intended to qualify under
Rule 16b-3 under the Securities Exchange Act of 1934. The Board of Directors,
within the limitations of the Option Plan, determines the persons to whom
options will be granted, the number of shares to be covered by each option,
whether the options granted are intended to be ISOs, the duration and rate of
exercise of each option, the option purchase price per share and the manner of
exercise, and the time, manner and form of payment upon exercise of an option.

ISOs granted under the Option Plan may not be granted at a price less than
the fair market value of the Common Stock on the date of grant (or 110% of fair
market value in the case of persons holding 10% or more

34
<PAGE>

of the voting stock of the Company). The aggregate fair market value of shares
for which ISOs granted to any employee are exercisable for the first time by
such employee during any calendar year (under all stock option plans of the
Company and any related corporation) may not exceed $100,000. Options granted
under the Option Plan will expire not more than ten years from the date of
grant (five years in the case of ISOs granted to persons holding 10% or more of
the voting stock of the Company). All options granted under the Option Plan are
not transferable during an optionee's lifetime (unless otherwise provided in
the option agreement) but are transferable at death by will or by the laws of
descent and distribution. In general, upon termination of employment of an
optionee, all options granted to such person which are not exercisable on the
date of such termination immediately terminate, and any options that are
exercisable terminate 90 days following termination of employment.

In September 1997, the Company granted to Mr. Faber options to purchase
50,000 shares of Common Stock at an exercise price equal to 110% of the initial
public offering price of the Common Stock. Such options shall vest as to
one-fifth of the shares covered thereby annually over a five-year period
commencing on October 31, 1998, provided, however, that such options shall
terminate and be cancelled if Mr. Faber is no longer employed by the Company
prior to the date on which such options vest. Such options shall be exercisable
for a period of five years commencing immediately upon vesting, provided,
however, if Mr. Faber is no longer employed by the Company, such options shall
expire on the earlier of the date Mr. Faber is no longer employed by the
Company (or up to one year thereafter under certain circumstances) or five
years following the date on which such options vest.

Exculpatory Provisions and Indemnification Matters

The Company's Articles of Incorporation and By-Laws provide that the
Company shall indemnify its directors and officers to the fullest extent
permitted by the Florida Act. The Florida Act provides that no director or
officer of the Company shall be personally liable to the Company or its
shareholders for damages for breach of any duty owed to the Company or its
shareholders, except for liability for (i) acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (ii) any
unlawful payment of a dividend or unlawful stock repurchase or redemption in
violation of the Florida Act, (iii) any transaction from which the director
received an improper personal benefit or (iv) a violation of a criminal law.

lnsofar as indemnification for liabilities arising under the Securities
Act may be permitted for directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

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<PAGE>

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information, immediately prior to
the consummation of this Offering and as adjusted to reflect the sale by the
Company of the 2,300,000 Shares offered hereby (based on information obtained
from the persons named below), relating to the beneficial ownership of shares
of Common Stock by: (i) each person or entity who is known by the Company to
own beneficially 5% or more of the outstanding Common Stock, (ii) each of the
Company's directors and (iii) all directors and executive officers of the
Company as a group.

<TABLE>
<CAPTION>
Percentage of Shares
Beneficially Owned(2)
----------------------
Name and Address of Beneficial Number of Shares Before After
Owners(1) Beneficially Owned(2) Offering Offering
- ----------------------------------------- ---------------------- ---------- ---------
<S> <C> <C> <C>
Norton Herrick ........................ 3,691,100(3) 95.8% 60.0%
Howard Herrick ........................ 3,691,100(4) 95.8 60.0
Michael Herrick ........................ 488,460(5) 12.7 7.9
Jesse Faber ........................... 0(6) 0 0
Roy Abrams ........................... 0 0 0
George Farley ........................... 0 0 0
All directors and executive officers as a
group (7 persons) ..................... 3,691,100(3) 95.8% 60.0%
(4)(5)(6)
</TABLE>

- ------------
(1) The address for each named individual or group is in care of Audio Book
Club, Inc., 2295 Corporate Blvd., Suite 222, Boca Raton, Florida 33431.

(2) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock beneficially owned by them. A person is deemed to be the
beneficial owner of securities that can be acquired by such person within
60 days from the date of this Prospectus upon the exercise of options,
warrants or convertible securities. Each beneficial owner's percentage
ownership is determined by assuming that options, warrants or convertible
securities that are held by such person (but not those held by any other
person) and which are exercisable within 60 days of the date of this
Prospectus have been exercised and converted. Assumes 3,853,920 shares of
Common Stock outstanding prior to this Offering (including the 597,520
shares to be issued immediately prior to the consummation of this Offering
upon conversion of $5,975,200 of indebtedness) and a base of approximately
6,153,920 shares of Common Stock outstanding immediately after this
Offering, before any consideration is given to other outstanding options.
See "Description of Securities."

(3) Represents (i) 2,714,180 shares held by N. Herrick Irrevocable ABC Trust of
which Norton Herrick is the sole beneficiary and Howard Herrick is the
sole trustee (the "N. Herrick Trust"), (ii) 488,460 shares of Common Stock
held by Howard Herrick and (iii) 488,460 shares of Common Stock held by
M.E. Herrick Irrevocable Trust, of which Michael Herrick is the sole
beneficiary and Howard Herrick is the sole trustee (the "M.E.H. Trust").
The N. Herrick Trust agreement provides that Howard Herrick shall have
sole voting and dispositive power over the shares held by the trust.
Howard Herrick has irrevocably granted to Norton Herrick sole dispositive
power with respect to the shares of Common Stock held by Howard Herrick on
his own behalf and on behalf of the M.E.H. Trust.

(4) Includes the shares of Common Stock referred to in footnote 3(i) above and
footnote (5) below.

(5) Represents shares held by the M.E.H. Trust. The M.E.H. Trust agreement
provides that Howard Herrick shall have sole voting and dispositive power
over the shares held by the M.E.H. Trust and Howard Herrick has granted to
Norton Herrick sole dispositive power over the shares held by the M.E.H.
Trust.

(6) Does not include options to purchase 50,000 shares of Common Stock which
vest at various times commencing October 31, 1998.

36
<PAGE>

CERTAIN TRANSACTIONS

As of January 1, 1995, the Company entered into a sublease agreement with
H.H. Realty Investors, Inc., a company wholly-owned by Michael Herrick, Chief
Operating Officer, Vice Chairman of the Board and a director of the Company,
Howard Herrick, Executive Vice President and a director of the Company, and
Evan Herrick, a son of Norton Herrick and brother of Michael Herrick and Howard
Herrick. Pursuant to the agreement, the Company subleases 1,550 square feet of
space in Morristown, New Jersey at an annual rent of $24,000. H.H. Realty
Investors, Inc. leases such property from an independent third party.
Additionally, The Herrick Company, Inc., a company wholly-owned by Norton
Herrick, Chairman of the Board, Chief Executive Officer and a principal
shareholder of the Company, guaranteed the Company's obligations under the
Company's lease for its Florida office.

