##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549




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FORM 10-Q



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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended March 31, 2000

Commission File Number 000-26697


MP3.com, Inc.

(Exact name of registrant as specified in its
charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|                                                              
|                                                              
|                                                              
|                                                              
|Delaware                                                       |  | 33-0840026                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                              
|4790 Eastgate Mall, San Diego, CA                              |  | 92121                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

(858) 623-7000

(Registrants telephone number, including
area code)


N/ A

(Former name, former address and former fiscal
year, if changed since last reported)


Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding twelve
months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to
such filing requirements for the past ninety
days.  Yes  [X]  No 
[   ].

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest
practicable date:

Common Stock, $0.001 per share par value, 67,972,476 shares
outstanding as of March 31, 2000.

This report contains 31 pages



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TABLE OF CONTENTS



|                                |                                                                                              |  |  |  |  |  |  | 
|------------------------------- | -------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I -- FINANCIAL INFORMATION
|                                | Item 1.Financial Statements                                                                 
|                                | Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                | Item 3.Quantitative and Qualitative Disclosures about Market Risk                           
|PART II -- OTHER INFORMATION   
|                                | Item 1.Legal Proceedings                                                                    
|                                | Item 2.Changes in Securities and Uses of Proceeds                                           
|                                | Item 6.Exhibits and Reports on Form 8-K                                                     



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MP3.COM, INC.

FORM 10-Q

For the Quarter Ended March 31, 2000


INDEX

|                               |  |                                                                                        |  |      |    | 
|------------------------------ |  | -------------------------------------------------------------------------------------- |  | ---- | -- | 
|                               |  |                                                                                        |  | Page
|                               |  |                                                                                        |  |     
|PART I  FINANCIAL INFORMATION
|                              
|                              
|                              
|                              
|Item  1.                       |  | Financial Statements                                                                   |  |      | 3  | 
|                              
|                              
|                              
|                              
|Item  2.                       |  | Managements Discussion and Analysis of Financial Condition
	and Results of Operations |  |      | 10 | 
|                              
|                              
|                              
|                              
|Item  3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                             |  |      | 27 | 
|                              
|                              
|                              
|                              
|PART II  OTHER INFORMATION   
|                              
|                              
|                              
|                              
|Item  1.                       |  | Legal Proceedings                                                                      |  |      | 29 | 
|                              
|                              
|                              
|                              
|Item  2.                       |  | Changes in Securities and Uses of Proceeds                                             |  |      | 30 | 
|                              
|                              
|                              
|                              
|Item  6.                       |  | Exhibits and Reports on Form 8-K                                                       |  |      | 30 | 

2



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##### Table of Contents






PART I  FINANCIAL INFORMATION




Item 1. Financial Statements

MP3.COM, INC.

CONDENSED BALANCE SHEETS

(In thousands, except for share data)


ASSETS

|                                                        |                                                                                                                                                                                                                       |                            |         |              |         |   |         |         |         | 
|------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ------------ | ------- | - | ------- | ------- | ------- | 
|                                                        |                                                                                                                                                                                                                       | March 31,                  |         | December 31,
|                                                        |                                                                                                                                                                                                                       | 2000                       |         | 1999        
|                                                        |                                                                                                                                                                                                                       |                            |         |             
|                                                        |                                                                                                                                                                                                                       | (Unaudited)                |         |             
|                                                       
|                                                       
|                                                       
|                                                       
|Current assets:                                         |                                                                                                                                                                                                                       |                            |         |              |         |   |         |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Cash and cash equivalents                                                                                                                                                                                             |                            | $       | 223,862      |         |   | $       | 193,192 |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Marketable securities                                                                                                                                                                                                 |                            |         | 145,428      |         |   |         | 220,039 |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Short-term investments                                                                                                                                                                                                |                            |         | 9,203        |         |   |         | 14,750  |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Accounts receivable, net                                                                                                                                                                                              |                            |         | 6,058        |         |   |         | 6,871   |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Unbilled receivables                                                                                                                                                                                                  |                            |         | 813          |         |   |         | 1,279   |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Prepaid expenses                                                                                                                                                                                                      |                            |         | 3,211        |         |   |         | 2,878   |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Other current assets                                                                                                                                                                                                  |                            |         | 2,575        |         |   |         | 3,456   |        
|                                                        |                                                                                                                                                                                                                       |                            |         |              |         |   |         |        
|                                                        |                                                                                                                                                                                                                       | Total current assets       |         |              | 391,150 |   |         |         | 442,465 | 
|                                                       
|                                                       
|                                                       
|                                                       
|Property and equipment, net of accumulated depreciation |                                                                                                                                                                                                                       |                            | 18,239  |              |         |   | 13,849  |        
|                                                       
|                                                       
|                                                       
|                                                       
|Strategic investments                                   |                                                                                                                                                                                                                       |                            | 43,620  |              |         |   | 11,983  |        
|                                                       
|                                                       
|                                                       
|                                                       
|Prepaid marketing and promotions expense                |                                                                                                                                                                                                                       |                            | 2,875   |              |         |   | 2,162   |        
|                                                       
|                                                       
|                                                       
|                                                       
|Other non-current assets                                |                                                                                                                                                                                                                       |                            | 2,347   |              |         |   | 1,423   |        
|                                                        |                                                                                                                                                                                                                       |                            |         |              |         |   |         |        
|                                                        |                                                                                                                                                                                                                       | Total assets               |         | $            | 458,231 |   |         | $       | 471,882 | 
|                                                        |                                                                                                                                                                                                                       |                            |         |              |         |   |         |        
|LIABILITIES AND STOCKHOLDERS EQUITY                   
|                                                       
|                                                       
|                                                       
|                                                       
|Current liabilities:                                    |                                                                                                                                                                                                                       |                            |         |              |         |   |         |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Accounts payable                                                                                                                                                                                                      |                            | $       | 2,079        |         |   | $       | 5,659   |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Line of credit                                                                                                                                                                                                        |                            |         | 1,017        |         |   |         | 1,234   |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Accrued expenses                                                                                                                                                                                                      |                            |         | 14,145       |         |   |         | 5,019   |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Deferred revenues                                                                                                                                                                                                     |                            |         | 38,071       |         |   |         | 42,361  |        
|                                                        |                                                                                                                                                                                                                       |                            |         |              |         |   |         |        
|                                                        |                                                                                                                                                                                                                       | Total current liabilities  |         |              | 55,312  |   |         |         | 54,273  | 
|                                                       
|                                                       
|                                                       
|                                                       
|Other liabilities                                       |                                                                                                                                                                                                                       |                            | 272     |              |         |   | 59      |        
|                                                       
|                                                       
|                                                       
|                                                       
|Stockholders equity:                                   |                                                                                                                                                                                                                       |                            |         |              |         |   |         |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Preferred stock, par value $0.001 per share; 15,000,000
	authorized at March 31, 2000 and December 31, 1999;
	none issued and outstanding at March 31, 2000 and
	December 31, 1999                                    |                            |         |             |         |   |         |        |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Common stock, par value $0.001 per share; 300,000,000 authorized
	at March 31, 2000 and December 31, 1999; 67,972,476 and
	 68,620,913 issued and outstanding at March  31, 2000 and
	December 31, 1999, respectively |                            |         | 68           |         |   |         | 69      |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Additional paid in capital                                                                                                                                                                                            |                            |         | 478,320      |         |   |         | 477,272 |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Note receivable from stockholder                                                                                                                                                                                      |                            |         | (258         | )       |   |         | (258    | )      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Deferred compensation                                                                                                                                                                                                 |                            |         | (10,188      | )       |   |         | (18,148 | )      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Accumulated other comprehensive income (loss)                                                                                                                                                                         |                            |         | (4,319       | )       |   |         | 1,454   |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Accumulated deficit                                                                                                                                                                                                   |                            |         | (60,976      | )       |   |         | (42,839 | )      
|                                                        |                                                                                                                                                                                                                       |                            |         |              |         |   |         |        
|                                                        |                                                                                                                                                                                                                       | Total stockholders equity |         |              | 402,647 |   |         |         | 417,550 | 
|                                                        |                                                                                                                                                                                                                       |                            |         |              |         |   |         |        
|                                                        |                                                                                                                                                                                                                       | $                          | 458,231 |              |         | $ | 471,882 |        
|                                                        |                                                                                                                                                                                                                       |                            |         |              |         |   |         |        

The accompanying notes are an integral part of these condensed
financial statements.

3



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##### Table of Contents



MP3.COM, INC.

CONDENSED STATEMENTS OF OPERATIONS

(In thousands, except for share and per share data)


(Unaudited)


|                                                       |                                             |                    |                          |            |        |        |        |            |     |       | 
|------------------------------------------------------ | ------------------------------------------- | ------------------ | ------------------------ | ---------- | ------ | ------ | ------ | ---------- | --- | ----- | 
|                                                       |                                             |                   
|                                                       |                                             | Three Months Ended
|                                                       |                                             |                   
|                                                       |                                             | March 31,          |                          | March 31, 
|                                                       |                                             | 2000               |                          | 1999      
|                                                       |                                             |                    |                          |           
|Net revenues                                           |                                             | $                  | 17,495                   |            |        | $      | 666    |           
|                                                      
|                                                      
|                                                      
|                                                      
|Cost of revenues                                       |                                             |                    | 3,756                    |            |        |        | 206    |           
|                                                       |                                             |                    |                          |            |        |        |        |           
|                                                       |                                             | Gross profit       |                          |            | 13,739 |        |        |            | 460 |      
|                                                      
|                                                      
|                                                      
|                                                      
|Operating expenses:                                    |                                             |                    |                          |            |        |        |        |           
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Sales and marketing                         |                    |                          | 17,002     |        |        |        | 523        |    
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Product development                         |                    |                          | 5,279      |        |        |        | 305        |    
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | General and administrative                  |                    |                          | 7,762      |        |        |        | 459        |    
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Costs related to acquisition activities     |                    |                          | 1,704      |        |        |        |           |    
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Amortization of deferred compensation       |                    |                          | 4,402      |        |        |        | 652        |    
|                                                       |                                             |                    |                          |            |        |        |        |           
|                                                       |                                             |                    | Total operating expenses |            |        | 36,149 |        |            |     | 1,939 | 
|                                                       |                                             |                    |                          |            |        |        |        |           
|Loss from operations                                   |                                             |                    | (22,410                  | )          |        |        | (1,479 | )         
|                                                      
|                                                      
|                                                      
|                                                      
|Interest income, net                                   |                                             |                    | 5,678                    |            |        |        | 73     |           
|                                                       |                                             |                    |                          |            |        |        |        |           
|Loss before minority interest                          |                                             |                    | (16,732                  | )          |        |        | (1,406 | )         
|                                                      
|                                                      
|                                                      
|                                                      
|Minority interest in loss of unconsolidated subsidiary |                                             |                    | 1,405                    |            |        |        |       |           
|                                                       |                                             |                    |                          |            |        |        |        |           
|Net loss                                               |                                             | $                  | (18,137                  | )          |        | $      | (1,406 | )         
|                                                       |                                             |                    |                          |            |        |        |        |           
|Net loss per share:                                    |                                             |                    |                          |            |        |        |        |           
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Basic and diluted                           |                    | $                        | (0.28      | )      |        | $      | (0.05      | )  
|                                                       |                                             |                    |                          |            |        |        |        |           
|                                                       | Weighted average shares  basic and diluted |                    |                          | 64,628,000 |        |        |        | 27,537,000 |    
|                                                       |                                             |                    |                          |            |        |        |        |           

The accompanying notes are an integral part of these condensed
financial statements.

