SECURITIES AND EXCHANGE COMMISSION
                             Washington, 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 DECEMBER 31, 1996

                          Commission File No.: 0-26192

                           CODA MUSIC TECHNOLOGY, INC.
           (Name of Small Business Issuer as specified in its charter)

    Minnesota                                           41-1716250
(State or other jurisdiction of                        (IRS Employer
incorporation or organization)                       Identification Number)

               6210 Bury Drive, Eden Prairie, Minnesota 55346-1718
               (Address of principal executive offices)(Zip Code)

         Issuer's telephone number, including area code: (612) 937-9611

    Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act:Common Stock

Check  whether  the Issuer  (1) has 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 disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B  is not  contained  herein,  and  will  not 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]

Issuer's revenues for its most recent fiscal year:  $5,500,158

The  aggregate  market  value of the Common Stock held by  nonaffiliates  of the
Registrant  as of March 14,  1997 was  approximately  $5,311,370  based upon the
closing  price of the  Registrant's  Common  Stock on such date.

There were 4,327,035 shares of Common Stock outstanding as of March 14, 1997.

                            ------------------------

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the  Registrant's  Annual Report to Shareholders for the fiscal year
ended  December  31,  1996 are  incorporated  into Part II and  portions  of the
Registrant's  definitive  Proxy  Statement  for  its  1997  Annual  Meeting  are
incorporated by reference into Part III.

Transitional Small Business Disclosure Format (check one).  Yes       No     X





<PAGE>



                                     PART I


ITEM 1.           DESCRIPTION OF BUSINESS

General

     Coda Music Technology,  Inc. ("Coda" or the "Company") develops and markets
proprietary  music  technology  products  designed to enhance music learning and
composition, increase productivity and make practicing and performing music fun.
Since 1988,  the Company and its  predecessor  have  marketed the  award-winning
Finale(R) music notation software  products which eliminate the  restrictiveness
and tedium of music  notation  and have  established  the Company as a leader in
this market.  In June 1994,  the Company  introduced  the Vivace(R)  system,  an
innovative  musical  accompaniment  system  that  responds  to the  musician  in
real-time.  For  students,   educators,  adult  music  hobbyists,   professional
musicians and composers in the approximately $5 billion music products industry,
Coda's  innovative  products  provide  easy-to-use,  efficient  alternatives  to
traditional practice, education and composition techniques.

Coda Strategy

     The Company's  objective is to use modern  technology  to provide  products
that enhance the process of learning, performing and composing music. The Vivace
system  provides  accompaniment  which  follows the tempo of the  musician in an
effort to enhance the process of learning,  practicing and performing music. The
Company's  Finale music  notation  software  products  allow  musicians to enter
compositions  into a computer  electronically  while playing,  thus freeing them
from the  tedious  task of  handwriting  notes as they are  played,  and  allows
musicians to manipulate,  edit,  play back and print  compositions.  The Company
intends to implement the following strategies in pursuing its objective:

o Expand  applications  for Vivace  technology.  The Vivace product is currently
available  for band and vocal  applications.  The  technology  is available in a
modular system or soundcard  configuration.  The Company  intends to continue to
adapt the technology for the orchestral and MIDI-equipped  instrumental markets,
and to develop lower cost  applications.  These  products are designed to permit
more  professional  and amateur  musicians to experience  the joy and emotion of
music by performing with accompaniment that listens to and follows the musician.

o Further develop the repertoire  library.  Coda has created over 2700 classical
and jazz repertoire  titles  contained on  approximately  400 cartridges for use
with the Vivace  product and plans to create  catalogs of repertoire  covering a
broad spectrum of musical  genres,  instruments  and skill levels.  In 1997, the
Company will introduce  Vivace  accompaniments  for the Belwin 21st Century Band
Method, a standardized method of instruction targeting elementary students.  The
Company  intends to continue to select popular titles from the world's  existing
and  growing  body of music to  develop  additional  repertoire  for each of its
market segments.

o Expand the markets for and  distribution of the Vivace  products.  The Company
initially introduced its Vivace products to the education and professional music
market segment  through a network of band and orchestra  dealers,  most of which
sell to both  schools  and  individuals.  The  Company  intends to expand to the
student,  adult music hobbyist and international markets as it develops products
and distribution  channels that are designed to satisfy the unique needs of each
of these market segments.



<PAGE>



o Establish Finale music notation  software as the industry  standard.  Coda has
established  a  reputation  of quality and power for its Finale  music  notation
software  products and intends to promote  Finale's  file format as the industry
standard as music publishers  increasingly move toward  electronic  distribution
and sale of sheet music.

