##### Table of Contents



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

FORM 10-Q

| |                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the quarterly period ended June 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

---

|                                         |  |  |                                     
|---------------------------------------- |  |  | ------------------------------------
|Minnesota                                |  |  | 41-1819471                          
|                                         |  |  |                                     
|(State of incorporation or organization) |  |  | (I.R.S. Employer Identification No.)

|                                                                                                   |  |  |                 
|-------------------------------------------------------------------------------------------------- |  |  | ----------------
|10025 Valley View Road, Suite 190
Eden Prairie, Minnesota
(Address of principal executive offices) |  |  | 55344
(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.  Yes  No

The number of
shares outstanding of each of the registrant's classes of capital stock, as of August 10, 2001 was: Common
Stock, no par value, 2,240,300 shares.





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TABLE OF CONTENTS



|                                                                                              |                                                                                     |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|Part I  Financial Information                                                               
|Item 1. Financial Statements                                                                 
|                                                                                              | Balance Sheets  June 30, 2001 and December 31, 2000                               
|                                                                                              | Statements of Operations  Three months and six months ended June 30, 2001 and 2000
|                                                                                              | Statement of Cash Flows  Six months ended June 30, 2001 and 2000                  
|                                                                                              | Notes to Condensed Consolidated Financial Statements  June 30, 2001               
|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. Change in Securities and Use of Proceeds                                             
|Item 3. Defaults Upon Senior Securities                                                      
|Item 4. Submission of Matters to a Vote of Security Holders                                  
|Item 5. Other Information                                                                    
|Item 6. Exhibits and Reports on Form 8-K                                                     
|Signatures                                                                                   
|Amendment to Employment Agreement for Michael Wise                                           



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##### Table of Contents



NETRADIO CORPORATION

Index

|                                                   |  |                                                                                      
|-------------------------------------------------- |  | -------------------------------------------------------------------------------------
|Part I                                             |  | Financial Information                                                                
|                                                  
|                                                  
|                                                  
|                                                  
|Item 1.                                            |  | Financial Statements                                                                 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |  | Balance Sheets  June 30, 2001 and December 31, 2000                                 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |  | Statements of Operations  Three months and six months ended June 30, 2001 and 2000  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |  | Statements of Cash Flows  Six months ended June 30, 2001 and 2000                   
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |  | Notes to Condensed Consolidated Financial Statements  June 30, 2001                 
|                                                  
|                                                  
|                                                  
|                                                  
|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.                                            |  | Change in Securities and Use of Proceeds                                             
|                                                  
|                                                  
|                                                  
|                                                  
|Item 3.                                            |  | Defaults Upon Senior Securities                                                      
|                                                  
|                                                  
|                                                  
|                                                  
|Item 4.                                            |  | Submission of Matters to a Vote of Security Holders                                  
|                                                  
|                                                  
|                                                  
|                                                  
|Item 5.                                            |  | Other Information                                                                    
|                                                  
|                                                  
|                                                  
|                                                  
|Item 6.                                            |  | Exhibits and Reports on Form 8-K                                                     
|                                                  
|                                                  
|                                                  
|                                                  
|Signatures                                        
|                                                  
|                                                  
|                                                  
|                                                  
|Amendment
to Employment Agreement For Michael Wise | 

