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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q



|    |                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------
|[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarterly period ended September 30, 2001

OR



|      |                                                                                         
|----- | ----------------------------------------------------------------------------------------
|[   ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  to

Commission file number: 0-27575

NETRADIO CORPORATION(Exact name of registrant as specified in its charter)

|                                                          |  |                                     
|--------------------------------------------------------- |  | ------------------------------------
|Minnesota                                                 |  | 41-1819471                          
|                                                          |  |                                     
|(State of incorporation or organization)                  |  | (I.R.S. Employer Identification No.)
|                                                         
|                                                         
|10025 Valley View Road, Suite 190
Eden Prairie, Minnesota |  | 55344                               
|                                                          |  |                                     
|(Address of principal executive offices)                  |  | (Zip Code)                          

(952) 259-6700
(Registrants telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.    [ X] Yes [    ] No

The number of shares outstanding of each of the registrants classes of
capital stock, as of November 14, 2001 was: Common Stock, no par value,
2,240,300 shares.



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NETRADIO CORPORATION

Index

|           |  |                                                                                           |    |  |    |  |  | 
|---------- |  | ----------------------------------------------------------------------------------------- | -- |  | -- |  |  | 
|Part I.    |  | Financial Information                                                                     | 3 
|Item 1.    |  | Financial Statements                                                                      | 3 
|           |  | Balance Sheets  September 30, 2001 and December 31, 2000                                 | 3 
|           |  | Statements of Operations  Three months and nine months ended September 30, 2001 and 2000 | 4 
|           |  | Statements of Cash Flows  Nine months ended September 30, 2001 and 2000                  | 5 
|           |  | Notes to Condensed Consolidated Financial Statements  September 30, 2001                 | 6 
|Item 2.    |  | Management's Discussion and Analysis of Financial Condition and Results of Operations     | 7 
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                                | 10
|Part II.   |  | Other Information                                                                         | 10
|Item 1.    |  | Legal Proceedings                                                                         | 10
|Item 2.    |  | Change in Securities and Use of Proceeds                                                  | 10
|Item 3.    |  | Defaults Upon Senior Securities                                                           | 10
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                       | 10
|Item 5.    |  | Other Information                                                                         | 10
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                          | 10
|Signatures |  |                                                                                           |    |  | 11

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PART I.  FINANCIAL INFORMATION

