U. S. Securities and Exchange Commission
                             Washington, D. C. 20549

                                   FORM 10-QSB

[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the quarter ended March 31, 2001
                           ------------------

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period from               to
                                    -------------    -------------

                           Commission File No. 0-25167
                                     ------

                                  MCY.COM, INC.
                       -----------------------------------
                 (Name of Small Business Issuer in its Charter)

<TABLE>
<CAPTION>
<S>                                                                    <C>
        Delaware                                                               13-4049302
-------------------------------                                        --------------------------
(State or Other Jurisdiction of                                        (I.R.S. Employer I.D. No.)
 incorporation or organization)
</TABLE>

                           1133 Avenue of the Americas
                               New York, NY 10036
                            -------------------------
                    (Address of Principal Executive Offices)

                    Issuer's Telephone Number: (212) 944-6664

     Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Company was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.

     (1)   Yes  X    No            (2)   Yes  X    No
               ---      ---                  ---      ---

               (ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
                       DURING THE PAST FIVE YEARS)

     Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes____ No ___

                 (APPLICABLE ONLY TO CORPORATE ISSUERS)

          State the number of shares outstanding of each of the Issuer's classes
of common equity, as of the latest practicable date:

       61,583,531 at March 31, 2001 of common stock (.001 per value)



                    DOCUMENTS INCORPORATED BY REFERENCE

                              NONE.

Transitional Small Business Issuer Format   Yes  x    No
<PAGE>
                  PART I - FINANCIAL INFORMATION

Item 1.   Financial Statements.



                         MCY.COM, INC. AND SUBSIDIARIES
                          (a development stage company)

                   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                 March 31, 2001






<PAGE>
MCY.COM, INC. AND SUBSIDIARIES
(a development stage company)

Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>

                                                                                             March 31,          December 31,
                                                                                                2001                2000
                                                                                            (Unaudited)

ASSETS
Current assets:
<S>                                                                                      <C>                 <C>
   Cash and cash equivalents                                                             $       5,461,000   $      10,300,000
   Sundry receivables                                                                              453,000             343,000
   Advances to officer                                                                              95,000             101,000
   Other current assets                                                                             56,000              63,000
                                                                                         -----------------   -----------------

      Total current assets                                                                       6,065,000          10,807,000

Equipment and software, net                                                                      8,587,000           9,034,000

Other assets, including security deposits of $1,088,000 and $3,789,000, record
   company advances of $0 and $500,000 and prepaid event costs of
   $163,000 and $670,000, respectively.                                                          1,805,000           4,989,000
                                                                                         -----------------   -----------------

                                                                                         $      16,457,000   $      24,830,000
                                                                                         =================   =================

LIABILITIES
Current liabilities:
   Accounts payable, accrued expenses and sundry liabilities                             $       4,487,000   $       4,538,000
   Current Portion of capital lease obligation                                                                         713,000
   Deferred revenue                                                                                415,000             471,000
                                                                                         -----------------   -----------------
      Total current liabilities                                                                  4,902,000           5,722,000

Capital lease obligation, net of current portion                                                                     1,681,000
                                                                                         -----------------   -----------------
                                                                                                 4,902,000           7,403,000
                                                                                         -----------------   -----------------

Commitments and contingencies (Note B)

STOCKHOLDERS' EQUITY
Preferred stock - $.001 par value; 10,000,000 shares authorized;
   1,000,000 shares of Series 1 Preferred Stock issued and outstanding                               1,000               1,000
Common stock - $.001 par value; 100,000,000 shares authorized;
   61,533,531 and 59,670,551 shares issued and outstanding, respectively                            61,000              59,000
Common stock payable (50,000 and 1,326,313 shares)                                                 525,000           2,360,000
Additional paid-in capital                                                                     184,374,000         182,961,000
Deficit accumulated during the development stage                                              (165,651,000)       (158,491,000)
Cumulative foreign currency translation adjustment                                                (116,000)           (190,000)
                                                                                         ------------------  -----------------

                                                                                                19,194,000          26,700,000
Unamortized deferred compensation                                                               (7,575,000)         (9,209,000)
Stock subscriptions receivable                                                                     (64,000)            (64,000)
                                                                                         -----------------   -----------------

                                                                                                11,555,000          17,427,000
                                                                                         -----------------   -----------------

                                                                                         $      16,457,000   $      24,830,000
                                                                                         =================   =================

See notes to financial statements                                                                                         2
</TABLE>

<PAGE>
MCY.COM, INC. AND SUBSIDIARIES
(a development stage company)

<TABLE>
<CAPTION>

Condensed Consolidated Statement of Operations- Unaudited
                                                                                                             Inception
                                                                       For the Three Months              (January 8, 1999)
                                                                         Ended March 31,                      Through
                                                                    2001                 2000             March 31, 2001

<S>                                                         <C>                  <C>                   <C>
Revenues                                                    $         578,000    $          38,000     $        1,395,000
                                                             ----------------     ----------------      -----------------

Expenses:

