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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, 2002

Commission file number: 0-31955

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

Delaware

36-3683315(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)2011 Seward Avenue,
Naples, Florida

34109(Address of principal executive offices)

(Zip Code)


Issuer's
telephone number(239) 597-5888

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
X  No

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.  X

The
issuer's revenues for its most recent fiscal year were $12,010,826.

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 ($1.30) and
closing asked ($1.35) price of such common equity, as of June 30, 2002 was $3,502,442.

The
number of shares outstanding of the issuer's common stock as of June 30, 2002 was 9,248,956. Transitional Small Business Disclosure Format (Check one):  Yes
  No X

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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, 2002, 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
and manufacture and sale of music rolls for player pianos. Registrant's corporate offices and Pianomation® development facilities and showroom are located in Naples, Florida. Registrant
has a warehouse, piano restoration 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. In May 2002 the Registrant discontinued the manufacture of a majority of its acoustic pianos,
and the manufacturing facility in Seneca, Pennsylvania has been converted to concentrate on pianos with special features and imported pianos. See "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, Samick Music Corporation 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 serve the
working musician as a MIDI slave, interacting on a sophisticated level with all manner of MIDI equipment. Registrant also sells the Playola System of portable piano automation. Unlike the

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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 and Organ Co., Young Chang Pianos, Weber Pianos and Samick Music Corporation and other distributors who private label the system. Playola is distributed
though the same network of independent piano retailers.

STORY &
CLARK PIANOS

Registrant
manufactures, imports and sells pianos under 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. In 1997, Story & Clark introduced the Hampton Grand Piano which is an art-case piano. An art case piano is a piano with a
body other than the traditional bent rim frame used on a majority of pianos made. The Hampton utilizes a yacht tail design where four pieces of wood are joined to form the frame. A traditional piano
takes 1 piece of wood and bends it into the curved shape. For fiscal year ended June 30, 2002 and June 30, 2001 Hampton piano sales represented 1.75% of total overall sales, and 2.9% of
overall sales respectively.

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

With the exception of its Prelude and Cambridge lines, all Story & Clark pianos were manufactured at Registrant's 46,000 square foot facility in Seneca,
Pennsylvania. The Prelude and Cambridge lines are imported from the Peoples Republic of China. Registrant believes that there is an adequate supply of all materials used to build its 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 name is used for pianos imported from the Dongbei Piano Company, of the People's Republic of China, and the Cambridge name is used on pianos imported from the Beijing Piano, of the People's
Republic of China. For fiscal year ended June 30, 2002 and June 30, 2001 combined Cambridge and Prelude sales represented 19.15% and 8.39% of overall sales respectively.

Piano Distribution

Registrant distributes its pianos through a network of approximately 125 to 180 independent piano stores in the following states: Alabama (2); Arizona (4);
California (9); Colorado (9); Connecticut (3); Delaware (3); Florida (10); Georgia (3); Iowa (1); Illinois (6); Indiana (6); Kansas (1); Kentucky (8); Louisiana (3); Massachusetts (4); Maryland (4);
Minnesota (6); Missouri (2); Mississippi (2); North Carolina (3); North Dakota (1); Nebraska (2); New Hampshire (1); New Jersey (4); Nevada (1); New York (10); Ohio (10); Oklahoma (2); Oregon (5);
Pennsylvania (19); South Carolina (2); Tennessee (5); Texas (7); Utah (5); Virginia (2); Vermont (1); Washington (2); Wisconsin (5); Wyoming (1).

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, 2002, approximately
11.4% 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 $75,134 for the year ended June 30, 2002. In Fiscal 2002, 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, 2002 and 2001 player piano roll sales represented 3.9% and 3.47% 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.

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Roll Distribution.

Player piano rolls and player piano accessories are primarily sold though mail order catalog. Registrant maintains a mailing list of over 89,000 qualified buyers.
Registrant also sells player piano rolls and accessories on its internet web site and through approximately 55 independent dealers.