Item 1.     FINANCIAL STATEMENTS

NetRadio Corporation
Balance Sheets

|                                           |                                                                                                                                                            |                                                                                                                  |           |               |            |              |            |             |            | 
|------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------- | --------- | ------------- | ---------- | ------------ | ---------- | ----------- | ---------- | 
|                                           |                                                                                                                                                            |                                                                                                                  |           | September 30, |            | December 31,
|                                           |                                                                                                                                                            |                                                                                                                  |           | 2001          |            | 2000        
|                                           |                                                                                                                                                            |                                                                                                                  |           |               |            |             
|Assets                                     |                                                                                                                                                            |                                                                                                                  |           |               |            |              |            |            
|Current assets:                            |                                                                                                                                                            |                                                                                                                  |           |               |            |              |            |            
|                                           | Cash and cash equivalents                                                                                                                                  |                                                                                                                  | $         | 3,884,574     |            |              | $          | 82,943      |           
|                                           | Short-term investments                                                                                                                                     |                                                                                                                  |           | 627,226       |            |              |            | 11,440,356  |           
|                                           | Trade accounts and notes receivable, less allowance for doubtful
accounts of $17,000 at September 30, 2001, and $20,000 at December 31, 2000, respectively |                                                                                                                  |           | 44,460        |            |              |            | 291,692     |           
|                                           | Other receivable                                                                                                                                           |                                                                                                                  |           | 75,000        |            |              |            |            |           
|                                           | Prepaid advertising                                                                                                                                        |                                                                                                                  |           |              |            |              |            | 833,873     |           
|                                           | Prepaid expenses                                                                                                                                           |                                                                                                                  |           | 75,409        |            |              |            | 98,948      |           
|                                           | Other current assets                                                                                                                                       |                                                                                                                  |           |              |            |              |            | 350,667     |           
|                                           |                                                                                                                                                            |                                                                                                                  |           |               |            |             
|Total current assets                       |                                                                                                                                                            |                                                                                                                  | 4,706,669 |               |            |              | 13,098,479 |            
|Property and equipment, net                |                                                                                                                                                            |                                                                                                                  | 2,142,804 |               |            |              | 3,075,455  |            
|Patents and trademarks, net                |                                                                                                                                                            |                                                                                                                  | 46,907    |               |            |              | 48,553     |            
|Other assets                               |                                                                                                                                                            |                                                                                                                  | 120,254   |               |            |              | 120,254    |            
|                                           |                                                                                                                                                            |                                                                                                                  |           |               |            |             
|                                           |                                                                                                                                                            | $                                                                                                                | 7,016,634 |               |            | $            | 16,342,741 |            
|                                           |                                                                                                                                                            |                                                                                                                  |           |               |            |             
|Liabilities and shareholders equity       |                                                                                                                                                            |                                                                                                                  |           |               |            |              |            |            
|Current Liabilities:                       |                                                                                                                                                            |                                                                                                                  |           |               |            |              |            |            
|                                           | Accounts payable                                                                                                                                           |                                                                                                                  | $         | 1,299,111     |            |              | $          | 1,791,672   |           
|                                           | Accrued expenses                                                                                                                                           |                                                                                                                  |           | 603,312       |            |              |            | 1,149,681   |           
|                                           | Deferred advertising revenue                                                                                                                               |                                                                                                                  |           | 163,419       |            |              |            |            |           
|                                           | Note payable                                                                                                                                               |                                                                                                                  |           | 3,096,827     |            |              |            | 9,596,827   |           
|                                           | Current maturities of capital lease obligation                                                                                                             |                                                                                                                  |           | 6,836         |            |              |            | 89,630      |           
|                                           |                                                                                                                                                            |                                                                                                                  |           |               |            |             
|Total current liabilities                  |                                                                                                                                                            |                                                                                                                  | 5,169,505 |               |            |              | 12,627,810 |            
|Shareholders equity:                      |                                                                                                                                                            |                                                                                                                  |           |               |            |              |            |            
|                                           | Preferred stock;                                                                                                                                           |                                                                                                                  |           |               |            |              |            |             |           
|                                           |                                                                                                                                                            | Authorized shares   2,222,222                                                                                   |           |               |            |              |            |             |            | 
|                                           |                                                                                                                                                            | Issued and outstanding shares  none at September 30, 2001 and
December 31, 2000                                 |           |               |            |              |            |             |            | 
|                                           | Common stock, no par value;                                                                                                                                |                                                                                                                  |           |               |            |              |            |             |           
|                                           |                                                                                                                                                            | Authorized shares   11,111,111                                                                                  |           |               |            |              |            |             |            | 
|                                           |                                                                                                                                                            | Issued
and outstanding shares  2,240,300 at September 30, 2001 and
2,240,300 at December 31, 2000, respectively |           |               | 41,092,132 |              |            |             | 41,092,132 | 
|                                           | Deferred Compensation                                                                                                                                      |                                                                                                                  |           | (37,708       | )          |              |            | (71,646     | )         
|                                           | Accumulated deficit                                                                                                                                        |                                                                                                                  |           | (39,207,295   | )          |              |            | (37,305,555 | )         
|                                           |                                                                                                                                                            |                                                                                                                  |           |               |            |             
|Total shareholders equity                 |                                                                                                                                                            |                                                                                                                  | 1,847,129 |               |            |              | 3,714,931  |            
|                                           |                                                                                                                                                            |                                                                                                                  |           |               |            |             
|Total liabilities and shareholders equity |                                                                                                                                                            | $                                                                                                                | 7,016,634 |               |            | $            | 16,342,741 |            
|                                           |                                                                                                                                                            |                                                                                                                  |           |               |            |             