   Sales, marketing and public relations                              863,000            3,733,000             20,828,000
   Product development                                              1,991,000            1,413,000             10,625,000
   Content acquisition                                              1,143,000            1,465,000             22,668,000
   General and administrative                                       3,918,000            9,563,000             77,824,000
   Amortization of acquired intangibles                                                  1,584,000              6,336,000
   Write-off of impaired intangible assets                                                                     28,385,000
                                                             ----------------     ----------------      -----------------

                                                                    7,915,000           17,758,000            166,166,000
                                                             ----------------     ----------------      -----------------

Operating loss                                                     (7,337,000)         (17,720,000)          (164,771,000)

Share of loss of predecessor companies                                                           0               (663,000)
Interest income, net of interest expense                              177,000              435,000              2,353,000
                                                             ----------------     ----------------     ------------------

Net loss                                                    $      (7,160,000)   $     (17,285,000)    $     (163,081,000)
                                                             =================    ================     ==================

Net loss per common share -
   basic and diluted                                              $(0.12)               $(0.31)
                                                                  ======                ======

Weighted average common
   shares outstanding                                            61,583,000           55,819,000
                                                                 ==========           ==========

See notes to financial statements                                                                                         3
</TABLE>

<PAGE>
MCY.COM, INC. AND SUBSIDIARIES
(a development stage company)

<TABLE>
<CAPTION>
Condensed Consolidated Statement of Cash Flows - Unaudited

                                                                                                                    For the
                                                                                                                  Period From
                                                                                                                   January 8,
                                                                                                                      1999
                                                                               For the            For the         (Inception)
                                                                          Three Months Ended   Three Months         Through
                                                                                                   Ended
                                                                              March 31,          March 31,         March 31,
                                                                                 2001              2000               2001
Cash flows from operating activities:
<S>                                                                       <C>                <C>               <C>
   Net loss                                                               $     (7,160,000)  $    (17,285,000) $   (162,470,000)
      Adjustments to reconcile net loss to net cash used in operating
        activities:
           Depreciation and amortization of equipment and software                 447,000            160,000         1,537,000
           Amortization of intangibles                                                              1,584,000         6,336,000
           Write-off of impaired intangibles, equipment and software                                                 28,385,000
           Stock-based compensation                                              1,214,000          7,611,000        68,080,000
           Share of loss of predecessor companies                                                                       663,000
           Changes in:
              Receivables                                                         (110,000)           114,000          (458,000)
              Other current assets                                                  13,000                              649,000
              Other assets                                                         745,000         (1,909,000)         (498,000)
              Accounts payable, accrued expenses and sundry
                Liabilities                                                       (107,000)         1,824,000         2,200,000
                                                                          -----------------  ----------------  ----------------
                   Net cash used in operating activities                        (4,958,000)        (7,901,000)      (55,576,000)
                                                                          ----------------   ----------------  ----------------

Cash flows from investing activities:
   Cost of developing internal-use software                                                        (1,229,000)       (7,558,000)
   Datatek acquisition, net of acquired companies cash of $565,000                                                   (1,748,000)
   Decrease (increase) in security deposits                                      2,701,000         (1,500,000)       (1,091,000)
   Purchase of equipment                                                          (262,000)        (1,089,000)       (4,634,000)
                                                                          -----------------  ----------------  ----------------
                   Net cash used in investing activities                         2,439,000         (3,818,000)      (15,031,000)
                                                                          ----------------   ----------------  ----------------

Cash flows from financing activities:
   Proceeds from sale of warrants                                                                                       750,000
   Purchase of treasury stock                                                                                        (1,835,000)
   Principal payments on line of credit                                                                                 (40,000)
   Principal payments on capital lease obligation                               (2,394,000)                          (2,394,000)
   Proceeds from sale of stock, net of related costs                                               35,015,000        80,009,000
                                                                          ----------------   ----------------  ----------------
                   Net cash provided by financing activities                    (2,394,000)        35,015,000        76,490,000
                                                                          -----------------  ----------------  ----------------

Effect of exchange rate changes on cash                                             74,000                             (422,000)
                                                                          ----------------   ----------------  ----------------

Net (decrease) increase in cash and cash equivalents                            (4,839,000)        23,296,000         5,461,000
Cash and cash equivalents, beginning of period                                  10,300,000         26,060,000
                                                                          ----------------   ----------------

Cash and cash equivalents, end of period                                  $      5,461,000   $     49,356,000  $      5,461,000
                                                                          ================   ================  ================

Supplemental disclosures of non-cash investing and financing activities:
      Issuance of warrants relating to events                                                $      3,894,000
      Issuance of stock for stock subscription receivable                                                      $         64,000
      Issuance of stock and warrants in connection with Datatek
        acquisition                                                                                            $     25,590,000
      Deferred compensation to consultants and employees by
        issuance of options                                                                                    $     41,447,000
      Issuance of stock for notes payable and accrued interest                                                 $        730,000
      Acquisition of fixed assets by capital lease                                                             $      2,394,000

See notes to financial statements                                                                                         4
</TABLE>
<PAGE>
MCY.COM, INC. AND SUBSIDIARIES
(a development stage company)

Condensed Consolidated Statement of Stockholders' Equity
For the Period From January 1, 2001 Through March 31, 2001
<TABLE>
<CAPTION>