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, 2002 and 2001 were 7.69% and 6.97% 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 and Organ, 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, 2002 perforated paper roll players represented 3.77% of our piano sales, and for fiscal year ended June 30, 2001 they represented 7.52%. For
fiscal year ended June 30, 2002 and 2001, nickelodeons represented 3.16% and 5.15% of piano sales respectively. Total piano sales for fiscal year ended June 30, 2002 and 2001 represented
27.96% and 21.44% of total overall sales respectively. Sales of Pianomation® systems and hardware products for fiscal year ended June 30, 2002 and 2001 represented 57.71% and 63.54%
of overall sales respectively. Approximately 45.15% of Story & Clark pianos sold were retrofitted with the Pianomation® system in fiscal year 2002 and approximately 1.45% in fiscal
year 2001.

EMPLOYEES

Registrant
employs 45 full-time employees and 1 part-time employee.

PATENTS
TRADEMARKS AND LICENSES

Registrant
has 5 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 No. 2,490,762 (Story & Clark) and Registration No. 2,227,035 (Pianomation).

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

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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 President 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 an
unrelated party an
additional 1,500 square feet of showroom space in Naples, Florida. Registrant leases from its President 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.

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
Naples, Florida                 |  | $                   | 873   |               | 04/01/2002 |           
|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.

None

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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 Sheets. The high and low bids of Registrant's common stock for each quarter during fiscal years ended June 30, 2002, and 2001 are as follows:

High Bid Price

Low Bid PriceFiscal Year Ended June 30, 2001:First Quarter

$
1.70

$
1.01Second Quarter


1.50


.56
25Third Quarter


3.25


.57Fourth Quarter


3.00


1.02Fiscal Year Ended June 30, 2002:First Quarter


1.25


.60Second Quarter


.72


.45Third Quarter


1.95


.45Fourth Quarter


2.07


1.20


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 139 registered owners of Registrant's common stock as of June 30, 2002.

Registrant
has paid no dividends in the past three fiscal years. Registrant has no intention of paying dividends in the foreseeable future.

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; and other factors particular to Registrant.

The
Registrant's fiscal year ends each June 30, and the fiscal years ended June 30, 2002, June 30, 2001 are referred to as "fiscal 2002" and "fiscal 2001",
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 divisions in New York, Pennsylvania, Florida and Nevada.

FISCAL
2002 COMPARED TO FISCAL 2001.

SALES.Total sales decreased 11.6% from $13.59 million in fiscal 2001 to $12.01 million in fiscal 2002.
Pianomation sales decreased overall by $1.7 million. Lower Pianomation® sales were a result of the financial difficulties being experienced by two of the piano manufacturers that
distribute the system. Young Chang Pianos, USA, one of the two OEM accounts with decreased sales, has experienced a decrease in overall sales due to the current decline in piano
purchases.Baldwin has filed for protection under the bankruptcy laws of the United States and has ordered fewer Pianomation® systems for
installation on its pianos. Since filing for protection under the bankruptcy laws of the United States, the assets of the corporation were acquired by Gibson Musical Instruments, Inc. Overall,
the piano industry experienced a significant decrease in sales starting in January of 2001. The overall decline in purchases can be attributed to the overall decline in the economy, and the
reluctance of the public to spend money on relatively large purchases. Despite the decline in piano sales throughout the industry, Registrant's sales of pianos increased by $445,000 in fiscal 2002.
The introduction of a new imported piano and the continued overall acceptance of the Story & Clark line of pianos by the dealer network have contributed to the increase.

COSTS AND EXPENSES.Total cost of sales decreased 7.6% from $9.07 million in fiscal 2001 to $8.38 million in
fiscal 2002. As a percentage of sales, cost of sales increased 3.04 percentage points from 66.79% in fiscal 2001 to 69.83% in fiscal 2002. The increase is a result of special introductory
promotions offered in the 4th quarter, which reduced revenues per unit sold, and an inventory write-down taken by the Registrant for the disposal of parts no longer required
since the Registrant ceased a majority of its piano production.

Selling,
general and administrative expenses decreased 29.6% from $3.06 million in fiscal 2001 to $2.16 million in fiscal 2002. Expenses were higher in 2001as compared to
2002 due to higher bonuses being paid in fiscal 2001 and the write-off of amounts from Baldwin Piano and Organ in fiscal 2001. The decreased expenses in 2002 are also attributable to the
2002 reduction in office personnel for the
Las Vegas and Seneca operations    Research and development expenses increased 8.7% from $283,000 in fiscal 2001 to $308,000 in fiscal 2002 due to the additional expense of development of
a new self-tuning piano.