On November 17, 1995, Norton Herrick entered into a loan agreement
pursuant to which Norton Herrick agreed to loan the Company up to $8,000,000,
including the $5,380,000 aggregate amount of loans made to the Company by
Norton Herrick as of such date. The loan agreement was subsequently amended to
increase permitted borrowings by the Company of up to $13,000,000 and Norton
Herrick subsequently assigned his rights under the loan agreement to N. Herrick
Irrevocable ABC Trust, of which Norton Herrick is the sole beneficiary and
Howard Herrick is the sole trustee (the "N. Herrick Trust"). Borrowings under
the loan agreement are non-interest bearing and are permitted by the Company
until the earlier of June 30, 1998 or the date of this Prospectus, and, as
described below, will be converted into equity upon the consummation of this
Offering. To date, Norton Herrick, directly and through the N. Herrick Trust,
has loaned the Company an aggregate of $11,975,200, including $4,105,000,
$5,575,200 and $595,000 during the years ended December 31, 1995 and 1996 and
six months ended June 30, 1997, respectively. In May 1997, the Company used the
proceeds from the $6,000,000 loan from Bank of America National Trust and
Savings Association (the "Bank") to repay a portion of the outstanding
indebtedness under the loan agreement with the N. Herrick Trust. The shares of
Common Stock held by the N. Herrick Trust were pledged to the Bank as security
for the $6,000,000 loan. In the event the Company fails to repay the loans at
maturity, the personal guarantee of Norton Herrick to the Bank will become
effective. The Company intends to use a portion of the proceeds of the Offering
to repay the $9,000,000 aggregate principal amount of loans from the Bank, plus
accrued interest thereon.

Immediately prior to the consummation of this Offering, the N. Herrick
Trust is converting the outstanding $5,975,200 of indebtedness owed to it under
the loan agreement into 597,520 shares of Common Stock at a price per share
equal to the initial offering price of the Common Stock.

In August 1996, Norton Herrick personally guaranteed an irrevocable
standby letter of credit in the amount of $50,000 issued by the Bank on behalf
of the Company to a vendor of the Company.

On May 12, 1997, Howard Herrick entered into a consolidation and
restatement of loan agreements with the Company relating to the aggregate
$400,000 loaned to the Company by Howard Herrick (consisting of a $50,000 loan
made in June 1994 and a $350,000 loan made in February 1997). Such borrowings,
did not bear interest through July 31, 1997 and, thereafter, bore interest at
an annual rate equal to the greater of 10% or the prime rate charged by
Citibank, N.A. of New York ("Citibank"). This loan, together with accrued
interest, was repaid in September 1997.

On May 12, 1997, the M.E. Herrick Irrevocable Trust (the "M.E.H. Trust"),
of which Michael Herrick is the sole beneficiary and Howard Herrick is the sole
trustee, entered into a loan agreement with the Company relating to the
aggregate $400,000 loaned to the Company by the M.E.H. Trust (consisting of a
$50,000 loan made in June 1994 and a $350,000 loan made in May 1997). Such
borrowings did not bear interest through July 31, 1997 and, thereafter, bore
interest at an annual rate equal to the greater of 10% or the prime rate
charged by Citibank. This loan, together with accrued interest, was repaid in
September 1997.

Companies wholly-owned by Norton Herrick have in the past provided certain
accounting, administrative and general office services to, and obtained
insurance coverage for, the Company at cost since the Company's inception, and
the Company paid to such entities for such services, in the aggregate,
$115,839, $38,928 and $43,505, during the years ended December 31, 1995 and
1996 and the six months ended June 30, 1997, respectively. The Company
anticipates obtaining similar services from time to time from companies
affiliated with Norton Herrick for which it will reimburse such companies' cost
to provide such services to the Company.

37
<PAGE>

During 1997, Abrams Direct Marketing ("ADM"), a company wholly-owned by
Roy Abrams, a director designee of the Company, provided independent marketing
consulting services to the Company and has been paid approximately $25,500 by
the Company for such services. In June 1997, the Company entered into a
consulting agreement with ADM pursuant to which ADM assists the Company in
connection with marketing activities, including designing, implementing and
reviewing the results of direct marketing campaigns and selecting direct
marketing lists, on an as-needed basis at the rate of $250 per hour.

The Company's policy with respect to transactions between the Company and
its officers, directors 5% or greater shareholders is that each such future
transaction (other than in accordance with existing agreements described in
this Prospectus) will be on terms no less favorable than could be obtained from
independent third parties. Notwithstanding the foregoing, companies affiliated
with Norton Herrick may continue to provide certain accounting, administrative
and general office services to, and obtain insurance coverage for, the Company
at cost.

38
<PAGE>

DESCRIPTION OF SECURITIES

Capital Stock

General

The Company is authorized to issue 25,000,000 shares of Common Stock, no
par value, and 5,000,000 shares of Preferred Stock, no par value. As of the
date of this Prospectus, there are 3,256,400 shares of Common Stock
outstanding, which are held of record by four shareholders. Immediately prior
to the consummation of this Offering, there will be approximately 3,853,920
shares of Common Stock outstanding and no shares of Preferred Stock
outstanding.

Common Stock

The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of the shareholders, including the election of
directors, and, subject to preferences that may be applicable to any Preferred
Stock outstanding at the time, are entitled to receive ratably such dividends,
if any, as may be declared from time to time by the Board of Directors out of
funds legally available therefor. In the event of liquidation or dissolution of
the Company, the holders of Common Stock are entitled to receive all assets
available for distribution to the shareholders, subject to any preferential
rights of any Preferred Stock then outstanding. The holders of Common Stock
have no preemptive or other subscription rights, and there are no conversion
rights or redemption or sinking fund provisions with respect to the Common
Stock. All outstanding shares of Common Stock are, and the shares of Common
Stock offered hereby upon issuance and sale will be, fully paid and non-
assessable. The rights, preferences and privileges of the holders of Common
Stock are subject to, and may be adversely affected by, the right of the
holders of any shares of Preferred Stock which the Company may designate in the
future.