                                                                                                               Deficit   Cumulative
                                                                                                             Accumulated  Foreign
                                      Preferred Stock      Common Stock       Common   Additional            During the   Currency
                                       # of               # of       Par       Stock     Paid-In   Treasury  Development Translation
                                      Shares   Amount    Shares     Value     Payable    Capital     Stock      Stage    Adjustment

<S>                <C>              <C>        <C>     <C>          <C>      <C>        <C>              <C>             <C>
Balances - January 1, 2001          1,000,000  1,000   59,670,551   59,000   2,360,000  182,961,000      0 (158,491,000) (190,000)

Issuance of common stock in
 connection with services to
 the Company                                              586,667    1,000                  298,000

Issuance of common stock payable                        1,276,313    1,000  (1,835,000)   1,834,000

Cancellation of options issued
 to employees and consultants
 - Various dates                                                                           (719,000)

Amortization of deferred compensation

Comprehensive loss:
    Gain on foreign currency
     translation                                                                                                           74,000
    Net loss for period                                                                                       (7,160,000)

Balances - March 31, 2001            1,000,000   1,000 61,533,531   61,000     525,000  184,374,000      0 (165,651,000) (116,000)
                                     =========   ===== ==========   ======     =======  ===========   ==== ============= =========
</TABLE>

<PAGE>
MCY.COM, INC. AND SUBSIDIARIES
(a development stage company)

Condensed Consolidated Statement of Stockholders' Equity
For the Period From January 1, 2001 Through March 31, 2001

<TABLE>
<CAPTION>
(Cont'd)


                                    Unamortized        Stock
                                     Deferred       Subscription
                                    Compensation    Receivable          Total

<S>                <C>              <C>            <C>                <C>
Balances - January 1, 2001          (9,209,000)    (64,000)           17,427,000

Issuance of common stock in
 connection with services to
 the Company                                                             299,000

Issuance of common stock payable                                               0

Cancellation of options issued
 to employees and consultants
 - Various dates                       719,000                                 0

Amortization of deferred
 compensation                          915,000                           915,000

Comprehensive loss:
    Gain on foreign currency
     translation                                                          74,000
    Net loss for period                                               (7,160,000)

Balances - March 31, 2001           (7,575,000)    (64,000)           11,555,000
                                    ===========    ========           ===========
</TABLE>


                                                                               5
<PAGE>
MCY.COM, INC. AND SUBSIDIARIES
(a development stage company)

NOTE A - THE COMPANY

The accompanying financial statements include the accounts of MCY.com, Inc. (the
"Company") and its wholly-owned subsidiaries after elimination of all
intercompany transactions.

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-QSB. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. The results of operations
for the three months ended March 31, 2001 are not necessarily indicative of the
results to be expected for the full year. For further information, refer to the
Company's annual report filed on Form 10-KSB for the year ended December 31,
2000.

The Company operates an Internet website offering an interactive environment and
virtual music store where music buyers can purchase digital music downloads and
web-casts in an encrypted and enhanced format, as well as other products. Due to
several factors which occurred in the year ended December 31, 2000, which were
beyond the control of the Company, it repositioned its operations to that of (i)
the acquisition, production and sales through broadcast, cable, Internet and
physical distribution channels of premium music and media products, and (ii) the
development and sale of NETrax technology that will provide customers with
solutions for the secure and accountable distribution of digital assets across
all of the emerging digital channels, i.e., Internet, broadband and wireless.
These two businesses, although complementary, are not dependent upon each other
for customers or revenue. The Company is considered to be in the development
stage since, although planned operations have commenced, there have been no
significant revenues therefrom.

The Company is subject to those general risks associated with development stage
companies, as well as special risks unique to emerging E-commerce companies
which, by definition, seek to create new markets for their innovative products
and services. As shown in the accompanying financial statements, the Company has
incurred substantial net losses, including the write-down of the carrying value
of intangibles and certain equipment and software, and utilized substantial cash
in operating activities. Further, the Company has generated minimal revenues. In
response thereto, management has repositioned its operations as described above
and implemented a plan to reduce operating expenses, including the reduction of
personnel. The Company's business concept and business model are unproven and,
accordingly, the Company's viability is uncertain. In order to finance its
continued development the Company is presently attempting to raise additional
financing through additional private placements. However, there is no assurance
that the Company will be successful in that effort, nor that it will ever attain
profitable operations and operating cash flow.

NOTE B - COMMITMENTS AND CONTINGENCIES

[1]      Lease commitments:

      (a)  Operating:

       The Company leases facilities and equipment under noncancellable
       operating leases expiring through October 2004. Such leases provide for
       annual payments as detailed below. In connection with the aforementioned
       leases, the Company has provided security deposits of $1,186,000
       (included in other assets.)

       Future minimum annual lease payments as of December 31, 2000 are as
       follows:

                     For The Year Ending
                         December 31,
                   2001                                      $   1,603,000
                   2002                                          1,254,000
                   2003                                            405,000
                   2004                                            332,000
                                                             -------------
                                                             $   3,594,000
                                                             =============
                                                                               6
<PAGE>
MCY.COM, INC. AND SUBSIDIARIES
(a development stage company)

(b)      Capital:

       The Company entered into a 36-month lease, effective January 1, 2001, to
       finance computer equipment and software. This lease was accounted for as
       a capital lease. The net book amount of equipment held under this capital
       lease was $2,394,000 at December 31, 2000. In connection with the lease,
       the Company provided deposits of $75,000 and deposited $2,529,000 as
       collateral for letters of credit issued by a bank to the lessor and
       equipment vendor.