4



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##### Table of Contents



MP3.COM, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)


(Unaudited)


|                                                                         |                                              |                                           |                                   |           |        |        |        |     |      |      |  
|------------------------------------------------------------------------ | -------------------------------------------- | ----------------------------------------- | --------------------------------- | --------- | ------ | ------ | ------ | --- | ---- | ---- | -
|                                                                         |                                              |                                          
|                                                                         |                                              | Three Months Ended                       
|                                                                         |                                              |                                          
|                                                                         |                                              | March 31,                                 |                                   | March 31,
|                                                                         |                                              | 2000                                      |                                   | 1999     
|                                                                         |                                              |                                           |                                   |          
|Operating activities:                                                    |                                              |                                           |                                   |           |        |        |        |    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Net loss                                                                 |                                              | $                                         | (18,137                           | )         |        | $      | (1,406 | )  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Adjustments to reconcile net loss to cash used in operating
	activities: |                                              |                                           |                                   |           |        |        |        |    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Depreciation                                 |                                           |                                   | 1,158     |        |        |        | 34  |     
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Certain employee related costs               |                                           |                                   | 6,583     |        |        |        |    |     
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Amortization of stock based marketing        |                                           |                                   | 208       |        |        |        |    |     
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Amortization of deferred compensation        |                                           |                                   | 4,402     |        |        |        | 652 |     
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Loss from the sale of fixed assets           |                                           |                                   | 19        |        |        |        |    |     
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Changes in operating assets and liabilities: |                                           |                                   |           |        |        |        |     |     
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                              | Accounts receivable                       |                                   |           | 813    |        |        |     | (107 | )   
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                              | Unbilled receivables                      |                                   |           | 466    |        |        |     | 6    |     
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                              | Prepaid expenses and other current assets |                                   |           | 552    |        |        |     | (243 | )   
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                              | Accounts payable                          |                                   |           | (3,580 | )      |        |     | 578  |     
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                              | Accrued expenses                          |                                   |           | 8,786  |        |        |     | (20  | )   
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                              | Deferred revenue                          |                                   |           | (4,290 | )      |        |     | 68   |     
|                                                                         |                                              |                                           |                                   |           |        |        |        |    
|                                                                         |                                              |                                           | Cash used in operating activities |           |        | (3,020 | )      |     |      | (438 | )
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Investing activities:                                                    |                                              |                                           |                                   |           |        |        |        |    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Purchase of property and equipment                                       |                                              |                                           | (5,571                            | )         |        |        | (1,132 | )  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Maturities of marketable securities, net                                 |                                              |                                           | 74,385                            |           |        |        |       |    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Purchases of strategic investments                                       |                                              |                                           | (31,637                           | )         |        |        |       |    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Other assets                                                             |                                              |                                           | (1,845                            | )         |        |        | (52    | )  
|                                                                         |                                              |                                           |                                   |           |        |        |        |    
|Cash provided by (used in) investing activities                          |                                              |                                           | 35,332                            |           |        |        | (1,184 | )  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Financing activities:                                                    |                                              |                                           |                                   |           |        |        |        |    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Payments under capital lease obligation                                  |                                              |                                           |                                  |           |        |        | (8     | )  
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Proceeds from issuance of Series A convertible preferred
	stock          |                                              |                                           |                                  |           |        |        | 10,918 |    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Proceeds from exercise of stock options for common stock                 |                                              |                                           | 975                               |           |        |        |       |    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Repurchase of unvested common stock                                      |                                              |                                           | (2,400                            | )         |        |        |       |    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Payments on line of credit                                               |                                              |                                           | (217                              | )         |        |        |       |    
|                                                                         |                                              |                                           |                                   |           |        |        |        |    
|Cash (used in) provided by financing activities                          |                                              |                                           | (1,642                            | )         |        |        | 10,910 |    
|                                                                         |                                              |                                           |                                   |           |        |        |        |    
|Increase in cash and cash equivalents                                    |                                              |                                           | 30,670                            |           |        |        | 9,288  |    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Cash and cash equivalents at beginning of period                         |                                              |                                           | 193,192                           |           |        |        | 39     |    
|                                                                         |                                              |                                           |                                   |           |        |        |        |    
|Cash and cash equivalents at end of period                               |                                              | $                                         | 223,862                           |           |        | $      | 9,327  |    
|                                                                         |                                              |                                           |                                   |           |        |        |        |    
|Supplemental disclosures of cash flow information:                       |                                              |                                           |                                   |           |        |        |        |    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Interest paid                                                            |                                              | $                                         | 27                                |           |        | $      | 8      |    
|                                                                         |                                              |                                           |                                   |           |        |        |        |    
|Taxes paid                                                               |                                              | $                                         |                                  |           |        | $      | 58     |    
|                                                                         |                                              |                                           |                                   |           |        |        |        |    
|Supplemental schedule of non-cash activities:                            |                                              |                                           |                                   |           |        |        |        |    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Common stock issued for notes receivable                                 |                                              | $                                         |                                  |           |        | $      | 338    |    
|                                                                         |                                              |                                           |                                   |           |        |        |        |    
|Cancellation of stockholder notes receivable                             |                                              | $                                         |                                  |           |        | $      | 78     |    
|                                                                         |                                              |                                           |                                   |           |        |        |        |    
|Compensation associated with the acceleration of stock option
	vesting   |                                              | $                                         | 6,030                             |           |        | $      |       |    
|                                                                         |                                              |                                           |                                   |           |        |        |        |    
|Unrealized loss on marketable securities, net                            |                                              | $                                         | 5,773                             |           |        | $      |       |    
|                                                                         |                                              |                                           |                                   |           |        |        |        |    
|Forfeiture of stock options                                              |                                              | $                                         | 3,558                             |           |        | $      |       |    
|                                                                         |                                              |                                           |                                   |           |        |        |        |    

The accompanying notes are an integral part of these condensed
financial statements.

5



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##### Table of Contents



MP3.COM, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)


Note 1  The Company and Summary of Significant
Accounting Policies

The Company

MP3.com, Inc. (MP3.com) is developing a revolutionary
 approach to the promotion and distribution of music. MP3.com
uses the Internet and file formats that make music files smaller
to enable a growing number of artists to distribute and promote
their music worldwide and to enable consumers to conveniently
access this expanding music catalog. Consumers can search for,
listen to and download music free of charge. In addition, MP3.com
 is developing its role as an online Music Service Provider (or
MSP), which allows users to access, manage and listen
 to their personal music collections anytime, anywhere, on any
web-enabled device or application. MP3.com shares are traded on
the Nasdaq National Market System under the symbol
MPPP. MP3.com was incorporated in the state of
Delaware on March 17, 1998 and commenced operations on that
date. MP3.com is headquarted in San Diego, California.

Basis of Presentation

The accompanying condensed financial statements as of
March 31, 2000 and for the three months ended March 31,
 2000 and 1999 are unaudited and have been prepared by MP3.com
pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC). The unaudited financial
statements have been prepared on the same basis as the audited
financial statements and, in the opinion of management, include
all adjustments, consisting only of normal recurring adjustments,
 necessary to state fairly the financial information included, in
 accordance with generally accepted accounting principles.
Certain information and footnote disclosures normally included in
 financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to such
 SEC rules and regulations. The results of operations for the
three months ended March 31, 2000 are not necessarily
indicative of the results which may be reported for any other
interim period or for the year ending December 31, 2000.

Use of Estimates

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
 liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

Net Loss Per Share

MP3.com computes net loss per share following SFAS No. 128,
Earnings Per Share and SEC Staff Accounting Bulletin
No. 98 (SAB 98). Under the provisions of SFAS
No. 128, basic net income (loss) per share is computed
by dividing the net income (loss) available to common
stockholders for the period by the weighted average number of
common shares outstanding during the period. Diluted net income
(loss) per share is computed by dividing the net income (loss)
for the period by the weighted average number of common and
common equivalent shares outstanding during the period. Common
equivalent shares, composed of unvested restricted common shares,
 incremental common shares issuable upon the exercise of stock
options, and common shares issuable on assumed conversion of
Series A preferred stock, are included in diluted net income
 (loss) per share to the extent these shares are dilutive.
Common equivalent shares are not included in the computation of
dilutive net loss per share for the three months ended
March 31, 2000 and 1999 because the effect would be
anti-dilutive.

6



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##### Table of Contents



MP3.COM, INC.


NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share data)


Under the provisions of SAB 98, common shares issued for nominal
consideration, if any, would be included in the per share
calculations as if they were outstanding for all periods
presented. No common shares have been issued for nominal
consideration.

The following table sets forth the computation of basic and
diluted net loss per share as follows:

|                                              |                                                                           |                    |            |            |   |  |            |            |  
|--------------------------------------------- | ------------------------------------------------------------------------- | ------------------ | ---------- | ---------- | - |  | ---------- | ---------- | -
|                                              |                                                                           |                   
|                                              |                                                                           | Three Months Ended
|                                              |                                                                           |                   
|                                              |                                                                           | March 31,          |            | March 31, 
|                                              |                                                                           | 2000               |            | 1999      
|                                              |                                                                           |                    |            |           
|Numerator:                                    |                                                                           |                    |            |            |   |  |            |           
|                                             
|                                             
|                                             
|                                             
|                                              | Net loss                                                                  |                    | $          | 18,137     |   |  | $          | 1,406      |  
|                                              |                                                                           |                    |            |            |   |  |            |           
|Denominator:                                  |                                                                           |                    |            |            |   |  |            |           
|                                             
|                                             
|                                             
|                                             
|                                              | Weighted average shares outstanding                                       |                    |            | 67,811,000 |   |  |            | 31,285,000 |  
|                                             
|                                             
|                                             
|                                             
|                                              | Weighted average unvested common shares subject to repurchase
	agreements |                    |            | (3,183,000 | ) |  |            | (3,748,000 | )
|                                              |                                                                           |                    |            |            |   |  |            |           
|Denominator for basic and diluted calculation |                                                                           |                    | 64,628,000 |            |   |  | 27,537,000 |           
|                                              |                                                                           |                    |            |            |   |  |            |           
|Net loss per share:                           |                                                                           |                    |            |            |   |  |            |           
|                                             
|                                             
|                                             
|                                             
|                                              | Basic and diluted                                                         |                    | $          | (0.28      | ) |  | $          | (0.05      | )
|                                              |                                                                           |                    |            |            |   |  |            |           

Diluted common stock equivalents include common stock options, as
 if converted, and restricted stock that has not yet fully
vested. Potentially dilutive securities total approximately
6,738,000 common shares for the three months ended March 31,
 2000 and were excluded from historical diluted earnings per
share because of their anti-dilutive effect.

Comprehensive Income

MP3.com adopted the provisions of SFAS No. 130,
Reporting Comprehensive Income. SFAS No. 130
establishes standards for reporting comprehensive income and its
components in financial statements. Comprehensive income, as
defined, includes all changes in equity (net assets) during a
period from non-owner sources. Net income (loss) and other
comprehensive income (loss), including foreign currency
translation adjustments, and unrealized gains and losses on
investments shall be reported, net of their related tax effect,
to arrive at comprehensive income. There were no differences
between MP3.coms net loss and its total comprehensive loss
for the three months ended March 31, 2000 and 1999, except
for unrealized losses on investments of approximately $5,773,000
and zero, respectively.

