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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

Form 10-KSB

ANNUAL REPORT PURSUANT TO
Section 13 Or 15(d) Of The Securities Exchange Act Of 1934

For the fiscal year ended June 30, 2003

Commission file number: 0-31955

QRS Music Technologies, Inc.(Name of small business issuer in its charter)

|Delaware(State or other jurisdiction of incorporation or organization)      |  | 36-3683315(I.R.S. Employer Identification No.)
|--------------------------------------------------------------------------- |  | ----------------------------------------------
|2011 Seward Avenue, Naples, Florida(Address of principal executive offices) |  | 34109(Zip Code)                               
|(239) 597-5888Issuer's telephone number                                    
|Securities registered under Section 12(b) of the Exchange Act: None        
|Securities registered under Section 12(g) of the Exchange Act:             
|Common, $0.01 par value(Title of class)                                    

Check
whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Check
if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this
Form 10-KSB.    ý

The
issuer's revenues for its most recent fiscal year were $14,934,100.

The
aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the average of the closing bid ($.85) and
closing asked ($1.10) price of such common equity, as of June 30, 2003 was $2,595,354.

The
number of shares outstanding of the issuer's common stock as of June 30, 2003 was 9,258,956.

Transitional
Small Business Disclosure Format (Check
one): Yes o    No ý

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PART I

Item 1. Description of Business.

GENERAL

QRS Music Technologies, Inc. ("Registrant") is a Delaware Corporation which was formed in January, 1990. During fiscal year ended June 30, 2003,
Registrant's primary lines of business were manufacture and sale of Pianomation® Music Instrument Digital Interface ("MIDI"), manufacture and sale of Story & Clark pianos, sale of
MIDI CDs and floppy disks, distribution of piano supply parts, manufacture and distribution of the Gulbransen Digital Hymnal, and manufacture and sale of music rolls for player pianos. During fiscal
year ended June 30, 2003 a wholly owned subsidiary was formed (Church Services, Inc.) for the purposes of the acquisition of a new business operation. All financial statements presented
are consolidated statements. Registrant's corporate offices and Pianomation® development facilities and showroom are located in Naples, Florida. Registrant has a warehouse, teaching
facility and showroom facility in Las Vegas, Nevada, piano manufacturing and Pianomation® assembly and showroom facilities in Seneca, Pennsylvania, and a piano roll manufacturing and
warehouse facility and software development facility in Buffalo, New York. See "Consolidated Financial Statements" for financial information.

PIANOMATION®

The Pianomation® MIDI System is a Musical Instrument Digital Interface equipped playback system for acoustic and digital pianos.
Pianomation®, which is Registrant's flagship product, automates Registrant's own line of Story & Clark pianos, and can be retrofitted by independent installers into virtually any
brand of piano. Several major piano manufacturers, including
Baldwin Piano & Organ Co and Young Chang Pianos, have selected Pianomation® as an OEM choice for factory installation in new instruments.

The
Pianomation® product consists of an electronic processor and a mechanical assembly which drives solenoid actuators. The processor receives MIDI signals from a MIDI master
controller such as a CD player, disk drive or personal computer. The signals received from the master controller are processed by the Pianomation® processor which in turn causes the
mechanical solenoid actuators to "play" the piano's keys. The MIDI signal contains, and the Pianomation® processor transmits, the information necessary to control the duration of each note
and the level of expression and foot pedal operation. The Pianomation® system is unique as it is the only system currently available which not only controls the mechanical operation of a
piano but synchronizes the MIDI signal with a separate track containing an audio music signal and stores both tracks in analog format on a CD. This allows the Pianomation® system to
enhance the piano performance with a vocalist, symphony orchestra or other recorded music.

The
ease of installation and minimal service requirements of the Pianomation® system and the software which allows the conversion of a digital signal into analog format are
principal features. A unique low profile solenoid rail actuates the keys, and can be easily regulated to the touch of the host piano to a high degree of sensitivity. In fact, Pianomation®
can actually play at volume levels below the capabilities of the human pianist for the ultimate in background music. The sustain pedal is operated by a specially designed solenoid, or can be simulated
by the system's exclusive "Magic Pedal" feature.

Pianomation's®
flexibility and open-ended architecture allow a wide range of use and flexibility for all current and future playback formats. With QRS CDs,
Pianomation® can play unobtrusively with solo piano music or with concert-quality performances that include audio accompaniment; with QRS videos, Pianomation® can be used for
group sing-alongs or karaoke; with QRS floppies, Pianomation® can drive a general MIDI system for the MIDI enthusiast; and, with various computer programs, it can

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serve
the working musician as a MIDI slave, interacting on a sophisticated level with all manner of MIDI equipment. Introduced this year were the new Transcription Series and SyncAlong CDs. The
SyncAlong Series CDs leverage the Pianomation system advantages to allow the end-user to experience the true audio recordings of major recording artists. Registrant also sells the
Playola System of portable piano automation. Unlike the Pianomation® System which requires installation by a trained technician, the Playola system consists of only two components which
can be easily placed on and removed from a piano by a user. Playola is also MIDI compatible. Also introduced this year was a Playola specifically designed to the play the Hammond B3 organ. The unit is
currently being marketed under the Psalmist name to churches by a third party distributor.

Pianomation® Manufacturer

The components of the Pianomation® MIDI System and Playola system are manufactured for Registrant by a number of different suppliers. With the
exception of a number of small pieces, Registrant has located more than one supplier for each component. It maintains an inventory of components which it believes would be sufficient to continue its
business if the single source vendor of small pieces should cease to adequately supply ordered parts. Registrant assembles some of the Pianomation® System and Playola components in its
Pennsylvania facility. In large part, the Pianomation® System is shipped in kit form for installation by a technician into an acoustic piano. Registrant believes there to be ample sources
and quantities of raw materials for the manufacture of all components.

Pianomation® Distribution

Registrant distributes the Pianomation® system as an option on its Story & Clark pianos, through approximately 260 independent piano retailers
and independent piano technicians who install the system on pianos initially sold by the retailer or as a retrofit on pianos owned by customers. Registrant also distributes through OEM sales to large
piano manufacturers such as Baldwin Piano Co., Young Chang Pianos and Weber Pianos and other distributors who private label the system. Playola is distributed though the same network of independent
piano retailers.

STORY & CLARK PIANOS

Registrant imports and sells pianos under the Story & Clark trademark, and manufactures a select number of specialty pianos bearing the Story &
Clark trademark. The Story & Clark line includes reproducing player pianos, grand pianos, console and studio pianos, nickelodeons, custom leaded glass panel pianos, roll players, and various
piano accessories such as piano benches and lamps. The term player piano is used to describe any acoustic piano that has been modified to play itself. A nickelodeon is a piano that plays itself, and
has additional instruments (such as drums, xylophone, castanets, etc.) that are mounted on or near the piano and are also played by the same solenoid system.

All
Story & Clark pianos, including imported pianos, are thoroughly serviced and prepared by factory piano technicians prior to sale. All Story & Clark pianos are
pre-slotted to allow for easy later installation of the Pianomation® system.

Piano Manufacture

A majority of Registrant's line of pianos, including its Prelude and Cambridge lines, are imported from the Peoples Republic of China. Specialty pianos and all
piano prep services are performed at Registrant's 46,000 square foot facility in Seneca, Pennsylvania. Registrant believes that there is an adequate supply of all materials used to build its specialty
pianos in Pennsylvania. Registrant also believes there are other sources of imported pianos if current supply were interrupted.

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The
name Story & Clark is used on pianos that are manufactured at Registrant's Pennsylvania facility, including the Hampton, Classic, Nickelodeon and Roll Player pianos. The
Prelude and Cambridge names are used for pianos imported from various manufacturers from the People's Republic of China. For fiscal year ended June 30, 2003 and June 30, 2002 combined
Cambridge and Prelude sales represented 39.04% and 19.15% of overall sales respectively.

Piano Distribution

Registrant distributes its pianos and technology products through a network of approximately 300 to 400 independent piano stores in the following areas of the
country: East Coast (207); Central States (107); and West Coast (75).

The
Registrant may enter into an agreement with a financing company when the dealer (purchaser) desires to finance his purchases. For the year ended June 30, 2003, approximately
24.2% of the Registrant sales were subject to these financing agreements. Under these agreements, the entire sale is financed. Total amount of material cost incurred by the Registrant due to
repurchasing of repossessed merchandise amounted to $51,075 for the year ended June 30, 2003. In Fiscal 2003, Registrant also retailed its pianos through its own showrooms in Naples and Las
Vegas.