Preferred Stock

Authorized but undesignated shares of Preferred Stock may be issued from
time to time in one or more series upon authorization by the Company's Board of
Directors. The Board of Directors, without further approval of the
shareholders, is authorized to fix the dividend rights and terms, conversion
rights, voting rights, redemption rights and terms, liquidation preferences,
and other rights, preferences, privileges and restrictions applicable to each
series of Preferred Stock. The issuance of Preferred Stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes could, among other things, adversely affect the voting power of the
holders of Common Stock and, under certain circumstances, make it more
difficult for a third party to gain control of the Company, prevent or
substantially delay a change of control, discourage bids for the Company's
Common Stock at a premium or otherwise adversely affect the market price of the
Common Stock.

Transfer Agent

The transfer agent for the Common Stock is Continental Stock Transfer &
Trust Company, 2 Broadway, New York, New York 10004.

Reports to Shareholders

The Company intends to file a registration statement with the Securities
and Exchange Commission to register its Common Stock and Warrants under the
provisions of Section 12(b) of the Exchange Act prior to the date of this
Prospectus and has agreed with the Underwriters that it will use its best
efforts to continue to maintain such registration. Such registration will
require the Company to comply with periodic reporting, proxy solicitation and
certain other requirements of the Exchange Act.

39
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon the consummation of this Offering, the Company will have 6,153,920
shares of Common Stock outstanding. All 2,300,000 of the Shares being offered
hereby will be immediately tradeable without restriction or further
registration under the Securities Act. The remaining 3,853,920 shares of Common
Stock outstanding are deemed to be "restricted securities," as that term is
defined under Rule 144 promulgated under the Securities Act, in that such
shares were acquired by the shareholders of the Company in transactions not
involving a public offering, and, as such, may only be sold pursuant to a
registration statement under the Securities Act, in compliance with the
exemption provisions of Rule 144, or pursuant to another exemption under the
Securities Act. Of the 3,853,920 restricted shares of Common Stock, 3,093,580
shares will become eligible for sale under Rule 144, subject to the volume
limitations prescribed by the Rule and the contractual restrictions described
below commencing 90 days following the date of this Prospectus.

In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or persons whose shares are aggregated with an affiliate), who has
owned restricted shares of Common Stock beneficially for at least one year is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class or, if the common stock is quoted on the Nasdaq, the average weekly
trading volume during the four calendar weeks preceding the sale. A person who
has not been an affiliate of the Company for at least three months immediately
preceding the sale and who has beneficially owned shares of Common Stock for at
least two years is entitled to sell such shares under Rule 144 without regard
to any of the limitations described above.

All of the Company's current officers, directors and security holders have
agreed with the Representative not to sell or otherwise dispose of any
securities of the Company for a period of 13 months from the date of this
Prospectus without the Representative's prior written consent. The Company has
granted certain demand and "piggy-back" registration rights to the
Representative with respect to the shares of Common stock issuable upon
exercise of the Representatives' Warrants.

Prior to this Offering, there has been no market for the Common Stock and
no prediction can be made as to the effect, if any, that public sales of shares
of Common Stock or the availability of such shares for sale will have on the
market prices of the Common Stock prevailing from time to time. Nevertheless,
the possibility that substantial amounts of Common Stock may be sold in the
public market may adversely affect prevailing market prices for the Common
Stock and could impair the Company's ability in the future to raise additional
capital through the sale of its equity securities.

40
<PAGE>

UNDERWRITING

The Underwriters named below (the "Underwriters"), for whom L.H. Friend,
Weinress, Frankson & Presson, Inc. acting as representative (the
"Representative"), have severally agreed, subject to the terms and conditions
of the Underwriting Agreement, between the Company and the Representative (the
"Underwriting Agreement"), to purchase from the Company, and the Company has
agreed to sell to the Underwriters on a firm commitment basis, the respective
number of shares of Common stock set forth opposite their name below.

Number of Shares
Underwriter of Common Stock
- ----------- -----------------
L.H. Friend, Weinress, Frankson & Presson, Inc. ...... 1,095,000
Allen & Company Incorporated ........................ 90,000
Cruttenden Roth Incorporated ........................ 90,000
H.D. Brous & Co., Inc. .............................. 90,000
J.W. Charles Securities, Inc. ........................ 90,000
Pauli & Company, Inc. ................................. 90,000
Van Kasper & Company ................................. 90,000
National Securities Corporation ..................... 65,000
Cohig & Associates, Inc. .............................. 50,000
Commonwealth Associates .............................. 50,000
First Colonial Securities Group, Inc. ............... 50,000
First Equity Corporation of Florida .................. 50,000
First Southwest Company .............................. 50,000
Frederick & Company, Inc. ........................... 50,000
Joseph Charles & Associates, Inc. ..................... 50,000
Laidlaw Securities, Inc. .............................. 50,000
Morgan Fuller Capital Group, LLC ..................... 50,000
Nutmeg Securities, Ltd. .............................. 50,000
Smith, Moore & Co. .................................... 50,000
Starr Securities, Inc. .............................. 50,000
----------
Total ............................................. 2,300,000
==========

The Underwriters are committed to purchase all of the Common Stock offered
hereby, if any of the Common Stock is purchased. The Underwriting Agreement
provides that the obligations of the several Underwriters are subject to
conditions precedent specified therein.

The Company has been advised by the Representative that it proposes
initially to offer the shares of Common Stock to the public at the initial
public offering price set forth on the cover page of this Prospectus and to
certain dealers at such prices less concessions not in excess of $.44 per share
of Common Stock. Such dealers may re-allow a concession not in excess of $.10
per share of Common Stock to certain other dealers. After the initial public
offering, the public offering prices, concession and reallowance may be changed
by the Representative.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute
to payments that the Underwriters may be required to make. The Company has
agreed to pay the Representative underwriting discounts and commissions of 8%
of the gross proceeds from the sale of the Common Stock offered hereby and a
nonaccountable expense allowance of 2.75% of the gross proceeds from the sale
of the Common Stock offered hereby, of which $50,000 has been paid as of the
date of this Prospectus. A finder's fee of $60,000 will be paid out of such
nonaccountable expense allowance to the indivdual who introduced the Company to
the Representative. In addition, the Company has paid $50,000 of expenses
incurred in connection with due diligence and informational meetings with
potential investors.

The Selling Shareholder and the Company have granted to the Underwriters
an over-allotment option, exercisable within 45 days of the date of this
Prospectus, to purchase up to 110,000 and 235,000 additional shares of Common
Stock, respectively, at the initial public offering price per share, less
underwriting discounts and commissions (the "Over-Allotment Option"). The first
shares to be issued in connection with the exercise of all or a portion of the
Over-Allotment Option will be purchased by the Underwriters from the Selling
Shareholder.

41
<PAGE>

To the extent such option is exercised, each Underwriter will become obligated,
subject to certain conditions, to purchase approximately the same percentage of
shares of Common Stock as the percentage it was obligated to purchase pursuant
to the Underwriting Agreement. Such option may be exercised only for the
purpose of covering over-allotments, if any, incurred in the sale of the Common
Stock offered hereby.