       On March 23, 2001, the Company and the lessor entered into an agreement
       to terminate the lease. In return for a cash payment of $2,330,000 to the
       lessor, the Company took ownership of the leased equipment and software.
       The carrying value of the equipment and software was increased by the
       $262,000 excess of the payment over the $2,068,000 carrying amount of the
       capital lease obligation at such date.


[2]      Legal proceedings:

As of December 31, 2000, the Company was a party to a litigation in New York
State Supreme Court filed by a former employee of MCY Music World, Inc.
("MusicWorld".) The Company settled this matter during the quarter ended March
31, 2001 by payment of $50,000.

On May 3, 2000, an individual who had been retained by MCY America, Inc. and
MusicWorld to obtain equity capital from a specific investor for MusicWorld
filed a complaint against the defendants MCY America, Inc. and MusicWorld in
federal District Court in New York City, alleging claims for breach of contract,
promissory estoppel and unjust enrichment. The plaintiff appears to allege a
claim for breach of a written engagement agreement and that the defendants
allegedly breached an oral agreement to compensate the plaintiff for enabling
the defendants to obtain financing through a well-known investment banking firm.
The plaintiff asserts further that he is entitled to a cash fee, as well as
stock options, in return for his alleged involvement in the financing, and seeks
damages of at least $13,315,000, together with prejudgment interest and costs.
The Company believes that the plaintiff's claims lack substantial merit and
intends to vigorously defend against this action and has filed a motion for
summary judgment.

In November 2000, Ozzy Osbourne, Osbourne Management and other performers who
appeared in the Ozzfest 2000 tour commenced an action against the Company and
its sub-licensees DirecTV Enterprises, Inc. ("DirecTV") and iN Demand LLC ("iN
Demand") in the United States District Court for the Central District of
California in reference to pay-per-view television broadcasts of performances
from the Ozzfest 2000 tour on DirectTV and iN Demand. The plaintiffs seek
$20,000,000 in damages, as well as profits earned by the defendants, copyright
infringement damages, legal fees and the film footage. The plaintiffs followed
the filing of the action with an application to the court for a temporary
restraining order which was subsequently denied. The matter arises out of a
Sponsorship Agreement executed in April, 2000 (the "Agreement") among
MusicWorld, Osbourne Management and SFX Holdings, Inc. ("SFX"), whereby
defendants allege that MusicWorld obtained the right, amongst other things, to
produce a videotape of the OZZfest 2000 concert tour and license the program for
broadcast in various media outlets including pay-per-view television. Pursuant
to the Agreement, MusicWorld thereafter entered into license agreements with
DirecTV and iN Demand licensing the program for specified time periods to
broadcast the videotape produced by MusicWorld pursuant to the Agreement, on a
pay-per-view television or cable basis. In summary, the complaint filed by the
plaintiffs alleges that the Agreement only provided MusicWorld the right to


                                                                               7
<PAGE>
broadcast the MusicWorld videotape as a Web-cast over the Internet and that the
defendants proceeded with the pay-per-view television and cable broadcasts
without obtaining the allegedly required consents of the plaintiffs.
Furthermore, plaintiffs allege claims against MusicWorld, iN Demand and DirecTV
for federal copyright infringement, federal trademark infringement, federal
trademark dilution, commercial appropriation of identity, state statutory and
common law trademark dilution, unfair competition and constructive trust.
Plaintiff Osbourne Management further has alleged a claim against MusicWorld for
breach of the Agreement. Among other claims and defenses, MusicWorld contends
that it acted within its rights under the Agreement; that the Agreement was
breached by Osbourne Management; and that under the Agreement, Osbourne
Management was obligated to provide MusicWorld with all necessary clearances for
the pay-per-view broadcasts which occurred. MusicWorld further contends that,
under the Agreement, as a result of the breach of the Agreement by Osbourne
Management, SFX is obligated to indemnify, hold harmless and defend MusicWorld
for any breach of the Agreement by Osbourne Management, and that both Osbourne
Management and SFX are obligated to indemnify, hold harmless and defend
MusicWorld for the claims asserted by the plaintiffs who are not parties to the
Agreement, as well as any claims which hereafter may be asserted by any third
parties. MusicWorld intends to vigorously defend this action and has filed
several counterclaims with its answer against the Osbourne plaintiffs, including
breach of contract and interference with contract. This matter is in the early
discovery stage.

In July 2000, MusicWorld commenced an action in the Supreme Court of the State
of New York, New York County against TBA Entertainment Corp. ("TBA"), arising
out of a contract to acquire certain rights relative to musical performances at
the "2000 Hard Rock Rockfest" concert festival. In the action, the Company
alleges breach of contract, misrepresentation and fraud in the inducement for
TBA's knowing failure to deliver rights necessary for MusicWorld to exploit the
concert rights on the Internet and television pursuant to the terms of the
contract between the companies and to recover damages in the amount of
out-of-pocket costs incurred thereby. Defendant TBA and counterclaim plaintiff
Hard Rock International (USA), Inc. have asserted counterclaims for $1,000,000
against MusicWorld for breach of contract. MusicWorld has filed motions to
dismiss the counterclaims and amend the complaint which are currently pending
before the court and intends to vigorously pursue its claims and defenses. This
matter is in the discovery stage.