PLAYER PIANO ROLLS

Registrant is the only major manufacturer in the world of paper player piano rolls. Registrant has master recording data for over 5,000 music titles for player
piano rolls and maintains an inventory of over 40,000 music rolls at its Buffalo facility. Registrant contracts with copyright owners for nonexclusive rights to produce various musical selections and
then with artists who actually perform the musical selection. Registrant has master rolls representing the only player piano performance of Liberace and one of only a few of the performances of Scott
Joplin, Fats Waller, George Gershwin and
other famous pianists. Celebrity performances are recorded on a specially equipped piano called a marking piano. Each key on the marking piano is connected pneumatically to a metal stylus on unit
sitting next to the piano. There is a blank roll of piano roll paper that passes over a drum equipped with a piece of carbon paper. As a key is depressed on the piano, the metal stylus descends
against the piano roll paper, and a carbon mark is made on the underside of the paper. As long as the key is depressed, the stylus stays down. Once the key is released, the stylus raises. Once the
performance is complete, the roll with the carbon marks is taken out, and the carbon lines are cut out with an exacto knife. This becomes the pattern for the piano rolls that will be
mass-produced. Celebrity performances are recorded on the marking piano because it requires no knowledge of player piano roll arranging by the performer. The artist is only required to sit
at the piano and play as they normally would. Upon completion of the performance there is a pattern of the exact performance that can then be reproduced in the form of a perforated piano roll. When
the completed roll is played on a customer's piano, the original artist's performance will be duplicated exactly. For fiscal year ended June 30, 2003 and 2002 player piano roll sales
represented 2.82% and 3.9% of total overall sales respectively. Non-celebrity performances are done on a digital keyboard or computer. All raw materials for the rolls are readily available
from multiple sources. Registrant also sells player piano accessories.

Roll Distribution

Player piano rolls and player piano accessories are primarily sold though mail order catalog. Registrant maintains a prospect list of over 89,000 qualified
buyers. Registrant also sells player piano rolls and accessories on its internet web site and through approximately 50 independent dealers.

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MIDI CDS AND FLOPPY DISKS

Registrant has an inventory of over 2000 musical data files in MIDI format which it sells in CD and floppy disk format and as downloads on its internet web site.
The CDs are primarily used for electronic player devices such as Pianomation®. The floppy disks and web downloads can be used on digital keyboards, computers and any other MIDI sequencer.
Total CD and floppy sales for fiscal year ended June 30, 2003 and 2002 were 5.63% and 7.69% of total overall sales respectively.

COMPETITION

Pianomation® has two major competitors, Yamaha Music and PianoDisc. The Yamaha Disklavier system is only available as a factory installed option on
Yamaha pianos. The PianoDisc system is retrofitable. Principal competitive factors are reliability, features, system flexibility and ease of
installation. Registrant believes it competes well as a result of the reliability of its system, ease of installation, and the ability to store live recorded background music including vocals as well
as piano signal on one CD.

Story &
Clark competes with very large (Baldwin Piano Co., Steinway Pianos, Samick Pianos, Young Chang Pianos, and Kawai Music) and small piano manufacturers and has a very small
portion of the market. Principal competitive factors are distribution channels, trademark and price. While it is one of only a handful of domestic piano manufacturers, Registrant competes by filling
niche markets including player pianos and nickelodeons rather than competing in the mass distribution market for standard home-use and commercial-use pianos.

New
player rolls are sold by only one other company (Mastertouch Piano Rolls) which does not market to the United States. Used player piano rolls are sold by numerous individuals.

PIANOMATION AND OTHER PIANO SALES

For fiscal year ended June 30, 2003 perforated paper roll players represented 1.28% of our piano sales, and for fiscal year ended June 30, 2002 they
represented 3.77%. For fiscal year ended June 30, 2003 and 2002, nickelodeons represented 0% and 3.16% of piano sales respectively. Total piano sales for fiscal year ended June 30, 2003
and 2002 represented 40.95% and 27.96% of total overall sales respectively. Sales of Pianomation® systems and hardware products for fiscal year ended June 30, 2003 and 2002
represented 46.68% and 57.71% of overall sales respectively. Approximately 48.11% of Story & Clark pianos sold were retrofitted with the Pianomation® system in fiscal year 2003 and
approximately 45.15% in fiscal year 2002.

EMPLOYEES

Registrant employs 50 full-time employees and 1 part-time employee.

RESEARCH AND DEVELOPMENT

Registrant is involved in several research and development projects both in the area of Pianomation products and pianos. The expenditures for fiscal year 2002
were $307,000 and for fiscal 2003 they were $421,000. All research and development expenses were borne directly by the company. Other than new products discussed elsewhere herein, all other publicly
announced new products are in the research and development stage.

PATENTS TRADEMARKS AND LICENSES

Registrant has 6 United States Trademark registrations: Registration No. 658,518 (QRS logo), Registration No. 2,190,286 (QRS), Registration
No. 2,562,052 (Hobart M. Cable), Registration

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No. 2,490,762
(Story & Clark), Registration No. 2,227,035 (Pianomation), and Registration No. 744,841 (Gulbransen).

Item 2. Description of Property.

Registrant owns a 24,000 square foot building in Buffalo, New York which is used for piano roll manufacture and warehouse, a 46,000 square foot building in
Seneca, Pennsylvania which is used as a piano manufacturing and warehouse facility, and a 17,000 square foot building in Seneca, Pennsylvania which is used for Pianomation® System assembly
and warehouse. Registrant leases from its Chairman and largest shareholder, 4,000 square feet of office and warehouse space in Naples, Florida. The Naples location is Registrant's principal corporate
office. Registrant leases from its Chairman and largest shareholder approximately 6,000 square feet of showroom and warehouse space in Las Vegas, Nevada. The terms of the office space arrangements for
Las Vegas and Naples are comparable to similar spaces available on the open market. Registrant is currently utilizing without charge warehouse space in New South Wales, Australia provided by Alltech
International Holdings, an affiliate of Registrant's Chairman. The Registrant intends to ship pianos and Pianomation units to be inventoried in this spaces.

The
principle provisions of those leases are as follows:

|Location                                 |  | Base Rent Per Month |       | Date of Lease |            | Expiration
|---------------------------------------- |  | ------------------- | ----- | ------------- | ---------- | ----------
|Offices and Warehouse
Naples, Florida    |  | $                   | 2,000 |               | 01/01/1993 |           
|Showroom and Warehouse
Las Vegas, Nevada |  | $                   | 6,250 |               | 04/01/2000 |           

Item 3. Legal Proceedings.

On October 16, 2000, Family Music Centers, Inc ("FMC") and Burgett, Inc (d/b/a Pianodisc) brought an action in District Court, Clark County, Nevada against
Registrant, Richard Dolan and a former employee of Registrant, Larry Bateman ("the QRS Defendants"). The QRS Defendants have been sued for misappropriation of trade secrets, unfair trade practices,
tortuous interference with business opportunities, intentional interference with prospective economic advantage and unjust enrichment. The Plaintiffs assert that the QRS Defendants induced Larry
Bateman to leave his employment at FMC to work for QRS and then used FMC's confidential business information gained from Batemen. Plainfiff's motion for partial summary judgment on the claims relating
to the unlawful copying of music recordings has been denied. Discovery is continuing; no trial date has been set. The QRS Defendants deny liability and are vigorously defending the claims. The outcome
of the case is uncertain.

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

No matters were submitted to shareholders.

PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

On August 6, 2001 the Company's common stock began quotation on the OTCBB under the symbol QRSM. Prior to that time, the Company's common stock was quoted
on the Electronic Pink

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Sheets.
The high and low bids of Registrant's common stock for each quarter during fiscal years ended June 30, 2003 and 2002 are as follows:

|                                 |                | High Bid Price |      | Low Bid Price
|-------------------------------- | -------------- | -------------- | ---- | -------------
|Fiscal Year Ended June 30, 2002: |                |                |      |              
|                                 | First Quarter  |                | 1.25 |              
|                                 | Second Quarter |                | .72  |              
|                                 | Third Quarter  |                | 1.95 |              
|                                 | Fourth Quarter |                | 2.07 |              
|Fiscal Year Ended June 30, 2003: |                |                |      |              
|                                 | First Quarter  |                | 1.35 |              
|                                 | Second Quarter |                | .80  |              
|                                 | Third Quarter  |                | 1.40 |              
|                                 | Fourth Quarter |                | 1.07 |              

Trading
information is as reported by the National Association of Securities Dealers Composite feed or other qualified interdealer quotation medium and as compiled by Pink Sheets, LLC.
Such over-the-counter quotations reflect inter-dealer prices, without retail markup, markdown or commission, and may not necessarily represent actual transactions.

The
records of American Registrar and Transfer Co., Registrant's transfer agent, indicate that there are 136 registered owners of Registrant's common stock as of June 30, 2003.

Registrant
has paid no dividends on common stock in the past four fiscal years. Registrant has no intention of paying dividends on common stock in the foreseeable future.
Registrant has declared and paid $409,000 in preferred stock dividends in fiscal year 2003. All shares of preferred stock are owned by Registrant's Chairman.

Item 6. Management's Discussion and Analysis or Plan of Operation.

GENERAL.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.