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NetRadio Corporation
Statements of Operations

|                                               |                                  |   |                    |           |                   |   |            |           |      |   |            |           |   |   |             |            |  
|---------------------------------------------- | -------------------------------- | - | ------------------ | --------- | ----------------- | - | ---------- | --------- | ---- | - | ---------- | --------- | - | - | ----------- | ---------- | -
|                                               |                                  |   | Three Months Ended |           | Nine Months Ended
|                                               |                                  |   | September 30,      |           | September 30,    
|                                               |                                  |   | 2001               |           | 2000              |   | 2001       |           | 2000
|                                               |                                  |   |                    |           |                   |   |            |           |     
|Net revenues                                   |                                  |   |                    |           |                   |   |            |           |      |   |            |           |   |   |             |           
|                                               | Product sales                    |   | $                  | 4,093     |                   |   | $          | 134,338   |      |   | $          | 63,458    |   |   | $           | 567,973    |  
|                                               | Internet advertising             |   |                    | 58,015    |                   |   |            | 322,097   |      |   |            | 276,916   |   |   |             | 1,069,521  |  
|                                               |                                  |   |                    |           |                   |   |            |           |     
|Total net revenues                             |                                  |   | 62,108             |           |                   |   | 456,435    |           |      |   | 340,374    |           |   |   | 1,637,494   |           
|Operating expenses:                            |                                  |   |                    |           |                   |   |            |           |      |   |            |           |   |   |             |           
|                                               | Cost of revenues                 |   |                    |          |                   |   |            | 121,753   |      |   |            | 45,346    |   |   |             | 522,088    |  
|                                               | Operations and technical support |   |                    | 1,290,918 |                   |   |            | 2,391,042 |      |   |            | 4,336,179 |   |   |             | 7,558,092  |  
|                                               | Sales and marketing              |   |                    | 951,175   |                   |   |            | 1,904,632 |      |   |            | 1,823,237 |   |   |             | 4,630,928  |  
|                                               | General and administrative       |   |                    | 759,728   |                   |   |            | 590,722   |      |   |            | 1,650,598 |   |   |             | 2,149,634  |  
|                                               |                                  |   |                    |           |                   |   |            |           |     
|Total operating expenses                       |                                  |   | 3,001,821          |           |                   |   | 5,008,149  |           |      |   | 7,855,360  |           |   |   | 14,860,742  |           
|                                               |                                  |   |                    |           |                   |   |            |           |     
|Loss from operations                           |                                  |   | (2,939,713         | )         |                   |   | (4,551,714 | )         |      |   | (7,514,986 | )         |   |   | (13,223,248 | )         
|Other (income) expenses                        |                                  |   |                    |           |                   |   |            |           |      |   |            |           |   |   |             |           
|                                               | Interest (Income)                |   |                    | (49,211   | )                 |   |            | (410,829  | )    |   |            | (425,375  | ) |   |             | (1,099,585 | )
|                                               | Interest Expense                 |   |                    | 57,194    |                   |   |            | 242,786   |      |   |            | 312,129   |   |   |             | 699,121    |  
|                                               |                                  |   |                    |           |                   |   |            |           |     
|Net loss before extraordinary item             |                                  |   | (2,947,696         | )         |                   |   | (4,383,671 | )         |      |   | (7,401,740 | )         |   |   | (12,822,784 | )         
|Extraordinary gain on debt forgiveness         |                                  |   |                   |           |                   |   |           |           |      |   | 5,500,000  |           |   |   |            |           
|                                               |                                  |   |                    |           |                   |   |            |           |     
|Net income (loss) after extraordinary gain     |                                  | $ | (2,947,696         | )         |                   | $ | (4,383,671 | )         |      | $ | (1,901,740 | )         |   | $ | (12,822,784 | )         
|                                               |                                  |   |                    |           |                   |   |            |           |     
|Net income (loss) per share, basic and diluted |                                  |   |                    |           |                   |   |            |           |      |   |            |           |   |   |             |           
|Loss per share before extraordinary item       |                                  | $ | (1.32              | )         |                   | $ | (1.97      | )         |      | $ | (3.30      | )         |   | $ | (5.76       | )         
|Extraordinary gain                             |                                  |   |                   |           |                   |   |           |           |      |   | 2.46       |           |   |   |            |           
|                                               |                                  |   |                    |           |                   |   |            |           |     
|                                               |                                  | $ | (1.32              | )         |                   | $ | (1.97      | )         |      |   | (0.84      | )         |   |   | (5.76       | )         
|                                               |                                  |   |                    |           |                   |   |            |           |     
|Weighted average shares outstanding            |                                  |   |                    |           |                   |   |            |           |      |   |            |           |   |   |             |           
|                                               | Basic                            |   |                    | 2,240,300 |                   |   |            | 2,226,597 |      |   |            | 2,240,300 |   |   |             | 2,225,225  |  