During the quarter ended March 31, 2001, MusicWorld filed for arbitration with
the American Arbitration Association against SFX Marketing, Inc. ("SFX")
claiming breach of contract arising out of an agreement between parties entered
into in September, 2000. In summary, among other claims, the Company claims that
SFX failed to perform under the terms of the agreement between the parties and
seeks rescission of the agreement and return of payments aggregating $150,000
made by the Company to SFX. SFX has filed a counter arbitration arising out of
the same agreement seeking payments under the contract totaling $600,000. The
parties are currently in the process of selecting an arbitrator.

The ultimate outcome of the litigation and arbitration referred to in the second
through fifth paragraphs above is not presently determinable, however,
management believes that an adverse outcome in any of such matters could have a
material adverse effect on the financial position or results of operations of
the Company.


NOTE C - STOCKHOLDERS' EQUITY

[1]    During the quarter ended March 31, 2001, the Company issued to a vendor
       1,742,980 shares of common stock (including 1,276,313 shares previously
       recorded as issuable) in payment for services.

[2]    During the quarter ended March 31, 2001, the Company issued 120,000
       shares of common stock to artists.

[3]    During the quarter ended March 31, 2001, in connection with the
       resignation of certain employees, approximately 1,128,000 non-vested
       options previously granted were cancelled. Additionally, with respect to
       those certain employees, the period over which approximately 77,000
       vested options are exercisable was modified to 90 days from date of
       resignation.

                                                                               8
<PAGE>
ITEM 1.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

         When used in this discussion and analysis, the words "anticipates,"
"estimates," "expects" and similar terms are intended to identify
forward-looking statements regarding our activities that are subject to risks
and uncertainties, including those set forth above under "Risk Factors," that
could cause actual results to differ materially from those projected. These
forward-looking statements refer only to the date hereof. We expressly disclaim
any obligation or undertaking to release publicly any updates or revisions to
any forward-looking statements contained herein to reflect any changes in
events, conditions or circumstances on which any statement is based. You should
read this discussion and analysis in conjunction with the financial statements
and other financial information contained in this Quarterly Report on Form
10QSB.

         In addition to historical statements, this Quarterly Report on Form
10QSB contains certain forward-looking statements that are subject to certain
risks and uncertainties, which could cause actual results to differ materially
from those stated or implied. Forward-looking statements are those that use the
words "anticipates," "believes," "estimates," "expects," "may," "will," and
similar expressions. These forward-looking statements reflect management's
opinions only as of the date hereof, and the Company assumes no obligation to
update this information. Risks and uncertainties include, but are not limited to
those discussed in the Company's prior SEC filings.

Results of Operations

         We are a next-generation media company, focused on the acquisition,
production and sale of premium music and media products across all available
channels. To enable the secure and accountable delivery of digital assets over
digital channels, we also develop and license proprietary digital rights
management and digital asset management technologies.

         During the first quarter of 2001, we focused our efforts on the further
development and initial commercialization of our content development and
technology operations, respectively. During the remainder of 2001 we anticipate
continued growth in each business and are planning for commercialization
activities in keeping with expected market growth and maturity.

         We are subject to the general risks associated with, in the case of our
technology business, the growth of a development-stage technology company that
is moving to commercialize its products, and in the case of our media business,
a competitive market for the acquisition, production and licensing of music and
media products.

         We have incurred significant net losses since inception and generated
minimal revenues related to our planned operations during the first quarter of
2001. We may experience significant fluctuations in operating results in future
periods due to a variety of factors, including:

o        general global economic conditions;
o        the amount and timing of capital expenditures and other costs relating
         to the expansion of our operations;
o        the speed and nature of broadband growth;
o        consumer and business demand for music media products;
o        consumer and business demand for digital content delivery solutions;
o        the introduction of new products and services by us or our competitors;
o price competition or pricing changes in the entertainment and technology
industries; o the availability of event and other music product rights for
acquisition; and o actions of major music and media conglomerates.

                                                                               9
<PAGE>
Net Revenues

         For the quarter ended March 31, 2001, our consolidated revenue totaled
$578,000 compared to $38,000 for the quarter ended March 31, 2000. Event related
revenue generated substantially all of the revenue during both quarters.

         Revenue from the licensing and distribution of content through
broadcast, cable, wireless and physical distribution channels is recorded in the
licensing period in which the broadcast and/or distribution takes place. This
licensing period may have a lifetime of several months or, in some cases,
several years. Advertising revenues are derived from the sale of advertising
space on our website and are recorded during the period in which the advertising
services are provided. We recognize revenue applicable to delivery of music when
the digital files and/or streams are delivered with related royalties charged to
the cost of sales.

         In February 2001, we formed the joint venture with Pyramid for the
purpose of acquiring exclusive rights from well-known artists, and developing
and selling multi-media products from these rights. In the future, we anticipate
revenues derived from the sublicensing of event rights to increase.