In connection with this Offering, the Company has agreed to sell to the
Representative and its designees, for nominal consideration, warrants to
purchase from the Company up to 230,000 shares of Common Stock (the
"Representative's Warrants"). The Representative's Warrants are exercisable at
a price of $16.50 per share (165% of the initial public offering price per
share) for a period of five years commencing on the effectiveness of this
Offering. However, the Representative's Warrants may not be sold, transferred,
assigned or hypothecated for a period of one year from the date of this
Prospectus, except to officers of the Representative. The Representative's
Warrants provide for adjustments in the number of shares of Common Stock
issuable upon the exercise thereof and in the exercise price of the
Representative's Warrants as a result of certain events, including subdivisions
and combinations of the shares of Common Stock. The Representative's Warrants
grant to the holders thereof certain rights of registration for the Common
Stock issuable upon exercise of the Representative's Warrants.

All of the officers, directors and security holders of the Company as of
the date of this Prospectus, have agreed not to, directly or indirectly, offer,
issue, sell, contract to sell, grant any option for the sale of or otherwise
dispose of any equity securities of the Company for a period of thirteen months
following the effective date of the Registration Statement without the prior
written consent of the Representative, except for the Common Stock issued
pursuant to the Over-Allotment Option. An appropriate legend shall be marked on
the reverse of the certificates representing all such securities. The Company
has agreed not to, without the prior written consent of the Representative,
offer, issue, sell, contract to sell, grant any option for the sale of or
otherwise dispose of any equity securities for a period of thirteen months
following the effective date of the Registration Statement, except for options
under the Option Plan which have an exercise price no less than the market
price of the Common Stock on the date of grant.

The Company has agreed that, for a period of three years from the date of
this Prospectus, if so requested by the Representative, to nominate and use its
best efforts to elect a designee (reasonably acceptable to the Company) of the
Representative as a director of the Company, or, at the Representative's
option, as a non-voting advisor to the Company's Board of Directors. Such
person shall be entitled to attend all such meetings and to receive all notices
and other correspondence and communications sent by the Company to members of
its Board of Directors. The Company's officers, directors and shareholders have
agreed to vote their shares of Common Stock in favor of such designee. The
Representative has not yet exercised its right to designate such a person. The
Company has agreed to reimburse the designee of the Representative for such
designee's out-of-pocket expenses incurred in connection with such designee's
attendance of meetings of the Board of Directors.

Prior to this Offering, there has been no public trading market for the
Common Stock. Consequently, the initial public offering price of the Common
Stock has been determined by negotiation between the Company and the
Representative and does not necessarily bear any relationship to the Company's
asset value, net worth or other established criteria of value. The factors
considered in such negotiations, in addition to prevailing market conditions,
included the history of and prospects for the industries in which the Company
competes, an assessment of the Company's management and the prospects of the
Company, the Company's capital structure, the market for initial public
offerings and certain other factors as were deemed relevant.

The Underwriters will not make sales of the securities offered hereby to
discretionary accounts.

In connection with this Offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Com-pany's
Common Stock. Such transactions may include stabilization transactions effected
in accordance with Rule 104 of Regulation M, pursuant to which, such persons
may bid for or purchase Common Stock of the Company for the purpose of
stabilizing its market price. The Underwriters also may create a short position
of the account of the Underwriters by selling more of the Common Stock in
connection with the Offering then they are committed to purchase from the
Company, and in such case may purchase Common Stock of the Company in the

42
<PAGE>

open market following completion of the Offering to cover all or a portion of
such short position. The Underwriters may also cover all or a portion of such
short position by exercising the Over-Allotment Option. In addition, the
Representative, on behalf of the Underwriters, may impose "penalty bids" under
contractual arrangements with the Underwriters whereby it may reclaim from an
Underwriter (or dealer participating in the Offering) for the account of other
Underwriters, the selling concession with respect to the shares of Common Stock
that are distributed in the Offering but subsequently purchased for the account
of the Underwriters in the open market. Any of the transactions described in
this paragraph may stabilize or maintain the price of the Common Stock of the
Company at a level above that which might otherwise prevail in the open market.
None of the transactions described in this paragraph is required, and, if they
are undertaken, they may be discontinued at any time.

The foregoing is a summary of the agreements described above and does not
purport to be complete. Reference is made to copies of each such agreement
which are filed as exhibits to the Registration Statement. See "Additional
Information."

Since its inception in 1984, the Representative has been engaged generally
in the securities underwriting and brokerage business. The Representative has
acted as co-managing underwriter in over fifty public offerings, but has not
served as the sole managing underwriter of a public offering. The senior
officers and managing directors of the Representative, however, each have a
minimum of fifteen years of experience in the investment banking industry. The
senior officer of the Representative overseeing this Offering has served as the
lead investment banker for more than one hundred registered public offerings
over the last twenty five years.

LEGAL MATTERS

The legality of the securities offered by this Prospectus has been passed
upon for the Company by Atlas, Pearlman, Trop & Borkson, P.A., Ft. Lauderdale,
Florida. Certain legal matters with respect to this Offering have been passed
upon by Tenzer Greenblatt LLP, New York, New York. Camhy Karlinsky & Stein LLP,
New York, New York, has acted as counsel to the Underwriters in connection with
this Offering.

EXPERTS

The financial statements of the Company as of December 31, 1996 and for
each of the years in the two year period ended December 31, 1996 have been
included herein and in the Registration Statement of which this Prospectus is a
part, in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein and upon the authority
of said firm as experts in accounting and auditing.

With respect to the unaudited interim financial information for the
periods ended June 30, 1996 and 1997, included herein, KPMG Peat Marwick LLP
have reported that they applied limited procedures in accordance with
professional standards for a review of such information. However, their
separate report for the six months ended June 30, 1996 and 1997 included
herein, states that they did not audit and they do not express an opinion on
that interim financial information. Accordingly, the degree of reliance on
their report on such information should be restricted in light of the limited
nature of the review procedures applied. KPMG Peat Marwick LLP are not subject
to the liability provisions of Section 11 of the Securities Act for their
report on the unaudited interim financial information because that report is
not a "report" or a "part" of the registration statement prepared or certified
by KPMG Peat Marwick LLP within the meaning of Sections 7 and 11 of the
Securities Act.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form SB-2 (the "Registration
Statement") under the Securities Act with respect to the securities offered by
this Prospectus. This Prospectus, filed as a part of such Registration
Statement, does not contain all of the information set forth in, or annexed as
exhibits to, the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulation of the Commission. For further
information with respect to the Company and this Offering, reference is made to
the Registration Statement, including the exhibits filed therewith, which may
be inspected without charge at the Office of the Commission, 450 Fifth Street,
N.W.,

43
<PAGE>

Washington D.C. 20549; and at the following regional offices: Midwest Regional
Office, Northwestern Atrium Center, 500 West Madison, Suite 1400, Chicago,
Illinois 60661-2511, and the Northeast Regional Office, 7 World Trade Center,
13th Floor, New York, New York 10048. Copies of the Registration Statement may
be obtained from the Commission at its principal office upon payment of
prescribed fees. Statements contained in this Prospectus as to the contents of
any contract or other document are not necessarily complete and, where the
contract or other document has been filed as an exhibit to the Registration
Statement, each statement is qualified in all respects by reference to the
applicable document filed with the Commission. The Commission maintains an
Internet web site that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the
Commission. The address of that site is http://www.sec.gov.