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NetRadio Corporation
Statements of Cash Flows

|                                                                                         |                                      |                                           |            |                   |            |      |             |             |             |  
|---------------------------------------------------------------------------------------- | ------------------------------------ | ----------------------------------------- | ---------- | ----------------- | ---------- | ---- | ----------- | ----------- | ----------- | -
|                                                                                         |                                      |                                           |            | Nine Months Ended
|                                                                                         |                                      |                                           |            | September 30,    
|                                                                                         |                                      |                                           |            |                  
|                                                                                         |                                      |                                           |            | 2001              |            | 2000
|                                                                                         |                                      |                                           |            |                   |            |     
|Operating activities                                                                     |                                      |                                           |            |                   |            |      |             |            
|Net loss                                                                                 |                                      | $                                         | (1,901,740 | )                 |            | $    | (12,822,784 | )          
|Adjustment to reconcile net loss to net cash
provided by (used in) operating activities: |                                      |                                           |            |                   |            |      |             |            
|                                                                                         | Depreciation and amortization        |                                           |            | 1,247,071         |            |      |             | 1,430,111   |            
|                                                                                         | Stock option compensation            |                                           |            | 33,938            |            |      |             | 57,989      |            
|                                                                                         | Note payable forgiveness             |                                           |            | (5,500,000        | )          |      |             |             |            
|Change in operating assets and liabilities:                                              |                                      |                                           |            |                   |            |      |             |            
|                                                                                         | Accounts receivable                  |                                           |            | 172,232           |            |      |             | (153,198    | )          
|                                                                                         | Prepaid advertising and expenses     |                                           |            | 857,412           |            |      |             | (28,978     | )          
|                                                                                         | Trade accounts payable               |                                           |            | (492,561          | )          |      |             | (1,989,506  | )          
|                                                                                         | Accrued liabilities and other        |                                           |            | (546,369          | )          |      |             | 254,605     |            
|                                                                                         | Deferred revenue                     |                                           |            | 163,419           |            |      |             | (4,764      | )          
|                                                                                         | Other assets                         |                                           |            | 350,667           |            |      |             | (288,701    | )          
|                                                                                         |                                      |                                           |            |                   |            |     
|                                                                                         |                                      | Net cash used in operating activities     |            |                   | (5,615,931 | )    |             |             | (13,545,226 | )
|Investing activities                                                                     |                                      |                                           |            |                   |            |      |             |            
|                                                                                         | Note receivable  officer            |                                           |            |                  |            |      |             | (3,710      | )          
|                                                                                         | Purchase of property and equipment   |                                           |            | (312,774          | )          |      |             | (1,988,079  | )          
|                                                                                         | Purchase of patents and trademarks   |                                           |            |                  |            |      |             | (42,186     | )          
|                                                                                         | Purchase of short-term investments   |                                           |            | (1,121,194        | )          |      |             | (18,033,229 | )          
|                                                                                         | Sale of short-term investments       |                                           |            | 11,934,324        |            |      |             | 21,991,378  |            
|                                                                                         |                                      |                                           |            |                   |            |     
|                                                                                         |                                      | Net cash provided by investing activities |            |                   | 10,500,356 |      |             |             | 1,924,174   |  
|Financing activities                                                                     |                                      |                                           |            |                   |            |      |             |            
|                                                                                         | Payment on capital lease obligations |                                           |            | (1,000,000        | )          |      |             |            |            
|                                                                                         | Payment on capital lease obligations |                                           |            | (82,794           | )          |      |             | (85,534     | )          
|                                                                                         | Proceeds from stock issuances        |                                           |            |                  |            |      |             | 13,400      |            
|                                                                                         |                                      |                                           |            |                   |            |     
|                                                                                         |                                      | Net cash used in financing activities     |            |                   | (1,082,794 | )    |             |             | (72,134     | )
|                                                                                         |                                      |                                           |            |                   |            |     
|Net increase (decrease) in cash and cash equivalents                                     |                                      |                                           | 3,801,631  |                   |            |      | (11,693,186 | )          
|Cash and cash equivalents at beginning of period                                         |                                      |                                           | 82,943     |                   |            |      | 11,721,536  |            
|                                                                                         |                                      |                                           |            |                   |            |     
|Cash and cash equivalents at end of period                                               |                                      | $                                         | 3,884,574  |                   |            | $    | 28,350      |            
|                                                                                         |                                      |                                           |            |                   |            |     
|Fixed assets aquired under capital lease                                                 |                                      | $                                         |           |                   |            | $    | 82,175      |            