Products

     Coda has  established a reputation of quality with its Finale  products and
intends to build on that reputation with its Vivace system.

   Vivace Products

     The  Vivace  system  consists  of  hardware,  Intelligent  Accompaniment(R)
software and repertoire.  The hardware configurations currently available are a)
a  modular  system  - - a VCR-sized  box  which  incorporates  a high  quality
synthesizer,  converter of acoustic sounds into digital format,  digital effects
signal  processor,  mixer and  computer  interface  and b) an  AWE-32  soundcard
packaged with a small repertoire cartridge. The prototype technology upon which
the Vivace  system is based was  patented  by  Carnegie  Mellon  University  and
licensed  to  the  Company.  Coda  then  significantly  enhanced  the  prototype
technology with additional patented features, producing a marketable product.

     The Intelligent  Accompaniment software allows the user to start playing at
any  point in the  musical  piece,  repeat  difficult-to-play  segments,  change
instrumentation  and adjust the degree to which the  accompaniment  follows  the
musician. In addition, the musician can control tempo and reverb,  transpose the
music into any key, play with or without  repeats and designate  sections of the
music to cut. With a feature called "Remember Tempos," the system can adjust the
accompaniment to handle even the most extreme  interpretation of a passage where
there is little  input,  or few notes,  from the  musician.  The  products  also
feature  warm-up  exercises for  vocalists,  the ability to tap in tempo changes
with  variations  in speed,  and the ability to insert  breath marks and cues to
wait for a  particular  tone.  These  "variables"  can be saved  with the music,
creating a personally customized version of the accompaniment.

     The Company's Intelligent  Accompaniment technology is available for the 17
standard band  instruments,  such as flutes,  clarinets,  saxophones,  trumpets,
trombones and tubas; in 1996, it also became available for vocal applications.

            Vivace Repertoire

     The sale of a single Vivace system has the ability to generate multiple and
ongoing sales of repertoire as musicians  build their own library of repertoire.
The  repertoire  delivery  system  consists  of a  computer  floppy  disk  and a
cartridge that plugs into the Vivace hardware,  similar to the insertion of a CD
into a stereo system.  Unlike CDs, however, the repertoire  cartridges will only
work with the Company's  Vivace system and have been  specially  designed by the
Company to protect against illegal  duplication.  A typical repertoire cartridge
retails   for  $29.95  to  $39.95  and  may   contain   more  than  one  musical
accompaniment.

     Coda  has  entered  into  license  agreements  with top  music  publishers,
including  Hal Leonard  and Warner  Bros.  These  license  agreements  allow the
Company to produce synthesized versions of musical arrangements for use with the
Vivace system.  The Company's royalty  arrangements  range from payments of $.75
per  cartridge to five percent of the suggested  retail price of the  cartridge.
Coda has also received the exclusive rights from certain major publishers to all
solo classical works for voice, wind, brass, percussion, string and keyboard for
the purpose of musical accompaniment  products which respond in real-time to the
musician. These exclusive licenses generally have terms ranging from five to ten
years and require Coda to pay cumulative  royalty advances  aggregating  $75,000
through 2001.





<PAGE>


     Coda has  created a catalog of over  4,200  individual  classical  and jazz
accompaniments   contained  on  over  500  cartridge  products  for  its  Vivace
Intelligent  Accompaniment  product,  of  which  over  2,700  accompaniments  on
approximately 400 cartridges are currently  available for sale. The Company made
its accompaniment  selection based on a review of the most frequently  performed
titles in state  academic  soloist  contests as well as popular  titles of sheet
music sold at  retail.  These  accompaniments  vary in  complexity  from easy to
challenging  and cover a broad  range of  musical  genres  for  almost  all band
instruments and voices.  The Company intends to use its  relationships  with key
publishers and other sources to select the most popular  titles for  development
as  repertoire  for Vivace  products.  Further,  the Company plans to expand its
library of repertoire to cover a broad spectrum of music genres, instruments and
skill levels.

   Finale Music Notation Software Products

     Coda is a  market  leader  in music  notation  software  with  its  Finale,
Academic  Edition of Finale and Finale  Allegro  family of products for use with
Macintosh and PC Windows  operating  systems.  Music notation software enables a
musician  to enter  musical  data into a  computer  using  either  the  computer
keyboard,  a MIDI  equipped  electronic  music  keyboard or other MIDI  equipped
instrument  and  contemporaneously  display  the data on a computer  screen as a
musical score.  The dramatic  improvements in speed and flexibility  provided by
programs  like Finale and Finale  Allegro  software  have made such software the
dominant  method for  composers,  arrangers,  publishers  and music  teachers to
create printed music.