-2-



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##### Table of Contents









PART I  FINANCIAL INFORMATION

Item 1. Financial Statements

-3-



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##### Table of Contents






NetRadio Corporation

|                                           |                                                                                                                                      |                                                                                                             |           |             |            |   |              |             |            | 
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------- | --------- | ----------- | ---------- | - | ------------ | ----------- | ---------- | 
|                                           |                                                                                                                                      |                                                                                                             |           | June 30,    |            |   | December 31, |            
|                                           |                                                                                                                                      |                                                                                                             |           | 2001        |            |   | 2000         |            
|                                           |                                                                                                                                      |                                                                                                             |           |             |            |   |              |            
|Assets                                    
|                                          
|                                          
|                                          
|                                          
|Current assets:                           
|                                          
|                                          
|                                          
|                                          
|                                           | Cash and cash equivalents                                                                                                            |                                                                                                             | $         | 17,629      |            |   | $            | 82,943      |           
|                                          
|                                          
|                                          
|                                          
|                                           | Short-term investments                                                                                                               |                                                                                                             |           | 6,202,014   |            |   |              | 11,440,356  |           
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts receivable, less allowance for doubtful accounts of $10,000
at June 30, 2001 and $20,000 at December 31, 2000, respectively |                                                                                                             |           | 77,078      |            |   |              | 291,692     |           
|                                          
|                                          
|                                          
|                                          
|                                           | Prepaid advertising                                                                                                                  |                                                                                                             |           | 802,793     |            |   |              | 833,873     |           
|                                          
|                                          
|                                          
|                                          
|                                           | Prepaid expenses                                                                                                                     |                                                                                                             |           | 137,505     |            |   |              | 98,948      |           
|                                          
|                                          
|                                          
|                                          
|                                           | Other current assets                                                                                                                 |                                                                                                             |           | 17,000      |            |   |              | 350,667     |           
|                                           |                                                                                                                                      |                                                                                                             |           |             |            |  
|                                          
|                                          
|                                          
|                                          
|Total current assets                       |                                                                                                                                      |                                                                                                             | 7,254,019 |             |            |   | 13,098,479   |            
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                                                      |                                                                                                             |           |             |            |  
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                                                      |                                                                                                             |           |             |            |  
|                                          
|                                          
|                                          
|                                          
|Property and equipment, net                |                                                                                                                                      |                                                                                                             | 2,563,651 |             |            |   | 3,075,455    |            
|                                          
|                                          
|                                          
|                                          
|Patents and trademarks, net                |                                                                                                                                      |                                                                                                             | 58,217    |             |            |   | 48,553       |            
|                                          
|                                          
|                                          
|                                          
|Other assets                               |                                                                                                                                      |                                                                                                             | 120,254   |             |            |   | 120,254      |            
|                                           |                                                                                                                                      |                                                                                                             |           |             |            |  