         In January 2001, we formed NTI, a new wholly owned subsidiary of Music
World focused on the marketing, sale and continued development of our
technologies. Revenues expected to be generated from NTI include technology
licensing fees, implementation service fees, maintenance fees, network service
fees and clearinghouse fees.

Sales, Marketing and Public Relations Expenses

         Sales, marketing and public relations expenses consist primarily of:

o Sales and marketing salaries and benefits, including stock-based compensation;
o The cost of producing and promoting events and attending trade shows; o
Consulting fees and related expenses for public relations activities.
         Sales, marketing and public relations costs were $863,000 and
$3,733,000 in the quarters ended March 31, 2001 and 2000, respectively. Sales
and marketing expenses decreased in 2001 due to a reduction in costs related to
promotional events and consultant fees. As part of our marketing strategy and in
an effort to create brand awareness, a significant portion of our sales and
marketing costs in 2000 were expended on acquiring sponsorships related to our
premium content events, attending trade shows, broadening our sales
relationships and increasing our marketing and promotional activities.

         We expect a continued reduction in sales and marketing expenditures in
2001 due to: (1) increased outsourcing of technology sales through
performance-based compensation agreements; and (2) the shift of almost all
content marketing expenditures to business-to-business licensing and
distribution partners.

Research and Development Expenses

         Our predecessor companies began developing the NETrax(TM) suite of
products in 1995. Research and development expenses consist principally of:

o        software development;
o        telecommunications and network services charges;
o        www.mcy.com website development and maintenance; and
o        salaries, including stock-based compensation, and other expenses
         related to building our digital music distribution platform and
         partnerships.

                                                                              10
<PAGE>
         Since inception, we have spent over $23,000,000 designing and building
NETrax(TM) including expenses related to software, equipment, personnel and
direct research and development expenses. Our direct research and development
expenses were $1,991,000 for the quarter ended March 31, 2001 and $1,413,000 for
the quarter ended March 31, 2000. The increase in research and development costs
is primarily due to an increase in payroll, consulting expenses, and web design
costs.

         We expect our research and development costs to decrease during the
remainder of 2001. Furthermore, with the formation of our NTI subsidiary,
subject to availability of sufficient capital, we expect an increase in the
level of operational and developmental activities.

Content Development

         Costs incurred with respect to content development include amounts paid
to secure rights to music and related media as well as the costs related to the
production and delivery of finished products to our customers. Total content
development costs, which include stock-based compensation and the costs of
employee salaries as well as consultants dedicated to content acquisition
activities totaled $1,143,000 and $1,465,000 for the quarters ended March 31,
2001 and 2000, respectively. The reduction in content development costs is due
to the fact that in 2000, we used the events that we acquired as part of our
marketing strategy to create brand awareness. They were offered at no charge
and, therefore, were included in sales and marketing expenses. In 2001, we no
longer use such strategy.

General and Administrative Expenses

         General and administrative expenses consist primarily of stock-based
compensation, and executive management, finance, legal, administrative and
related overhead costs, such as rent and insurance. General and administrative
expenses for the quarters ended March 31, 2001 and 2000 were $3,918,000 and
$9,563,000 respectively. In 2000, $7,287,000 of our general and administrative
expenses was attributable to stock-based compensation. In 2001, stock-based
compensation totaled $1,420,000. This decrease in general and administrative
expenses is primarily attributable to the decrease in stock-based compensation
which accounted for $5,645,000 of this difference, partially offset by an
increase in other expenses. For the remainder 2001, we expect general and
administrative expenses to decrease due to cost cutting initiatives begun in
August 2000.

Amortization of Acquired Intangibles

         During 1999, Music World acquired certain predecessor companies. As a
result, we recorded intangible assets comprised as follows:
<TABLE>
<CAPTION>

<S>                                                                                      <C>
                  Technology and related contracts                                       $   4,410,000
                  Record label contracts and catalogs                                    $     630,000
                  Excess of cost over fair value of identifiable net assets acquired     $  23,281,000
                                                                                          ------------
                                                                                         $  28,321,000
</TABLE>
The identifiable intangible assets were being amortized over a thirty-six month
period and the excess of cost over fair value of identifiable net assets
acquired was being amortized over a sixty month period until June 30, 2000 as
discussed below.

         We account for impairment of long-lived assets, including our
intangible assets, in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of". SFAS No. 121 requires that
long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the book value of the asset may not be recoverable.
We evaluate at each balance sheet date whether events and circumstances have
occurred that indicate possible impairment. In accordance with SFAS No. 121, we
use an estimate of the future undiscounted net cash flows of the related assets
over their remaining estimated useful lives in measuring whether the assets are
recoverable. Based on the limited revenues to date earned by our acquired
intangibles, and giving further consideration to the impact of events outside of

                                                                              11
<PAGE>
our control such as rapidly changing market circumstances related to
consumer acceptance of the company's business model and proposed product
offerings, and the delayed development of technology conducive to its intended
operations, including, but not limited to the development of broadband
transmission networks, we have revised our projections of future cash flows as
they relate to the acquired intangibles. As a result, we no longer expect
reasonably estimable future net cash flows related to the use of our acquired
technology over the remaining estimated useful lives of the intangibles to be
adequate to recover our investment in the acquired intangibles, and further
believe the fair value of such intangibles to be nominal. Through March 31,
2000, we had amortized $1,584,000. As of June 30, 2000, we wrote off
$21,985,000, representing the then unamortized balance of such intangibles,
consisting principally of the excess of cost over the fair value of identifiable
net assets acquired.