     The Finale product has won five  consecutive  MacWorld "World Class" awards
for  best  music  notation  software  and  is  among  those  products  generally
recognized  as one of the most  powerful  and  comprehensive  notation  software
products in the world.  Finale music notation software products retail for $545.
Finale  software is  differentiated  from other music  notation  software by its
breadth  and depth of  features,  including  patented  capabilities  such as its
"hyperscribe"  feature.  Hyperscribe  allows  users to freely  play  music  with
varying tempos via a MIDI keyboard while the software  interpolates  the rhythms
and accurately notates the music in real time.

     Coda also produces an Academic  Edition of the Finale  product that is sold
exclusively  to schools,  school  teachers  and college  students at a suggested
retail price of $275. The Finale  Academic  Edition  product has also been a key
source of  revenue  and  registered  user base  growth  for the  Company  and it
represents  a market  that is  continually  being  replenished  with new student
users.  The Douglas  Stewart Company  ("Douglas  Stewart") is the largest single
distributor of Finale  products.  Pursuant to the terms of a written  agreement,
Douglas  Stewart  acts as the  Company's  exclusive  distributor  of the  Finale
Academic  Edition products to "college stores" (as defined in the agreement) and
as a  nonexclusive  distributor  of the same products to non-profit  educational
institutions  and  authorized  resellers  other than "college  stores."  Douglas
Stewart has agreed to limit its distribution of music notation software products
exclusively  to those of the  Company.  Coda is  obligated  to  provide  Douglas
Stewart  reasonable sales  literature,  support and training upon request and to
notify Douglas Stewart of all upgrades.  Although the agreement provides limited
restocking rights to Douglas Stewart, historically returns have been immaterial.
The agreement  renews  monthly  unless  either party  provides the other with 30
days' written notice or it is otherwise earlier terminated.

     The Company  introduced the Finale Allegro  product,  a less powerful music
notation software  product,  in 1993. The Finale Allegro music notation software
product  retails for $199 and contains a subset of the notation tools  contained
in the Finale product. The Finale Allegro product allows the Company to offer an
entry level product to the retail customer.





<PAGE>




     Product manuals are currently available in German, French,  Italian, Dutch,
Japanese and Spanish.  The Company  believes the  international  market is a key
growth opportunity as computer penetration  increases  worldwide.  International
revenues, primarily from the sale of notation software products, represented 20%
and 21% of 1996 and 1995 revenues, respectively.

Marketing, Sales and Distribution

     The Company has adopted  different  strategies to distribute  the Company's
Vivace products and its Finale products to various targeted market segments.

   Vivace Products

     The Company has selected the education and professional  musician market as
its point of entry for a variety  of  reasons.  First,  members  of this  market
typically are regular purchasers of musical products in the current Vivace price
range and could be candidates  for multiple  Vivace  installations.  Second,  by
penetrating this market the Company believes it will create a long-term customer
base with strong annual repertoire buying rates. Finally, endorsements from this
market will create awareness and credibility  among the larger student and adult
hobbyist markets.

     After testing alternative  distribution methods, the Company concluded that
a band and  orchestra  dealer  network  would be the most  effective  method  of
penetrating the market.  Coda expanded the dealer network to  approximately  100
dealers  in 1996 and  provided  training  at the  Company's  offices  to product
specialists  employed by those  dealers.  This  network  sells to a  significant
portion of the  educational  institutions  in the U.S.  and Canada.  The Company
plans to add dealers and geographies during 1997. In addition,  a distributor in
Japan was added to represent the Vivace product in that country.

   Finale Music Notation Software Products

     Coda's  Finale  products  are  currently  sold  through   electronic  music
instrument   retailers,   mail  order  software  retailers,   college  bookstore
distributors,   computer   dealers,   educational   software   distributors  and
international software distributors. These channels of distribution are designed
to service the composer, arranger, education and theological markets worldwide.

     The  Company  believes  it can  significantly  build on its music  notation
software  business by  continuously  expanding the  installed  base of users and
regularly  providing  them  with  upgrades,   increasing  retail   distribution,
producing additional international versions of the products and establishing the
products as a means for electronic transmission of music. The Company introduced
upgrades on both the Windows(R)  platform and  Macintosh(R)  platform in each of
the last three years.

     A key marketing strategy of the Company is to introduce the Finale products
to students as they learn so they are more likely to continue to use the product
during their lives. To improve its position in the education market, the Company
introduced a low-priced  Academic  Edition for students and teachers,  developed
product  lab packs  consisting  of five copies of the Finale  product  sold at a
reduced  price  per  copy,   which  allow  schools  and  universities  to  cost-
effectively bring Finale music notation software products into their curriculum,
added an on-campus direct seller network,  and developed low-cost music software
bundles that  include the Finale  product and a high  quality  music  sequencing
program for exclusive distribution to the academic channel. As a result of these
and  other  targeted   programs,   the  Company  has  significantly   grown  its
distribution in the education market over the past three years and now generates
over half of its installed user base growth from that channel.





