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 September 30, 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>

                               509 Madison Avenue
                               New York, NY 10022
                          ----------------------------

                    (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:

     62,149,507 at September 30, 2001 of common stock (.001 per value)

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      NONE.

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


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

                   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                               September 30, 2001






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

Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>

                                                                                          September 30,        December 31,
                                                                                               2001                2000
                                                                                           (Unaudited)

ASSETS
Current assets:
<S>                                                                                     <C>                 <C>
   Cash and cash equivalents                                                            $       2,895,000   $      10,300,000
   Sundry receivables                                                                             128,000             343,000
   Short term investments                                                                         611,000                   0
   Advances to officer                                                                             97,000             101,000
   Other current assets                                                                           812,000              63,000
                                                                                        -----------------   -----------------

      Total current assets                                                                      4,543,000          10,807,000

Equipment and software, net                                                                     2,051,000           9,034,000

Other assets, including security deposits of $168,000 and $3,789,000, record
   company advances of $0 and $500,000 and prepaid event costs
   of $625,000 and $670,000, respectively.                                                        793,000           4,989,000
                                                                                        -----------------   -----------------

                                                                                        $       7,387,000   $      24,830,000
                                                                                        =================   =================

LIABILITIES
Current liabilities:
   Accounts payable, accrued expenses and sundry liabilities                            $       3,595,000   $       4,538,000
   Obligation related to securities                                                               611,000                   0
   Current Portion of capital lease obligation                                                          0             713,000
   Deferred revenue                                                                               472,000             471,000
                                                                                        -----------------   -----------------

      Total current liabilities                                                                 4,678,000           5,722,000

Capital lease obligation, net of current portion                                                        0           1,681,000
                                                                                        -----------------   -----------------
                                                                                                4,678,000           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;
   62,149,507 and 59,670,551 shares issued and outstanding, respectively                           62,000              59,000
Common stock payable (50,000 and 1,326,313 shares)                                                525,000           2,360,000
Additional paid-in capital                                                                    185,230,000         182,961,000
Deficit accumulated during the development stage                                             (177,826,000)       (158,491,000)
Cumulative foreign currency translation adjustment                                               (340,000)           (190,000)
                                                                                        ------------------  -----------------
                                                                                                7,652,000          26,700,000
Unamortized deferred compensation                                                              (4,879,000)         (9,209,000)
Stock subscriptions receivable                                                                    (64,000)            (64,000)
                                                                                        -----------------   -----------------
                                                                                                2,709,000          17,427,000
                                                                                        -----------------   -----------------

                                                                                        $       7,387,000   $      24,830,000
                                                                                        =================   =================
</TABLE>

See notes to financial statements                                              2
<PAGE>
MCY.COM, INC. AND SUBSIDIARIES
(a development stage company)

Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>

                                                                                                                  Inception
                                              For the Three Months               For the Nine Months          (January 8, 1999)
                                               Ended September 30,               Ended September 30,               Through
                                              2001             2000            2001              2000         September 30, 2001


<S>                                     <C>               <C>             <C>               <C>              <C>
Revenues                                $       201,000   $     211,000   $     1,300,000   $       474,000  $       2,117,000
                                        ---------------   -------------   ---------------   ---------------  -----------------

Expenses:
   Sales, marketing and public
      Relations                               614,000         2,178,000         1,665,000         8,627,000         21,630,000
   Product development                        855,000         1,797,000         4,160,000         5,512,000         12,794,000
   Content acquisition                        163,000         2,753,000         1,851,000        10,107,000         22,875,000
   General and administrative               3,513,000         3,042,000        10,482,000        16,961,000         84,388,000
   Amortization of acquired
      Intangibles                                                                                 3,168,000          6,336,000
   Write-off of impaired intangibles,
      equipment and software                 1,000,000                          1,000,000        21,985,000         29,385,000
                                        ---------------   -------------   ---------------   ---------------  -----------------
                                             6,145,000        9,770,000        19,158,000        66,360,000        177,408,000
                                        ---------------   -------------   ---------------   ---------------  -----------------