         Prior to Music World's acquisition of the above-referenced predecessor
companies, Bernhard Fritsch and certain other individuals employed by the
predecessor companies engaged in research and development activities which
included the development, purchase, licensing and acquisition of rights to
utilize technology and property rights including patent, copyright, trademark
and trade secrets. These acquired rights and software assets developed by Mr.
Fritsch and others to distribute media under these rights include:

o        digital distribution and encrypted delivery of all forms of media;
o        physical distribution and delivery of such media;
o        online, Internet or electronic distribution, transfer or delivery of
         such media;
o        digital warehousing of such media;
o        physical warehousing of such media;
o        database storage of such media ;
o        search of such media by any means and through any medium now known or
         as may become known in the future; and
o        operation of a "shopping basket" for the purchase of such media.

         Prior to the formation of NTI, costs incurred as a result of engaging
in the above described activities were primarily concentrated in the rights
acquisition area followed by the payment of salaries in the development of the
software to exploit such rights. The result of such activities and costs
incurred in obtaining the various rights described above prior to the
acquisition of the predecessor companies by Music World was the development of
the NETrax(TM) player, our proprietary software for playing downloadable music
and proprietary encryption software contained within the NETrax(TM) player. NTI
will continue to evolve and develop new features within the NETrax(TM) product
suite and further develop its digital distribution technology.

Stock Based Compensation

         We recorded charges related to stock based compensation totaling
$915,000 and $7,611,000 for the quarters ended March 31, 2001 and 2000,
respectively. Future amortization related to stock based compensation will be:
<TABLE>
<CAPTION>

                   Year Ending December 31,                                Amount

<S>                <C>                                                     <C>
                   2001                                                    $  4,016,000
                   2002                                                    $  3,114,000
                   2003                                                    $    445,000
                                                                           -------------
                   TOTAL                                                   $  7,575,000
                                                                           =============
</TABLE>


                                                                              12
<PAGE>
Liquidity and Capital Resources

         Our cash balance as of March 31, 2001 was $5,461,000. During the first
quarter of 2001, net cash of $4,913,000 was used for operating activities
consisting of net losses of $7,160,000, substantially offset by:

o       non-cash expense of $1,214,000 associated with stock and stock-based
        compensation;
o       non-cash expense of $ 447,000 associated with the depreciation
        of capital assets.

For the three months ended March 31, 2000, net cash of $7,901,000 was used for
operating activities consisting of net losses of $17,285,000, substantially
offset by stock-based compensation of $7,611,000 and amortization of intangibles
of $1,584,000.

         For the three months ended March 31, 2001, net cash of $4,958,000 was
used for operating activities consisting of net losses of $7,160,000, offset by
stock-based compensation of $1,214,000 and depreciation of $447,000.

         For the three months ended March 31, 2001, we purchased $262,000 in
capital equipment and received $2,701,000 in returned security deposits. During
the three months ended March 31, 2000, we purchased approximately $1,089,000 in
capital equipment and incurred $1,229,000 to develop internal-use software. We
expect to incur negative cash flow from operations for the foreseeable future,
as we continue to develop our business.

          During the three months ended March 31, 2000, we raised net proceeds
of approximately $35,015,000 through the sale of 5,006,390 shares of our common
stock at $7.50 per share less related.

         We lease facilities and equipment under non-cancelable operating leases
expiring through October 2004. Such leases provide for annual payments as
detailed below. In connection with the aforementioned leases, we are required to
provide security totaling $1,088,000. Such security has been provided by
deposits and collateralized letters of credit totaling $1,088,000.

         Since inception, we have experienced significant losses and negative
cash flows from operations. We believe that our existing capital resources will
be sufficient to fund our planned level of operating activities, capital
expenditures and other obligations through the next 12 months. However, we may
need to raise additional funds in future periods through public or private
financings, or other sources, to fund our operations and potential acquisitions,
if any, until we achieve profitability, if ever. We may not be able to obtain
adequate or favorable financing in a timely manner or at all. Failure to raise
capital when needed could harm our business. If we raise additional funds
through the issuance of equity securities, the percentage of ownership of our
stockholders would be reduced. Furthermore, these equity securities might have
rights, preferences or privileges senior to our common stock.

                                                                              13
<PAGE>
                   PART II - OTHER INFORMATION

Item 1.   Legal Proceedings.