INTEREST EXPENSE, NET.Net interest expense decreased 29.7% from $128,000 in fiscal 2001 to $90,000 in fiscal 2002. The
decrease is due to declining loan balances and the repayment in full of a loan from a shareholder.

PROVISION FOR INCOME TAXES.Registrant's effective tax rate for fiscal 2001 and fiscal 2002 was 37.1% 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 $1.5 million and $753,000 at June 30, 2002 and 2001, respectively. Fiscal 2002 earnings before interest, taxes, depreciation and
amortization ("EBITDA") decreased $10,000 to $1.29 million from $1.30 million in fiscal 2001. Registrant's cash and cash equivalent increased for year ended June, 30, 2002 as compared to
the year ended June 30, 2001 as a result of better collection of account balances, a reduction of inventory levels offset by an advance made to the registrants major shareholder, as well as
reductions in trade payables, accrued expenses and debt obligation. The accounts receivable for fiscal year ended June 30, 2002 were lower than fiscal

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year ended June 30, 2001, due to better collection of outstanding balances and more dealer financing in the last quarter.

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 (4.75% at June 30, 2002) 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
|---------------- |  | ------- |  | ----------------------
|
|Long Term Debt   |  | 811,291 |  | 165,012               
|Operating Leases |  | 997,857 |  | 106,857               

Item 7. Recently Adopted Accounting Standards.

In July 2001, the FASB issued Statement of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141") and Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 141 requires all business combinations to be accounted for using the purchase
method of accounting and is effective for all business combinations initiated after June 30, 2001. Under SFAS 142, businesses are no longer required to amortize goodwill and other
intangible assets with indefinite lives, but would be subject to periodic testing for impairment. The Registrant is currently not affected by these pronouncements but will consider the affects of
adoption with regard to future transactions.

In
August 2001, the FASB issued Statement of Financial Accounting Standards No. 143, "Accounting for Obligations Associated with the Retirement of Long-Lived
Assets" ("SFAS 143"). SFAS 143 establishes
accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset cost. It also provides accounting guidance for legal obligations associated with the
retirement of tangible long-lived assets. SFAS 143 is effective in fiscal years beginning after June 15, 2002, with early adoption permitted. The Company plans to
adopt SFAS 143 effective July 1, 2003. The Registrant does not expect that the adoption will have a material impact on its results of operations and financial condition.

In
October 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144"). SFAS 144 establishes a single accounting model for the impairment or disposal of long-lived assets, including discontinued operations. SFAS 144
superseded Statement of Financial Accounting Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for Long Lived Assets to Be Disposed Of," and APB Opinion
No. 30, "Reporting the Results of Operations, Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." The
provisions of SFAS 144 are effective in fiscal years beginning after December 15, 2001, with early adoption permitted, and in general are to be applied prospectively. The Company
will adopt SFAS 144 effective July 1, 2002 and does not expect that the adoption will have a material impact on its results of operations and financial condition.

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Item 8. Financial Statements.

10

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QRS Music Technologies Inc.        Table of Contents        June 30, 2002 and 2001

|                              |                                               | Page      
|----------------------------- | --------------------------------------------- | ----------
|Independent Auditors' Report  |                                               | F-1       
|Financial Statements          |                                               |           
|                              | Balance Sheets                                |           
|                              | Statements of Income                          |           
|                              | Statements of Changes in Stockholders' Equity |           
|                              | Statements of Cash Flows                      |           
|Notes to Financial Statements |                                               | F-6 - F-10

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Independent Auditors' Report

Board
of Directors of
QRS Music Technologies Inc.

We
have audited the accompanying balance sheets of QRS Music Technologies Inc. as of June 30, 2002 and 2001, and the related statements of income, changes in stockholders'
equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these 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 audits 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 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 financial statements referred to above present fairly, in all material respects, the financial position of QRS Music Technologies Inc. as of June 30,
2002 and 2001, 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 16, 2002