Certain statements in this Form 10-KSB constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform
Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Registrant to be
materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: the effects of the
September 11, 2001 terrorist attack on New York City and Washington, D.C. including effects on international and domestic transportation of goods, the state of the economy; the financial
condition of major OEM's such as Baldwin Piano and Organ and Young Chang Pianos; competition; seasonality; success of operating initiatives; new product development and introduction schedules;
acceptance of new product offerings; advertising and promotional efforts; adverse publicity; changes in business strategy or development plans; availability and terms of capital; labor and employee
benefit costs; changes in government regulations; uncertainty
regarding economic recovery of the United States and international economies in general and consumer spending in particular, and other factors particular to Registrant.

The
Registrant's fiscal year ends each June 30, and the fiscal years ended June 30, 2003, June 30, 2002 are referred to as "fiscal 2003" and "fiscal 2002",
respectively.

Registrant
is a Delaware Corporation and is a manufacturer and distributor of pianos, pianomation units, and compact discs and music rolls for use in player pianos. Registrant sells its
products to dealers

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and
end-users, predominately in the United States and has offices in New York, Pennsylvania, Florida and Nevada recently started utilizing space in New South Wales, Australia.

Critical Accounting Policies and Estimates

Summary:

The consolidated financial statements include the accounts and transactions of QRS Music Technologies Inc. and its wholly-owned subsidiary. All significant
inter-company transactions and balances are eliminated in consolidation. The preparation of consolidated financial statements requires the Registrant to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an on-going basis, the Registrant evaluates its estimates, including
those related to revenue recognition, product returns and allowances, bad debts, inventory valuation, goodwill and intangible assets, income taxes, warranty provisions, contingencies and litigation.
The Registrant bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual amounts may differ from these estimates under different assumptions or
conditions. The Registrant believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Revenue Recognition:

Sales of products are recognized by the Registrant upon shipment to its customers. Stated terms of each sale are generally FOB shipping point and title for the
products transfers to the customer upon shipment. The Registrant may, at times, arrange financing of customers' purchases through commercial financing companies. These arrangements generally require
the Registrant to repurchase pianos financed and repossessed by the commercial financing companies. The purchase price is typically the total unpaid balance owed to the finance companies plus
reasonable expenses. Shipping and handling costs are included in cost of sales net of amounts invoiced to the customer per the order. The Registrant's products generally carry a warranty. These costs
are accrued at the point of shipment and, at June 30, 2003, the Registrant had a reserve for returns of $91,000.

Allowance for Doubtful Accounts:

No single customer of the Registrant has represented greater than 10% of revenues or accounts receivable in fiscal 2003 or fiscal 2002. The Registrant maintains
allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the Registrant's customers were to
deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The Registrant does not request collateral from its customers but collectibility is
enhanced through the use of credit card payments. The Registrant assesses collectibility based on a number of factors including, but not limited to, past transaction history with the customer, the
credit-worthiness of the customer, independent credit reports, industry trends and the macro-economic environment. For fiscal 2003 and fiscal 2002 the Registrant recorded a provision for doubtful
accounts of approximately $73,000 and $166,000, respectively.

Inventories:

Inventories are valued at the lower of cost or market using the first-in, first-out (FIFO) method. On a regular basis the Registrant
reviews its inventories for slow-moving and obsolete items and adjusts the value of such inventory to its estimated net realizable value. As of June 30, 2003, the Registrant
reflected a reserve for slow-moving and obsolete inventory of approximately $349,000.

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The
Registrant believes that the mix of inventory reflects the current customer demand for products. The Registrant maintains several hundred suppliers for both manufactured and
distributed components and products. The Registrant feels that there are many sources for component suppliers, and maintains a listing of alternative source for many critical parts. No assurances can
be given as to maintaining a
supply from any one distributor. Currently, the Registrant doesn't have any knowledge from any distributor as to a reduction or discontinuation of products currently being purchased. Registrant has no
information indicating that any distributor intends to reduce or discontinue products currently being purchased.

Long-Lived Assets, Intangible Assets and Goodwill:

The Registrant adopted SFAS No. 141, "Business Combinations," and SFAS 142, "Goodwill and Other Intangible Assets," effective July 1, 2002.
Under these standards, all acquisitions subsequent to June 30, 2001 must be accounted for under the purchase method of accounting, and purchased goodwill is no longer subject to amortization.
Rather, it is subject to periodic impairment tests based on its fair value. Goodwill represents the excess cost over the fair value of tangible net assets of the Registrant and is recorded on the
consolidated balance sheet in other assets. The Registrant reviews the carrying value of the goodwill annually and at other times when facts or circumstances indicate that the recorded amount of
goodwill may be impaired. If this review indicates that goodwill is not recoverable, the Registrant's carrying value of the goodwill is reduced by the estimated shortfall. As of June 30, 2003,
no impairment has been recorded.

Income Taxes:

As part of the process of preparing the consolidated financial statements, the Registrant is required to estimate its income taxes in each of the jurisdictions in
which it operates. This process involves the Registrant estimating its actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as
depreciation, amortization, and inventory reserves, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the consolidated balance
sheets. The Registrant must then assess the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes that recovery is not likely, the
Registrant must establish a valuation allowance. In the event that actual results differ from these estimates, or the Registrant adjusts these estimates in future periods, the Registrant may need to
establish an additional valuation allowance which could materially impact its financial position and results of operations.

The
Registrant has substantial deferred tax assets associated with inventory adjustments, allowance for doubtful accounts and other accruals which will reduce taxable income in the
future. The Registrant believes that it is more likely than not that the deferred tax assets will be utilized.

FISCAL 2003 COMPARED TO FISCAL 2002.

SALES. Total sales increases 24.34% from $12.01 million in fiscal 2002 to $14.93 million in fiscal 2003. The majority of the increase is
attributable to an increase in the sales of Story & Clark pianos, and to a lesser extent Pianomation Hardware sales. In fiscal 2003 the company changed focus from manufacturing and production
to sales and marketing. Changes involved included expanding the piano line, adjusting the mix of piano sizes and finishes, and realigning talent to focus on procuring, maintaining, and developing the
dealer network of Story & Clark dealers. These efforts not only led to a substantial increase in piano sales, but also had the benefit of exposing dealers to the advantages of the Pianomation
system, and thereby increasing the sales of Pianomation Hardware. Although there was only a small net change in the number of Story & Clark dealers, the company was benefited by a stronger
penetration with the current dealers and a shifting of dealers in some markets to a larger store or chain affording more opportunities for customer sales. The decrease in Pianomation sales to OEM

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accounts
such as Samick and Baldwin was more than offset by the additional unit purchases by the existing dealer base, and the increase in factory installed units on Story & Clark pianos.

COSTS
AND EXPENSES. Total cost of sales increased 18.24% from $8.33 million in fiscal 2002 to $9.85 million in fiscal 2003. As a percentage of sales, cost of sales
decreased 3.4 percentage points from 69.37% in fiscal 2002 to 65.97% in fiscal 2003. While higher sales accounted for a higher total cost of sales, the changes in the company produced positive
results by reducing the cost of sales as a percentage of sales. The shift from manufacturing produced the greatest savings. An important factor in the decision to cease a majority of piano
manufacturing was the lower cost of importing pianos from the Peoples Republic of China. The cost of purchasing, importing, and prepping the pianos was lower than the cost of manufacturing similar
products and resulted in a reduced cost of sales. Since the Registrant is only producing a small percentage of specialty pianos, a majority of the pianos sold bear the Prelude and Cambridge names,
indicating they were imported from the Peoples Republic of China. The product mix (pianos vs. technology) also has a great impact on the cost of sales.

Selling,
general and administrative expenses increased 23.68% from $2.21 million in fiscal 2002 to $2.74 million in fiscal 2003. The greatest impact of the shift from
manufacturing and production to sales and marketing was felt in the selling, general and administrative expenses. Several employees were shifted from direct labor positions to commissioned sales
positions. This in addition to new marketing material produced in fiscal 2003 increased expenses. Since a majority of the sales force in place is paid on a percentage of sales, these expenses also
increased with the increased sales. Research and development expenses increased 36.96% from $308,000 in fiscal 2002 to $421,000 in fiscal 2003 due to the varying development times of products in
development. Several products, such as the Psalmist and the Virtuoso Violin moved from development to production and distribution, and several more products will be released in fiscal year 2004.
Several new projects were begun that will not be completed or produced until fiscal year 2005.

INTEREST
EXPENSE, NET. Net interest expense decreased 66.12% from $90,000 in fiscal 2002 to $31,000 in fiscal 2003. The decrease is due to declining loan balances and a lower interest
rate negotiated in May, 2002.

PROVISION
FOR INCOME TAXES. Registrant's effective tax rate for fiscal 2003 and fiscal 2002 was 37.6% and 36%, respectively.

LIQUIDITY AND CAPITAL RESOURCES.