Segment Information

MP3.com has adopted the provisions of SFAS No. 131,
Disclosures about Segments of an Enterprise and Related
Information. SFAS 131 requires public companies to
report financial and descriptive information about their
reportable operating segments. MP3.com identifies its operating
segments based on how management internally evaluates separate
financial information (if available), business activities and
management responsibility. MP3.com believes it operates in a
single business segment. Through March 31, 2000, there were
no foreign operations.

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##### Table of Contents



MP3.COM, INC.


NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share data)


A summary of advertising and merchandise revenue from customers
is as follows:

|            |  |                    |        |      |  |   |     | 
|----------- |  | ------------------ | ------ | ---- |  | - | --- | 
|            |  |                   
|            |  | Three Months Ended
|            |  | March 31,         
|            |  |                   
|            |  | 2000               |        | 1999
|            |  |                    |        |     
|Advertising |  | $                  | 16,830 |      |  | $ | 560 | 
|           
|           
|           
|           
|Merchandise |  |                    | 665    |      |  |   | 106 | 
|            |  |                    |        |      |  |   |     | 
|            |  | $                  | 17,495 |      |  | $ | 666 | 
|            |  |                    |        |      |  |   |     | 

Note 2  Legal Proceedings

On January 21, 2000, ten major recording companies filed a
copyright infringement lawsuit against MP3.com in the United
States District Court for the Southern District of New York. The
complaint alleges that MP3.com, in connection with its
recently-introduced My.MP3.com service, made unauthorized copies
of approximately 45,000 audio CDs in violation of the Copyright
Act. The complaint further alleges that offering the new
My.MP3.com service, which allows a user to listen, via the
Internet, to the tracks of certain commercial audio CDs of his or
 her choosing, constitutes unauthorized copying and willful
infringement of plaintiffs copyrighted sound recordings.
Plaintiffs seek damages (including statutory damages of up to
$150,000 per violation) and injunctive relief prohibiting MP3.com
 from operating its My.MP3.com service or any other service that
uses reproductions of plaintiffs copyrighted sound
recordings. In February 2000, MP3.com filed an answer to the
complaint denying each of the substantive allegations therein,
and the plaintiffs moved for summary judgement. In March 2000,
MP3.com filed materials in opposition to the plaintiffs
motion for summary judgement, and a hearing on the motion was
held by the court on April 14, 2000. The court is expected
to provide a ruling on the motion on April 28, 2000.

On March 14, 2000, two large music publishing companies
filed a copyright infringement lawsuit against MP3.com in the
United States District Court for the Southern District of New
York. The complaint alleges that MP3.com, in connection with its
recently-introduced My.MP3.com service, made unauthorized copies
of approximately 45,000 audio CDs in violation of the Copyright
Act, and that MP3.com, in connection with the streaming of audio
content to users of the My.MP3.com service, continues to make
unauthorized digital phonorecords in violation of the Copyright
Act. The complaint further alleges that MP3.coms actions
constitute unauthorized copying and willful infringement of
plaintiffs copyrights. Plaintiffs seek damages (including
statutory damages of up to $150,000 per violation) and injunctive
 relief prohibiting MP3.com from operating its My.MP3.com service
 or any other service that uses unauthorized reproductions of
plaintiffs copyrighted works.

On April 12, 2000, several artists filed a class action
lawsuit in the United States District Court for the Southern
District of New York against MP3.com and several major recording
companies that claimed to own copyrights in sound recordings
featuring the artists. The complaint alleges that the recording
company defendants are claiming, their separate lawsuit against
MP3.com (filed on January 21, 2000  see above),
rights in plaintiffs recordings that they do not possess.
In particular, the complaint alleges that the recording company
defendants do not possess any copyright protections with respect
to plaintiffs pre-1972 published and pre-1978 unpublished
recordings, do not possess the right to digitally transmit
plaintiffs pre-1996 recordings over the Internet, and do
not possess the right to control the conversion of
plaintiffs recordings into mp3 files. The complaint further
 alleges that MP3.com has used the names and likenesses of
plaintiffs without their consent or authorization and in a
deceptive manner, in violation of the federal Lanham Act, the New
 York Civil Rights Law, and unspecified unfair competition and
misappropriation laws. In their prayer for relief, plaintiffs ask
 to have their class action certified, to be awarded unspecified
damages and attorneys fees, to have the defendants enjoined
 from using plaintiffs names and likenesses to promote
downloading music

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##### Table of Contents



MP3.COM, INC.


NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)

(In thousands, except share and per share data)


over the Internet, and to receive declaratory relief regarding
plaintiffs rights in their pre- and post-1972 recordings.

MP3.com believes that it has meritorious defenses to the
plaintiffs claims, including the fair use
doctrine, based in part on the belief that these services augment
 the market for music and music CDs, and we intend to vigorously
defend against such claims. However, we cannot assure you that we
 will be successful in defending these lawsuits, and we may be
required to pay license fees or substantial damages, including
statutory, punitive or other damages that far exceed the
resources and overall market capitalization of our company. We
also may be required at any time by the courts to cease all
operations of the My.MP3.com, Instant Listening, Beam-it or other
 services. Furthermore, our insurance coverage and other capital
resources may be inadequate to cover anticipated costs of the
lawsuit or any possible settlements or licenses. If successful,
any of these lawsuits could seriously harm our business by
forcing us to cease providing services to our consumers or
requiring us to pay monetary damages. Even if unsuccessful, these
 lawsuits still can harm our business severely by damaging our
reputation, requiring us to incur legal costs, lowering our stock
 price and public demand for our stock, and diverting
managements attention away from our primary business
activities in general.

Note 3  Recent Events

In April 2000, MP3.com acquired the remaining 53.5% ownership of
mp3radio.com, a joint venture with Cox Interactive Media, Inc.
(CIM), for $4 million in cash. During the
transition period ending June 30, 2000, the costs of
relocating the ventures operations to San Diego, subject to
 a maximum of $2.5 million, will be shared pro rata based
upon the partys previous ownership percentages. The
remaining cash balance of the venture on June 30, 2000 will
be split between MP3.com and CIM based upon the partys
previous ownership percentages or 46.5% and 53.5%, respectively.

9



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##### Table of Contents






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

Forward-Looking Statements

This document contains forward-looking statements within the
meaning of the Safe Harbor provisions of the Private
Securities Litigation Reform Act of 1995. These statements relate
 to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology
 such as may, will, going to,
 should, could, expect,
plan, anticipate, believe,
estimate, predict, potential
or continue, the negative of such terms or other
comparable terminology. These statements are only predictions,
and reflect our expectations and assumptions as of the date of
this quarterly report based on currently available operating,
financial and competitive information.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee
future events or results, levels of activity, performance or
achievements, all of which may differ materially. Moreover,
neither we nor any other person assumes responsibility for the
accuracy and completeness of the forward-looking statements. We
are under no obligation to update any of the forward-looking
statements after the filing of this Form 10-Q to conform
such statements to actual results or to changes in our
expectations.

The following discussion should be read in conjunction with our
financial statements and the related notes and the other
financial information appearing elsewhere in this Form 10-Q.
 Readers are also urged to carefully review and consider the
various disclosures made by us which attempt to describe some of
the factors which affect our business and may cause such material
 differences, including without limitation the disclosures made
under the caption Risk Factors, the audited financial
 statements and related footnotes included herein and in the
Companys Form 10-K dated March 30, 2000
(No. 000-26697).

Neither MP3.com nor any other person assumes responsibility for
the accuracy and completeness of the forward-looking statements
made in this document. Also, MP3.com is under no obligation, and
we assume no obligation, to update any of the forward-looking
statements for any reason, even if new information becomes
available or other events occur in the future.

Overview

MP3.com, Inc. is pioneering a revolutionary approach to the
promotion and distribution of music. MP3.coms web site has
grown into a premier online music destination for Internet users
around the world. MP3.com uses the Internet and file formats that
 make music files smaller to enable a growing number of artists
to distribute and promote their music worldwide and to enable
consumers to conveniently access this expanding music catalog. As
 of March 31, 2000, MP3.coms web site contained over
387,000 songs and audio files from over 62,000 artists, which we
believe represents one of the largest collections of digital
music available on the Internet. Consumers can search for, listen
 to and download music free of charge.

In addition to the wide variety of music available on our web
site, consumers have a substantial amount of music already in
their personal music collections that they want to access, manage
 and listen to in a variety of ways. Just as consumers use an
Internet service provider (ISP) as the central
mechanism through which they interact with the Internet,
individuals are increasingly looking for one central resource, or
 a Music Service Provider (or MSP), that
allows them to access, manage and listen to all of their music.
In January 2000, MP3.com launched the foundation of our Music
Service Provider initiative, our upgraded My.MP3.com
service. The My.MP3.com service allows users to place their CDs
and favorite mp3 files online, organize their music and receive
personalized music services. In order to maintain MP3.coms
position as the premiere Music Service Provider, MP3.com intends
to work through strategic partnerships with leading web sites,
application developers, device manufacturers, wireless carriers
and connectivity providers to enable our users to access their
music anytime, anywhere, on any web-enabled device or
application.

MP3.com generates revenue from online advertising, offline
advertising and electronic commerce. For the three months ended
March 31, 2000, 96.2% of MP3.coms revenues was from
the sale of advertising space. MP3.com also receives revenue from
 advertisers for their sponsorship of CD samplers, which are
distributed free of charge to consumers and contain collections
of music. MP3.com sells CDs online, both fully-packaged

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Since the beginning of 1999, MP3.coms growth has been
dramatic. The number of employees increased from 54 on
March 31, 1999 to 303 on March 31, 2000. In March 2000,
 MP3.com added over 100 artists and over 1,000 new songs and
audio files on average each day. During March 2000, visitors to
MP3.coms web site viewed over 142 million web pages
and listened to or downloaded over 27.7 million songs.

The Three Months Ended March 31, 2000 Compared to
March 31, 1999

Results of Operations

Net Revenues

For the three months ended March 31, 2000, net revenues were
 $17,495,000, which were derived from online advertisements on
our web site, offline advertisements through various promotions
and events that were not hosted on our web site and the online
sale of CDs and music-related merchandise. This compares to
$666,000 during the same period a year ago. The increase in net
revenues during the first quarter over the same period in 1999
was mostly attributable to a significant increase in online
advertisements, the introduction of various offline
advertisements and events and a significant increase in CD sales
on our web site.

Revenue from online advertising.For the quarter ended
March 31, 2000, revenues from online advertising were
$13,563,000 or 77.5% of net revenues compared to $560,000 or
84.1% of net revenues for the same period a year ago. Online
advertising revenues primarily consist of banner, button, portal
and sponsorship advertisements on MP3.coms web site in
addition to advertisements placed in e-mail and greeting card
campaigns. The duration of MP3.coms online advertising
commitments range from one month to approximately three years.
Banner, button and portal advertisements are impression based,
requiring the advertisement to be displayed a minimum number of
times over the contract period. Sponsorship advertising contracts
 involve static advertisements, whereby the advertisement is
continually displayed on a specified area of the MP3.com web site
 during the contract period. E-mails containing various
advertisements are sent to MP3.coms artists and users of
the MP3.com web site on a regular basis. Greeting cards also
contain advertisements and are sent electronically whenever a
user of the MP3.com web site requests that a card be delivered to
 a person(s) of their choice. The increase in revenue from online
 advertising for the three months ended March 31, 2000 as
compared to the three months ended March 31, 1999 was
primarily due to a significant increase in pageview volume
resulting from significant increases in unique visitors,
MP3.coms advertiser customer base, and the introduction of
new product lines such as e-mail and greeting cards.