Operating loss                               (5,944,000)     (9,559,000)      (17,858,000)      (65,886,000)      (175,291,000)
Share of loss of predecessor
   companies                                          0               0                 0               0             (663,000)
Loss on disposition of investments               75,000                        (1,794,000)                          (1,794,000)
Interest income, net of interest
   Expense                                       80,000         493,000           317,000         1,336,000          2,493,000
                                        ---------------   -------------   ---------------   ---------------  -----------------

Net loss                                $    (5,789,000)  $  (9,066,000)  $   (19,335,000)  $   (64,550,000) $    (175,255,000)
                                        ================  ==============  ===============   ================ ==================

Net loss per common share -
   basic and diluted                         $(0.09)          $(0.89)          $(0.31)          $(1.10)
                                             ======           ======           ======           =======

Weighted average common
   Shares outstanding                        62,149,000      50,295,000        61,785,000        58,556,000
                                        ===============   =============   ===============   ===============
</TABLE>


See notes to condensed consolidated financial statements                       3
<PAGE>
MCY.COM, INC. AND SUBSIDIARIES
(a development stage company)

Condensed Consolidated Statement of Cash Flows - Unaudited
<TABLE>
<CAPTION>
                                                                                                                     For the
                                                                                                                   Period From
                                                                                                                   January 8,
                                                                                                                      1999
                                                                               For the            For the          (Inception)
                                                                          Nine Months Ended  Nine Months Ended       Through
                                                                            September 30,      September 30,      September 30,
                                                                                 2001               2000              2001
Cash flows from operating activities:
<S>                                                                       <C>                <C>                <C>
   Net loss                                                               $    (19,335,000)  $    (64,550,000)  $   (175,256,000)
      Adjustments to reconcile net loss to net cash used in operating
        activities:
           Depreciation and amortization of equipment and software               1,829,000            837,000          2,919,000
           Amortization of intangibles                                                              3,168,000          6,336,000
           Write-off of impaired intangibles, equipment and software             1,000,000         21,985,000         29,385,000
           Stock-based compensation                                              4,460,000         14,348,000         71,326,000
           Noncash compensation                                                    999,000                  0            999,000
                  Realized (loss) on disposition of securities                   1,752,000                             1,752,000
           Share of loss of predecessor companies                                                                        663,000
           Changes in:
              Record company advances                                                               1,422,000
              Receivables                                                          215,000           (134,000)          (133,000)
              Other current assets                                                (745,000)                             (109,000)
              Other assets                                                       1,802,000         (6,141,000)         1,170,000
              Accounts payable, accrued expenses and sundry
                Liabilities                                                       (900,000)           623,000          1,407,000
                                                                          -----------------  ----------------   ----------------
                   Net cash used in operating activities                        (8,923,000)       (28,442,000)       (59,541,000)
                                                                          -----------------  ----------------   ----------------

Cash flows from investing activities:
   Cost of developing internal-use software                                                        (6,202,000)        (7,558,000)
   Datatek acquisition, net of acquired companies cash of $565,000                                                    (1,748,000)
   Decrease (increase) in security deposits                                      2,394,000         (1,625,000)        (1,398,000)
   Proceeds from the sale of short term investments                              1,500,000                             1,500,000
   Purchase of equipment                                                                           (3,683,000)        (4,372,000)
                                                                          ----------------   -----------------  ----------------
                   Net cash provided by (used in) investing activities           3,894,000       (11,510,000)        (13,576,000)
                                                                          ----------------   -----------------  ----------------

Cash flows from financing activities:
   Purchase of treasury stock                                                                     (1,835,000)         (1,835,000)
   Sale of warrants                                                                                  750,000             750,000
     Payment of line of credit
                                                                                                                         (40,000)
   Principal payments on capital lease obligation                               (2,394,000)                           (2,394,000)
   Proceeds from sale of stock and warrants, net of related costs                                 34,353,000          80,009,000
                                                                          ----------------   -----------------  ----------------

                   Net cash (used in) provided by financing activities          (2,394,000)       33,268,000         76,490,000
                                                                          ----------------   -----------------  ----------------

Effect of exchange rate changes on cash                                             18,000          (248,000)          (478,000)
                                                                          ----------------   -----------------  ----------------