|                                           |                                                                                                                                      | $                                                                                                           | 9,996,141 |             |            | $ | 16,342,741   |            
|                                           |                                                                                                                                      |                                                                                                             |           |             |            |  
|Liabilities and shareholders equity      
|                                          
|                                          
|                                          
|                                          
|Current Liabilities                       
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts payable                                                                                                                     |                                                                                                             | $         | 1,287,519   |            |   | $            | 1,791,671   |           
|                                          
|                                          
|                                          
|                                          
|                                           | Accrued expenses                                                                                                                     |                                                                                                             |           | 635,479     |            |   |              | 1,149,681   |           
|                                          
|                                          
|                                          
|                                          
|                                           | Deferred advertising revenue                                                                                                         |                                                                                                             |           | 164,363     |            |   |              |            |           
|                                          
|                                          
|                                          
|                                          
|                                           | Note payable                                                                                                                         |                                                                                                             |           | 3,096,827   |            |   |              | 9,596,827   |           
|                                          
|                                          
|                                          
|                                          
|                                           | Current maturities of capital lease obligation                                                                                       |                                                                                                             |           | 28,441      |            |   |              | 89,630      |           
|                                           |                                                                                                                                      |                                                                                                             |           |             |            |  
|Total current liabilities                  |                                                                                                                                      |                                                                                                             | 5,212,629 |             |            |   | 12,627,809   |            
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|                                          
|Shareholders equity:                     
|                                          
|                                          
|                                          
|                                          
|                                           | Preferred stock,                                                                                                                    
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                                                      | Authorized shares   2,222,222                                                                             
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                                                      | Issued and outstanding shares  none at June 30, 2001 and
December 31, 2000                                
|                                          
|                                          
|                                          
|                                          
|                                           | Common stock, no par value;                                                                                                         
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                                                      | Authorized shares   11,111,111                                                                            
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                                                      | Issued and outstanding shares - 2,240,300 at June 30, 2001 and
2,240,300 at December 31, 2000, respectively |           |             | 41,092,132 |   |              |             | 41,092,133 | 
|                                          
|                                          
|                                          
|                                          
|                                           | Deferred Compensation                                                                                                                |                                                                                                             |           | (49,021     | )          |   |              | (71,646     | )         
|                                          
|                                          
|                                          
|                                          
|                                           | Accumulated deficit                                                                                                                  |                                                                                                             |           | (36,259,599 | )          |   |              | (37,305,555 | )         
|                                           |                                                                                                                                      |                                                                                                             |           |             |            |  
|Total shareholders equity                 |                                                                                                                                      |                                                                                                             | 4,783,512 |             |            |   | 3,714,932    |            
|                                           |                                                                                                                                      |                                                                                                             |           |             |            |  
|Total liabilities and shareholders equity |                                                                                                                                      | $                                                                                                           | 9,996,141 |             |            | $ | 16,342,741   |            
|                                           |                                                                                                                                      |                                                                                                             |           |             |            |  