44
<PAGE>

AUDIO BOOK CLUB, INC.

Index to Financial Statements

<TABLE>
<CAPTION>
Page
---------
<S> <C>
Independent Auditors' Report .................................... F-2

Independent Accountants' Review Report ........................... F-3

Balance Sheets as of December 31, 1996 (audited) and June 30, 1997
(unaudited) ................................................... F-4

Statements of Operations for the years ended December 31, 1995 and
1996 (audited) and for the six months ended June 30, 1996 and 1997
(unaudited) ................................................... F-5

Statements of Stockholders' Deficiency for the years ended December
31, 1995 and 1996 (audited) and for the six months ended June 30,
1997 (unaudited) ................................................ F-6

Statements of Cash Flows for the years ended December 31, 1995 and
1996 (audited) and for the six months ended June 30, 1996 and 1997
(unaudited) ................................................... F-7

Notes to Financial Statements .................................... F-8-F-12
</TABLE>

F-1
<PAGE>

Independent Auditors' Report

The Board of Directors
Audio Book Club, Inc.:

We have audited the accompanying balance sheet of Audio Book Club, Inc. as of
December 31, 1996, and the related statements of operations, stockholders'
deficiency and cash flows for each of the years in the two-year period ended
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Audio Book Club, Inc. as of
December 31, 1996, and the results of its operations and its cash flows for
each of the years in the two-year period ended December 31, 1996 in conformity
with generally accepted accounting principles.

KPMG Peat Marwick LLP

New York, New York
March 7, 1997, except as to note 11(a), which
is as of July 16, 1997, and notes 11(b), (c) and (d)
which are as of September 16, 1997

F-2
<PAGE>

Independent Accountants' Review Report

The Board of Directors
Audio Book Club, Inc.:

We have reviewed the accompanying balance sheet of Audio Book Club, Inc. as of
June 30, 1997, and the related statements of operations for the six month
period ended June 30, 1996 and 1997, statement of stockholders' deficiency for
the six month period ended June 30, 1997, and statements of cash flows for the
six month period ended June 30, 1996 and 1997, in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute
of Certified Public Accountants. All information included in these financial
statements is the representation of the management of Audio Book Club, Inc.

A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for them to be
in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

New York, New York
July 16, 1997, except for notes 11(b), (c) and (d)
which are as of September 16, 1997

F-3
<PAGE>

AUDIO BOOK CLUB, INC.

Balance Sheets

December 31, 1996 (audited) and
June 30, 1997 (unaudited - see accompanying
review report of KPMG Peat Marwick LLP)

<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
Assets --------------- ----------------
(unaudited)
<S> <C> <C>
Current assets:
Cash ............................................................ $ 92,856 114,855
Accounts receivable, net of allowances for sales returns and
doubtful accounts of $831,669 and $643,718, respectively ...... 595,630 1,793,986
Due from related party (note 4) ................................. 20,000 --
Inventory ...................................................... 836,660 1,096,263
Royalty advances ................................................ 235,440 259,215
------------- ------------
Total current assets ....................................... 1,780,586 3,264,319
Fixed assets, at cost, net of accumulated depreciation of $8,214 and
$11,225, respectively ............................................. 19,503 22,619
Deferred offering costs (note 3) ................................. -- 85,000
Prepaid loan costs, net .......................................... -- 8,333
------------- ------------
$ 1,800,089 3,380,271
============= ============
Liabilities and Stockholders' Deficiency
Current liabilities:
Accounts payable ................................................ 1,517,796 2,740,175
Accrued expenses ................................................ 123,645 107,500
Bank debt (note 6) ............................................. -- 6,000,000
------------- ------------
Total current liabilities .................................... 1,641,441 8,847,675
Notes payable - related parties (note 5) ........................... 11,480,200 6,775,200
------------- ------------
Total liabilities .......................................... 13,121,641 15,622,875
------------- ------------
Commitments and contingencies (notes 7, 9, 10 and 11)
Stockholders' deficiency (notes 2 and 5):
Common stock; no par value. Authorized 10,000 shares; 200
shares issued and outstanding ................................. 200 200
Contributed capital ............................................. 231,325 478,151
Accumulated deficit ............................................. (11,553,077) (12,720,955)
------------- ------------
Total stockholders' deficiency .............................. (11,321,552) (12,242,604)
------------- ------------
$ 1,800,089 3,380,271
============= ============
</TABLE>

See accompanying notes to financial statements.

F-4
<PAGE>

AUDIO BOOK CLUB, INC.

Statements of Operations

Years ended December 31, 1995 and 1996 (audited) and for
the six months ended June 30, 1996 and 1997 (unaudited --
see accompanying review report of KPMG Peat Marwick LLP)

<TABLE>
<CAPTION>
Years ended Six months
December 31, ended June 30,
----------------------------------- -------------------------------
1995 1996 1996 1997
----------------- --------------- --------------- -------------
(unaudited)
<S> <C> <C> <C> <C>
Sales .......................................... $ 3,406,395 8,343,304 4,224,659 6,499,331
Returns, discounts and allowances ............ 770,980 2,743,221 965,201 1,409,289
------------- ----------- ----------- -----------
Sales, net .............................. 2,635,415 5,600,083 3,259,458 5,090,042
Cost of sales ................................. 2,145,898 4,327,344 2,328,224 2,810,548
------------- ----------- ----------- -----------
Gross profit ........................... 489,517 1,272,739 931,234 2,279,494
Expenses:
Advertising and promotion (for acquisi-
tion and retention of members) 2,670,650 5,469,761 2,486,834 2,249,737
General and administrative .................. 1,094,973 1,948,821 801,400 725,777
Professional fees ........................... 113,997 99,093 79,484 152,535
Depreciation and amortization ............... 2,333 5,193 2,041 4,678
------------- ----------- ----------- -----------
Operating loss ........................... (3,392,436) (6,250,129) (2,438,525) (853,233)
Interest expense, net of interest income of
$4,380 and $7,638 at December 31, 1995
and 1996, respectively, and $195 and $1,514
at June 30, 1996 and 1997, respectively ...... 3,947 211,140 56,994 314,645
------------- ----------- ----------- -----------
Net loss ................................. $ (3,396,383) (6,461,269) (2,495,519) (1,167,878)
============= =========== =========== ===========
Net loss per share of common stock ............ $ (16,982) (32,306) (12,478) (5,839)
============= =========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE>

AUDIO BOOK CLUB, INC.