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NETRADIO CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. They should be read in conjunction with the financial statements
for the year ended December 31, 2000 included in the Companys 2000 Form 10K.
In the opinion of management, the interim condensed financial statements
include all adjustments (consisting of normal recurring accruals) necessary for
the fair presentation of the results for interim periods presented. Operating
results for the nine months ended September 30, 2001 are not necessarily
indicative of the operating results for the year ending December 31, 2001.

On October 17, 2001, the Company announced
that it had determined to
immediately discontinue operations and terminate most of its employees because
it had been unable to obtain additional financing. Because of the
discontinuation of operations, effective October 17, 2001, the Company adopted
the liquidation basis of accounting. This basis of accounting is considered
appropriate when the liquidation of a company appears imminent and the net
realizable value of its assets is reasonably determinable. Under this basis of
accounting, assets and liabilities are stated at their net realizable value and
estimated costs through the liquidation date are provided to the extent
reasonably determinable. The Companys management is in the process of
determining the net realizable value of its assets and the costs to be incurred
as a result of the decision to liquidate the Company.

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|        |                                                                                      
|------- | -------------------------------------------------------------------------------------
|Item 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Cautionary Statement

This Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements
reflect managements current expectations or beliefs and future actual results
could differ materially from those in any forward-looking statements depending
on the outcome of certain factors. Any such forward-looking statements are
subject to risks and uncertainties including, but not limited to, risks from
discontinuing broadcast operations, our ability to settle obligations to our
creditors, our ability to generate revenue from a new and unproven business
model, the incurrence of operating losses, the necessity to obtain additional
financing to achieve our strategic business objectives, disruption in the
financial and capital markets, the fluctuation of subscription and advertising
revenues, liquidity of NetRadio common stock on the Over the Counter Bulletin
Board, our ability to expand our technical capacity, competition and other
risks and uncertainties, including the factors set forth on Exhibit 99.1 to our
Annual Report on Form 10-K for the year ended December 31, 2000. Except as
required by applicable law, we undertake no obligation to update or revise any
such forward-looking statements.

RECENT DEVELOPMENTS

On October 17, 2001, NetRadio announced the termination of its pending
strategic investment transaction with The Advisory Board, Inc. and that it was
unable to finalize an alternative transaction to support continuing operations
in the near term. On October 18, 2001, NetRadio received notice from The
Nasdaq Listing Qualifications Hearing Panel that its common stock had been
delisted from The Nasdaq SmallCap Market. The Companys common stock had been
trading on The Nasdaq SmallCap Market under the symbol NETRC. The Company
now trades on the Over The Counter Bulletin Board (OTCBB) under the ticker
symbol NETR.

In light of NetRadios inability to meet current creditor obligations and
support the future working capital needs of the business, NetRadio discontinued
its broadcast operations and terminated most of its employees on October 17,
2001.

RESULTS OF OPERATIONS

Net Revenues

Net revenues consist of Internet advertising revenues and product sales.
Net revenues decreased to $62,000 for the three months ended September 30, 2001
from $456,000 for the three months ended September 30, 2000, an 87% decrease.
Net revenues decreased to $340,000 for the nine months ended September 30, 2001
from $1,637,000 for the nine months ended September 30, 2000, a 80% decrease.
The decrease in revenues for both the three and nine months ended September 30,
2001, from the prior year periods was due to the outsourcing of our e-commerce
operations commencing March 2001 and an overall decrease in advertising as
customers reduced discretionary spending in the slowing economy.