The primary sources of Registrant's cash are net cash flows from operating activities and short-term vendor financing. Currently, Registrant does not
have available any established lines of credit with banking facilities.

Registrant's
cash and cash equivalents were $967,000 and $1.5 million at June 30, 2003 and 2002, respectively. Fiscal 2003 earnings before interest, taxes, depreciation and
amortization ("EBITDA") increased $760,000 to $2.05 million from $1.29 million in fiscal 2002. Registrant's cash and cash equivalent decreased for year ended June, 30, 2003 as compared
to the year ended June 30, 2002 as a result of the shift from manufacturing pianos to importing pianos and the payment of preferred stock dividends. The importation of pianos from China
requires that the pianos be paid upon shipping from overseas, instead of purchasing parts and paying for them 30 days after receipt. This process has a negative impact on cash flow as it
requires the use of funds 90 to 120 days prior to the receipt of funds for an item. Although the increased sales and additional funds available due to the decrease in cost of sales have allowed
the Registrant to maintain proper inventory levels. Also during fiscal year 2003, the Registrant made payments on the outstanding preferred stock dividends. The accounts receivable for fiscal year
ended June 30, 2003 were slightly higher than fiscal year ended June 30, 2002, due to the increased sales in the fourth quarter.

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The
Registrant had a note payable to a lending institution due May 2002 with a balloon payment of approximately $919,000 payable at that time (see Note 4 to the Financial
Statements). Registrant refinanced this note prior to the due date. The new note payable in monthly installments of $13,751, plus accrued interest at the prime rate (4.25% at June 30, 2003) and
due in May 2007, requires the Registrant to satisfy certain tests concerning tangible capital funds and debt coverage ratio. The Registrant is in compliance with these covenants.

Registrant
believes its current available cash position, coupled with its cash forecast for the year and periods beyond, is sufficient to meet its cash needs on both a
short-term and long-term basis. There are no major capital expenditures planned for in the foreseeable
future, nor any payments planned for off-balance sheet obligations. Except as stated above, Registrant's management is not aware of any known trends or demands, commitments, events, or
uncertainties, as they relate to liquidity which could negatively affect Registrant's ability to operate and grow as planned.

Future
contractual obligations of the Registrant are as follows:

PAYMENTS DUE BY PERIOD

|Contractual
Obligations |  | Total   |  | Next 12
Months |  | 1-3 Years |  | After
4 Years
|----------------------- |  | ------- |  | -------------- |  | --------- |  | -------------
|Long Term Debt          |  | 646,278 |  | 165,012        |  | 481,266   |  |             
|Operating Leases        |  | 216,000 |  | 24,000         |  | 72,000    |  | 120,000      

Recent Accounting Pronouncements

In November 2002, the Financial Accounting Standards Board ("FASB") issued Interpretation ("FIN") No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others," an interpretation of SFAS 5, 57 and 107 and Rescission of FIN 34. FIN 45 requires that guarantors recognize a liability for certain types of guarantees equal to
the fair value of the guarantee upon its issuance. FIN 45 also requires increased disclosure of guarantees, including product warranty information. The disclosure provisions of FIN 45 are effective
for financial statements of interim or annual periods that end after December 15, 2002. The provisions for initial recognition and measurement are effective on a prospective basis for
guarantees that are issued or modified after December 31, 2002. Effective January 1, 2003 the Company adopted FIN 45, which did not have a material impact on its financial position or
results of operations.

In
November 2002, the Emerging Issues Task Force ("EITF") reached a consensus on EITF Issue 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables."
EITF Issue 00-21 provides guidance on how to determine when an arrangement that involves multiple revenue-generating activities or deliverables should be divided into separate units of
accounting for revenue recognition purposes, and if this division is required, how the arrangement consideration should be allocated among the separate units of accounting. The guidance in the
consensus is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The Company is currently evaluating certain implementation provisions, but does not
expect the adoption of EITF Issue 00-21 to have a material effect on its financial position, results of operations and cash flows.

In
December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based CompensationTransition and Disclosure," an amendment to SFAS 123.
SFAS 148 amends SFAS 123, "Accounting for Stock-based Compensation" to provide alternative methods of transition to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of
accounting for stock-based compensation and the effect of the method

10

---

used
on reported results. SFAS 148 is effective for fiscal years ending after December 15, 2002 with respect to the alternative transition methods permitted and the annual
disclosures required. The disclosure provisions for interim financial information is effective for all periods presented in financial reports containing financial statements for interim periods
beginning after December 15, 2002. Because the Company currently does not have stock-based compensation plans, SFAS 148 does not have an impact on the Company's financial statements and
related disclosures.

In
January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities: an Interpretation of ARB No. 51" (FIN 46). FIN 46 addresses
consolidation by business enterprises of entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity
to finance its activities without additional subordinated financial support from other parties. Variable interest entities are required to be consolidated by their primary beneficiaries if they do not
effectively disperse risks among parties involved. The primary beneficiary of a variable interest entity is the party that absorbs a majority of its expected residual returns. The consolidation
requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003 and apply to existing entities in the first fiscal year or interim period
beginning after June 15, 2003. Certain new disclosure requirements apply to all financial statements issued after January 31, 2003. The Company does not believe that these provisions
will have a material impact on its financial statements.

In
April 2003, FASB issued SFAS 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS 149 amends and clarifies financial
accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities." The changes in SFAS 149 improve financial reporting by requiring that contracts with similar characteristics be accounted for similarly. SFAS 149 is
effective, with some exceptions, for contracts entered into or modified after June 30, 2003. The Company does not expect the application of SFAS 149 to have a material impact on its
financial position or results of operations because the Company does not use derivative instruments.

In
May 2003, the FASB issued SFAS 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity" ("SFAS 150").
SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS 150 requires that an
issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). The requirements of this statement apply to issuers' classification and measurement
of freestanding financial instruments, including those that comprise more than one option or forward contract. SFAS 150 is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company is in the process of assessing the impact of adopting
SFAS 150 on its results of operations, financial position or consolidated cash flows.

ReclassificationsCertain
amounts reported in the 2002 financial statements have been reclassified to conform with the 2003 presentation without affecting previously reported
net income.

Item 7. Financial Statements.

11

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QRS Music Technologies Inc.  Table of Contents  June 30, 2003 and 2002

|                             |                                                            | Page
|---------------------------- | ---------------------------------------------------------- | ----
|Independent Auditors' Report |                                                            | 13  
|Financial Statements         |                                                            |     
|                             | Consolidated Balance Sheets                                |     
|                             | Consolidated Statements of Income                          |     
|                             | Consolidated Statements of Changes in Stockholders' Equity |     
|                             | Consolidated Statements of Cash Flows                      |     
|                             | Notes to the Consolidated Financial Statements             |     

12

---



Independent Auditors' Report

Board
of Directors of
QRS Music Technologies Inc.

We
have audited the accompanying consolidated balance sheets of QRS Music Technologies Inc. as of June 30, 2003 and 2002, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of QRS Music Technologies Inc. as of June 30,
2003 and 2002, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.