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##### Table of Contents






NetRadio Corporation

|                                               |                                  |   |                    |           |   |                  |            |           |      |   |            |           |   |   |            |           |  
|---------------------------------------------- | -------------------------------- | - | ------------------ | --------- | - | ---------------- | ---------- | --------- | ---- | - | ---------- | --------- | - | - | ---------- | --------- | -
|                                               |                                  |   | Three Months Ended |           |   | Six Months Ended |           
|                                               |                                  |   | June 30,           |           |   | June 30,         |           
|                                               |                                  |   |                    |           |   |                  |           
|                                               |                                  |   | 2001               |           |   | 2000             |            |           | 2001 |   |            | 2000      |  
|                                               |                                  |   |                    |           |   |                  |            |           |      |   |            |           |  
|Net revenues                                  
|                                               | Product sales                    |   | $                  | 3,961     |   |                  | $          | 210,294   |      |   | $          | 59,365    |   |   | $          | 433,636   |  
|                                              
|                                              
|                                              
|                                              
|                                               | Internet advertising             |   |                    | 71,890    |   |                  |            | 405,943   |      |   |            | 218,901   |   |   |            | 747,423   |  
|                                               |                                  |   |                    |           |   |                  |            |           |      |   |            |          
|Total net revenues                             |                                  |   | 75,851             |           |   |                  | 616,237    |           |      |   | 278,266    |           |   |   | 1,181,059  |          
|                                              
|                                              
|                                              
|                                              
|Operating expenses:                           
|                                              
|                                              
|                                              
|                                              
|                                               | Cost of revenues                 |   |                    |          |   |                  |            | 202,427   |      |   |            | 45,346    |   |   |            | 400,334   |  
|                                              
|                                              
|                                              
|                                              
|                                               | Operations and technical support |   |                    | 1,347,170 |   |                  |            | 2,644,686 |      |   |            | 3,045,261 |   |   |            | 5,167,050 |  
|                                              
|                                              
|                                              
|                                              
|                                               | Sales and marketing              |   |                    | 381,423   |   |                  |            | 1,219,548 |      |   |            | 872,062   |   |   |            | 2,726,296 |  
|                                              
|                                              
|                                              
|                                              
|                                               | General and administrative       |   |                    | 460,794   |   |                  |            | 784,989   |      |   |            | 890,870   |   |   |            | 1,558,912 |  
|                                               |                                  |   |                    |           |   |                  |            |           |      |   |            |          
|Total operating expenses                       |                                  |   | 2,189,387          |           |   |                  | 4,851,650  |           |      |   | 4,853,539  |           |   |   | 9,852,592  |          
|                                               |                                  |   |                    |           |   |                  |            |           |      |   |            |          
|Loss from operations                           |                                  |   | (2,113,536         | )         |   |                  | (4,235,413 | )         |      |   | (4,575,273 | )         |   |   | (8,671,533 | )        
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|Other (income) expenses                       
|                                              
|                                              
|                                              
|                                              
|                                               | Interest (Income)                |   |                    | (84,139   | ) |                  |            | (327,505  | )    |   |            | (376,164  | ) |   |            | (688,757  | )
|                                              
|                                              
|                                              
|                                              
|                                               | Interest Expense                 |   |                    | 63,013    |   |                  |            | 235,364   |      |   |            | 254,935   |   |   |            | 456,335   |  
|                                               |                                  |   |                    |           |   |                  |            |           |      |   |            |          
|Net loss before extraordinary item             |                                  |   | (2,092,410         | )         |   |                  | (4,143,272 | )         |      |   | (4,454,044 | )         |   |   | (8,439,111 | )        
|                                              
|                                              
|                                              
|                                              
|Extraordinary gain on debt forgiveness         |                                  |   |                   |           |   |                  |           |           |      |   | 5,500,000  |           |   |   |           |          
|                                               |                                  |   |                    |           |   |                  |            |           |      |   |            |          
|Net income (loss) after extraordinary gain     |                                  | $ | (2,092,410         | )         |   | $                | (4,143,272 | )         |      | $ | 1,045,956  |           |   | $ | (8,439,111 | )        
|                                               |                                  |   |                    |           |   |                  |            |           |      |   |            |          
|Net income (loss) per share, basic and diluted
|                                              
|                                              
|                                              
|                                              
|Loss per share before extraordinary item       |                                  | $ | (0.93              | )         |   | $                | (1.86      | )         |      | $ | (1.99      | )         |   | $ | (3.79      | )        
|                                              
|                                              
|                                              
|                                              
|Extraordinary gain                             |                                  |   |                   |           |   |                  |           |           |      |   | 2.46       |           |   |   |           |          
|                                               |                                  |   |                    |           |   |                  |            |           |      |   |            |          
|                                               |                                  | $ | (0.93              | )         |   | $                | (1.86      | )         |      |   | 0.47       |           |   |   | (3.79      | )        
|                                               |                                  |   |                    |           |   |                  |            |           |      |   |            |          
|Weighted average shares outstanding           
|                                               | Basic                            |   |                    | 2,240,300 |   |                  |            | 2,224,822 |      |   |            | 2,240,300 |   |   |            | 2,224,531 |  