Product Sales.Revenues for both the three and nine months ended
September 30, 2001 reflect the impact on product sales of outsourcing
e-commerce operations to Amazon.com. Since March 2001, product sales have consisted of
commissions earned for products sold by Amazon.com to customers through a link
from our web site. Prior to March 2001, product sales consisted of sales of
audio merchandise, including shipping and handling costs. Last year, the
company received 100% of the revenues from product sales. Reported
product revenues decreased by 98% to $4,000 for the three months ended
September 30, 2001 from $134,000 for the three months ended September 30, 2000.
Product sales for the nine months ended September 30, 2001 were $63,000
compared with $568,000 for the nine months ended September 30, 2000, a decrease
of 87%.

Internet Advertising.Internet advertising revenues include audio, video
and banner advertising sales. Internet advertising revenues for the three
months ended September 30, 2001 were $58,000 compared to $322,000 for the three
months ended September 30, 2000, a decrease of 82%. Internet advertising
revenues for the nine months ended September 30, 2001 were $277,000 compared to
$1,070,000 for the nine months ended September 30, 2000, a decrease of 75%. On
a cash revenue basis, advertising revenues were down 82% and 67% for both the
three and nine months ended September 30, 2000, respectively. Advertising
revenue included $2,000 and $252,000 of non-cash barter advertising for both
the three and nine months ended

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September 30, 2000, respectively. The decrease in advertising revenue for both
the three and nine months ended September 30, 2001, over the prior year periods
was due to the industry-wide decrease in discretionary spending resulting from
the slowdown in the U.S. economy.

Operating Expenses Cost of Revenues

Cost of Revenues.Costs of revenues decreased to $0 for the three months
ended September 30, 2001 from $122,000 for the three months ended September 30,
2000. Cost of revenues decreased to $45,000 for the nine months ended
September 30, 2001 from $522,000 for the nine months ended September 30, 2000.
Cost of revenues primarily consists of the cost of audio merchandise that we
sell, including fulfillment costs through third party vendors that ship
directly to our customers. Costs of revenues for the quarter reflect the
impact on product sales of outsourcing e-commerce operations to
Amazon.com. The decrease
in cost of revenue for the three and nine months ended September 30, 2001 over
the prior year periods was due to the outsourcing of the e-commerce operations.
Prior to March 2001, the company incurred costs associated with product sales,
which were eliminated by the outsourcing arrangement.

Operations and Technical Support.Operations and technical support
expenses consist primarily of data communications expenses, personnel expenses
associated with broadcasting, e-commerce and technical support, software and
content license fees, operating supplies and overhead. Operations and
technical support expenses were $1,291,000 for the three months ended September
30, 2001, compared to $2,391,000 for the three months ended September 30, 2000,
a decrease of 47%. Operations and technical support expenses were $4,336,000
for the nine months ended September 30, 2001, compared to $7,558,000 for the
nine months ended September 30, 2000, a decrease of 43%. The decrease in
operations and technical support expenses for both the three and nine months
ended September 30, 2001 over the prior year periods was due primarily to a
decrease in bandwidth costs, outsourcing e-commerce operations, reducing
headcount through attrition and reducing other administrative expenses.

Sales and Marketing.Sales and marketing expenses consist primarily of
personnel expenses and costs associated with the sale of advertising and the
marketing of our Web site. Sales and marketing expenses were $951,000 for the
three months ended September 30, 2001, compared to $1,905,000 for the three
months ended September 30, 2000, a decrease of 51%. Sales and marketing
expenses were $1,823,000 for the nine months ended September 30, 2001, compared
to $4,631,000 for the nine months ended September 30, 2000, a decrease of 61%.
The decrease in sales and marketing expenses for both the three and nine months
ended September 30, 2001 over the prior year periods was due to the reduction
of advertising expenses.