F-1

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QRS Music Technologies Inc.        Balance Sheets        June 30, 2002 and 2001

|                                     |                                                                                                                                                                                                                                   | 2002 |           | 2001     
|------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | --------- | ---------
|Assets                               |                                                                                                                                                                                                                                   |      |           |          
|Current assets                       |                                                                                                                                                                                                                                   |      |           |          
|                                     | Cash                                                                                                                                                                                                                              |      | $         | 1,504,880
|                                     | Accounts receivable (net of allowance for doubtful accounts of $166,000 and $150,000, respectively, as of June 30, 2002 and 2001)                                                                                                 |      |           | 864,273  
|                                     | Inventories                                                                                                                                                                                                                       |      |           | 3,554,071
|                                     | Note receivablestockholder                                                                                                                                                                                                       |      |           | 552,073  
|                                     | Income taxes refundable                                                                                                                                                                                                           |      |           | 55,000   
|                                     | Deferred income taxes                                                                                                                                                                                                             |      |           | 285,000  
|                                     | Prepaid expenses and other current assets                                                                                                                                                                                         |      |           | 187,374  
|                                     |                                                                                                                                                                                                                                   |      |           |          
|                                     |                                                                                                                                                                                                                                   |      | 7,002,671 |          
|Property, plant and equipment        |                                                                                                                                                                                                                                   |      | 998,945   |          
|Other assets                         |                                                                                                                                                                                                                                   |      | 33,129    |          
|                                     |                                                                                                                                                                                                                                   |      |           |          
|                                     |                                                                                                                                                                                                                                   | $    | 8,034,745 |          
|                                     |                                                                                                                                                                                                                                   |      |           |          
|Liabilities and Stockholders' Equity |                                                                                                                                                                                                                                   |      |           |          
|Current liabilities                  |                                                                                                                                                                                                                                   |      |           |          
|                                     | Current portion of long-term debt                                                                                                                                                                                                 |      | $         | 165,012  
|                                     | Note payablestockholder                                                                                                                                                                                                          |      |           |          
|                                     | Accounts payable                                                                                                                                                                                                                  |      |           | 443,957  
|                                     | Accrued expenses (including due to related parties of $320,000 as of June 30, 2001)                                                                                                                                               |      |           | 290,548  
|                                     | Income taxes payable                                                                                                                                                                                                              |      |           |          
|                                     |                                                                                                                                                                                                                                   |      |           |          
|                                     |                                                                                                                                                                                                                                   |      | 899,517   |          
|                                     |                                                                                                                                                                                                                                   |      |           |          
|Long-term debt                       |                                                                                                                                                                                                                                   |      | 646,279   |          
|                                     |                                                                                                                                                                                                                                   |      |           |          
|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 2002 and 2001, liquidation value of $2,909,992, and $2,781,610, respectively, as of June 30,
2002 and 2001 |      |           | 5,349    
|                                     | Class A common stock, voting, $.01 par value, 40,000,000 shares authorized, 9,248,956 shares issued and outstanding in 2002 and 2001                                                                                              |      |           | 92,490   
|                                     | Additional paid-in capital                                                                                                                                                                                                        |      |           | 5,672,557
|                                     | Retained earnings                                                                                                                                                                                                                 |      |           | 718,553  
|                                     |                                                                                                                                                                                                                                   |      |           |          
|                                     |                                                                                                                                                                                                                                   |      | 6,488,949 |          
|                                     |                                                                                                                                                                                                                                   |      |           |          
|                                     |                                                                                                                                                                                                                                   | $    | 8,034,745 |          
|                                     |                                                                                                                                                                                                                                   |      |           |          

See
accompanying notes.

F-2

---

QRS Music Technologies Inc.        Statements of Income        Years Ended June 30, 2002 and 2001