ALTSCHULER,
MELVOIN AND GLASSER LLP

Chicago,
Illinois
August 21, 2003

13

---



QRS Music Technologies Inc.  Consolidated Balance Sheets  June 30, 2003 and 2002

|                                     |                                                                                                                                                                                                                                     | 2003 |           | 2002     
|------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | --------- | ---------
|Assets                               |                                                                                                                                                                                                                                     |      |           |          
|Current assets                       |                                                                                                                                                                                                                                     |      |           |          
|                                     | Cash                                                                                                                                                                                                                                |      | $         | 966,935  
|                                     | Accounts receivable (net of allowance for doubtful accounts of $73,400 and $166,000 as of June 30, 2003 and 2002, respectively)                                                                                                     |      |           | 967,009  
|                                     | Inventories                                                                                                                                                                                                                         |      |           | 5,055,195
|                                     | Note receivablestockholder                                                                                                                                                                                                         |      |           |          
|                                     | Income taxes refundable                                                                                                                                                                                                             |      |           | 185,000  
|                                     | Deferred income taxes                                                                                                                                                                                                               |      |           | 288,000  
|                                     | Prepaid expenses and other current assets                                                                                                                                                                                           |      |           | 222,999  
|                                     |                                                                                                                                                                                                                                     |      |           |          
|                                     |                                                                                                                                                                                                                                     |      | 7,685,138 |          
|Property, plant and equipment        |                                                                                                                                                                                                                                     |      | 992,208   |          
|Other assets                         |                                                                                                                                                                                                                                     |      | 95,019    |          
|                                     |                                                                                                                                                                                                                                     |      |           |          
|                                     |                                                                                                                                                                                                                                     | $    | 8,772,365 |          
|                                     |                                                                                                                                                                                                                                     |      |           |          
|Liabilities and Stockholders' Equity |                                                                                                                                                                                                                                     |      |           |          
|Current liabilities                  |                                                                                                                                                                                                                                     |      |           |          
|                                     | Current portion of long-term debt                                                                                                                                                                                                   |      | $         | 165,012  
|                                     | Accounts payable                                                                                                                                                                                                                    |      |           | 472,868  
|                                     | Accrued expenses                                                                                                                                                                                                                    |      |           | 319,122  
|                                     |                                                                                                                                                                                                                                     |      |           |          
|                                     |                                                                                                                                                                                                                                     |      | 957,002   |          
|                                     |                                                                                                                                                                                                                                     |      |           |          
|Long-term debt                       |                                                                                                                                                                                                                                     |      | 481,267   |          
|                                     |                                                                                                                                                                                                                                     |      |           |          
|Commitments and contingencies        |                                                                                                                                                                                                                                     |      |           |          
|Stockholders' equity                 |                                                                                                                                                                                                                                     |      |           |          
|                                     | Series A preferred stock, voting, $.01 par value, 2,000,000 shares authorized, 534,925 shares issued and outstanding in 2003 and 2002, liquidation value of $2,565,185, and $2,909,992, respectively, as of June 30,
 2003 and 2002 |      |           | 5,349    
|                                     | Class A common stock, voting, $.01 par value, 40,000,000 shares authorized, 9,258,956 and 9,248,956 shares issued and outstanding in 2003 and 2002, respectively                                                                    |      |           | 92,590   
|                                     | Additional paid-in capital                                                                                                                                                                                                          |      |           | 5,334,848
|                                     | Retained earnings                                                                                                                                                                                                                   |      |           | 1,901,309
|                                     |                                                                                                                                                                                                                                     |      |           |          
|                                     |                                                                                                                                                                                                                                     |      | 7,334,096 |          
|                                     |                                                                                                                                                                                                                                     |      |           |          
|                                     |                                                                                                                                                                                                                                     | $    | 8,772,365 |          
|                                     |                                                                                                                                                                                                                                     |      |           |          

See
accompanying notes.

14

---

QRS Music Technologies Inc.  Consolidated Statements of Income  Years Ended June 30, 2003 and 2002

|                                                       |                                     | 2003 |            | 2002      |  
|------------------------------------------------------ | ----------------------------------- | ---- | ---------- | --------- | -
|Net sales                                              |                                     | $    | 14,934,100 |           | $
|Cost of sales                                          |                                     |      | 9,852,111  |           |  
|                                                       |                                     |      |            |           |  
|Gross profit                                           |                                     |      | 5,081,989  |           |  
|                                                       |                                     |      |            |           |  
|Operating expenses                                     |                                     |      |            |           |  
|                                                       | Selling, general and administrative |      |            | 2,735,328 |  
|                                                       | Research and development            |      |            | 421,397   |  
|                                                       |                                     |      |            |           |  
|                                                       |                                     |      | 3,156,725  |           |  
|                                                       |                                     |      |            |           |  
|Income from operations                                 |                                     |      | 1,925,264  |           |  
|Interest expense                                       |                                     |      | 30,508     |           |  
|                                                       |                                     |      |            |           |  
|Income before income taxes                             |                                     |      | 1,894,756  |           |  
|                                                       |                                     |      |            |           |  
|Income tax expense (benefit)                           |                                     |      |            |           |  
|                                                       | Federal                             |      |            | 615,000   |  
|                                                       | State                               |      |            | 100,000   |  
|                                                       | Deferred                            |      |            | (3,000    | )
|                                                       |                                     |      |            |           |  
|                                                       |                                     |      | 712,000    |           |  
|                                                       |                                     |      |            |           |  
|Net income                                             |                                     |      | 1,182,756  |           |  
|Less current year preferred stock dividends in arrears |                                     |      | (128,382   | )         |  
|                                                       |                                     |      |            |           |  
|Income available to common stockholders                |                                     | $    | 1,054,374  |           | $
|                                                       |                                     |      |            |           |  
|Net income per common share                            |                                     |      |            |           |  
|                                                       | Basic                               |      | $          | 0.11      |  
|                                                       |                                     |      |            |           |  
|                                                       | Assuming dilution                   |      | $          | 0.11      |  
|                                                       |                                     |      |            |           |  
|Shares used in computing per share amounts             |                                     |      |            |           |  
|                                                       | Basic                               |      |            | 9,358,956 |  
|                                                       |                                     |      |            |           |  
|                                                       | Assuming dilution                   |      |            | 9,358,956 |  
|                                                       |                                     |      |            |           |  

See
accompanying notes.

15

---



QRS Music Technologies Inc.  Consolidated Statements of Changes in Stockholders' Equity  Years Ended June 30, 2003 and 2002

|                                                                              |  | Series A Preferred Stock |  | Common Stock |       |  |           |  |   |        | 
|----------------------------------------------------------------------------- |  | ------------------------ |  | ------------ | ----- |  | --------- |  | - | ------ | 
|
|Balance, June 30, 2001                                                        |  | 534,925                  |  | $            | 5,349 |  | 9,248,956 |  | $ | 92,490 | 
|Net income                                                                    |  |                          |  |              |       |  |           |  |   |        | 
|Stock options issued for services                                             |  |                          |  |              |       |  |           |  |   |        | 
|                                                                              |  |                          |  |              |       |  |           |  |   |        | 
|Balance, June 30, 2002                                                        |  | 534,925                  |  |              | 5,349 |  | 9,248,956 |  |   | 92,490 | 
|Net income                                                                    |  |                          |  |              |       |  |           |  |   |        | 
|Issuance of common stock                                                      |  |                          |  |              |       |  | 10,000    |  |   | 100    | 
|Series A preferred stock dividends paid (net of dividends previously accrued) |  |                          |  |              |       |  |           |  |   |        | 
|                                                                              |  |                          |  |              |       |  |           |  |   |        | 
|Balance, June 30, 2003                                                        |  | 534,925                  |  | $            | 5,349 |  | 9,258,956 |  | $ | 92,590 | 
|                                                                              |  |                          |  |              |       |  |           |  |   |        | 

See
accompanying notes.

16

---

QRS Music Technologies Inc.  Consolidated Statements of Cash Flows  Years Ended June 30, 2003 and 2002

|                            |                                                     | 2003                                      |          | 2002      |           
|--------------------------- | --------------------------------------------------- | ----------------------------------------- | -------- | --------- | ----------
|Operating activities        |                                                     |                                           |          |           |           
|                            | Net income                                          |                                           | $        | 1,182,756 |           
|                            | Depreciation and amortization                       |                                           |          | 123,504   |           
|                            | Loss on disposition of assets                       |                                           |          | 1,014     |           
|                            | Provision for bad debts                             |                                           |          | 265,841   |           
|                            | Reserve for returns                                 |                                           |          | 9,000     |           
|                            | Deferred tax expense (benefit)                      |                                           |          | (3,000    | )         
|                            | Stock options issued for services                   |                                           |          |           |           
|                            | Changes in                                          |                                           |          |           |           
|                            |                                                     | Accounts receivable                       |          |           | (368,577  
|                            |                                                     | Inventories                               |          |           | (1,180,127
|                            |                                                     | Incomes taxes refundable                  |          |           | (130,000  
|                            |                                                     | Prepaid expenses and other current assets |          |           | (192,445  
|                            |                                                     | Other assets                              |          |           | (1,890    
|                            |                                                     | Accounts payable                          |          |           | 28,911    
|                            |                                                     | Accrued expenses                          |          |           | 23,765    
|                            |                                                     | Income taxes payable                      |          |           |           
|                            |                                                     |                                           |          |           |           
|                            | Net cash provided by (used in) operating activities |                                           |          | (241,248  | )         
|                            |                                                     |                                           |          |           |           
|Investing activities        |                                                     |                                           |          |           |           
|                            | Acquisitions of property and equipment              |                                           |          | (131,331  | )         
|                            | Proceeds from sale of assets                        |                                           |          | 13,550    |           
|                            | Acquisition of certain assets of Gulbransen, Inc.   |                                           |          | (164,177  | )         
|                            | Advances to stockholder                             |                                           |          |           |           
|                            | Repayments from stockholder                         |                                           |          | 552,073   |           
|                            |                                                     |                                           |          |           |           
|                            | Net cash provided by (used in) investing activities |                                           |          | 270,115   |           
|                            |                                                     |                                           |          |           |           
|Financing activities        |                                                     |                                           |          |           |           
|                            | Repayments of note payablestockholder              |                                           |          |           |           
|                            | Repayments of long-term debt                        |                                           |          | (165,012  | )         
|                            | Issuance of common stock                            |                                           |          | 7,200     |           
|                            | Series A preferred stock dividends paid             |                                           |          | (409,000  | )         
|                            |                                                     |                                           |          |           |           
|                            | Net cash used in financing activities               |                                           |          | (566,812  | )         
|                            |                                                     |                                           |          |           |           
|Increase (decrease) in cash |                                                     |                                           | (537,945 | )         |           
|Cash                        |                                                     |                                           |          |           |           
|                            | Beginning of year                                   |                                           |          | 1,504,880 |           
|                            |                                                     |                                           |          |           |           
|                            | End of year                                         |                                           | $        | 966,935   |           
|                            |                                                     |                                           |          |           |           

See
accompanying notes.