Revenue from offline advertising.For the three months
ended March 31, 2000, revenues from offline advertising were
 $3,267,000 or 18.7% of net revenues compared to zero for the
same period a year ago. During the first quarter of 2000, offline
 advertising revenues primarily consisted of advertising
sponsorships of CD sampler products, contests and sweepstakes. CD
 Samplers are multi-media CDs containing advertising, free
software, videos and games as well as collections of music from
artists that have posted music on the MP3.com web site. These CDs
 are sponsored by several different advertisers and distributed
free of charge to users of MP3.coms web site who register
to receive the CD. MP3.com held contests during the quarter that
were sponsored by various advertisers and provided prizes to the
winners of each contest. The increase in revenue from offline
advertising is due to the introduction of all offline products.

Revenue from online sales of CDs and other music-related
merchandise.For the three months ended March 31, 2000,
revenues from online sales of CDs and other music-related
merchandise was $665,000 or 3.8% of net revenues compared to
$106,000 or 15.9% of net revenues for the same period a year ago.
 Online e-commerce sales consist of DAM and compilation CDs and,
to a lesser extent, other music-related merchandise. The increase
 in revenues from online sales of CDs and other music-related
merchandise during the first quarter of 2000 as compared to the
first quarter of 1999 was primarily due to an increase in the
sales volume of DAM CDs (approximately 71,000 units) resulting
from increased musical content available on MP3.coms web
site as a result of increased brand awareness, an increase in the
 average selling price of CDs

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Revenue Concentration.We expect that most of our revenues
 will continue to be derived from third party advertising
agreements like those we have with Groupe Arnault and Visitalk.
In July 1999, MP3.com entered into an agreement with Groupe
Arnault, which committed to purchase an aggregate of $150,000,000
 in advertising, promotion and marketing services from MP3.com
over a three-year period beginning October 1999, including
$5,000,000 in 1999, $40,000,000 in 2000, $70,000,000 in 2001 and
$35,000,000 in the first half of 2002. Under this agreement,
MP3.com received pre-payments of $45,000,000 in July 1999
representing advertising, promotional and marketing services to
be delivered by MP3.com in the form of online and offline
advertisements from October 1, 1999 through
December 31, 2000. In January 2000, MP3.com entered into an
agreement with Visitalk, which committed to purchase an aggregate
 of $12,500,000 over a twelve-month period ending on
December 31, 2000. During the quarter ended March 31,
2000, MP3.com recognized revenue of $6,845,000 and $3,078,000
associated with the Groupe Arnault and Visitalk agreements,
respectively. Groupe Arnault and Visitalk revenues will be
distributed between online and offline sources based on a
changing percentage from quarter-to-quarter.

Cost of Revenues

Cost of revenues for the three months ended March 31, 2000
were $3,756,000 or 21.5% of net revenues compared to $206,000 or
30.9% of net revenues during the same period a year ago,
resulting in gross margins of 78.5% and 69.1%, respectively. The
increase in cost of revenues was primarily due to increases in
fulfillment costs associated with increased CD volume, bandwidth
requirements, royalties to artists, and costs associated with
newly introduced products such as CD sampler production costs.
The increase in gross margins was primarily due to a significant
amount of the Groupe Arnault revenues allocated to online
advertising, which has higher gross margins. CD and other
music-related merchandise sales typically have lower gross
margins which offset the higher gross margins from online and
offline advertising products. MP3.com anticipates that future
gross margins will fluctuate depending on changes in its revenue
mix and the timing of expenditures in web site and fulfillment
operations. Additionally, future gross margins could fluctuate
depending on the amount of Groupe Arnault quarterly revenues
allocated between online and offline advertising products.

Sales and Marketing

During the three months ended March 31, 2000, sales and
marketing expense was $17,002,000 or 97.2% of net revenues
compared to $523,000 or 78.5% of net revenues during the same
period a year ago. The increase in sales and marketing expense,
both in absolute dollar amounts and as a percentage of net
revenue, was primarily due to new marketing programs, substantial
 increases in sales and marketing payroll and related expenses,
cash and non-cash charges related to certain employee costs,
amortization of prepaid marketing expenses in connection with our
 arrangements with internationally known artists, and costs
associated with the growth of our business. MP3.com anticipates
that overall sales and marketing expense will continue to
increase significantly in the foreseeable future; however, sales
and marketing expense as a percentage of net revenues may
fluctuate depending on the timing of new marketing programs and
the addition of sales and marketing personnel.

In the future, MP3.com anticipates that it will enter into
arrangements with additional artists and creative talent agencies
 to secure their promotional and marketing services and obtain
rights to their music. Future expenses may include costs related
to promotional events, which will be expensed to sales and
marketing in the period the event is held. Proceeds from these
events, if any, will be credited against promotional expenses
incurred. Depending upon the terms and timing of promotional
activities, substantial sales and marketing expenses may be
incurred in any quarterly or annual period.

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Product Development

During the three months ended March 31, 2000, product
development expense was $5,279,000 or 30.2% of net revenues
compared to $305,000 or 45.8% of net revenues during the same
period a year ago. The increase in the level of product
development expense in absolute dollar amounts was primarily due
to increased payroll and related expenses associated with
increased headcount, expensed computer supplies, increased
computer equipment depreciation, and costs associated with the
growth of MP3.coms business. The decrease in product
development expense as a percentage of net revenue is primarily
due to increased net revenues. MP3.com anticipates that overall
product development expenses will increase in the foreseeable
future; however, product development expenses as a percentage of
net revenues may fluctuate depending on the level of future net
revenues and the timing of investments in product development and
 hiring.

General and Administrative

General and administrative expense was $7,762,000 or 44.4% of net
 revenues during the quarter ended March 31, 2000 compared
to $459,000 or 68.9% of net revenues during the same period a
year ago. The increase in general and administrative expense in
absolute dollar amounts was primarily a result of increased
finance and administrative payroll and related expenses, legal
costs associated with the RIAA lawsuit, increased legal and
accounting expenses, increased facility related cost, and costs
associated with the growth of MP3.coms business. General
and administrative expenses as a percentage of net revenue
decreased primarily due to increased net revenues. MP3.com
anticipates that overall general and administrative expenses will
 increase in the foreseeable future; however, general and
administrative expense as a percentage of net revenues may
fluctuate depending on the level of future net revenues and the
timing of additional investments in general and administrative
infrastructure.

Costs Related to Acquisition Activities

Acquisition related costs for the first quarter of 2000 were
$1,704,000 compared to zero for the same period one year ago. The
 increase in these costs was a result of certain costs charged to
 expense associated to the previously announced acquisition of
TransComputing International Corporation (TCI) d.b.a.
 seeUthere.com, which was not completed.

Amortization of Deferred Compensation

During the quarter ended March 31, 2000, total deferred
compensation of $4,402,000 was amortized to expense compared to
$652,000 during the quarter ended March 31, 1999. The
increase in amortization of deferred compensation is primarily
related to the increase in the granting of stock options to
executive management and employees hired after March 31,
1999 and prior to August 11, 1999. Deferred compensation is
being amortized over the vesting period of the granted stock
options, which is generally four years.

Interest Income, Net

Interest income (net of interest expense) during the quarter
ended March 31, 2000 was $5,678,000 compared to $73,000
during the same period a year ago. The interest income during the
 quarter ended March 31, 2000 is directly related to
interest income earned on cash, cash equivalent balances and
marketable securities associated with proceeds from the issuance
of common stock in connection with MP3.coms initial public
offering in July 1999, the exercise of stock options and a
warrant for the purchase of common stock, and the issuance of
Series A, B, and C convertible preferred stock for an
aggregate of approximately $426,300,000 during 1999. Interest
income during the same period one year ago was due to interest
income on the proceeds from the issuance of Series A
convertible preferred stock in January 1999.

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##### Table of Contents



Provision for Income Taxes

Due to the loss form operations for both book and tax purposes,
no provision or benefit for income taxes was recorded for the
three months ended March 31, 2000 and 1999. Currently, we
provide a valuation allowance for all future tax benefits.

Minority Interest in Loss of an Unconsolidated
Subsidiary

Minority interest in the loss of a subsidiary during the quarter
ended March 31, 2000 was $1,405,000 compared to zero for the
 same period a year ago. The increase in minority interest in the
 loss of an unconsolidated subsidiary is directly related to
mp3radio.com, our former joint venture with Cox Interactive
Media, Inc., and reflects expenses incurred to grow the
mp3radio.com business.

Liquidity and Capital Resources

Overview

To date, MP3.com has generated cash from internal operations,
proceeds from the sale of convertible preferred stock, the
proceeds from its initial public offering and, to a lesser
extent, the exercise of stock options and equipment financing
through a line of credit. As of March 31, 2000, MP3.com had
approximately $369,300,000 in cash, cash equivalents and
marketable securities. Additionally, MP3.com has a line of credit
 of $4,766,000 to fund future capital equipment purchases and
working capital draws, with a sub-limit of $1,500,000 for credit
cards; and a $1,017,000 17-month fully amortizing term loan
requiring monthly principal and interest payments expiring in May
 2001. Borrowings under the amended line of credit accrue
interest at the banks prime rate plus 1% (10% as of
March 31, 2000) and convert into a term loan on
November 30, 2000, which shall provide for 30 equal
principal payments plus interest as evidenced in a promissory
note. MP3.com is required to comply with debt covenants, the most
 restrictive of which is a minimum liquidity ratio which requires
 MP3.com to maintain a cash, cash equivalents and accounts
receivable balance of the greater of two times current
liabilities plus all bank debt or six months cash burn measured
on a two-month rolling average basis. As of March 31, 2000,
we were in compliance with all debt covenants.

Operating Activities

Net cash used in operating activities during the quarter ended
March 31, 2000 was approximately $3.0 million,
consisting primarily of the following:



| |   |                                                                                          
| | - | -----------------------------------------------------------------------------------------
| |  | net loss of approximately $18,137,000;                                                   
|
| |  | amortization of deferred compensation of approximately
	$4,402,000;                      
|
| |  | depreciation of property and equipment of approximately
	$1,158,000;                     
|
| |  | amortization of stock based marketing costs of approximately
	$208,000;                  
|
| |  | certain employee costs of approximately $6,583,000;                                      
|
| |  | a decrease in accounts and unbilled receivables of approximately
	$1,279,000;            
|
| |  | a decrease in prepaid expenses and other assets of approximately
	$552,000;              
|
| |  | a net increase in accounts payable and accrued expenses of
	approximately $5,206,000; and
|
| |  | a decrease in deferred revenue of approximately $4,290,000.                              

Investing Activities

Net cash provided by investing activities during the quarter
ended March 31, 2000 was approximately $35,332,000,
consisting primarily of property and equipment expenditures of
$5,571,000, net maturities of marketable securities of
$74,385,000, and purchases of strategic equity investments of
approximately $31,637,000.

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##### Table of Contents



Financing Activities

Net cash used in financing activities during the quarter ended
March 31, 2000 was approximately $1,642,000, consisting
primarily of the repurchase of common stock from an executive
officer offset by the exercise of stock options.