|                                                       |                                     | 2002 |            | 2001      |  
|------------------------------------------------------ | ----------------------------------- | ---- | ---------- | --------- | -
|Net sales                                              |                                     | $    | 12,010,826 |           | $
|Cost of sales                                          |                                     |      | 8,387,713  |           |  
|                                                       |                                     |      |            |           |  
|Gross profit                                           |                                     |      | 3,623,113  |           |  
|                                                       |                                     |      |            |           |  
|Operating expenses                                     |                                     |      |            |           |  
|                                                       | Selling, general and administrative |      |            | 2,156,039 |  
|                                                       | Research and development            |      |            | 307,686   |  
|                                                       |                                     |      |            |           |  
|                                                       |                                     |      | 2,463,725  |           |  
|                                                       |                                     |      |            |           |  
|Income from operations                                 |                                     |      | 1,159,388  |           |  
|Interest expense                                       |                                     |      | 90,063     |           |  
|                                                       |                                     |      |            |           |  
|Income before income taxes                             |                                     |      | 1,069,325  |           |  
|                                                       |                                     |      |            |           |  
|Income tax expense (benefit)                           |                                     |      |            |           |  
|                                                       | Federal                             |      |            | 250,000   |  
|                                                       | State                               |      |            | 45,000    |  
|                                                       | Deferred                            |      |            | 90,000    |  
|                                                       |                                     |      |            |           |  
|                                                       |                                     |      | 385,000    |           |  
|                                                       |                                     |      |            |           |  
|Net income                                             |                                     |      | 684,325    |           |  
|Less current year preferred stock dividends in arrears |                                     |      | (128,382   | )         |  
|                                                       |                                     |      |            |           |  
|Income available to common stockholders                |                                     | $    | 555,943    |           | $
|                                                       |                                     |      |            |           |  
|Net income per common share                            |                                     |      |            |           |  
|                                                       | Basic                               |      | $          | 0.06      |  
|                                                       |                                     |      |            |           |  
|                                                       | Assuming dilution                   |      | $          | 0.06      |  
|                                                       |                                     |      |            |           |  
|Shares used in computing per share amounts             |                                     |      |            |           |  
|                                                       | Basic                               |      |            | 9,248,956 |  
|                                                       |                                     |      |            |           |  
|                                                       | Assuming dilution                   |      |            | 9,248,956 |  
|                                                       |                                     |      |            |           |  

See
accompanying notes.

F-3

---



QRS Music Technologies Inc.        Statements of Changes in Stockholders' Equity        Years Ended June 30, 2002 and 2001

|                                  |  | Series A Preferred Stock |  | Common Stock |       |  |           |  |   |       
|--------------------------------- |  | ------------------------ |  | ------------ | ----- |  | --------- |  | - | ------
|
|Balance, June 30, 2000            |  | 534,925                  |  | $            | 5,349 |  | 9,248,956 |  | $ | 92,490
|Net income                        |  |                          |  |              |       |  |           |  |   |       
|                                  |  |                          |  |              |       |  |           |  |   |       
|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
|                                  |  |                          |  |              |       |  |           |  |   |       

See
accompanying notes.

F-4

---

QRS Music Technologies Inc.        Statements of Cash Flows        Years Ended June 30, 2002 and 2001

|                                                 |                                        | 2002                                      |           | 2001      |          
|------------------------------------------------ | -------------------------------------- | ----------------------------------------- | --------- | --------- | ---------
|Operating activities                             |                                        |                                           |           |           |          
|                                                 | Net income                             |                                           | $         | 684,325   |          
|                                                 | Depreciation and amortization          |                                           |           | 129,592   |          
|                                                 | Allowance for doubtful accounts        |                                           |           | 16,000    |          
|                                                 | Reserve for repurchased pianos         |                                           |           |           |          
|                                                 | Reserve for returns                    |                                           |           | (8,000    | )        
|                                                 | Deferred tax expense (benefit)         |                                           |           | 90,000    |          
|                                                 | Stock options issued for services      |                                           |           | 41,312    |          
|                                                 | Changes in                             |                                           |           |           |          
|                                                 |                                        | Accounts receivable                       |           |           | 324,152  
|                                                 |                                        | Inventories                               |           |           | 1,255,869
|                                                 |                                        | Incomes taxes refundable                  |           |           | (55,000  
|                                                 |                                        | Prepaid expenses and other current assets |           |           | (49,632  
|                                                 |                                        | Other assets                              |           |           | 14,232   
|                                                 |                                        | Accounts payable                          |           |           | (115,358 
|                                                 |                                        | Accrued expenses                          |           |           | (300,061 
|                                                 |                                        | Income taxes payable                      |           |           | (160,000 
|                                                 |                                        |                                           |           |           |          
|Net cash provided by operating activities        |                                        |                                           | 1,867,431 |           |          
|                                                 |                                        |                                           |           |           |          
|Investing activities                             |                                        |                                           |           |           |          
|                                                 | Acquisitions of property and equipment |                                           |           | (20,889   | )        
|                                                 | Advances to stockholder                |                                           |           | (552,073  | )        
|                                                 |                                        |                                           |           |           |          
|                                                 | Net cash used in investing activities  |                                           |           | (572,962  | )        
|                                                 |                                        |                                           |           |           |          
|Financing activities                             |                                        |                                           |           |           |          
|                                                 | Repayments of note payablestockholder |                                           |           | (374,000  | )        
|                                                 | Repayments of long-term debt           |                                           |           | (169,046  | )        
|                                                 |                                        |                                           |           |           |          
|                                                 | Net cash used in financing activities  |                                           |           | (543,046  | )        
|                                                 |                                        |                                           |           |           |          
|Increase (decrease) in cash                      |                                        |                                           | 751,423   |           |          
|Cash                                             |                                        |                                           |           |           |          
|                                                 | Beginning of year                      |                                           |           | 753,457   |          
|                                                 |                                        |                                           |           |           |          
|                                                 | End of year                            |                                           | $         | 1,504,880 |          
|                                                 |                                        |                                           |           |           |          
|Supplemental disclosure of cash flow information |                                        |                                           |           |           |          
|                                                 | Interest paid                          |                                           | $         | 90,063    |          
|                                                 |                                        |                                           |           |           |          
|                                                 | Income taxes paid                      |                                           | $         | 510,000   |          
|                                                 |                                        |                                           |           |           |          