Net (decrease) increase in cash and cash equivalents                            (7,405,000)       (6,932,000)          2,895,000
Cash and cash equivalents, beginning of period                                  10,300,000        26,060,000
                                                                          ----------------   -----------------  ----------------

Cash and cash equivalents, end of period                                  $      2,895,000   $    19,128,000    $      2,895,000
                                                                          ================   ================   ================

Supplemental disclosures of non-cash investing and financing activities:
      Issuance of warrants relating to events                                                $     3,889,000    $      3,889,000
      Deferred compensation to consultants and employees                  $        550,000   $     5,678,000    $     41,997,000
        by issuance of options
      Acquisition of securities in connection with sale of internal-use   $     13,293,000                      $     13,293,000
        software ($3,986,000), incurrence of related obligaition
        ($9,000,000) and issuance of common stock ($307,000)
      Reduction in market value of securities and related obligation      $      8,389,000                      $     8,389,000
      Issuance of stock and warrants for software development                                $     1,835,000    $     1,835,000
      Issuance of common stock payable                                    $      1,835,000                      $     1,835,000
      Issuance of stock for subscription receivable                                          $        38,000    $        64,000
      Issuance of stock and warrants in connection with Datatek                                                 $    25,590,000
        acquisition
      Issuance of stock for notes payable and accrued interest                                                  $       730,000
      Acquisition of fixed assets by capital lease                                                              $     2,394,000
</TABLE>
See notes to financial statements                                              4
<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 nine months ended September 30, 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.

Management believes that operating losses and negative operating cash flows will
continue in fiscal year 2001 and thereafter which raises substantial doubt about
the Company's ability to continue as a going concern. The Company's continued
existence is dependent on its ability to obtain additional financing through
additional private placements. There is no assurance that the Company will
obtain additional financing or achieve profitable operations. The financial
statements do not include any adjustments relating to the recoverability or
classification of recorded asset amounts or the amount and classification of
liabilities that might be necessary as a result of this uncertainty.


NOTE B - COMMITMENTS AND CONTINGENCIES

[1]      Lease commitments:

      (a)  Operating:
       The Company leases facilities and equipment under noncancellable
       operating leases expiring through July 2003. Such leases provide for
       annual payments as detailed below. In connection with the aforementioned
       leases, the Company has provided security deposits of $168,000 (included
       in other assets.)

       Future minimum annual lease payments as of September 30, 2001 are as
follows:

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

                       For The Year Ending
                          December 31,
                   2001 (October 1 through December 31)         $        58,000
                   2002                                                 110,000
                   2003                                                   7,000
                                                                 --------------
                                                                $       175,000
                                                                 ==============

(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:

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. The Company's motion for
summary judgment is currently pending before the court.

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
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.
                                                                               6
<PAGE>
MCY.COM, INC. AND SUBSIDIARIES
(a development stage company)

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 . The Company settled this matter
during the fourth quarter of 2001 by payment of $20,000.


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 arbitration.

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 nine months ended September 30, 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, 120,000 shares
       of common stock to artists and 615,976 shares to purchase software (see
       Note D ) in connection with the ADSX transaction.

[2]    During the nine months ended September 30, 2001, in connection with the
       resignation of certain employees, approximately 1,648,000 non-vested
       options previously granted were cancelled. Additionally, with respect to
       those certain employees, the period over which approximately 646,000
       vested options are exercisable was modified to 90 days from date of
       resignation and 538,000 of those vested options were subsequently
       cancelled.

[3]    During the nine months ended September 30, 2001, the Company issued an
       option at an exercise price of $0.35 to purchase 2,500,000 shares of the
       Company's stock to a consultant at an exercise price of $0.35. Such
       option was valued at $550,000 utilizing the Black-Scholes valuation model
       and the following factors; a fair market value of $0.43 per share, an
       expected life of 3 years, a risk-free interest rate of 5.70%, a dividend
       rate of $0.00 and a volatility of 60%.