MP3.com has no material financial commitments other than its
financial commitment to TransComputing International Corporation
(TCI), d.b.a. seeUthere.com, credit facilities and
operating leases. MP3.com expects to substantially increase
expenditures for the following:



| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | computer equipment and furniture and fixtures associated with new
	 employees and facility expansion;
|
| |  | web site computer equipment;                                                                         
|
| |  | bandwidth and networking equipment and infrastructure;                                               
|
| |  | additional sales and marketing employees;                                                            
|
| |  | equipment and additional employees related to product
	development;                                  
|
| |  | increased advertising, promotion and branding efforts;                                               
|
| |  | investments in entities with whom we have collaborative
	arrangements; and                           
|
| |  | development and acquisition of content.                                                              

Capital requirements in any particular period will depend on the
timing of these expenditures.

Recent Events

On January 21, 2000, ten major recording companies filed a
copyright infringement lawsuit against MP3.com in the United
States District Court for the Southern District of New York. The
complaint alleges that MP3.com, in connection with its recently
introduced My.MP3.com service, made unauthorized copies of
approximately 45,000 audio CDs in violation of the Copyright Act.
 The complaint further alleges that offering the new My.MP3.com
service, which allows a user to listen, via the Internet, to the
tracks of certain commercial audio CDs of his or her choosing,
constitutes unauthorized copying and willful infringement of
plaintiffs copyrighted sound recordings. Plaintiffs seek
damages (including statutory damages of up to $150,000 per
violation) and injunctive relief prohibiting MP3.com from
operating its My.MP3.com service or any other service that uses
reproductions of plaintiffs copyrighted sound recordings.
In February 2000, MP3.com filed an answer to the complaint
denying each of the substantive allegations therein, and the
plaintiffs moved for summary judgement. In March 2000, MP3.com
filed materials in opposition to the plaintiffs motion for
summary judgement, and a hearing on the motion was held by the
court on April 14, 2000. The court is expected to provide a
ruling on the motion on April 28, 2000.

On March 14, 2000, two large music publishing companies
filed a copyright infringement lawsuit against MP3.com in the
United States District Court for the Southern District of New
York. The complaint alleges that MP3.com, in connection with its
recently-introduced My.MP3.com service, made unauthorized copies
of approximately 45,000 audio CDs in violation of the
Copyright Act, and that MP3.com, in connection with the streaming
 of audio content to users of the My.MP3.com service, continues
to make unauthorized digital phonorecords in violation of the
Copyright Act. The complaint further alleges that MP3.coms
actions constitute unauthorized copying and willful infringement
of plaintiffs copyrights. Plaintiffs seek damages
(including statutory damages of up to $150,000 per violation) and
 injunctive relief prohibiting MP3.com from operating its
My.MP3.com service or any other service that uses unauthorized
reproductions of plaintiffs copyrighted works.

On April 12, 2000, several artists filed a class action lawsuit
in the United States District Court for the Southern District of
New York against MP3.com and several major recording companies
that claimed to own copyrights in sound recordings featuring the
artists. The complaint alleges that the recording company
defendants are claiming, in their separate lawsuit against
MP3.com (filed on January 21, 2000  see above),
rights in plaintiffs recordings that they do not possess.
In particular, the complaint alleges that the recording

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MP3.com believes that it has meritorious defenses to the
plaintiffs claims, including the fair use
doctrine, based in part on the belief that these services augment
 the market for music and music CDs, and we intend to vigorously
defend against such claims. However, we cannot assure you that we
 will be successful in defending these lawsuits, and we may be
required to pay license fees or substantial damages, including
statutory, punitive or other damages that far exceed the
resources and overall market capitalization of our company. We
also may be required at any time by the courts to cease all
operations of the My.MP3.com, Instant Listening, Beam-it or other
 services. Furthermore, our insurance coverage and other capital
resources may be inadequate to cover anticipated costs of the
lawsuit or any possible settlements or licenses. If successful,
any of these lawsuits could seriously harm our business by
forcing us to cease providing services to our customers or
requiring us to pay monetary damages. Even if unsuccessful, these
 lawsuits still can harm our business severely by damaging our
reputation, requiring us to incur legal costs, lowering our stock
 price and public demand for our stock, and diverting
managements attention away from our primary business
activities in general.

MP3.com believes that it has meritorious defenses to the
plaintiffs claims and intends to vigorously defend such
claims. However, no assurances can be made that MP3.com will be
successful in these or any other lawsuits, and MP3.com may be
required to pay significant legal damages, fees and/or settlement
 amounts or be required to discontinue significant aspects of our
 business, which could have a material adverse affect on MP3.com
and its results of operation and financial position.

In April 2000, MP3.com acquired the remaining 53.5% ownership of
mp3radio.com, a joint venture with Cox Interactive Media, Inc.
(CIM), for $4,000,000 in cash. During the transition
period ending June 30, 2000, the costs of relocating the
ventures operations to San Diego, subject to a maximum of
$2,500,000, will be shared pro rata based upon the partys
previous ownership percentages. The remaining cash balance of the
 venture at the end of the transition period will be split
between MP3.com and CIM based upon the partys previous
ownership percentages or 46.5% and 53.5%, respectively.

Future Capital Requirements

MP3.com believes that its cash and cash equivalent balances,
marketable securities, and funds available under its existing
line of credit reduced by its commitment to purchase up to
$12,000,000 of TCI preferred stock on or before August 2000 will
be sufficient to satisfy its cash requirements for at least the
next 12 months. MP3.com intends to invest its cash in excess
 of current operating requirements in short-term,
interest-bearing, investment-grade securities.

To the extent MP3.coms net revenues increase in the future,
 MP3.com anticipates significant increases in its working capital
 requirements to finance higher relative levels of associated
accounts receivable, unbilled receivables and other assets,
offset by increases in accounts payable and other liabilities.
However, MP3.com does not expect that the increases in accounts
payable and other liabilities will offset the increases in
accounts receivable, unbilled receivables and other assets.

MP3.com may need to raise additional capital if it expands more
rapidly than initially planned, to develop new or enhanced
products and/or services, to pay any damage awards or settlement
costs related to our current litigation proceedings, to respond
to competitive pressures or to acquire complementary products,
content, businesses or technologies. If additional funds are
raised through the sale of equity or convertible debt securities,
 the percentage ownership of MP3.coms stockholders will be
reduced, its stockholders may

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Risks Related To Our Business Model



| |                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We Are Currently Engaged In Three Major Lawsuits That May
	Result In Monetary Damages Substantially Greater Than Our Overall
	 Market Capitalization And The Discontinuation Or Interruption Of
	 Services To Our Consumers.

We are currently the named defendant in a lawsuit brought by
several of the largest companies from the music recording
industry, a second lawsuit by two major music publishers, and a
third class-action lawsuit in which we are named as co-defendants
 with several major recording companies. These lawsuits allege
that among other things, our My.MP3.com and related services
violate their respective copyrights and misappropriate the
artists name and likeness. We cannot assure you that we will be
successful in defending these lawsuits, and we may be required to
 pay license fees or substantial damages, including punitive,
statutory or other damages that far exceed the resources and
overall market capitalization of our company. We also may be
required at any time by the courts to cease all operations of the
 My.MP3.com, Instant Listening, Beam-it or other
services. Furthermore, our insurance coverage and other capital
resources may be inadequate to cover anticipated costs of the
lawsuit or any possible settlements or licenses. If successful,
any of these lawsuits could seriously harm our business by
forcing us to cease providing services to our consumers or
requiring us to pay monetary damages. Even if unsuccessful, these
 claims still can harm our business severely by damaging our
reputation, requiring us to incur legal costs, lowering our stock
 price and public demand for our stock, and diverting
managements attention away from our primary business
activities in general.



| |                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our Business Model Is Not Typical Of Traditional, More
	Established Business Enterprises And May Not Generate Sufficient
	Revenues For Our Business To Survive.

Our model for conducting business and generating revenues is new
and unproven and may evolve rapidly. Our business model depends
upon our ability to generate revenue streams from multiple
sources through our web site, including:

  web site advertising fees from third parties;

  promotional activity fees;

  marketing our artist and consumer information; and

  online sales of CDs and music-related merchandise.

Since our business revenues may evolve rapidly, including those
derived from the development of our My.MP3.com and other MSP
services, these sources of revenue may change or increase or
decrease in importance, as well. It is uncertain whether a
music-based web site that relies on attracting people to learn
about, listen to and download music, mostly from lesser-known
artists, can generate sufficient revenues to survive. In
addition, our efforts to exploit sources of revenue from the
My.MP3.com and other MSP services in development may not be
successful or may meet significant consumer resistance. We cannot
 assure you that our business model will succeed or will be
sustainable as our business grows. In order for our business to
be successful, we must not only develop services that directly
generate revenue, but also provide content and services that
attract consumers to our web site frequently. We will need to
develop new offerings as consumer preferences change and new
competitors emerge. We cannot assure you that we will be able to
provide consumers with an acceptable blend of products, services,
 and informational and community offerings that will attract
consumers to our web site frequently. We provide many of our
products and services, including our My.MP3.com and MSP services
in development, without charge, and we may not be able to
generate

17



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| |                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------
| | We Are Competing In A New Market Which May Not Develop Or
	Where We May Fail To Gain Market Acceptance For Our Products And
	Services.

The market for online music promotion and distribution is new and
 rapidly evolving. As a result, demand and market acceptance for
our products and services expose us to a high degree of
uncertainty and risk. We are attempting to capitalize on a talent
 pool of artists not currently served by the traditional
recording industry. We cannot assure you that consumers will
continue to be interested in listening to or purchasing music
from our artists or that the traditional music industry will not
successfully serve these artists in the future. If this new
market fails to develop, develops more slowly than expected or
becomes saturated with competitors, or our products and services
do not achieve or sustain market acceptance, our business could
be harmed. We believe the future popularity of downloadable
digital music will depend, in part, on the availability of
portable devices to store and replay this music. In addition, we
are attempting to develop new features and services for our
consumers based on the My.MP3.com and other MSP services to allow
 consumers additional ways to access, manage and listen to their
music on any web-enabled device or application. These efforts may
 not be successful and may meet significant consumer and industry
 resistance. To the extent that consumer acceptance or
distribution of these portable devices and/or MSP services is
delayed or these devices or services are not available at
affordable prices, our market and thus a portion of our revenues,
 may not grow at a sufficient pace and our business could be
harmed.

We Have A Limited Operating History That Makes An
Evaluation Of Our Business Difficult.

MP3.com was incorporated in March 1998. Due to our limited
operating history, it is difficult to evaluate our current
business and prospects and accurately predict our future revenues
 or results of operations. This uncertainty may result in one or
more future quarters where our financial results may fall below
the expectation of analysts and investors. As a result, the
trading price of our common stock might decline. Operating
results may vary depending on a number of factors, many of which
are outside our control.



| |                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Rapid Growth In Our Operations And Infrastructure Is Placing A
	 Significant Strain On Our Resources, And Failure To Manage This
	Growth Effectively Could Disrupt Our Operations And Prevent Us
	From Generating The Revenues We Expect.

We currently are experiencing a period of rapid expansion in our
web site traffic, personnel, facilities and infrastructure. For
example, the number of daily visitors to our web site increased
approximately 255% from December 1998 to March 2000. Our number
of employees increased from eight on December 31, 1998 to
303 on March 31, 2000. We expect further significant
expansion will be required to address potential growth in our
artist and consumer bases, the breadth of our product and service
 offerings, and other opportunities. This expansion has placed,
and we expect it will continue to place, a significant strain on
our management, operational and financial resources. Our failure
to manage growth could disrupt our operations and ultimately
prevent us from generating the revenues we expect.



| |                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our Continued Reliance On Revenue From Advertising May Not
	Provide Sufficient Financial Returns For Our Business To Grow Or
	Survive. We Currently Depend On A Small Group Of Customers For
	Our Advertising Revenue.