See
accompanying notes.

F-5

---

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.

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

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, 2002 and 2001, 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.

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.

AdvertisingThe Company expenses advertising as the costs are incurred. Advertising expense was approximately $132,000 and
$220,000 for the years ended June 30, 2002 and 2001, 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 Financial Accounting Standard (FAS) 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

F-6

---

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:

2002

2001NumeratorNet income

$
684,325

$
652,851Preferred stock dividends


(128,382
)

(128,382
)Basic EPSIncome available to common stockholders

$
555,943

$
524,469DenominatorBasic and dilutive income per share-weighted average shares outstanding


9,248,956


9,248,956Basic net income per share

$
0.06

$
0.06Diluted net income per share

$
0.06

$
0.06


In
2002 and 2001, 534,925 weighted average common shares from the conversion of convertible preferred stock were not included in the computation because they were antidilutive. In 2002,
options for 200,000 common shares were not included in the computation because they were antidilutive.

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 July 2001, the FASB issued Statement of Financial Accounting Standards
No. 141, "Business Combinations" ("SFAS 141") and Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 141
requires all business combinations to be accounted for using the purchase method of accounting and is effective for all business combinations initiated after June 30, 2001. Under
SFAS 142, businesses are no longer required to amortize goodwill and other intangible assets with indefinite lives, but would be subject to periodic testing for impairment. The Company is
currently not affected by these pronouncements but will consider the affects of adoption with regard to future transactions.

In
August 2001, the FASB issued Statement of Financial Accounting Standards No. 143, "Accounting for Obligations Associated with the Retirement of Long-Lived
Assets" ("SFAS 143"). SFAS 143 establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset cost. It also provides
accounting guidance for legal obligations associated with the retirement of tangible long-lived assets. SFAS 143 is effective in fiscal years beginning after June 15,
2002, with early adoption permitted. The Company plans to adopt SFAS 143 effective July 1, 2003. The Company does not expect that the adoption will have a material impact on its results
of operations and financial condition.

In
October 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144"). SFAS 144 establishes a single accounting model for the impairment or disposal of long-lived assets, including discontinued

F-7

---

operations. SFAS 144 superseded Statement of Financial Accounting Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," and APB Opinion No. 30, "Reporting the Results of OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions." The provisions of SFAS 144 are effective in fiscal years beginning after December 15, 2001, with early adoption permitted, and in
general are to be applied prospectively. The Company will adopt SFAS 144 effective July 1, 2002 and does not expect that the adoption will have a material impact on its results of
operations and financial condition.