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##### Table of Contents






NetRadio Corporation

|                                                                                         |                                      |                                                     |           |                  |            |   |            |             |            |  
|---------------------------------------------------------------------------------------- | ------------------------------------ | --------------------------------------------------- | --------- | ---------------- | ---------- | - | ---------- | ----------- | ---------- | -
|                                                                                         |                                      |                                                     |           | Six Months Ended |           
|                                                                                         |                                      |                                                     |           | June 30,         |           
|                                                                                         |                                      |                                                     |           |                  |           
|                                                                                         |                                      |                                                     |           | 2001             |            |   | 2000       |            
|                                                                                         |                                      |                                                     |           |                  |            |   |            |            
|Operating activities                                                                    
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Net income (loss)                                                                        |                                      | $                                                   | 1,045,956 |                  |            | $ | (8,439,111 | )          
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Adjustment to reconcile net loss to net cash
provided by (used in) operating activities:
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Depreciation and amortization        |                                                     |           | 836,322          |            |   |            | 956,629     |           
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Stock option compensation            |                                                     |           | 22,625           |            |   |            |            |           
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Note payable forgiveness             |                                                     |           | (5,500,000       | )          |   |            |            |           
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Change in operating assets and liabilities:                                             
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Accounts receivable                  |                                                     |           | 214,614          |            |   |            | (138,818    | )         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Prepaid expenses                     |                                                     |           | (7,477           | )          |   |            | (34,613     | )         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Trade accounts payable               |                                                     |           | (504,152         | )          |   |            | (1,139,177  | )         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Accrued liabilities                  |                                                     |           | (514,202         | )          |   |            | 224,528     |           
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Deferred revenue                     |                                                     |           | 164,363          |            |   |            | (4,764      | )         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Other assets                         |                                                     |           | 333,667          |            |   |            | 251,966     |           
|                                                                                         |                                      |                                                     |           |                  |            |  
|                                                                                         |                                      | Net cash used in operating activities               |           |                  | (3,908,284 | ) |            |             | (8,323,360 | )
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Investing activities                                                                    
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Increase in intangible assets        |                                                     |           | (16,174          | )          |   |            | (2,440      | )         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Purchase of property and equipment   |                                                     |           | (318,009         | )          |   |            | (1,640,097  | )         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Purchase of short-term investments   |                                                     |           | (493,968         | )          |   |            | (10,717,583 | )         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Sale of short-term investments       |                                                     |           | 5,732,310        |            |   |            | 21,123,992  |           
|                                                                                         |                                      |                                                     |           |                  |            |  
|                                                                                         |                                      | Net cash provided by (used in) investing activities |           |                  | 4,904,159  |   |            |             | 8,763,872  |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Financing activities                                                                    
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Payment on capital lease obligations |                                                     |           | (61,189          | )          |   |            | (56,442     | )         
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Payments of notes payable            |                                                     |           | (1,000,000       | )          |   |            |            |           
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Proceeds from stock issuances        |                                                     |           |                 |            |   |            | 13,400      |           
|                                                                                         |                                      |                                                     |           |                  |            |  
|                                                                                         |                                      | Net cash provided by (used in) financing activities |           |                  | (1,061,189 | ) |            |             | (43,042    | )
|                                                                                         |                                      |                                                     |           |                  |            |  
|Net (decrease) increase in cash and cash equivalents                                     |                                      |                                                     | (65,314   | )                |            |   | 397,470    |            
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                      |                                                     |           |                  |            |  
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Cash and cash equivalents at beginning of period                                         |                                      |                                                     | 82,943    |                  |            |   | 11,721,536 |            
|                                                                                         |                                      |                                                     |           |                  |            |  
|                                                                                         |                                      |                                                     |           |                  |            |  
|Cash and cash equivalents at end of period                                               |                                      | $                                                   | 17,629    |                  |            | $ | 12,119,006 |            
|                                                                                         |                                      |                                                     |           |                  |            |  

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##### Table of Contents






NETRADIO CORPORATION

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 six months ended June 30, 2001 are not necessarily indicative of the operating results
for the year ending December 31, 2001.

-7-



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##### Table of Contents






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, our ability to generate revenue from a new and unproven business model, the incurrence of operation losses, the
necessity to obtain additional financing to achieve our strategic business objectives, the fluctuation of subscription and
advertising revenues, 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.

GENERAL

NetRadio Corporation is a leading Webcaster specializing in originally programmed audio entertainment. The company is
pursuing a B2B strategy to grow its business by leveraging its webcasting expertise, creative programming and extensive offering of
on-line music to provide entertainment programming to leading companies nationwide.

NetRadio's initial online offering, NetRadio.com, serves 3 to 4 million cumulative daily unique guests who visit the site
several times a month to access its channels of music and information on demand, 24 hours a day, seven days a week. The NetRadio.com
Web site connects music enthusiasts to over 16 interactive music communities ranging from Jazz, Latin, Modern Rock and New Age to
Vintage Rock, Country and Classical. NetRadio.com's On-Screen Player allows listeners to view the title and artist of every song
they hear. Users can simply click to purchase what they're hearing from an inventory of more than 250,000 music titles.

We recognize
revenues related to banner advertising over the period in which the
advertisement is displayed on our web site. Barter advertising
revenue is recognized by multiplying the contracted impression rate by the amount of monthly impressions served until the
contracted amount of impressions is depleted. The contracted impression rate is comparable to rates realized in sales of
advertising to other third parties. We derive promotional advertising revenues from product or artists related promotions, and
recognize these revenues over the term of the promotion. We derive audio and video advertising revenues from the sale of advertising
spots, and recognize these revenues when the audio or video advertisement is broadcast.