17

---

QRS Music Technologies Inc.  Consolidated Statements of Cash Flows, ContinuedYears Ended June 30, 2003 and 2002

|                                                  |                   | 2003 |   | 2002   
|------------------------------------------------- | ----------------- | ---- | - | -------
|Supplemental disclosures of cash flow information |                   |      |   |        
|                                                  | Interest paid     |      | $ | 30,508 
|                                                  |                   |      |   |        
|                                                  | Income taxes paid |      | $ | 845,000
|                                                  |                   |      |   |        

Supplemental schedule of noncash financing activities



See
accompanying notes.

18

---



QRS Music Technologies Inc.  Notes to the Consolidated Financial Statements  Years Ended June 30, 2003 and 2002

Note 1 Nature of Operations and Significant Accounting Policies

Nature of OperationsQRS Music Technologies, Inc. (the "Company") is a manufacturer and
distributor of pianos, pianomation units, and compact discs and music rolls for use in player pianos. The Company sells its products to dealers and end-users, predominantly in the United
States.

Church
Services, Inc., a wholly owned subsidiary, was established during the year ended June 30, 2003 to acquire certain assets of Gulbransen, Inc.

The
Company has divisions in Buffalo, New York; Seneca, Pennsylvania; Naples, Florida; and Las Vegas, Nevada.

Principles of ConsolidationThe consolidated financial statements include the accounts of the Company and its wholly owned
subsidiary, Church Services, Inc. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of EstimatesThe preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Revenue RecognitionThe Company recognizes sales when products are shipped. The Company may, at times, arrange financing of
customers' purchases through commercial financing companies. These arrangements generally require the Company to repurchase pianos financed and repossessed by the commercial financing companies. The
purchase price is typically the total unpaid balance owed to the finance companies plus reasonable expenses.

Pianos
purchased from the finance companies are recorded into inventory on the same basis as the company records purchases of pianos from independent piano suppliers.

SegmentsIn June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which established annual reporting standards for an enterprise's operating segments and related disclosures about its products, services, geographic
areas and major customers. The Company's operations are within one reportable segment operating in the United States.

CashAt June 30, 2003 and 2002, the Company had deposits at two commercial banks. Deposits are insured by the Federal
Deposit Insurance Corporation (FDIC) up to $100,000. Deposits may from time to time exceed federally insured limits.

Accounts ReceivableThe Company grants trade credit to domestic and international customers. Receivables are valued at
management's estimate of the amount that will ultimately be collected. The allowance for doubtful accounts is based on the specific identification of uncollectible accounts and the Company's
historical collection experience.

InventoriesInventories are valued at the lower of cost or market under the first-in, first-out (FIFO)
method.

Property, Plant and EquipmentProperty, plant and equipment are valued at cost and depreciated using the
straight-line method over the estimated useful lives of the assets. Maintenance and repairs are charged to income as incurred. Expenditures that materially extend the useful lives of
assets are capitalized.

19

---

GoodwillThe Company adopted SFAS 141, "Business Combinations," and SFAS 142, "Goodwill and Other Intangible
Assets," effective July 1, 2002. Under these standards, all acquisitions subsequent to June 30, 2001 must be accounted for under the purchase method of accounting and
purchased goodwill is no longer subject to amortization. Rather, it is subject to periodic impairment tests based on its fair value. Goodwill represents the excess cost over the fair value of tangible
net assets of the Company and is recorded on the consolidated balance sheet in other assets. The Company reviews the carrying value of the goodwill annually and at other times when facts or
circumstances indicate that the recorded amount of goodwill may be impaired. If this review indicates that goodwill is not recoverable, the Company's carrying value of the goodwill is reduced by the
estimated shortfall. As of June 30, 2003, the Company has $60,000 of goodwill included in other assets on the consolidated balance sheets and no impairment has been recorded.

AdvertisingThe Company expenses advertising as the costs are incurred. Advertising expense was approximately $52,000 and
$132,000 for the years ended June 30, 2003 and 2002, respectively.

Research and DevelopmentThe Company expenses research and development as the costs are incurred.

Deferred Income TaxesDeferred income tax assets and liabilities are recognized for the expected future tax consequences of
events that have been included in the financial statements or tax returns. Under this method, deferred income tax assets and liabilities are determined based on the financial statement and tax basis
of assets and liabilities (Note 7).

Earnings Per ShareThe Company computes earnings per share ("EPS") under Statement of Financial Accounting Standard (SFAS)
No. 128, "Earnings per Share." Basic net earnings less preferred dividends are divided by the weighted average number of common shares outstanding during the year to calculate basic net
earnings per common share. Diluted net earnings per common share are calculated to give effect to the potential dilution that could occur if convertible preferred stock, warrants, options or other
contracts to issue common stock were exercised and resulted in the issuance of additional common shares.

The
computation of basic and diluted EPS was as follows:

| |                              | 2003                                                                   |   | 2002 |          
| | ---------------------------- | ---------------------------------------------------------------------- | - | ---- | ---------
| | Numerator                    |                                                                        |   |      |          
| |                              | Net income                                                             |   | $    | 1,182,756
| |                              | Preferred stock dividends                                              |   |      | (128,382 
| |                              |                                                                        |   |      |          
| | Basic EPS                    |                                                                        |   |      |          
| |                              | Income available to common stockholders                                |   | $    | 1,054,374
| |                              |                                                                        |   |      |          
| | Denominator                  |                                                                        |   |      |          
| |                              | Basic and diluted income per share-weighted average shares outstanding |   |      | 9,358,956
| |                              |                                                                        |   |      |          
| | Basic net income per share   |                                                                        | $ | 0.11 |          
| |                              |                                                                        |   |      |          
| | Diluted net income per share |                                                                        | $ | 0.11 |          
| |                              |                                                                        |   |      |          

In
2003 and 2002, 534,925 weighted average common shares from the conversion of convertible preferred stock were not included in the computation because they were antidilutive. In 2003
and 2002, options for 200,000 common shares were not included in the computation because they were antidilutive. In 2003, 100,000 common shares issued for the Gulbransen acquisition (Note 9)
were considered to be outstanding for the computation of basic and diluted shares, even though such shares have not yet been issued.

20

---

Fair Value of Financial InstrumentsThe carrying amounts of financial instruments including cash, accounts receivable,
accounts payable, and short-term debt approximate their fair values because of the relatively short maturity of these instruments. The carrying value of long-term debt,
including the current portion, approximated fair value based upon market prices for the same or similar instruments.

Recent Accounting PronouncementsIn November 2002, the Financial Accounting Standards Board ("FASB") issued
Interpretation ("FIN") No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," an interpretation of SFAS 5, 57 and
107 and Rescission of FIN 34. FIN 45 requires that guarantors recognize a liability for certain types of guarantees equal to the fair value of the guarantee upon its issuance. FIN 45 also requires
increased disclosure of guarantees, including product warranty information. The disclosure provisions of FIN 45 are effective for financial statements of interim or annual periods that end after
December 15, 2002. The provisions for initial recognition and measurement are effective on a prospective basis for guarantees that are issued or modified after December 31, 2002.
Effective January 1, 2003 the Company adopted FIN 45, which did not have a material impact on its financial position or results of operations.

In
November 2002, the Emerging Issues Task Force ("EITF") reached a consensus on EITF Issue 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables."
EITF Issue 00-21 provides guidance on how to determine when an arrangement that involves multiple revenue-generating activities or deliverables should be divided into separate units of
accounting for revenue recognition purposes, and if this division is required, how the arrangement consideration should be allocated among the separate units of accounting. The guidance in the
consensus is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The Company is currently evaluating certain implementation provisions, but does not
expect the adoption of EITF Issue 00-21 to have a material effect on its financial position, results of operations and cash flows.

In
December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based CompensationTransition and Disclosure," an amendment to SFAS 123.
SFAS 148 amends SFAS 123, "Accounting for Stock-based Compensation" to provide alternative methods of transition to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of
accounting for stock-based compensation and the effect of the method used on reported results. SFAS 148 is effective for fiscal years ending after December 15, 2002 with respect
to the alternative transition methods permitted and the annual disclosures required. The disclosure provisions for interim financial information is effective for all periods presented in financial
reports containing financial statements for interim periods beginning after December 15, 2002. Because the Company currently does not have stock-based compensation plans, SFAS 148 does
not have an impact on the Company's financial statements and related disclosures.