Although our business model contemplates multiple sources of
revenue, we anticipate that in the foreseeable future we will
depend substantially on revenue from advertising. During the
first quarter of 2000, revenue from advertising accounted for
96.2% of our net revenues. We currently depend on a small group
of customers for our revenue from advertising. During the first
quarter of 2000, two customers accounted for approximately 56.7%
of net revenues, and our top ten customers accounted for
approximately 79.6% of net revenues. We expect that most of our
revenues will continue to be derived from third party advertising
 agreements like those we have with Groupe Arnault, Visitalk,
Freeinternet.com, Buy.com and Voquette. If any of these important
 customers were to leave us, our business could be harmed. If we
do not increase

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| |   |                                                                                             
| | - | --------------------------------------------------------------------------------------------
| |  | conduct successful selling and marketing efforts aimed at
	advertisers;                     
|
| |  | increase the size of our sales force;                                                       
|
| |  | increase the size of the MP3.com audience by increasing both our
	artist and consumer bases;
|
| |  | increase the amount of revenues per advertisement;                                          
|
| |  | target advertisements to appropriate segments of our audience;
	and                         
|
| |  | measure accurately the size and demographic characteristics of
	our audience.               

Our failure to achieve these objectives could reduce our revenue
from online advertising and ultimately prevent us from generating
 the revenues we expect.



| |                                                                                                                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A Substantial Portion Of Our Revenues And Revenue Growth For
	At Least The Next Two Years Will Come From Groupe Arnault. If
	This Relationship Is Not Renewed, Or If Other Significant Sources
	 Of Revenue Are Not Developed, We May Not Have Sufficient
	Revenues To Sustain Our Growth And Our Stock Price May Fall.

In July 1999, we entered into a three-year advertising, promotion
 and marketing agreement with Groupe Arnault. We anticipate that
for at least the next two years a substantial portion of our
revenues will come from sales of our advertising, promotion and
marketing services under this agreement. Although payment for
these services has been secured for the term of the agreement by
a $45,000,000 pre-payment and an irrevocable letter of credit for
 the remaining $105,000,000 of services to be provided under the
agreement, Groupe Arnault is under no obligation to renew its
relationship with us after the current agreement terminates at
the end of June 2002. Furthermore, we anticipate that our revenue
 growth for the next two years will largely be due to the
scheduled growth in revenues under our agreement with Groupe
Arnault. Historically, most of our revenue sources have not
provided for a similarly-scheduled growth in revenues. If we do
not develop significant additional revenue sources in the future,
 our business will be substantially dependent on the Groupe
Arnault agreement. Moreover, if Groupe Arnault does not renew its
 relationship after termination of the current agreement at the
end of June 2002, or renews the relationship but at a lower level
 of commitment, our revenues or growth rate may decline in
periods subsequent to the end of the current agreement. We cannot
 guarantee that we will be able to develop enough additional
revenue to offset the loss of revenues that would result if
Groupe Arnault does not renew its relationship or that the other
revenue sources we may develop will be sufficient to maintain our
 rate of revenue growth. If either event causes our revenues or
our revenue growth rate to be substantially reduced, we may not
have sufficient revenues to support our business and the market
price of our stock may fall.



| |                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| | Without The Continued Development And Maintenance Of The
	Internet And The Availability Of Increased Bandwidth To
	Consumers, Our Business May Not Succeed.

Given the online nature of our business, without the continued
development and maintenance of the Internet infrastructure, we
could fail to meet our overall strategic objectives and
ultimately fail to generate the web site traffic and revenues we
expect. This continued development of the Internet includes
maintenance of a reliable network with the necessary speed, data
capacity and security, as well as timely development of
complementary products including high speed modems, for providing
 reliable Internet access and services. Because global commerce
on the Internet and the online exchange of information is new and
 evolving, we cannot predict whether the Internet will prove to
be a viable commercial marketplace in the long term. The success
of our business will rely on the continued improvement of the
Internet as a convenient means of consumer interaction and
commerce, as well as an efficient medium for the delivery and
distribution of music. Our business will depend on the ability of
 our artists and consumers to continue to upload and download mp3
 and other music files, as well as to conduct commercial
transactions with us, without significant delays or aggravation
that may be associated with decreased availability of Internet
bandwidth and access to our web

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| |                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In Order To Provide Music And Other Content On Our Web site,
	We Rely Heavily On The Contributions Of Artists Who, Over Time,
	May Be Difficult To Attract And Retain.

Our success depends on having a web site that offers high quality
 and diverse music choices, all of which come from outside
artists. Our failure to attract and retain artists who can
provide us with music and other content would limit the overall
quality and quantity of the offerings on our web site and harm
our business. Because our contracts with artists are, with few
exceptions, non-exclusive and can be terminated by the artist at
any time, our retention of artists requires that we offer
sufficient benefits, including artist services and
artist-oriented content, to encourage them to continue providing
us with content. If we are not able to maintain our ability to
serve and provide valuable tools to artists, artists may leave
our web site and remove their music and other content. This could
 also prevent us from attracting new artists. We may also lose
artists who gain recognition on our web site and then are
recruited by or attracted to the traditional music industry. The
loss of artists and the inability to attract new artists would
impair our ability to generate advertising revenue targeted to
our artist community and generate CD revenues.



| |                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------
| | Our Brand Name And Revenues Could Be Damaged If The Music
	Provided By Lesser-Known Artists Fails To Meet Consumer
	Expectations.

Although most of the artists that post music on our web site are
not bound by record contracts, some artists, including most
internationally-recognized artists, typically sign multi-year
exclusive recording contracts that may prevent them from posting
music on our web site. To post music on our web site, these
artists must typically get permission from their record company.
As a result, our access to internationally-recognized artists and
 our ability to distribute their music or place their music on
our web site and on our CDs is limited. For this reason, and
because of the emphasis of our business model on under-served
artists, we expect our music to continue to concentrate
principally on lesser-known and local artists. If the music
provided by these lesser-known and local artists fails to meet
consumer expectations, our brand name could be damaged and our
business may not generate sufficient revenues to survive.



| |                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------
| | Development Of New Standards For The Electronic Delivery Of
	Music May Diminish Our Brand Identity And Disrupt The Way We Do
	Business.

We currently rely on mp3 technology for both brand identity and
as a delivery method for the digital distribution of music. Mp3
is an open standard adopted by the Moving Picture Experts Group
that makes music files smaller. We do not own or control mp3
technology. The onset of competing industry standards for the
electronic delivery of music could significantly affect the way
we operate our business as well as the publics perception
of MP3.com as a company. For example, some of the major recording
 studios have devoted resources to develop a universal standard
for the electronic delivery of music, called the Secured Digital
Music Initiative, or SDMI. This delivery method may be available
during 2000. In addition, major

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| |                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Mp3 Technology Is Controversial Within The Traditional Music
	Industry And May Face Continued Opposition, Which May Negatively
	Affect The Perception Of Our Business, Lead To Market Confusion,
	Alienate Advertisers And Consumers And Reduce Our Revenue.

The traditional music industry has not embraced the development
of the mp3 format to deliver music, in part because users of mp3
technology can download and distribute unauthorized or
pirated copies of copyrighted recorded music over the
 Internet. Although our business model for the digital
distribution of music can support more than one audio compression
 format and method of delivery, and is intended to discourage
music piracy and ensure that only legitimate music is posted on
our web site, our brand identity is currently linked to the mp3
technology. As a result, we may face opposition from a number of
different music industry sources including record companies and
studios, the Recording Industry Association of America
(RIAA) and established artists with record contracts,
 due to our current brand identity and its potentially negative
associations. In addition, adverse news or events relating to mp3
 technology may lead to confusion in the public markets regarding
 our company and its prospects, alienate advertisers and
consumers, reduce revenues and harm our overall financial
results.



| |                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We May Have Difficulty Competing For Or Executing Business
	Partnerships And Making Acquisitions That We May Need To Expand
	Our Content And Distribution Channels, Which Could Impair Our
	Overall Strategic Goals.

Our business strategy includes entering into business
partnerships and may include acquiring complementary businesses,
technologies, content or products. We may be unable to complete
suitable business partnerships and acquisitions on commercially
reasonable terms, if at all. We expect to face competition for
business partnership and acquisition candidates and sponsorships.
 This competition could impair our ability to successfully pursue
 these aspects of our business strategy. Business partnerships or
 acquisitions could disrupt our ongoing business, distract our
management and employees and increase our expenses. If we acquire
 a company, we could face difficulties assimilating that
companys personnel, culture and operations. In addition,
the key personnel of the acquired company may decide not to work
for us. Acquisitions of additional services or technologies also
involve risks of incompatibility and lack of integration into our
 existing operations. If we finance the acquisitions by incurring
 debt or issuing equity securities, this could dilute our
existing stockholders. Any amortization of goodwill or other
assets, or other charges resulting from the costs of
acquisitions, could adversely affect our operating results.

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Financial Risks



| |                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our Quarterly Revenues And Operating Results Are Not
	Indicative of Future Performance And Are Difficult To Forecast,
	And Our Stock Price May Fall If Our Performance Does Not Meet
	Analysts Or Investors Expectations.

As a result of our limited operating history, we do not have
historical financial data for a significant number of periods
upon which to forecast quarterly revenues and results of
operations. We believe that period-to-period comparisons of our
operating results may not be meaningful and should not be relied
upon as indicators of future performance. In addition, our
revenue and earnings may vary substantially as a result of
holiday-based buying and the business cycles of the music
industry and of Internet commerce in general. However, the actual
 effect of these factors on the price of our stock will be
difficult to assess due to our limited operating history. In one
or more future quarters our results of operations may fall below
the expectations of securities analysts and investors, and the
trading price of our common stock may be affected.



| |                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------
| | We Expect Net Losses In The Future And May Never Achieve
	Profitability, Which May Cause Our Stock Price To Fall.

In 1999 and the first quarter of 2000, we had a net loss of
approximately $42.5 and $18.1 million, respectively. We
expect substantial net losses and negative cash flow for the
foreseeable future. We believe it is critical to our long term
success that we continue to develop MP3.com brand awareness and
loyalty through marketing and promotion, expand our artist and
consumer networks, develop our online content and expand our
other services. We expect that our operating expenses will
increase significantly during the next several years, especially
in sales and marketing and product development. With increased
expenses, we will need to generate significant additional
revenues to achieve profitability. As a result, we may never
achieve or sustain profitability and, if we do achieve
profitability in any period, we may not be able to sustain or
increase profitability on a quarterly or annual basis.



| |                                                                                                      
| | -----------------------------------------------------------------------------------------------------
| | Unless We Obtain Additional Financing, We May Not Be Able To
	Meet Our Strategic Business Objectives.

Our available cash and equivalents and short and long-term
investments in marketable securities are expected to be
sufficient to meet our cash requirements for at least the next
12 months. However, we may need to raise additional funds in
 order to:



| |   |                                                                                              
| | - | ---------------------------------------------------------------------------------------------
| |  | satisfy any damage awards or settlement costs related to our
	current litigation proceedings;
|
| |  | finance unanticipated working capital requirements;                                          
|
| |  | develop or enhance existing services or products;                                            
|
| |  | fund distribution relationships;                                                             
|
| |  | respond to competitive pressures; or                                                         
|
| |  | acquire complementary businesses, technologies, content or
	products.                        