Note 2 Inventories

Inventories at June 30, 2002 and 2001 consist of:

2002

2001Raw materials

$
1,841,641

$
3,220,594Work-in-process





39,546Finished goods


1,934,938


1,668,5433,776,579


4,928,683Valuation reserve


(222,508
)

(118,743
)$
3,554,071

$
4,809,940


Note 3 Property, Plant and Equipment

Property, plant and equipment at June 30, 2002 and 2001 consist of:

|                                          |  | 2002 |            | 2001 |   | Depreciable
Lives
|----------------------------------------- |  | ---- | ---------- | ---- | - | -----------------
|Land and buildings                        |  | $    | 874,983    |      | $ | 874,983          
|Leasehold improvements                    |  |      | 465,245    |      |   | 455,614          
|Machinery and equipment                   |  |      | 674,000    |      |   | 674,038          
|Office equipment                          |  |      | 287,325    |      |   | 276,029          
|Vehicles                                  |  |      | 85,496     |      |   | 101,092          
|                                          |  |      |            |      |   |                  
|                                          |  |      | 2,387,049  |      |   | 2,381,756        
|Accumulated depreciation and amortization |  |      | (1,388,104 | )    |   | (1,274,108       
|                                          |  |      |            |      |   |                  
|Net book value                            |  | $    | 998,945    |      | $ | 1,107,648        
|                                          |  |      |            |      |   |                  

Depreciation
and amortization expense amounted to $129,592 and $131,045 for the years ended June 30, 2002 and 2001, respectively.

F-8

---

Note 4 Long-Term Debt

Long-term debt at June 30, 2002 and 2001 consists of:

2002

2001Note payablelending institutionpayable in monthly installments of $13,751 plus accrued interest at the prime rate (4.75% at June 30, 2002), due May 2007, secured by all assets of the
Company

$
811,291

$
980,337Current portion


(165,012
)

(980,337
)$
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, 2002, 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.

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, 2002 and 2001.

On
August 27, 1998, the Company borrowed $488,000 from its major stockholder, of which $374,000 and $114,000 was repaid to the stockholder during the years ended June 30,
2002 and 2001, respectively. This amount bore interest at the rate of 6 percent per annum. Interest expense incurred for the years ended June 30, 2002 and 2001 was $19,388 and
$26,199, respectively.

Unpaid
salaries totaling $320,000 to various officer/stockholders are included in accrued expenses in the accompanying balance sheet as of June 30, 2001.

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. Dividends in arrears on the Series A Preferred
Stock amounted to $770,292 and $641,910, respectively, at June 30, 2002 and 2001.

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.

F-9

---

Note 7 Income Taxes

The components of the net deferred tax assets as of June 30, 2002 and 2001 are as follows:

2002

2001Deferred tax assetsAllowance for doubtful accounts

$
116,000

$
180,000Variation in inventories between tax and financial reporting purposes


115,000


88,000Other accruals


54,000


107,000$
285,000

$
375,000


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:

2002

2001Computed income tax expense at federal statutory rate

$
363,000

$
341,000Income tax expense at state rates (net of federal income tax effect)


15,000


36,000Other


7,000


8,202$
385,000

$
385,202


Note 8 Commitments and Contingencies

The Company is contingently liable under its third party financing agreements, arranged for its customers, in the amounts of $1,436,000 and $1,590,000,
respectively, at June 30, 2002 and 2001. The total pianos repurchased by the Company under these commitments amounted to $27,659 and $27,540, respectively, for the years ended
June 30, 2002 and 2001. A reserve for returns of $82,000 and $90,000 at June 30, 2002 and 2001, respectively, are 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.

F-10

---



Item 9. Changes In and Disagreement with Accountants and Accounting and Financial Disclosure

None

PART III

Item 10. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act.



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 |  | 67  |  | 1990                                    |  | President, Chief Executive Officer, Director           
|Ann A. Jones     |  | 37  |  | 1996                                    |  | Secretary, Treasurer, Chief Financial Officer, Director
|Geoffry Matlin   |  | 51  |  | 1998                                    |  | Director                                               

BIOGRAPHICAL
INFORMATION.

Richard
A. Dolan

For
more than the past five years, Mr. Dolan has been majority shareholder, President, Chief Executive Officer and a director of Registrant. He was the founder of and has
been the principal owner, Chairman, and President of Alltech Associates, Inc 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.

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.

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.

11

---

Item 11. 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, 2000, 2001 and 2002 of those persons who were, at June 30, 2002, the Chief Executive Officer of the Registrant and other highly compensated executive officers and
employees of Registrant.

SUMMARY COMPENSATION TABLE

|                                 |  | Annual Compensation |  |    
|-------------------------------- |  | ------------------- |  | ---
|
|
|Richard Dolan
    President, CEO |  | 2000
2001
2002      |  | $$$
|Ann Jones, CFO                   |  | 2000
2001
2002      |  | $$$

Mr. Dolan
has no employment agreement and is compensated in the amount of $60,000 per year. Registrant plans to continue compensating Mr. Dolan at the same rate in the
future.