In
January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities: an Interpretation of ARB No. 51" (FIN 46). FIN 46 addresses
consolidation by business enterprises of entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity
to finance its activities without additional subordinated financial support from other parties. Variable interest entities are required to be consolidated by their primary beneficiaries if they do not
effectively disperse risks among parties involved. The primary beneficiary of a variable interest entity is the party that absorbs a majority of its expected residual returns. The consolidation
requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003 and apply to existing entities in the first fiscal year or interim period beginning after
June 15, 2003. Certain new disclosure requirements apply to all financial statements issued after January 31, 2003. The Company does not believe that these provisions will have a
material impact on its financial statements.

21

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In
April 2003, FASB issued SFAS 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS 149 amends and clarifies financial
accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities." The changes in SFAS 149 improve financial reporting by requiring that contracts with similar characteristics be accounted for similarly. SFAS 149 is
effective, with some exceptions, for contracts entered into or modified after June 30, 2003. The Company does not expect the application of SFAS 149 to have a material impact on its
financial position or results of operations because the Company does not use derivative instruments.

In
May 2003, the FASB issued SFAS 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity" ("SFAS 150").
SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS 150 requires that an
issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). The requirements of this statement apply to issuers' classification and measurement
of freestanding financial instruments, including those that comprise more than one option or forward contract. SFAS 150 is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company is in the process of assessing the impact of adopting
SFAS 150 on its results of operations, financial position or consolidated cash flows.

ReclassificationsCertain amounts reported in the 2002 financial statements have been reclassified to conform with the 2003
presentation without affecting previously reported net income.

Note 2 Inventories

Inventories at June 30, 2003 and 2002 consist of:

|                  |  | 2003 |           | 2002 |  
|----------------- |  | ---- | --------- | ---- | -
|Raw materials     |  | $    | 3,669,461 |      | $
|Finished goods    |  |      | 1,734,576 |      |  
|                  |  |      |           |      |  
|                  |  |      | 5,404,037 |      |  
|Valuation reserve |  |      | (348,842  | )    |  
|                  |  |      |           |      |  
|                  |  | $    | 5,055,195 |      | $
|                  |  |      |           |      |  

Note 3 Property, Plant and Equipment

Property,
plant and equipment at June 30, 2003 and 2002 consist of:

|                                          |  | 2003 |            | 2002 |   | Depreciable
Lives
|----------------------------------------- |  | ---- | ---------- | ---- | - | -----------------
|Land and buildings                        |  | $    | 878,303    |      | $ | 874,983          
|Leasehold improvements                    |  |      | 523,163    |      |   | 465,245          
|Machinery and equipment                   |  |      | 473,563    |      |   | 674,000          
|Office equipment                          |  |      | 281,865    |      |   | 287,325          
|Vehicles                                  |  |      | 41,840     |      |   | 85,496           
|                                          |  |      |            |      |   |                  
|                                          |  |      | 2,198,734  |      |   | 2,387,049        
|Accumulated depreciation and amortization |  |      | (1,206,526 | )    |   | (1,388,104       
|                                          |  |      |            |      |   |                  
|Net book value                            |  | $    | 992,208    |      | $ | 998,945          
|                                          |  |      |            |      |   |                  

Depreciation
and amortization expense amounted to $123,504 and $129,592 for the years ended June 30, 2003 and 2002, respectively.

22

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Note 4 Long-Term Debt

Long-term debt at June 30, 2003 and 2002 consists of:

2003

2002Note payablelending institutionpayable in monthly installments of $13,751 plus accrued interest at the prime rate (4.25% at June 30, 2003), due May 2007, secured by all assets of the
Company

$
646,279

$
811,291Current portion


(165,012
)

(165,012
)$
481,267

$
646,279


The
note payable requires the Company to satisfy certain financial tests concerning tangible capital funds and debt service coverage ratio. As of June 30, 2003 the Company was in
compliance with these financial covenants.

Note 5 Related-Party Transactions

During the year ended June 30, 2002 the Company advanced $552,073 to its major stockholder. Such advance was evidenced by an unsecured demand note bearing
interest at 6 percent per annum. During the year ended June 30, 2003, the advance was repaid in full including $4,095 in interest.

The
Company leases property from its major stockholder under a 20-year operating lease which expires December 2012. Annual lease payments are $24,000. On
April 1, 2000, the Company entered into an additional rental agreement with the same stockholder. The lease is on a month-to-month basis for $6,250 per month. Rent
expense incurred related to these agreements amounted to $99,000 for the years ended June 30, 2003 and 2002.

On
August 27, 1998, the Company borrowed $488,000 from its major stockholder for which the remaining balance of $374,000 was repaid to the stockholder during the year ended
June 30, 2002. Amounts outstanding bore interest at the rate of 6 percent per annum. Interest expense incurred for the year ended June 30, 2002 was $19,388.

Note 6 Stockholders' Equity

Each share of the Series A Preferred Stock is convertible into one share of common stock. Cumulative dividends (when declared) on the Series A
Preferred Stock will be paid at a rate of 6 percent per annum of the original liquidation value on June 30 and December 31. The preferred liquidation amount is $4 per share. The
holders of the preferred shares are entitled to one vote per share with respect to all matters submitted to a vote of the Company's stockholders. During the year ended June 30, 2003, the
Company declared and paid dividends totaling $409,000 to holders of the preferred shares. Dividends in arrears on the Series A Preferred Stock amounted to $425,485 and $770,292 at
June 30, 2003 and 2002, respectively. On August 1, 2003, the Company declared and paid dividends totaling $236,985 to holders of the preferred shares.

During
the year ended June 30, 2002, in exchange for consulting services, the Company granted an option to purchase 200,000 shares of stock at $1 per share exercisable until
February 15, 2007. The fair value of these options based upon an option pricing model was $41,312.

23

---

Note 7 Income Taxes

The components of the net deferred tax assets as of June 30, 2003 and 2002 are as follows:

2003

2002Deferred tax assetsAllowance for doubtful accounts

$
66,000

$
116,000Variation in inventories between tax and financial reporting purposes


161,000


115,000Other accruals


61,000


54,000$
288,000

$
285,000


A
reconciliation of the provision for income taxes and the amount computed by applying the federal statutory rate to income before income tax expense is as follows:

2003

2002Computed income tax expense at federal statutory rate

$
644,000

$
363,000Income tax expense at state rates (net of federal income tax effect)


81,000


15,000Other


(13,000
)

7,000$
712,000

$
385,000


Note 8 Commitments and Contingencies

The
Company is contingently liable under its third party financing agreements, arranged for its customers, in the amounts of $1,160,000 and $1,436,000 at June 30, 2003 and 2002,
respectively. The total pianos repurchased by the Company under these commitments amounted to $51,075 and $27,659 for the years ended June 30, 2003 and 2002, respectively. A reserve for
returns of $91,000 and $82,000 at June 30, 2003 and 2002, respectively, is included in accrued expenses in the accompanying balance sheets.

The
Company is a party to various other claims, legal actions and complaints arising in the ordinary course of business. In the opinion of management, all such matters are adequately
covered by insurance, or if not so covered, are without merit or are of such kind or involve such amounts that
unfavorable disposition would not have a material effect on the Company's financial position, results of operations or liquidity.

The
Company has entered into various royalty and licensing agreements with third parties. Royalty and licensing expense for the years ended June 30, 2003 and 2002 amounted
to approximately $300,000 in each year.

Note 9 Asset Acquisition

On December 11, 2002, the Company, through a newly formed, wholly owned subsidiary, acquired certain assets of Gulbransen, Inc. for $164,177 in
cash, 100,000 shares of the Company's common stock and future royalty payments (through November 1, 2032) based on sales volume. The common stock is to be issued upon the completion of certain
documentation. The purchase price was negotiated based on the fair value of the inventory purchased plus a multiple of prior financial results and perceived opportunities. As of June 30, 2003,
the common stock was not issued and a liability was recorded in accrued expenses to reflect the fair value, as of December 11, 2002, of the common stock to be issued.

24

---

The
acquisition has been accounted for as a purchase under the provisions of SFAS 141, "Business Combinations." The total purchase price has been allocated to the tangible and
intangible assets of the Company based on their respective values. The following provides an allocation of the purchase price:

Inventory

$
164,177Goodwill


60,000Purchase price

$
224,177


Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

None

Item 8A. Controls and Procedures.

Evaluation
of Disclosure Controls and Procedures.

Our
Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act
Rules 240.13a-14(c) and 15d-14(c)) as of the end of the fiscal year. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that the Company's current disclosure controls and procedures are effective and timely, providing all material information relating to the Company required to be disclosed in reports filed
or submitted under the Exchange Act.

Changes
in Internal Controls.

There
have not been any significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their
evaluation. We are not aware of any significant deficiencies or material weaknesses, therefore no corrective actions were taken.

PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act.