Statements of Stockholders' Deficiency

Years ended December 31, 1995 and 1996 (audited) and for
the six months ended June 30, 1997 (unaudited --
see accompanying review report of KPMG Peat Marwick LLP)

<TABLE>
<CAPTION>
Common Accumu-
stock; no Contributed lated
par value capital deficit Total
----------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance at January 1, 1995 .................. $ 200 4,220 (1,695,425) (1,691,005)
Imputed interest on notes payable --
related parties (note 5) ............... -- 8,327 -- 8,327
Net loss ................................. -- -- (3,396,383) (3,396,383)
------ -------- ------------ ------------
Balance at December 31, 1995 ............... 200 12,547 (5,091,808) (5,079,061)
Imputed interest on notes payable --
related parties (note 5) ............... -- 218,778 -- 218,778
Net loss ................................. -- -- (6,461,269) (6,461,269)
------ -------- ------------ ------------
Balance at December 31, 1996 ............... 200 231,325 (11,553,077) (11,321,552)
Imputed interest on notes payable - related
parties (note 5) (unaudited) ............ -- 246,826 -- 246,826
Net loss for the six months ended June 30,
1997 (unaudited) ........................ -- -- (1,167,878) (1,167,878)
------ -------- ------------ ------------
Balance at June 30, 1997 (unaudited) ...... $ 200 478,151 (12,720,955) (12,242,604)
====== ======== ============ ============
</TABLE>

See accompanying notes to financial statements.

F-6
<PAGE>

AUDIO BOOK CLUB, INC.

Statements of Cash Flows

Years ended December 31, 1995 and 1996 (audited) and for
the six months ended June 30, 1996 and 1997 (unaudited --
see accompanying review report of KPMG Peat Marwick LLP)

<TABLE>
<CAPTION>
Years ended Six months
December 31, ended June 30,
-------------------------------- ------------------------------
1995 1996 1996 1997
----------------- ------------- ------------- ---------------
(unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss ................................................... $ (3,396,383) (6,461,269) (2,495,519) (1,167,878)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization .............................. 2,333 5,193 2,041 4,678
Imputed interest on notes payable - related parties ...... 8,327 218,778 57,189 246,826
Changes in asset and liability accounts:
(Increase) decrease in accounts receivable, net ......... (567,150) 6,418 (613,044) (1,198,356)
Decrease in due from related party ..................... -- -- -- 20,000
(Increase) decrease in inventory ........................ (200,654) (383,689) 48,844 (259,603)
(Increase) decrease in prepaid advertising ............... (63,341) 63,341 63,341 --
Decrease (increase) in royalty advances .................. 6,885 (235,440) (98,295) (23,775)
Increase in accounts payable and accrued expenses 225,429 1,170,410 162,077 1,206,234
Decrease in due to related parties, net .................. (83,300) -- -- --
------------- ----------- ----------- -----------
Net cash used in operating activities .................. (4,067,854) (5,616,258) (2,873,366) (1,171,874)
------------- ----------- ----------- -----------
Cash flows from investing activities:
Acquisition of fixed assets .............................. (13,774) (7,063) (9,563) (6,127)
------------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable - related
parties ................................................ 4,105,000 5,575,200 2,830,000 1,295,000
Repayment of notes payable - related parties ............ -- -- -- (6,000,000)
Proceeds from issuance of bank debt ..................... -- -- -- 6,000,000
Prepaid loan costs ....................................... -- -- -- (10,000)
Deferred offering costs ................................. -- -- -- (85,000)
------------- ----------- ----------- -----------
Net cash provided by financing activities ............... 4,105,000 5,575,200 2,830,000 1,200,000
------------- ----------- ----------- -----------
Net increase (decrease) in cash ........................... 23,372 (48,121) (52,929) 21,999
Cash at beginning of period ................................. 117,605 140,977 140,977 92,856
------------- ----------- ----------- -----------
Cash at end of period ....................................... $ 140,977 92,856 88,048 114,855
============= =========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-7
<PAGE>

AUDIO BOOK CLUB, INC.

Notes to Financial Statements

December 31, 1996 (audited) and
June 30, 1997 (unaudited - see accompanying
review report of KPMG Peat Marwick LLP)

(1) Organization

Audio Book Club, Inc. (the "Company"), a Florida corporation, was formed
on August 16, 1993. The Company is a negative option membership club engaged
principally in mail order sales of audiocassettes.

(2) Liquidity and Capital Resources

The Company has incurred a loss for the six months ended June 30, 1997,
for each of the years in the three year period ended December 31, 1996, and for
the period from August 16, 1993 (date of inception) to December 31, 1993.
Management has continued its development efforts to increase its subscriber
membership base.

In order to fund the Company's development efforts, the stockholders of
the Company have provided loans, net of repayments, to the Company of
$6,775,200 as of June 30, 1997 (see note 6). Additional loans pursuant to a
1995 loan agreement, as amended, with the Chairman, Chief Executive Officer and
founder in the amount of $7,024,800 are available to the Company until the
earlier of the effective date of an initial public offering by the Company or
June 30, 1998 (see note 5).

Any additional growth in the Company's current subscriber base, or
liabilities as they come due, to the extent that they cannot be funded by its
current level of operations, is expected to come from its existing stockholders
or alternative financing sources (see notes 5, 10, and 11). Accordingly, the
Company's Chairman, Chief Executive Officer and founder has committed to
provide additional funding necessary to fund the Company's cash requirements
until the earlier of June 30, 1998 or the receipt of net proceeds by the
Company of a minimum of $10,000,000 from the Company's proposed initial public
offering (see note 10).

(3) Significant Accounting Policies

Inventory

Inventory, consisting primarily of audiocassettes held for resale, is
valued at the lower of cost (weighted average cost method) or market.

Fixed Assets

Fixed assets, consisting primarily of furniture and computer equipment,
are recorded at cost. Depreciation is provided by the straight-line method over
the estimated useful life of five years.

Revenue Recognition

Revenue is recorded upon shipment of merchandise and simultaneous billing.
Allowances for future returns are based upon historical experience and
evaluation of current return trends.