It
does intend 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 12. Security Ownership of Certain Beneficial Owners and Management.

PRINCIPAL
SHAREHOLDERS.

The
following table sets forth as of June 30, 2002, 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 |  
|---------------------------------------- |  | ------------------------------------------------------- |  | --------------------------------- |  | ---------------------- | -- | ---------------- | -
|$.01 par                                 |  | Richard Dolan
2011 Seward Ave.
Naples, Florida 34109    |  | Record and Beneficial             |  | 6,440,491              | *  | 66               | %
|$.01 par                                 |  | Ann Jones
2011 Seward Ave.
Naples, Florida 34109        |  | Record and Beneficial             |  | 200,063                |    | 2                | %
|$.01 par                                 |  | Geoffry Matlin
2011 Seward Avenue
Naples, Florida 34109 |  | Record and Beneficial             |  | 14,000                 |    | ***              |  
|Common Stock $.01 par value Common Stock |  | All Officers and Directors as a Group                   |  | Record and Beneficial (3 persons) |  | 6,654,554              | ** | 68               | %

---

12

---

Item 13. 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.

During
the period July 2001 through 2002, the majority shareholder borrowed a total of $552,000 from Registrant. The obligation bears interest at 6% per annum and is payable on
demand. The loan was paid back to the company in September 2002.

Registrant
has no and is not currently considering adopting any policy regarding transactions with affiliates.

Item 14. Exhibits and Reports on Form 8-K.

a.    Exhibit Index

|Exhibit Number |  |                    |   | Page #                            
|-------------- |  | ------------------ | - | ----------------------------------
|2              |  | (i                 | ) | Articles of Incorporation         
|               |  | (ii                | ) | Bylaws                            
|6              |  | Material Contracts |   |                                   
|               |  | (i                 | ) | LeaseNaples, Florida             
|               |  | (ii                | ) | Monthly Rental AgreementLas Vegas

---

b.    None

13

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SIGNATURES

In accordance with Section 13 or 15(d) 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.(Registrant)
| |  | ----------------------------------------
| |  | By                                      

| |  | Date |  | 9/27/02
| |  | ---- |  | -------

In
accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

| |  | By |  | /s/ANN JONESAnn Jones, Chief Financial Officer, Director
| |  | -- |  | --------------------------------------------------------

| |  | Date |  | 9/27/02
| |  | ---- |  | -------

| |  | By |  | /s/RICHARD A. DOLANRichard A. Dolan, Chief Executive Officer, Director
| |  | -- |  | ----------------------------------------------------------------------

| |  | Date |  | 9/27/02
| |  | ---- |  | -------

14

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CERTIFICATION OF CHIEF EXECUTIVE OFFICER  Pursuant to Exchange Act Rule 13(a)-14

I,
Richard A. Dolan, certify that:



Date:
September 27, 2002

| |  | /s/RICHARD A. DOLANRichard A. Dolan
Chief Executive Officer
| |  | -----------------------------------------------------------

CERTIFICATION OF CHIEF FINANCIAL OFFICER  Pursuant to Exchange Act Rule 13(a)-14

I,
Ann A. Jones, certify that:



Date:
September 27, 2002

| |  | /s/ANN A. JONESAnn A. Jones
Chief Financial Officer
| |  | ---------------------------------------------------

15

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CERTIFICATION OF CHIEF EXECUTIVE OFFICER  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

In connection with the Annual Report of QRS Music Technologies, Inc. (the "Company") on Form 10-KSB for the period ending
June 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard A. Dolan, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:



DATED:
September 27, 2002

| |  | /s/RICHARD A. DOLANRichard A. Dolan
Chief Executive Officer
| |  | -----------------------------------------------------------

CERTIFICATION OF CHIEF EXECUTIVE OFFICER  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

In connection with the Annual Report of QRS Music Technologies, Inc. (the "Company") on Form 10-KSB for the period ending
June 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Ann A. Jones, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:



DATED:
September 27, 2002

| |  | /s/ANN A. JONESAnn A. Jones
Chief Financial Officer
| |  | ---------------------------------------------------

16

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