General and Administrative.General and administrative expenses consist
primarily of administrative personnel expenses, professional fees and
expenditures for facility costs. General and administrative expenses were
$760,000 for the three months ended September 30, 2001, compared to $591,000
for the three months ended September 30, 2000, an increase of 28%. General and
administrative expenses were $1,651,000 for the nine months ended September 30,
2001, compared to $2,150,000 for the month ended September 30, 2000, a decrease
of 24%. The increase in general and administrative expenses for the three
months ended September 30, 2001, over the three months ended September 30,
2000, was primarily due to a one-time payment to our Interim CEO for services
rendered during the period October 1, 2000 to August 15, 2001. The decrease in
general and administrative expenses for the nine months ended September 30,
2001, from the nine months ended September 30, 2000, was due to goodwill
amortization expenses being incurred during the period ended September 30, 2000
and not in the same period for 2001, a reduction in salary expense resulting
from the September 2000 resignation of a corporate officer, and a reduction in
professional fees.

Interest Expense.Interest expense for the three months ended September
30, 2001 was $57,000, compared to $243,000 for the three months ended September
30, 2000. Interest expense for the nine months ended September 30, 2001 was
$312,000, compared to $699,000 for the nine months ended September 30, 2000.
The decrease in interest expense for the three and nine months ended September
30, 2001 from the prior year periods was due to a lower federal prime rate of
interest, which positively impacts the interest due on the Navarre Note, and
the $5.5 million forgiveness of debt by Navarre.

Interest Income.Interest income for the three months ended September 30,
2001 was $49,000, compared to $411,000 for the three months ended September 30,
2000. Interest income for the nine months ended September 30, 2001 was
$425,000, compared to $1,100,000 for the nine months ended September 30, 2000.
The decreases were due to a lower cash balance in the periods ended September
30, 2001, for use in earning interest through the purchases of investments in
short- and long-term securities.

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Extraordinary Gain.In March 2001, we restructured our $9.6 million term
note with Navarre. Under the terms of the restructuring, Navarre forgave $5.5
million of the principal amount in exchange for a $1 million prepayment by
NetRadio. The $5.5 million forgiveness of debt resulted in an extraordinary
gain.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have incurred significant net losses primarily due to
the costs of developing our infrastructure, hiring management and personnel to
establish our audio channels and programming, building our brand and delivering
a quality listening experience to our users. We have funded our capital
requirements primarily through the sales of equity securities and prior to our
initial public offering, borrowings from Navarre.

The Company had working capital deficit of $463,000 at September 30, 2001,
compared to working capital of $471,000 at December 31, 2000. The change in
working capital position was primarily due to the use of cash for operating
expenses in excess of revenues generated.

Net cash used in operating activities was $5,616,000 and $13,545,000 for
the nine months ended September 30, 2001 and 2000, respectively. Net cash used
in operating activities for the nine months ended September 30, 2001 was
primarily comprised of our net losses before extraordinary items and a decrease
in accounts payable and accrued expenses, offset in part by depreciation,
accounts receivable, prepaid expenses, deferred revenue and other assets.

Accounts receivable decreased to $44,000 at September 30, 2001 from
$292,000 at December 31, 2000 and consisted primarily of agency-placed
advertising revenue accounts. The decrease in accounts receivable was due to
the decrease in advertising sales for the period. Advertising revenues placed
by an agency typically are collected in 60 to 90 days.

Other receivables increased to $75,000 at September 30, 2001 from $0 at
December 31, 2000 as a result of a settlement of the Advertising Time Credits
Agreements with Value Vision International, Inc. As part of the settlement,
NetRadio will receive $75,000 in exchange for the elimination of $800,000 of
advertising credits due from Value Vision International, Inc.

The decrease in accounts payable to $1,299,000 at September 30, 2001 from
$1,792,000 at December 31, 2000 was due primarily to less expenditures being
incurred during the nine months ended September 30, 2001.

We generated $10,500,000 and $1,924,000 in net cash from investing
activities for the nine months ended September 30, 2001 and 2000, respectively.
The net cash provided by investing activities for the nine months ended
September 30, 2001 and 2000 was the net result of short-term investment
purchases and sales offset by the purchases of property and equipment.