          On May 3, 2000, Andrew Sugerman, an individual who had been retained
by MCY America, Inc. and Music World to obtain equity capital from a specific
investor for Music World, filed a complaint against the defendants MCY America,
Inc. and Music World, Inc. in federal District Court in New York City, alleging
claims for breach of contract, promissory estoppel and unjust enrichment. The
plaintiff appears to allege a claim for breach of a written engagement agreement
and that the defendants allegedly breached an oral agreement to compensate the
plaintiff for enabling the defendants to obtain financing through a well-known
investment banking firm. The plaintiff asserts further that he is entitled to a
cash fee, as well as stock options, in return for his alleged involvement in the
financing, and seeks damages of at least $13,315,000, together with prejudgment
interest and costs. As we believe that the plaintiff's claims lack substantial
merit, we intend to vigorously defend against this action and have filed a
motion for summary judgment which is currently pending before the court. We
cannot predict the outcome of this litigation. Any adverse determination would
have a material adverse effect on our financial position or results of
operations.

         In July 2000, Music World commenced an action in the Supreme Court of
the State of New York, New York County against TBA Entertainment Corp. ("TBA"),
arising out of a contract to acquire certain rights relative to musical
performances at the "2000 Hard Rock Rockfest" concert festival. In the action,
we allege breach of contract, misrepresentation and fraud in the inducement for
TBA's knowing failure to deliver rights necessary for Music World to exploit the
concert rights on the Internet and television pursuant to the terms of the
contract between the companies and to recover damages caused thereby. Defendant
TBA and counterclaim plaintiff Hard Rock International (USA), Inc. have asserted
counterclaims against Music World for breach of contract. We intend to
vigorously pursue our claims and defenses. This matter is currently in the
discovery stage.

         In November 2000, Ozzy Osbourne, Osbourne Management and other
performers who appeared in the Ozzfest 2000 tour commenced an action against the
Company and its sub-licensees DirecTV Enterprises, Inc. ("DirecTV") and iN
Demand LLC ("iN Demand") in the United States District Court for the Central
District of California in reference to pay-per-view television broadcasts of
performances from the Ozzfest 2000 tour on DirectTV and iN Demand. The
plaintiffs followed the filing of the action with an application to the court
for a temporary restraining order which was subsequently denied. The matter
arises out of a sponsorship agreement executed in April, 2000 (the "Agreement")
among World Music, Osbourne Management and SFX Holdings, Inc. ("SFX"), whereby
defendants allege that we obtained the right, among other things, to produce a
videotape of the Ozzfest 2000 concert tour and license the program for broadcast
in various media outlets including pay-per-view television. Pursuant to the
Agreement, we thereafter entered into license agreements with DirecTV and iN
Demand licensing the program for specified time periods to broadcast the
videotape produced by us pursuant to the Agreement, on a pay-per-view television
or cable basis. In summary, the complaint filed by the plaintiffs alleges that
the Agreement only provided us the right to broadcast the program as a webcast
over the Internet and that the defendants proceeded with the pay-per-view
television and cable broadcasts without obtaining the allegedly required
consents of the plaintiffs. Furthermore, plaintiffs allege claims against us, iN
Demand and DirecTV for federal copyright infringement, federal trademark
infringement, federal trademark dilution, commercial appropriation of identity,
state statutory and common law trademark dilution, unfair competition and
constructive trust. Plaintiff Osbourne Management further has alleged a claim
against us for breach of the Agreement. Among other claims and defenses, we
contend that we acted within our rights under the Agreement; that the Agreement
was breached by Osbourne Management; and that under the Agreement, Osbourne
Management was obligated to provide us with all necessary clearances for the
pay-per-view broadcasts which occurred. We further contend that, under the
Agreement, as a result of the breach of the Agreement by Osbourne Management,
SFX is obligated to indemnify, hold harmless and defend us for any breach of the
Agreement by Osbourne Management, and that both Osbourne Management and SFX are
obligated to indemnify, hold harmless and defend us for the claims asserted by
the plaintiffs who are not parties to the Agreement, as well as any claims which
hereafter may be asserted by any third parties. We intend to vigorously defend
this action and have filed several counterclaims with our answer against the
Osbourne defendants, including breach of contract and interference with
contract. This matter has just entered the discovery stage.

                                                                              14
<PAGE>
         Subsequent to year-end, Music World filed for arbitration with the
American Arbitration Association against SFX Marketing, Inc. ("SFX") claiming
breach of contract arising out of an agreement between the parties entered into
in September 2000. In summary, among other claims, we claim that SFX failed to
perform under the terms of the agreement between the parties and seeks
rescission of the agreement and return of payments made by us to SFX. SFX has
filed a counter arbitration arising out of the same agreement seeking payments
under the contract totaling $600,000.

         From time to time, we are parties to various other claims and legal
proceedings incidental to our business. One or more adverse determinations would
have a material adverse effect on our financial position and results of
operations.


Item 2.   Changes in Securities.

         None; not applicable.

Item 3.   Defaults Upon Senior Securities.

          None; not applicable.

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

          No matter was submitted to a vote of the Company's security holders
during the quarter of the calendar year covered by this Report or during the two
previous calendar years.

Item 5.   Other Information.

         None; not applicable.

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

          (a)  Exhibits.

               None.

          (b)  Reports on Form 8-K.

               None.
                                                                              15
<PAGE>
                                   SIGNATURES

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

                                         MCY.COM, INC.

Date: 5/18/01                           By /s/ Bernhard Fritsch
                                               Bernhard Fritsch, CEO & Chairman

                                                                              16