RESULTS OF OPERATIONS

Net Revenues

Net revenues consist of Internet advertising revenues and product sales. Net revenues decreased to $76,000 for the three
months ended June 30, 2001 from $616,000 for the three months ended June 30, 2000, an 88% decrease. Net revenues decreased to
$278,000 for the six months ended June 30, 2001 from $1,181,000 for the six months ended June 30, 2000, a 77% decrease. The decrease
in revenues for both the three and six month periods ended June 30, 2001, over 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 six months ended June 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 percent of the revenues from product sales.
Reported product revenues decreased by 99% to $4,000 for the three months ended June 30, 2001 from $210,000 for the three
months ended June 30, 2000. Product sales for the six months ended June 30, 2001 were $59,000 compared with $434,000 for the six
months ended June 30, 2000, a decrease of 87%.

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Internet Advertising.Internet advertising revenues include audio, video and banner advertising sales. Internet
advertising revenues for the three months ended June 30, 2001 were $72,000 compared to $406,000 for the three months ended June 30,
2000, a decrease of 83%. Internet advertising revenues for the six months ended June 30, 2001 were $219,000 compared to $747,000 for
the six months ended June 30, 2000, a decrease of 71%. On a cash revenue basis, advertising revenues were down 83% and 65% for both
the three and six months ended June 30, 2000, respectively. Advertising revenue included $40,000 and $145,000 of non-cash barter
advertising for both the three and six months ended June 30, 2000, respectively. The decrease in advertising revenue for both the
three and six months ended June 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 June 30, 2001 from $202,000 for the three
months ended June 30, 2000. Cost of revenues decreased to $45,000 for the six months ended June 30, 2001 from $400,000 for the six
months ended June 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 six months ended
June 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 $1,347,000 for the three months ended June 30, 2001,
compared to $2,645,000 for the three months ended June 30, 2000, a decrease of 50%. Operations and technical support expenses were
$3,045,000 for the six months ended June 30, 2001, compared to $5,167,000 for the six months ended June 30, 2000, a decrease of 42%.
The decrease in operations and technical support expenses for both the three and six months ended June 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 $381,000 for the three months ended June
30, 2001, compared to $1,220,000 for the three months ended June 30, 2000, a decrease of 69%. Sales and marketing expenses were
$872,000 for the six months ended June 30, 2001, compared to $2,726,000 for the six months ended June 30, 2000, a decrease of 69%.
The decrease in sales and marketing expenses for both the three and six months ended June 30, 2001 over the prior year periods was
due to the elimination 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 $461,000 for the three months ended
June 30, 2001, compared to $785,000 for the three months ended June 30, 2000, a decrease of 42%. General and administrative expenses
were $891,000 for the six months ended June 30, 2001, compared to $1,559,000 for the month ended June 30, 2000, a decrease of 43%.
The decrease in general and administrative expenses for the three months ended June 30, 2001, over the three months ended June 30,
2000, was due to a reduction in salary expense due to the September 2000 resignation of a corporate officer and a reduction in
professional fees. The decrease in general and administrative expenses for the six months ended June 30, 2001, over the six months
ended June 30, 2000, was due to goodwill being fully amortized in the period ended June 30, 2000, a reduction in salary expense due
to the September 2000 resignation of a corporate officer, and a reduction in professional fees.

Interest Expense.Interest expense for the three months ended June 30, 2001 was $63,000, compared to $235,000 for the three
months ended June 30, 2000. Interest expense for the six months ended June 30, 2001 was $255,000, compared to $456,000 for the six
months ended June 30, 2000. The decrease in interest expense for the three and six months ended June 30, 2001 over 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 June 30, 2001 was $84,000, compared to $328,000 for the three
months ended June 30, 2000. Interest income for the six months
ended June 30, 2001 was $376,000, compared to $689,000

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for the six months ended June 30, 2000. The decreases were due to a lower cash balance in the periods ended June 30, 2001, for use in earning
interest through the purchases of investments in short- and long-term securities.