We used net cash for financing activities of $1,083,000 and $72,000 for
the nine months ended September 30, 2001 and 2000, respectively. Net cash used
for financing activities for the nine months ended September 30, 2001 was
primarily due to a $1,000,000 payment on the Navarre term note.

In March 2001, we restructured our term note of approximately $9.6 million
owing to Navarre. Under the terms of the restructuring, Navarre forgave $5.5
million of the principal amount in exchange for a $1 million prepayment by
NetRadio. In addition, Navarre extended the maturity date of the term note
from November 14, 2001 to March 31, 2002. The term note with Navarre bears
interest at Midwest prime plus one half-percentage point (7% as of September
30, 2001) and is payable monthly. After giving effect to this restructuring,
the principal balance of the term note with Navarre is currently approximately
$3.1 million. Navarre has notified us that an event of default has occurred
under the term note. An event of default accelerates the maturity date of the
term note.

In June 2001, our board of directors approved an amendment to our Articles
of Incorporation to effect a one for 4.5 shares reverse stock split of the
companys outstanding common stock. The reverse split was effected in order to
meet the Nasdaq SmallCap Markets maintenance standard that requires us to
maintain at least a $1.00 per common share minimum bid price.

On October 17, 2001, NetRadio announced the termination of its pending
strategic investment transaction with The Advisory Board, Inc. and that it was
unable to finalize an alternative transaction to support continuing operations
in the near term. In light of NetRadios inability to meet current creditor
obligations and support the future working capital needs of the business,
NetRadio discontinued its broadcast operations and terminated most of its
employees on October 17, 2001.

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NetRadio is pursuing an out-of-court settlement with its creditors as an
alternative to a bankruptcy proceeding. NetRadio believes this approach will
reduce further erosion of its assets and result in better recoveries for its
creditors. NetRadio cannot predict whether it will be able to reach an
out-of-court settlement with all of its creditors or whether NetRadio will be
subject to a bankruptcy proceeding.



|        |                                                           
|------- | ----------------------------------------------------------
|Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have no derivative financial instruments or derivative commodity
instruments. We invest our cash and cash equivalents and marketable securities
in investment grade, highly liquid investments, consisting of money market
instruments, bank certificates of deposit, overnight investments in commercial
paper, and short term government and corporate bonds.

We are exposed to market risk from changes in the interest rate on
borrowings under our term note that bears interest from time to time at prime
plus 0.5%. We do not believe that changes in interest rates on the maximum
borrowings outstanding under this term note would have a material effect on our
results of operations or liquidity.



|                             | 
|---------------------------- | 
|PART II.  OTHER INFORMATION



|        |                                                    
|------- | ---------------------------------------------------
|Item 1. | Legal Proceedings                                  
|       
|        | None                                               
|       
|Item 2. | Change in Securities and Use of Proceeds           
|       
|        | None.                                              
|       
|Item 3. | Defaults Upon Senior Securities                    
|       
|        | None                                               
|       
|Item 4. | Submission of Matters to a Vote of Security Holders
|       
|        | None                                               
|       
|Item 5. | Other Information                                  
|       
|        | None                                               
|       
|Item 6. | Exhibits and Reports on Form 8-K                   



| |                                                                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | B.      Report on Form 8-K NetRadio filed a current report on Form
8-K dated August 30, 2001 announcing the transaction with The
Advisory Board, Inc. and a current report on Form 8-K dated
October 17, 2001 announcing the termination of the transaction
with The Advisory Board, Inc. and the discontinuance of
operations.

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##### 



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

|                |  |                      |                                                                                                                                        
|--------------- |  | -------------------- | ---------------------------------------------------------------------------------------------------------------------------------------
|Dated: 11/14/01 |  | NETRADIO CORPORATION
|               
|               
|                |  | By                   | /s/   Cary DeaconCary Deacon
Chief Executive Officer and President
(Principal Executive Officer)                                       
|               
|               
|                |  | By                   | /s/   Michael P. WiseMichael P. Wise
Secretary, Chief Financial Officer and Vice President
(Principal Financial and Accounting Officer)

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