Income Taxes

The Company has elected to be taxed as a small business corporation (S
corporation) under Section 1362 of the Internal Revenue Code. No provision for
Federal income taxes has been made since such taxes are the obligation of the
stockholders.

Upon successful completion of the Company's contemplated offering, the
Company will be unable to retain its S corporation status. Accordingly the
Company will be taxed as an incorporated entity.

F-8
<PAGE>

AUDIO BOOK CLUB, INC.

Notes to Financial Statements -- (Continued)

December 31, 1996 (audited) and
June 30, 1997 (unaudited - see accompanying
review report of KPMG Peat Marwick LLP)

(3) Significant Accounting Policies -- (Continued)

Advertising and Promotional Costs

The Company expenses the production costs of advertising the first time
the advertising takes place. Direct-response advertising consists primarily of
print advertisements and mailings to individuals that include order forms for
the Company's products. The capitalized costs of the direct mail advertising
are amortized in the month of publication of the magazine in which it appears
or the month in which the individual letters are mailed.

Promotional costs for new and current members are expensed on the date the
promotional materials are mailed.

Advertising and promotion expense was $2,670,650 and $5,469,761 for the
years ended December 31, 1995 and 1996, respectively, and $2,486,834 and
$2,249,737 for the six months ended June 30, 1996 and 1997, respectively.

Royalties

The Company is liable for royalties to licensors based upon revenue earned
from the respective licensed product. Royalties, in excess of advances, are
payable based on contractual terms. Royalty advances not expected to be
recovered through royalties on sales are charged to royalty expense. For the
year ended December 31, 1996 and the six months ended June 30, 1997, no
writedown of royalty advances was recorded.

Use of Estimates

Management of the Company has made estimates and assumptions relating to
the reporting of assets and liabilities and the disclosure of contingent
liabilities to prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.

Fair Value of Financial Instruments

In estimating the fair value for financial instruments, the Company has
assumed that the carrying amount of cash, accounts receivable, accounts payable
and accrued expenses approximates fair value because of the short maturity of
those instruments. It is not practical to estimate the fair market value of
notes payable - related party due to the related party nature of the
transaction.

Reclassifications

Certain balances in the 1995 financial statements have been reclassified
to conform to the 1996 presentation.

Deferred Offering Costs

The Company has incurred expenses of $85,000 related to its contemplated
initial public offering (see note 10), including legal and accounting fees and
expenses. As of June 30, 1997, a portion of such amounts have been provided for
in accounts payable and accrued expenses. Upon successful completion of the
contemplated offering, the associated costs will be deducted from the net
proceeds of such offering. If the contemplated offering is abandoned, these
costs will be expensed.

Interim Reporting

The accompanying financial information as of June 30, 1997 and for the six
months ended June 30, 1996 and 1997 is unaudited and, in the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
considered necessary for a fair presentation have been included. Operating
results for any interim period are not necessarily indicative of the results
for any other interim period or for an entire year.

F-9
<PAGE>

AUDIO BOOK CLUB, INC.

Notes to Financial Statements -- (Continued)

December 31, 1996 (audited) and
June 30, 1997 (unaudited - see accompanying
review report of KPMG Peat Marwick LLP)

(4) Due from Related Party

Due from related party represents the amount due from a company affiliated
with the Company's Chairman, Chief Executive Officer and founder for the
reimbursement of employee services in the amount of $20,000 as of December 31,
1996.

(5) Notes Payable - Related Parties

On November 17, 1995, the Company executed a loan agreement with its
Chairman, Chief Executive Officer and founder in the amount of $8,000,000, of
which $5,805,000 had been granted in the form of unsecured, noninterest bearing
advances as of December 31, 1995.

On February 6, 1997, the loan agreement was amended to increase the
maximum borrowing amount to $13,000,000 from $12,000,000. On May 12, 1997, the
loan agreement was further amended to stipulate that the loan does not and will
not bear interest, and removed all references to interest in prior documents.
Additionally, the amendment stipulated that the obligation of the Chairman,
Chief Executive Officer, and founder to make further advances to the Company
under this loan agreement shall terminate on the earlier of the effective date
of an initial public offering by the Company or June 30, 1998. However, the
Company's Chairman, Chief Executive Officer and founder has committed to
provide additional funding necessary to fund the Company's cash requirements
until the earlier of June 30, 1998 or the receipt of net proceeds by the
Company of a minimum of $10,000,000 from the Company's proposed initial public
offering.

Immediately prior to the consummation of the Company's proposed initial
public offering, the Company's Chairman, Chief Executive Officer, and founder
will convert the outstanding $5,975,200 of indebtedness owed to him under the
loan agreement into 597,520 shares of common stock at a price per share equal
to the initial offering price of the common stock.

In June 1994, the Company received $50,000 from both the Chief Operating
Officer and Executive Vice President for a total of $100,000, in exchange for
the Company issuing two notes payable of $50,000 each.

In February 1997, the Company's Executive Vice President loaned the
Company an additional $350,000 pursuant to a loan agreement (the "1997 HH
Loan"). On May 12, 1997, loans payable to the Company's Executive Vice
President in the amounts of $50,000 and $350,000 were consolidated via a
consolidated and restated loan agreement. The consolidated loan balance of
$400,000 does not bear interest until August 1, 1997, after which time interest
is calculated annually at the greater of 10% or the prime rate of interest. The
principal and interest due on the consolidated loan is due on the earlier of 15
months from the consummation of an initial public offering by the Company or
December 31, 1998. (see note 11(c))

On May 12, 1997, the Chief Operating Officer loaned the Company $350,000
pursuant to a loan agreement (the "1997 MEH Loan"). Borrowings under the 1997
MEH Loan were consolidated via a loan agreement with the $50,000 loan balance
originated in June of 1994. The consolidated loan balance of $400,000 does not
bear interest until August 1, 1997, after which time interest is calculated
annually at the greater of 10% or the prime rate of interest. The principal and
interest due on the consolidated loan is due on the earlier of 15 months from
the consummation of an initial public offering by the Company or December 31,
1998. (see note 11(c))

In accordance with Staff Accounting Bulletin Topic 5:T, the Company has
imputed an interest cost on the portion of the non-interest bearing notes
payable to related parties which will not be converted to equity upon the
successful completion of the Company's contemplated offering. The imputed
interest rate used was based on the terms negotiated by the Company for its
bank debt (see note 6) and was 8.32% and 7.77% for the years

F-10
<PAGE>

AUDIO BOOK CLUB, INC.