We cannot assure you that additional financing will be available
on terms favorable to us, or at all. If adequate funds are not
available or are not available on acceptable terms, our ability
to fund our expansion, take advantage of unanticipated
opportunities, develop or enhance services or products or
otherwise respond to competitive pressures would be significantly
 limited. If we raise additional funds by issuing equity or
convertible debt securities, the percentage ownership of our
stockholders will be reduced, and these securities may have
rights, preferences or privileges senior to those of our
stockholders.

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| |                                                                                        
| | ---------------------------------------------------------------------------------------
| | Our Stock Price And Trading Volume Has Been And May Continue
	To Be Extremely Volatile.

The trading price of our common stock has been and is likely to
continue to be extremely volatile. Our stock price could be
subject to wide fluctuations in response to a variety of factors,
 including the following:



| |   |                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------
| |  | developments related to our current or future legal proceedings;                                                                    
|
| |  | actual or anticipated variations in quarterly and/or annual
	operating results;                                                     
|
| |  | announcements of technological innovations;                                                                                         
|
| |  | new products or services offered by us or our competitors;                                                                          
|
| |  | changes in financial estimates and/or ratings by securities
	analysts;                                                              
|
| |  | announcements of significant acquisitions, strategic
	partnerships, joint ventures or capital commitments by us or our
	competitors;
|
| |  | additions or departures of key personnel;                                                                                           
|
| |  | sales of common stock;                                                                                                              
|
| |  | perceived and/or actual sales of our stock by company insiders;
	and                                                                
|
| |  | other events or factors, many of which are beyond our control.                                                                      

In addition, the stock market in general, and the Nasdaq National
 Market and the stock prices of Internet-related companies in
particular, have experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate
to the operating performance of such companies. These broad
market and industry factors may materially adversely affect the
market price of our common stock, regardless of our actual
operating performance. In the past, following periods of
volatility in the market price of a companys securities,
securities class-action litigation has often been instituted
against such companies. Such litigation, if instituted, could
result in substantial costs and a diversion of managements
attention and resources, which could adversely affect our
business, financial condition and the market price of our common
stock.



| |                                                                                                        
| | -------------------------------------------------------------------------------------------------------
| | Substantial Future Sales Of Our Common Stock In The Public
	Market Could Cause Our Stock Price To Fall.

Sales of a large number of shares of our common stock in the
public market or the perception that such sales could occur could
 cause the market price of our common stock to drop. As of
March 31, 2000, we had 67,972,476 shares of common stock
outstanding, of which approximately 42,485,001 shares are freely
transferable without restriction or registration under the
Securities Act of 1933, unless such shares are held by our
affiliates, as that term is defined in Rule 144 under the
Securities Act. Sales of common stock by existing stockholders in
 the public market, or the availability of such shares for sale,
could adversely affect the market price of the common stock.

In July 1999, we filed a registration statement on Form S-8
with the Securities and Exchange Commission covering the
7,606,781 shares of common stock reserved for issuance under our
1998 Equity Incentive Plan and 1999 Employee Stock Purchase Plan
and for options issued outside such plans. In February 2000, our
board of directors approved our 2000 Equity Incentive Plan, which
 includes a reserve of 1,100,000 shares available for grant for
which we plan to file a registration statement on Form S-8
sometime in the future. We also will ask our shareholders to
approve an amendment to the 1998 Equity Incentive Plan to
increase the aggregate number of shares of common stock
authorized for issuance under such plan from 12,750,000 to
22,500,000 shares. Upon approval of such amendment at our 2000
annual meeting of shareholders, we plan to file a registration
statement on Form S-8 covering such shares. Once issued, any
 shares registered on such Form S-8 registration statements,
 could be freely transferable without restriction or registration
 under the Securities Act of 1933, unless such shares are held by
 our affiliates, as that term is defined in Rule 144 under
the Securities Act. Sales of a large number of shares could have
an adverse effect on the market price for our common stock.

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Holders of approximately 17,088,152 shares of our Common Stock
have certain registration rights. In addition, 10% of the
3,347,233 shares purchased by Arkaro Holding B.V. in our initial
public offering became available for sale to the public market on
 January 21, 2000, with an additional 10% becoming eligible
on the 21st day of each of the five months thereafter. If such
holders, by exercising either their registration rights or their
rights under Rule 144 or Rule 701, cause a large number
 of securities to be registered and/or sold in the public market,
 such sales could have an adverse effect on the market price for
our common stock. If we were to include in a company-initiated
registration shares held by such holders pursuant to the exercise
 of their registration rights, such sales may have an adverse
effect on our ability to raise needed capital.

Risks Related To Sales, Marketing And Competition



| |                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------
| | Unless We Develop A Strong Brand Identity, Our Business May
	Not Continue To Grow And Our Financial Results May Suffer.

We believe that our historical growth and brand recognition have
been largely attributable to frequent and visible national and
local media exposure as well as individual, unsolicited promotion
 of our web site. The frequency or quality of this media exposure
 or promotion may not continue. We believe that continuing to
strengthen our brand will be critical to achieve widespread
acceptance of our products and services. Favorable public
perception of our brand will depend largely on our ability to
continue providing users with high quality products and services
and the success of our marketing efforts. We plan to increase our
 marketing expenditures to create and maintain brand recognition.
 However, brand promotion activities may not yield increased
revenues and, even if they do, any increased revenues may not
offset the expenses we incur in building our brand.



| |                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If We Do Not Transcend A Mere Association Between Our Company
	And The Mp3 Format In The Minds Of Consumers, Our Brand Identity
	And Financial Results Could Suffer.

The growth of our business will also depend in significant part
on our ability to develop a brand identity that transcends a mere
 association with the mp3 format. We must pursue a brand
development strategy that identifies our company as a primary
source for interesting and diverse high quality music and artists
 above and beyond mp3 technology. Although MP3.com is not tied
exclusively to the use of mp3 technology or to any other specific
 standard for the electronic delivery of music, failure to
achieve brand recognition apart from the mp3 format could
significantly affect the future viability of our brand name and
our ability to generate revenues.



| |                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If We Fail To Collect Accurate And Useful Data About Our
	Consumers, Potential Advertisers May Not Advertise On Our Web
	Site, Which May Result In Reduced Advertising Revenues.

We plan to use consumer data to expand, refine and target our
marketing and sales efforts. We collect most of our data from
users who report information to us as they conduct transactions
on our web site. If a large proportion of users impede our
ability to collect data or if they falsify data, our marketing
and sales efforts would be less effective since advertisers
generally require detailed demographic data on their target
audiences. In addition, laws relating to privacy and the use of
the Internet to collect personal information could limit our
ability to collect data and utilize our database. Failure to
collect accurate and useful data could result in a substantial
reduction in advertising revenues, which represented 93.5% of our
 total revenues during 1999. Because we use e-mail for direct
marketing, any legislative or consumer efforts to regulate
unsolicited bulk e-mails, commonly referred to as
spam, as well as other laws regulating the use of
e-mail, could significantly impair our sales and marketing
efforts and our associated advertising revenue.



| |                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------
| | We Expect Competition To Increase Significantly In The Future
	Which Could Reduce Our Revenues, Potential Profits And Overall
	Market Share.

The market for the online promotion and distribution of music and
 music-related products is competitive. Barriers to entry on the
Internet are relatively low, and we expect competition to
increase significantly in the future. We face competitive
pressures from numerous actual and potential competitors, many of
 which have

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Risks Related To Operations



| |                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------
| | Our Business Operations Could Be Significantly Disrupted If We
	 Lose Members Of, Or Fail To Properly Integrate, Our Management
	Team.

Our future performance will be substantially dependent on the
continued services of our management and our ability to retain
and motivate them. The loss of the services of any of our
officers or senior managers could harm our business. We do not
have long-term employment agreements with any of our key
personnel, other than our Chief Executive Officer, and we do not
maintain any key person life insurance policies
except on our Chief Executive Officer. Almost all of our
management team joined MP3.com in 1999. Since the completion of
our initial public offering in July 1999, we have experienced
turnover in our management team, and we may continue to
experience turnover. Most of these individuals have not
previously worked together and are currently being integrated as
a management team. If our senior managers are unable to work
effectively as a team, our business operations could be
significantly disrupted.



| |                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We Rely On Cinram International, Inc. To Fulfill All Of Our
	DAM CDs And Other Merchandise Production And Delivery Obligations
	 And May Be Vulnerable To Unexpected Interruptions Or
	Discontinuation Of Our Fulfillment Operations.

In November 1999, we outsourced exclusively to Cinram
International, Inc. our just-in-time DAM CD production and
fulfillment process, as well as the production and fulfillment of
 our other promotional CD products. The transition of fulfillment
 operations to Cinram was completed at the end of March 2000. For
 redundancy, we also currently maintain certain minimal
fulfillment capabilities at our main facility in San Diego.
Should Cinram cease to provide us with production and fulfillment
 services for any reason, we cannot assure you that we will be
able to fulfill any of our customers orders for DAM CDs and
 other merchandise without significant delays or expense, or at
all. Any such loss of fulfillment operations, for any period of
time no matter how brief, may substantially and irreparably harm
our business reputation and significantly decrease our revenues
and our total number of consumers, artists and users.



| |                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We May Not Be Able To Hire And Retain A Sufficient Number Of
	Qualified Employees, And As A Result We May Not Be Able To Grow
	As We Expect, Or Maintain The Quality Of Our Services.

Our future success will depend on our ability to attract, train,
retain and motivate other highly skilled technical, managerial,
marketing and customer support personnel. Competition for these
personnel is intense, especially for engineers, web designers and
 advertising sales personnel, and we may be unable to
successfully attract sufficiently qualified personnel.
Substantially all of our employees have joined us in 1999 and we
expect that our rate of hiring will continue at a very rapid
pace. If we cannot integrate these employees into our business,
we will not be able to effectively manage our growth. Also, our
inability to hire, integrate and retain qualified personnel in
sufficient numbers may reduce the quality of our programs,
products and services.



| |                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------
| | We Must Continue To Upgrade Our Technology Infrastructure, Or
	We Will Be Unable To Effectively Meet Demand On Our Web Site.

In December 1999, an average of approximately 38 gigabytes of
musical content was added to our web site each week and traffic
to the site increased by approximately 16% from the previous
month. We must continue to add hardware and enhance software to
accommodate the increased content and use of our web

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| |                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our New Financial Accounting System And Other Internal Systems
	 May Not Work Effectively And As A Result We May Not Have The
	Information We Need To Record Transactions And Meet Our
	Accounting And Reporting Obligations, Which In Turn Could Affect
	Our Ability To Run Our Business Efficiently Or Profitably.

In 1999, we installed a new financial accounting system. If our
accounting system does not work effectively, we may experience
delays or failures in our accounting processes. This could
adversely impact the promptness and accuracy of our transaction
processes, and our financial accounting and reporting. To manage
the expected growth of our operations and personnel, we will need
 to improve our operational and financial systems, transaction
processing, procedures and controls. Our current and planned
systems, transaction processing, procedures and controls may not
be adequate to support future operations.



| |                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our Data Warehousing And Web Server Systems May Stop Working
	Or Work Improperly Due To Natural Disasters, Failure Of
	Third-Party Services And Other Unexpected Problems.