NOTE D - LICENSE AGREEMENT

In October 2000, the Company signed an agreement to license their proprietary
secure digital encryption and distribution technologies, including its NETrax
software, to Applied Digital Solutions, Inc. ("ADSX"), a provider of e-business
solutions (the "Agreement"). The Agreement, as amended on March 30, 2001, allows
ADSX to utilize the Company's NETrax technologies for certain non-entertainment
business-to-business applications. Under the terms of the agreement, on April 3,
2001, the Company received net consideration of approximately $3,986,000 for the
grant of the license, consisting of $13,293,000, representing the quoted market

                                                                               7
<PAGE>
MCY.COM, INC. AND SUBSIDIARIES
(a development stage company)

value of the approximately 11.8 million shares of common stock of ADSX (a
publicly held company whose shares are traded on the NASDAQ); reduced by
$307,000, representing the quoted market value of the approximately 615,000
shares of common stock of the Company issued to ADSX and cash, not to exceed
$9,000,000, payable to ADSX from certain proceeds of the sale by the Company of
ADSX's stock. Such net consideration is based on the quoted market price of the
common stock of ADSX and the Company on April 3, 2001, the date the software and
shares were released from escrow. The net consideration received was applied in
accordance with SOP 98-1 to reduce the approximately $3,986,000 carrying value
of the NETrax software.

Under the terms of the Agreement, the Company is to keep the first $2,000,000
realized from the sale of the ADSX shares with the next $9,000,000 realized to
be paid to ADSX in satisfaction of the $9,000,000 payable and any proceeds in
excess of $11,000,000 are to be kept by the Company. Alternately, the $9,000,000
payable to ADSX can be satisfied by the return to ADSX of any unsold shares held
by the Company at October 13, 2001. As of September 30, 2001, the Company is
deemed to have realized a total of $1,958,000 in proceeds from the disposition
of ADSX shares and is entitled to retain the next $42,000 in proceeds. The
quoted market price at September 30, 2001 of the remaining ADSX shares held by
the Company amounted to approximately $611,000. As of September 30, 2001, the
obligation to ADSX has been reduced to $611,000 by realized and unrealized
losses aggregating $8,389,000 due to the decline in market value of the ADSX
shares which are for the account of ADSX. Any future proceeds, up to $9,000,000,
realized in excess of $42,000, together with any remaining unsold shares may be
transferred to ADSX in full payment of any remaining obligation. During the
three months ended September 30, 2001, the Company has realized losses
aggregating $42,000 on disposition of the ADSX shares, including the loss
referred to below. Such amount is net of $562,000 of realized losses charged to
ADSX.

In accordance with the terms of amended employment agreements entered into on
April 1, 2001, the Company's Chairman and CEO, and its Manager of Business
Affairs, each was entitled to receive; (i) shares of ADSX stock valued at
$200,000 based on the closing bid price on April 3, 2001 and (ii) 10% of the
ADSX shares remaining (if any) after satisfaction of the $9,000,000 obligation
payable out of proceeds of the sale of ADSX shares. Compensation expense of
$400,000 was recognized by the Company as a result of such agreement. The
transfer of shares to the individuals was delayed until June 15, 2001 when the
registration statement filed by ADSX registering the Company's shares was
declared effective by the SEC. As a result of the delay and the intervening
decline in quoted market price of the ADSX stock, the Company agreed to provide
additional shares to the Company's Chairmen and CEO, and its Manager of Business
Affairs so that the quoted market price of the total shares issued to each
individual totaled $200,000 on June 15, 2001. As a result, the Company
recognized an additional $283,000 in compensation and $681,000 in realized loss
on disposition of securities. In September, 2000, the Company agreed to provide
additional shares to the Company's Chairman and CEO, and its Manager of Business
Affairs so that the total that the individuals received equaled $200,000. As a
result, the Company recognized an additional $117,000 in compensation expense
and $822,000 in realized loss on disposition of securities, offset by the
reduction in the obligation related to ADSX. In addition, two other individuals
each received ADSX stock as compensation for assistance in completing the
transaction, resulting in $199,000 of compensation expense.

Subsequent to September 30, 2001 the Company returned the remaining unsold
shares to ADSX in full payment of the remaining obligation.

                                                                               8
<PAGE>
ITEM 2.  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

         MCY is a media company focused on the cross-channel distribution of
music products. To enable the secure and accountable delivery of digital assets
over digital channels, we have developed proprietary digital rights management
and digital asset management technologies.