Notes to Financial Statements -- (Continued)

December 31, 1996 (audited) and
June 30, 1997 (unaudited - see accompanying
review report of KPMG Peat Marwick LLP)

ended December 31, 1995 and 1996, respectively, and 7.79% and 7.88% for the six
months ended June 30, 1996 and 1997, respectively. Interest expense imputed was
$8,327 and $218,778 for the years ended December 31, 1995 and 1996,
respectively, and $57,189 and $246,826 for the six months ended June 30, 1996
and 1997, respectively.

(6) Bank Debt

On May 9, 1997, the Company borrowed $6,000,000 from a major bank, which
was used to repay a portion of the outstanding notes payable to the Company's
Chairman, Chief Executive Officer, and founder. The loan has a one-year term,
and bears an interest rate which is 1/2% under the bank's reference rate.
Interest is payable monthly. The principal will be due on May 7, 1998.

The portion of the outstanding stock of the Company owned by the Chairman,
Chief Executive Officer, and founder has been pledged as security for the loan.
Additionally, in the event the Company fails to repay the loan at maturity, the
personal guarantee of the Company's Chairman, Chief Executive Officer and
founder will become effective.

(7) Commitments and Contingencies

Leases - Related Parties

Rent expense for each of the years ended December 31, 1995 and 1996
amounted to $38,000, and $19,000 for each of the six months ended June 30, 1996
and 1997. The Company sublets office space from an entity wholly-owned by
officers and directors of the Company.

Minimum annual lease commitments under noncancelable operating leases are
as follows:

Year ending
December 31, Amount
------------ ---------
1997 ................................. $ 36,837
1998 ................................. 24,000
---------
Total lease commitments ............... $ 60,837
=========

(8) Supplemental Cash Flow Information

No cash has been expended for interest or income taxes for the years ended
December 31, 1995 and 1996.

No cash has been expended for income taxes for the six months ended June
30, 1996 and 1997. Cash expended for interest was none and $69,333 for the six
months ended June 30, 1996 and 1997, respectively.

During the years ended December 31, 1995 and 1996 and for each of the six
month periods ended June 30, 1996 and 1997, the Company had a noncash financing
activity related to the recognition of imputed interest on a portion of the
notes payable - related parties of $8,327, $218,778, $57,189 and $246,826,
respectively.

(9) Stock Option Plan

On June 20, 1997, the Company adopted the 1997 Stock Option Plan, pursuant
to which the Company's Board of Directors may grant stock options to key
employees of the Company. The Plan will terminate and any options granted will
be of no force or effect if the Company does not consummate its proposed
initial public offering prior to December 31, 1997. The Plan authorizes grants
of options to purchase up to 750,000 shares of

F-11
<PAGE>

AUDIO BOOK CLUB, INC.

Notes to Financial Statements -- (Continued)

December 31, 1996 (audited) and
June 30, 1997 (unaudited - see accompanying
review report of KPMG Peat Marwick LLP)

(9) Stock Option Plan -- (Continued)

authorized but unissued common stock. Under the Plan, the Company may grant
incentive and non-qualified stock options. The terms and conditions of options
granted under the Plan may vary at the discretion of the Company's Board of
Directors. In addition, shares issued pursuant to the exercise of the options
may be restricted as to their transferability. (see note 11(d))

(10) Proposed Offering

The Company is contemplating the raising of additional financing through a
proposed initial public offering of 2.3 million shares of common stock. If the
offering is successful, management plans to use the related proceeds for the
repayment of indebtedness to the bank, membership recruitment advertising,
internet web site marketing and development, and working capital and general
corporate purposes. Although management believes that it will successfully
obtain such capital, there can be no assurance that it will be able to do so.

(11) Subsequent Events

(a) Leases

On July 1, 1997, the Company entered into a new lease for office space.
Minimum monthly rent under the newly executed lease is $1,167 per month through
November, 1997, at which time the monthly rent increases to $1,307. The lease
expires on November 30, 2000 and is subject to two extension periods of three
years each. A company affiliated with the Chairman, Chief Executive Officer and
founder has guaranteed the lease.

(b) Bank Debt

The Company obtained loans of $2,250,000 and $750,000 from a major bank in
August and September 1997, respectively. The loans mature on October 31, 1998
and bear interest at 1/2% under the bank's reference rate. Interest is payable
monthly beginning September 30, 1997. The proceeds are being used to pay
accounts payable. In the event the Company fails to repay the loans at
maturity, the personal guarantee of the Company's Chairman, Chief Executive
Officer and founder will become effective.

On September 15, 1997, the Company repaid the $800,000 of outstanding
notes payable plus accrued interest to the Company's Chief Operating Officer
and Executive Vice President.

(d) Stock Options

In September 1997, the Company granted to an officer options to purchase
50,000 shares of common stock at an exercise price equal to 110% of the initial
public offering price per share of the Company's common stock. Such options
shall vest as to one-fifth of the shares covered thereby annually over a
five-year period commencing on October 31, 1998, provided, however, that such
options shall terminate and be cancelled if the officer is no longer employed
by the Company prior to the date on which such options vest. Such options shall
be exercisable for a period of five years commencing immediately upon vesting,
provided, however, if the officer is no longer employed by the Company, such
options shall expire on the earlier of 30 days following the date the officer
is no longer employed by the Company or five years following the date on which
such options vest.

F-12
<PAGE>
================================================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representations not contained in this Prospectus,
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Company or the Underwriters. This
Prospectus does not constitute an offer to sell or a solicitation of an offer
to buy, any security other than the securities offered by this Prospectus, or
an offer to sell or a solicitation of an offer to buy any securities by anyone
in any jurisdiction in which such offer or solicitation is not authorized or is
unlawful. The delivery of this Prospectus shall not, under any circumstances,
create any implication that the information contained herein is correct as of
any time subsequent to the date hereof.

--------------------------------------------
TABLE OF CONTENTS

Page
---------
Prospectus Summary .................. 3
Risk Factors ........................ 7
Use of Proceeds ..................... 15
Dilution ........................... 16
Dividend Policy ..................... 17
Capitalization ..................... 17
Selected Financial Data ............... 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ........................ 19
Business .............................. 24
Management ........................... 31
Principal Shareholders ............... 36
Certain Transactions ............... 37
Description of Securities ............ 39
Shares Eligible for Future Sale ...... 40
Underwriting ........................ 41
Legal Matters ........................ 43
Experts .............................. 43
Additional Information ............... 43
Index to Financial Statements ......... F-1

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Until November 16, 1997, (25 days after the date of this Prospectus),
all dealers effecting transactions in the shares of Common Stock offered
hereby, whether or not participating in this distribution may be required to
deliver a Prospectus. This is in addition to the obligation of dealers to
deliver a Prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.

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2,300,000 Shares

[LOGO]

Common Stock

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PROSPECTUS
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L.H. Friend, Weinress,
Frankson & Presson, Inc.

October 22, 1997

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