DIRECTORS AND OFFICERS. The Directors and Executive Officers of Registrant and the positions held by each of them are as follows. All directors serve until
Registrant's next annual meeting of shareholders.

|Name             |  | Age |  | Serving as
Director of
Registrant Since |  | Position Held With
the Registrant                      
|---------------- |  | --- |  | --------------------------------------- |  | -------------------------------------------------------
|Richard A. Dolan |  | 68  |  | 1990                                    |  | Director, Chairman                                     
|Ann A. Jones     |  | 38  |  | 1996                                    |  | Secretary, Treasurer, Chief Financial Officer, Director
|Geoffry Matlin   |  | 52  |  | 1998                                    |  | Director                                               
|Thomas A. Dolan  |  | 44  |  |                                         |  | President, Chief Executive Officer                     

BIOGRAPHICAL INFORMATION.

Richard
A. Dolan

For
more than the past five years, Mr. Dolan has been majority shareholder, and a director of Registrant. He also served as President and Chief Executive officer through
June, 2002. He was the founder of and has been the principal owner and Chairman of Alltech International Holdings since 1971. Prior to 1971 he was Research Director of Simoniz in Europe.
Mr. Dolan has a Bachelor of Science in chemistry from DePaul University, a Master of Science degree in chemistry from Roosevelt University.

25

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Ann A. Jones

Ms. Jones
has been Secretary, Treasurer, Chief Financial Officer and Director of Registrant since 1996. From June 1988 to June 1996 Ms. Jones has served in
various capacities with Registrant including customer service and manager. Ms Jones has a Bachelor of Science degree in hotel and resort management from the Rochester Institute of Technology.

Geoffry
Matlin

Geoffry
Matlin has been a director of the Registrant since September 1998. From 1998 to the present, Mr. Matlin has been the Chief Financial officer of Alltech
Associates, Inc., a manufacturer and distributor of chromatography equipment. From 1995 to 1998 he was the corporate controller of Alltech. Mr. Matlin is also a director of Alltech
International Holdings.

Thomas
A. Dolan

Thomas
A. Dolan, son of Chairman Richard A. Dolan, has been the President and Chief Executive Officer of the Registrant since July 2002. Employed by Registrant since 1994,
Mr. Dolan has served in various capacities including regional and national sales and manager of research and development. Mr. Dolan has a bachelor's degree in Industrial Administration
and Economics from Iowa State University, and an Electrical Engineering degree from the University of Arizona. He has worked for Motorola, Inc. in its component products division and Johnson
Controls as a Sales Engineer.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Based solely upon review of Forms 3 and 4 and amendments thereto furnished to Registrant under Rule 16a-3(e) during its most recent
fiscal year and written representations received from reporting persons, no person who was a director, officer or 10% beneficial owner failed to timely file reports required by
Section 16(a) of the Exchange Act.

Item 10. Executive Compensation.

The
following table sets forth information concerning compensation for services in all capacities by the Registrant and its subsidiaries for fiscal years ended June 30,
2001, 2002 and 2003 of those persons who were, at June 30, 2003, the Chief Executive Officer of the Registrant and other highly compensated executive officers and employees of Registrant.

SUMMARY COMPENSATION TABLE

|Name and
Principal postion |  | Year                |  | Salary |                             | Other Annual
Compensation |   | Long-Term Compensation
Securities
Underlying
Options/SARs
|-------------------------- |  | ------------------- |  | ------ | --------------------------- | ------------------------- | - | ---------------------------------------------------------
|Richard Dolan
Chairman     |  | 2000
2001
2002
2003 |  | $$$    | 60,000
60,000
60,000
      |                           |   |                                                          
|Ann Jones
CFO              |  | 2000
2001
2002
2003 |  | $$$$   | 85,000
85,000
85,000
87,000 |                           | $ | 300,000                                                  
|Thomas Dolan
Pres., CEO    |  | 2003                |  | $      | 81,000                      |                           |   |                                                          

26

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Mr. Richard
Dolan has no employment agreement and was compensated in the amount of $60,000 per year. In July 2003 he resigned as President and Chief Executive Officer and
has not received any compensation since then.

Registrant
intends to compensate directors for attendance at board meetings. Such director compensation has not been determined but is expected to be less than $2,000 per meeting.

Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

PRINCIPAL SHAREHOLDERS.

The following table sets forth as of June 30, 2003, the number of Registrant's voting securities beneficially owned by persons who own five percent or more
of Registrant's voting stock, by each director, and by all officers and directors as a group. The table presented below includes shares issued and outstanding, and warrants to purchase shares and
options exercisable within 60 days.

|Title and Class             |  | Name and Address
Of Beneficial Owner             |  | Type of
Ownership                 |  | Number of
Shares Owned |    | Percent of
Class |  
|--------------------------- |  | ------------------------------------------------ |  | --------------------------------- |  | ---------------------- | -- | ---------------- | -
|Common Stock
$.01 par value |  | Richard Dolan
2011 Seward Ave.
Naples, FL 34109  |  | Record and Beneficial             |  | 6,079,164              | *  | 61               | %
|Common Stock
$.01 par value |  | Ann Jones
2011 Seward Ave.
Naples, FL 34109      |  | Record and Beneficial             |  | 200,063                |    | 2                | %
|Common Stock
$.01 par value |  | Geoffry Matlin
2011 Seward Ave.
Naples, FL 34109 |  | Record and Beneficial             |  | 24,250                 |    | ***              |  
|Common Stock
$.01 par value |  | Thomas Dolan
2011 Seward Ave.
Naples, FL 34109   |  | Record and Beneficial             |  | 293,827                | ** | 3                | %
|Common Stock
$.01 par value |  | All Officers and Directors As a Group            |  | Record and Beneficial (4 persons) |  | 6,597,054              |    | 66               | %

---

Item 12. Certain Relationships and Related Transactions.

Registrant leases from Richard A. Dolan 4,000 square feet of warehouse and office space located in Naples, Florida. Richard A. Dolan is Registrant's President,
Chief Executive Officer, controlling shareholder and a Member of Registrant's Board of Directors. The lease was executed January 1, 1993 and has a term of 20 years. Rental is $24,000 per
year.

Registrant
also leases from Mr. Dolan 6,000 square feet of showroom space in Las Vegas, Nevada. That lease is month-to-month with rental payments of
$75,000 per year.

27

---

During
the year ended June 30, 2002, the Company advanced $552,073 to its major stockholder. Such advance was evidenced by an unsecured demand note bearing interest at
6 percent per annum. During the year ended June 30, 2003 the advance was repaid in full with $4,095 interest.

Registrant
has declared and paid $409,000 in preferred stock dividends in fiscal year 2003. All shares of preferred stock are owned by Registrant's Chairman.

Registrant
has no and is not currently considering adopting any policy regarding transactions with affiliates. In the future the Registrant will not advance funds to affiliates.

Item 13. Exhibits and Reports on Form 8-K.

|Exhibit Number          |                                                                             | Page #
|----------------------- | --------------------------------------------------------------------------- | ------
|2                       | (i)                                                                         |       
|                        | (ii)                                                                        |       
|6    Material Contracts |                                                                             |       
|                        | (i)                                                                         |       
|                        | (ii)                                                                        |       
|31.1                    | Certifications of Chief Financial Officer pursuant to rule 13a-14(a)        |       
|31.2                    | Certifications of Chief Executive Officer pursuant to rule 13a-14(a)        |       
|32.1                    | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 |       
|32.2                    | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 |       

---

Item 14. Principal Accountant Fees and Services.

The Board of Directors, upon recommendation of the Audit Committee, appointed the firm of Altschuler, Melvoin & Glasser LLP ("AM&G") certified public
accountants for fiscal 2003.

AM&G
has a continuing relationship with American Express Tax and Business Services, Inc. ("TBS") from which it leases staff who are full time, permanent employees of TBS and
through which its partners provide non-audit services. As a result of this arrangement, AM&G has no full time employees and, therefore, none of the audit services performed were provided
by permanent, full-time employees of AM&G. AM&G manages and supervises the audit engagement and the audit staff and are exclusively responsible for the opinion rendered in connection with
its audit.

Other
services, which do not include financial information system design and implementation have been provided by TBS.

Aggregate
fees billed to us by AM&G for professional services rendered for the year ended June 30, 2003 and 2002 and for reviews of the financial statements included in our
Quarterly Reports on Form 10-Q for those years approximated $63,000 in each year. AM&G provided no other professional services during fiscal 2003 or fiscal 2002. AM&G did not
render any services for financial information systems design and implementation.

Preapproval of Policies and Procedures by Audit Committee.

The accountants provide a quote for services to the audit committee before work begins for the fiscal year. After discussion the audit committee then makes a
recommendation to the board on whether to accept the proposal.

Percentage of services approved by Audit Committee.

All services were approved by the audit committee.

28

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

|               |  | QRS MUSIC TECHNOLOGIES, INC.                        
|-------------- |  | ----------------------------------------------------
|Date: 09/26/03 |  | /s/ANN A. JONESAnn A. Jones, Chief Financial Officer

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