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.

We had working capital of $2 million at June 30, 2001, compared to working capital of $471,000 at December 31,
2000, primarily as a result of the restructuring of the term note with Navarre.

Net cash used in operating activities was $3,908,000 and $8,323,000 for the six months ended June 30, 2001 and 2000,
respectively. Net cash used in operating activities for the six months ended June 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, deferred revenue and other assets.

Accounts receivable decreased to $77,000 at June 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. We expect advertising revenue accounts
generally to be collected within 60 to 90 days in the future.

The decrease in accounts payable to $1,288,000 at June 30, 2001 from $1,792,000 at December 31, 2000 was due primarily to
less expenditures being incurred during the six months ended June 30, 2001.

We generated $4,904,000 and $8,764,000 in net cash from investing activities for the six months ended June 30, 2001 and
2000, respectively. The net cash provided by investing activities for the six months ended June 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 $1,061,000 and $43,000 for the six months ended June 30, 2001 and 2000,
respectively. Net cash used for financing activities for the six months ended June 30, 2001 was primarily due to a $1,000,000
payment on the Navarre 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.

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 (7.5% as of June 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.

We believe that our current cash, cash equivalents and short-term investments will be sufficient to meet our anticipated
cash needs for working capital and capital expenditures through March 31, 2002. To fund future operations, we may need to raise
additional funds, through public or private financing, or other arrangements. We are evaluating potential issuances of our debt or
equity securities to strategic partners and are exploring potential strategic transactions. There can be no assurance that
additional financing, if needed, will be available on terms attractive to us, if at all. Our failure to raise capital when needed
could have a material adverse effect on our business, results of operations and financial condition. If additional funds are raised
through the issuance of equity securities, the percentage ownership
of our then current

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shareholders will be reduced. Furthermore, these equity securities might have rights, preferences or privileges senior to those of our common stock.

|        |  |                                                           
|------- |  | ----------------------------------------------------------
|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                                                                                                                                                                                                                                                                                                                              
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|           |  | None                                                                                                                                                                                                                                                                                                                                           
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|Item 2.    |  | Change in Securities and Use of Proceeds                                                                                                                                                                                                                                                                                                       
|           |  |                                                                                                                                                                                                                                                                                                                                                
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|           |  | 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 stock split was exempt
from registration under the Securities Act of 1933, as amended, pursuant to Section 3(a)(9) of the Securities
Act.
|           |  |                                                                                                                                                                                                                                                                                                                                                
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|Item 3.    |  | Defaults Upon Senior Securities                                                                                                                                                                                                                                                                                                                
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|           |  | None                                                                                                                                                                                                                                                                                                                                           
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|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                                                                                                                                                                                                                                                            
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|           |  | None                                                                                                                                                                                                                                                                                                                                           
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|Item 5.    |  | Other Information                                                                                                                                                                                                                                                                                                                              
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|           |  | None                                                                                                                                                                                                                                                                                                                                           
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|Item 6.    |  | Exhibits and Reports on Form 8-K                                                                                                                                                                                                                                                                                                               
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|           |  | B.        Report on Form 8-K                                                                                                                                                                                                                                                                                                                   
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|           |  | None                                                                                                                                                                                                                                                                                                                                           
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|           |  | 10.1  Amendment to Employment Agreement between NetRadio Corporation and Michael P. Wise                                                                                                                                                                                                                                                       

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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: 8/10/01 |  |  |  | NETRADIO CORPORATION                                                                                                                            
|               |  |  |  |                                                                                                                                                 
|              
|               |  |  |  | By        /s/ Eric H. Paulson
Eric H. Paulson
Chief Executive Officer and President
(Principal Executive Officer)                               
|               |  |  |  |                                                                                                                                                 
|              
|               |  |  |  | By        /s/ Michael P. Wise
Michael P. Wise
Secretary, Chief Financial Officer and Vice President
(Principal Financial and Accounting Officer)

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