         During the third quarter of 2001 we primarily focused our efforts on
the restructuring of operations in keeping with market conditions and capital
constraints, and on event production and licensing.

         Restructuring efforts included the reduction of staff; the transfer of
operations to smaller offices; the reduction of outsourced activities; the
streamlining of our technical infrastructure; the replacement or renegotiation
of service relationships; and the reduction of short-term liabilities.

         No revenue was generated from digital distribution and technology
licensing activities in the third quarter, due to factors including, but not
limited to, the ongoing impact of digital piracy, controls and barriers imposed
by major music owners, and a slowdown in corporate technology investment.

                                                                               9
<PAGE>
         Third quarter event production and licensing activities included the
licensing of MCY's Kid Creole and The Coconuts DVD and CD products;
the completion of post-production for the Pete Townshend Lifehouse Concert; the
initiation of post-production for the Deep Purple and Dave Mason concerts; the
pay-per-view broadcast of The Who Live From Royal Albert Hall; and the
commercial DVD release of The Who Live from Royal Albert Hall and Sammy Hagar
and the Waboritas' Cabo Wabo Bash.

         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 and evolving 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 third quarter of
2001. We may experience significant fluctuations in operating results in future
periods due to a variety of factors, including, but not limited to:

o        general global economic conditions;
o        actions of major music and media conglomerates;
o        the impact of digital piracy and copyright violation;
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;
         and,
o        pricing behavior in the music and technology industries.
o        the amount and timing of available financing for operations.

Net Revenues

         For the quarter and nine months ended September 30, 2001, our
consolidated revenue totaled $201,000 and $1,300,000, respectively. Revenue for
the quarter and nine months ended September 30, 2001 consisted of revenue from
media licensing.

          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.

                                                                              10
<PAGE>
Sales, Marketing and Public Relations Expenses

         Sales, marketing and public relations expenses consist principally of:

o        salaries and benefits, including stock-based compensation;
o        consulting fees and expenses; and
o        production and sales-related costs.
         Sales, marketing and public relations costs for the quarters ended
September 30, 2001 and 2000 totaled $614,000 and $2,178,000, respectively. Sales
and marketing expenses costs for the nine months ended September 30, 2001 and
2000 totaled $1,665,000 and $8,627,000, respectively.

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        salaries, including stock-based compensation;
o        software development and maintenance;
o        telecommunications and network services charges; and
o        website development and maintenance.

         Since inception, we have spent over $23,000,000 designing, building and
packaging NETrax(TM) including expenses related to software, equipment,
personnel and direct research and development expenses. Our direct research and
development expenses for the quarters ended September 30, 2001 and 2000 were
$855,000 and $1,797,000, respectively. Development expenses for the nine months
ended September 30, 2001 and 2000 were $4,160,000 $5,512,000, respectively.

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, including
stock-based compensation and the costs of employee salaries as well as
consultants dedicated to content acquisition activities. Content development
costs for the quarter ended September 30, 2001 and 2000 totaled $163,000 and
$2,753,000, respectively. Content development costs for the nine months ended
September 30, 2001 and 2000 $1,851,000 and $10,107,000, respectively. The
reduction in content development costs is due to the fact that in 2000, events
we acquired were offered to consumers free-of-charge to create brand awareness
and, therefore, were designated as sales and marketing expenses.

                                                                              11
<PAGE>
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 September 30, 2001 and 2000 were $3,514,000 and
$3,042,000, respectively. General and administrative costs for the nine months
ended September 30, 2001 and 2000, were $10,482,000 and $16,961,000,
respectively. In 2000, $8,887,000 of our general and administrative expenses was
attributable to stock-based compensation. In 2001, stock-based compensation and
compensation paid in securities totaled $5,459,000. This decrease in general and
administrative expenses is primarily attributable to the decrease in stock-based
compensation which accounted for $3,428,000 of this difference. For the
remainder 2001, we expect general and administrative expenses to decrease due to
cost cutting initiatives begun in August 2000.