Since our data warehousing, web server and network facilities are
 all located in Southern California, an earthquake or other
natural disaster could affect all of our facilities
simultaneously. An unexpected event like a power or
telecommunications failure, fire, flood or earthquake at our
on-site data warehousing facility or at either of our two
Internet service providers facilities could cause the loss
of critical data and prevent us from offering our services to
artists and consumers. Our business interruption insurance may
not adequately compensate us for losses that may occur. In
addition, we rely on third parties to securely store our archived
 data, house our web server and network systems, and connect us
to the Internet. A failure by any of these third parties to
provide these services satisfactorily would impair our ability to
 access archives and operate our web site.



| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | We May Lose Visitors To Our Web Site And Lose Revenues If Our
	Online Security Measures Fail.

If the security measures that we use to protect personal
information are ineffective, we may lose visitors to our web site
 which could reduce our revenues. We rely on security and
authentication technology licensed from third parties. With this
technology, we perform real-time credit card authorization and
verification. We cannot predict whether new technological
developments could allow these security measures to be
circumvented. In addition, our software, databases and servers
may be vulnerable to computer viruses, physical or electronic
break-ins and similar disruptions. We may need to spend
significant resources to protect against security breaches or to
alleviate problems caused by any breaches. We cannot assure that
we can prevent all security breaches.

Risks Related To Government Regulation, Content and
Intellectual Property

Government Regulation May Require Us To
Change The Way We Do Business.

The laws and regulations that govern our business change rapidly.
 Although our operations are currently based in California, the
United States government and the governments of other states and
foreign countries have attempted to regulate activities on the
Internet. Evolving areas of law that are relevant to our business
 include privacy law, proposed encryption laws, content
regulation and sales and use tax laws and regulations. Because of
 this rapidly evolving and uncertain regulatory environment, we
cannot predict how these laws and regulations might affect our
business. In addition, these uncertainties make it difficult to
ensure compliance with the laws and regulations governing the
Internet. These laws and regulations could harm us by subjecting
us to liability or forcing us to change how we do business.

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| |                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------
| | We May Be Liable To Third Parties For Music, Software And
	Other Content That Is Available On Our Web Site And On The CDs We
	 Distribute.

We may be liable to third parties for the content on our web site
 and on the CDs we distribute:



| |   |                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | if the music, text, graphics, software or other content on our
	web site or CDs violates their copyright, trademark, or other
	intellectual property rights;
|
| |  | if our artists violate their contractual obligations to others by
	 providing content on our web site or CDs; or                                            
|
| |  | if anything on our web site or CDs is deemed obscene, indecent or
	 defamatory.                                                                             

We may also be liable for anything that is accessible from our
web site through links to other web sites. We attempt to minimize
 these types of liability by requiring representations and
warranties relating to our artists ownership of and rights
to distribute and submit their content and by taking related
measures to review content on our web site and on our CDs.
However, alleged liability could harm our business by damaging
our reputation, requiring us to incur legal costs in defense,
exposing us to awards of damages and costs and diverting
managements attention away from our business.



| |                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We May Not Be Able To Prevent Others From Using Our
	Trademarks, Copyrights, Software And Other Intellectual Property
	Assets. If Others Do Use These Assets, Their Value To Us, And Our
	 Ability To Use Them To Generate Revenue, May Decrease.

Our intellectual property includes our trademarks and copyrights,
 proprietary software, and other proprietary rights. We believe
that our intellectual property is important to our success and
our competitive position, and we try to protect it. However, our
efforts may be inadequate. We do not have a registered trademark
for the MP3.com name and may not be able to prevent
others from using mp3 or MP3.com. Use of
the MP3.com name by others could dilute our brand
identity and confuse the market. In addition, our ability to
conduct our business may be harmed if others claim we violate
their intellectual property rights. For example, Sightsound.com,
Inc. has asserted that many online music providers, including
MP3.com, violate patent rights that it allegedly owns covering
the sale of music over the Internet through digital downloads. If
 successful, these claims, or similar claims by others, could
seriously harm our business by forcing us to cease using
important intellectual property or requiring us to pay monetary
damages. Even if unsuccessful, these claims could harm our
business by damaging our reputation, requiring us to incur legal
costs and diverting managements attention away from our
business.




Item 3. Quantitative and Qualitative Disclosures
about Market Risk

Interest Rate Risk

The primary objective of our investment activities is to preserve
 principal while at the same time maximizing yields without
significantly increasing risk. To achieve this objective, we
maintain a portfolio of cash equivalents and marketable
securities, including U.S. government agencies, corporate debt
securities, commercial paper, and money market funds. As of
March 31, 2000, approximately 96.5% of our total portfolio
matures in one year or less, with the remainder maturing in less
than two years.

Under our current policies, we do not use interest rate
derivative instruments to manage exposure to interest rate
changes. A hypothetical 100 basis point adverse move in interest
rates along the entire interest rate yield curve would not
materially affect the fair value of interest sensitive financial
instruments at March 31, 2000.

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The following table presents the fair value balances of our cash
equivalents and short-term investments that are subject to
interest rate risk by year of expected maturity and average
interest rates as of March 31, 2000 (dollars in thousands):

|                                                     |                        |      |         |      |   |   |        |      |  
|---------------------------------------------------- | ---------------------- | ---- | ------- | ---- | - | - | ------ | ---- | -
|                                                     |                        | 2000 |         | 2001
|                                                     |                        |      |         |     
|Cash equivalents                                     |                        | $    | 224,455 |      |   | $ |       |     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Average interest rates |      |         | 6.13 | % |   |        |     |  
|                                                    
|                                                    
|                                                    
|                                                    
|Short term investments, excluding equity investments |                        | $    | 132,447 |      |   | $ | 12,981 |     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Average interest rates |      |         | 6.04 | % |   |        | 6.61 | %

As of March 31, 2000, we held one derivative financial
instrument, a warrant to purchase 1.5 million shares of
Cinram International, Inc, and one marketable equity investment.
The deemed fair value of the warrant and equity investment were
$1,413,000 and $7,790,000, respectively. In addition, we had
outstanding debt as of March 31, 2000 of approximately
$1.0 million.

Foreign Currency Risk

Currently, all of MP3.com, Inc.s sales and expenses are
denominated in U.S. dollars and as a result the Company has
experienced no foreign exchange gains and losses.

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PART II  OTHER INFORMATION




Item 1. Legal Proceedings

On January 21, 2000, ten major recording companies filed a
copyright infringement lawsuit against MP3.com in the United
States District Court for the Southern District of New York. The
complaint alleges that MP3.com, in connection with its
recently-introduced My.MP3.com service, made unauthorized copies
of approximately 45,000 audio CDs in violation of the Copyright
Act. The complaint further alleges that offering the new
My.MP3.com service, which allows a user to listen, via the
Internet, to the tracks of certain commercial audio CDs of his or
 her choosing, constitutes unauthorized copying and willful
infringement of plaintiffs copyrighted sound recordings.
Plaintiffs seek damages (including statutory damages of up to
$150,000 per violation) and injunctive relief prohibiting MP3.com
 from operating its My.MP3.com service or any other service that
uses reproductions of plaintiffs copyrighted sound
recordings. In February 2000, MP3.com filed an answer to the
complaint denying each of the substantive allegations therein,
and the plaintiffs moved for summary judgement. In March 2000,
MP3.com filed materials in opposition to the plaintiffs
motion for summary judgement, and a hearing on the motion was
held by the court on April 14, 2000. The court is expected
to provide a ruling on the motion on April 28, 2000.

On March 14, 2000, two large music publishing companies
filed a copyright infringement lawsuit against MP3.com in the
United States District Court for the Southern District of New
York. The complaint alleges that MP3.com, in connection with its
recently-introduced My.MP3.com service, made unauthorized copies
of approximately 45,000 audio CDs in violation of the Copyright
Act, and that MP3.com, in connection with the streaming of audio
content to users of the My.MP3.com service, continues to make
unauthorized digital phonorecords in violation of the Copyright
Act. The complaint further alleges that MP3.coms actions
constitute unauthorized copying and willful infringement of
plaintiffs copyrights. Plaintiffs seek damages (including
statutory damages of up to $150,000 per violation) and injunctive
 relief prohibiting MP3.com from operating its My.MP3.com service
 or any other service that uses unauthorized reproductions of
plaintiffs copyrighted works.

On April 12, 2000, several artists filed a class action
lawsuit in the United States District Court for the Southern
District of New York against MP3.com and several major recording
companies that claimed to own copyrights in sound recordings
featuring the artists. The complaint alleges that the recording
company defendants are claiming, in their separate lawsuit
against MP3.com (filed on January 21, 2000  see
above), rights to plaintiffs recordings that they do not
possess. In particular, the complaint alleges that the recording
company defendants do not possess any copyright protections with
respect to plaintiffs pre-1972 published and pre-1978
unpublished recordings, do not possess the right to digitally
transmit plaintiffs pre-1996 recordings over the Internet,
and do not possess the right to control the conversion of
plaintiffs recordings into mp3 files. The complaint further
 alleges that MP3.com has used the names and likenesses of
plaintiffs without their consent or authorization and in a
deceptive manner, in violation of the federal Lanharn Act, the
New York Civil Rights Law, and unspecified unfair competition and
 misappropriation laws. In their prayer for relief, plaintiffs
ask to have their class action certified, to be awarded
unspecified damages and attorneys fees, to have the
defendants enjoined from using plaintiffs names and
likeness to promote downloading music over the Internet, and to
receive declaratory relief regarding plaintiffs rights in
their pre-and post-1972 recordings.

MP3.com believes that it has meritorious defenses to the
plaintiffs claims, including the fair use
doctrine, based in part on the belief that these services augment
 the market for music and music CDs, and we intend to vigorously
defend against such claims. However, we cannot assure you that we
 will be successful in defending these lawsuits, and we may be
required to pay license fees or substantial damages, including
statutory, punitive or other damages that far exceed the
resources and overall market capitalization of our company. We
also may be required at any time by the courts to cease all
operations of the My.MP3.com, Instant Listening, Beam-it or other
 services. Furthermore, our insurance coverage and other capital
resources may be inadequate to cover anticipated costs of the
lawsuit or any possible settlements or licenses. If successful,
any of these lawsuits could seriously harm our business by
forcing us to cease providing services to our consumers or
requiring us to pay monetary damages. Even if unsuccessful, these
 lawsuits still can harm our business severely by damaging our
reputation, requiring us to incur legal costs, lowering our stock
 price

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Item 2. Changes in Securities and Uses of
Proceeds

Use of Proceeds

From the time of receipt through March 31, 2000, the net
proceeds of our initial public offering were all applied to
temporary investments in corporate commercial paper and debt
securities, U.S. Government agencies, and money market funds.




Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits:



| |                 |                                                                                    
| | --------------- | -----------------------------------------------------------------------------------
| | Exhibit 10.23  | Separation Agreement dated March 9, 2000 between the
	Registrant and Thomas Spiegel
|
| | Exhibit 27.1   | Financial Data Schedule                                                            

(b)  Reports on Form 8-K:

None

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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.



| |              
| | -------------
| | MP3.COM, INC.
| | (Registrant) 

Date: April 21, 2000



| |     |                     
| | --- | --------------------
| | By: | /s/ PAUL L.H. OUYANG

| |                                             
| | --------------------------------------------
| |                                             
| | Paul L.H. Ouyang                            
| | Executive Vice President and Chief Financial
| | Officer(Authorized Officer)                 
| | (Principal Financial and Accounting Officer)

31