Equipment and Software

         Based on the limited revenues to date earned by us related to our
equipment and software, and giving further consideration to the impact of events
outside of our control such as rapidly changing market circumstances on consumer
acceptance of our business model and proposed product offerings, and the delayed
development of technology conducive to our 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 certain of our
investments in equipment and software. As a result, we no longer expect
reasonable estimable future net cash flows related to the use of certain of our
equipment and software over the remaining estimated useful lives of these assets
to be adequate to recover our investment in the selected equipment and software,
and further believe the fair value of such equipment and software to be nominal.
Accordingly, as of December 31, 2000, we wrote off $6,400,000, representing the
then undepreciated balance of such equipment and software. Additionally, for the
three and nine months ended September 30, 2001, we wrote off an additional
$1,000,000, representing the then undepreciated balance of such equipment and
software.

Amortization of Acquired Intangibles

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

                                                                              12
<PAGE>
<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
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. Accordingly, 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.

Stock Based Compensation

         We recorded charges related to stock based compensation for the quarter
and nine months ended September 30, 2001 of $2,732,000 and $4,460,000,
respectively. Future amortization related to stock based compensation will be:

                                                                              13
<PAGE>
        Year Ending December 31,                                Amount

       2001 (October 1 - December 31)                          $  1,317,000
       2002                                                    $  3,114,000
       2003                                                    $    448,000

Liquidity and Capital Resources

         Our cash balance as of September 30, 2001 was $2,895,000. Net cash of
$8,923,000 was used for operating activities during the nine months ended
September 30, 2001 consisting of net losses of $19,335,000, substantially offset
by: non cash expenses of $5,459,000 associated with stock and stock-based
compensation, $1,829,000 associated with the depreciation of capital assets, and
$1,000,000 associated to the write-off of impaired equipment and software, as
well as realized loss on sale of securities of $ 1,752,000.

         Our cash balance as of September 30, 2000 was $19,128,000. Net cash of
$28,442,000 was used for operating activities for the nine months ended
September 30, 2000. Such amounts were used principally as a result of net losses
of $64,550,000 generated during the period and the increase in current assets of
$6,275,000, offset by the increase in current liabilities of $623,000 and
non-cash expenses associated with stock and stock-based compensation of
$13,136,000, stock-based sales and marketing of $1,212,000, depreciation and the
amortization of intangibles of $4,005,000 and the write-down of intangible
assets of $21,985,000. The Company expects to incur negative cash flow from
operations for the foreseeable future.

         The Company has incurred substantial operating losses and sustained
substantial operating cash outflows. Management believes that operating losses
and negative operating cash flows will continue in fiscal year 2001 and
thereafter which raise substantial doubt about the Company's ability to continue
as a going concern. The Company's continued existence is dependent on its
ability to obtain additional equity and/or debt financing to fund its operations
and ultimately to achieve profitable operations. There is no assurance that the
Company will obtain additional financing or achieve profitable operations. The
financial statements do not include any adjustments relating to the
recoverability or classification of recorded asset amounts or the amount and
classification of liabilities that might be necessary as a result of this
uncertainty.

         During the nine months ended September 30, 2000, we raised net proceeds
of approximately $34,353,000 through the sale of 5,006,390 shares of our common
stock at $7.50 per share less related costs of approximately $3,200,000. No
proceeds were raised during the nine months ended September 30, 2001.

         Since inception, we have experienced significant losses and negative
cash flows from operations. We believe that our existing capital resources may
not be sufficient to fund our planned level of operating activities, capital
expenditures and other obligations through the next 12 months. 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.

                                                                              14
<PAGE>
PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

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. The Company's motion for
summary judgment is currently pending before the court.

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
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.

                                                                              15
<PAGE>
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 . The Company settled this matter
during the fourth quarter of 2001 by payment of $20,000.

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 arbitration.

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.

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.

     On October 24, 2001 the Company filed Form 8-K to report that the Company
and Richard A. Eisner & Company, LLP mutually agreed to terminate their
client-auditor relationship. On October 24, 2001 the Company engaged Holtz
Rubenstein & Co., LLP as their independent auditors.

                                                                              16
<PAGE>
                                   SIGNATURES

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

                                                 MCY.COM, INC.


                                             By:
                                                --------------------------------
                                                Bernhard Fritsch, CEO & Chairman








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