<PAGE>




     Coda currently sells its Finale products in 30 countries  around the world.
The product is distributed  by a leading music  software  distributor in each of
the international markets who is responsible for sales,  marketing and technical
support.

Product Development

     The Company intends to continue to expand its current product  offerings by
developing products for new applications and markets.


   Vivace Products

     Using the core  technologies  behind its Vivace  products,  the Company has
recently  developed a system for vocalists and intends to develop Vivace systems
to support orchestral instruments (such as violins, violas and cellos),  guitars
and  keyboards,  as well as new Vivace  applications  for rhythm and  intonation
training.  In addition,  the Company is exploring other cost reductions in order
to lower the price of its products for the student and music hobbyist market.

   Vivace Repertoire

     The Company  plans to expand its support of Vivace  products by adding more
titles to the  existing  repertoire  catalog,  creating  additional  catalogs of
repertoire  and generally  broadening  the  repertoire  library to include other
musical  genres  (such  as  popular,   rock  and  country).   Vivace  repertoire
development  has limited risk and short  development  cycles that range from one
month (solo collection of ten to twelve basic solos with piano accompaniment) to
four months (musical  theatre  collection with  orchestral  accompaniment).  The
Company has  established  an expertise  in  repertoire  development  by creating
methods to synthesize  classical music and mark music  sequences.  Additionally,
the  Company  has  automated  some of the  process  and  developed  a  technical
specification  that is used to  standardize  both quality and process.  Unlike a
game manufacturer which must continually invent new games, the Company need only
look to the most  popular  titles  in the large and  growing  supply of  musical
compositions to develop additional Vivace repertoires.

   Finale Music Notation Software Products

     To maintain its leadership position in the music notation marketplace, over
the past three  years Coda has  focused its  continuous  improvement  efforts on
developing upgrades of the Finale product on a regular basis and as a result has
successfully  migrated  to the third  generation  of the  Macintosh  and Windows
platforms.  The Company expects to make annual releases of such upgrades.  After
an  announcement  of an  upgrade  release  but  prior  to  the  actual  release,
purchasers  of a Finale  product  are  offered  this  upgrade at no charge for a
limited period of time.  Other Finale users are required to purchase the upgrade
product at prices  ranging  from $79.95 to  $119.95.  In  addition,  the Company
anticipates  adapting  its Finale  products to allow  on-line  transmission  and
viewing of musical scores.  Electronic music transmission would be used by music
publishers or  distributors  to  electronically  transmit  scores in Finale file
format to customers who would be able to view the music, then purchase and print
the score.  The Company  believes  that the use of the Finale file format as the
standard for electronic  music  distribution  may increase demand for the Finale
products.  Although a product  that may be used for such a purpose is not yet in
commercial  production,  the Company has an alpha version of such product, which
the Company will  demonstrate to key publishers to obtain market  feedback.  The
Company believes the cost of developing a commercially  viable product is within
its product development budget.






<PAGE>



     In January 1996, Warner Bros. Publications announced that they required all
submission of  compositions  for publication by Warner Bros. to be in the Finale
file format. The Company believes that this endorsement from the world leader of
sheet music publishing represents significant progress in establishing Finale as
the industry standard.

Competition

     The Company knows of no other musical  accompaniment  product that responds
to the musician.  However, the Company expects that Vivace products will compete
with  conventional  music  accompaniment  products  such as Music  Minus One and
Roland MTS 120.  These  products  offer  students the ability to play along with
prerecorded  songs.  They  differ  from the  Vivace  product in that they do not
automatically  adjust in real-time to the musician's changes in tempo.  Although
the Company believes its Vivace system is unique, there can be no assurance that
competitors will not enter the market.

     The market for the  Company's  Finale  music  notation  software  is highly
competitive.  The  competitors in this market tend to be similar in size to Coda
but many have a more comprehensive line of music software products.  The Company
regards Passport Designs,  Inc., Opcode Systems, Inc. and Steinberg/Jones as its
closest competitors based on product offerings and price points.

     Principal  competitive factors in marketing the Company's Vivace and Finale
products include product  features,  quality,  brand  recognition,  ease of use,
merchandising,  access to distribution  channels,  retail shelf space and price.
The Company believes it competes  effectively in these areas. To the extent that
competitors  achieve  significant  advantages  in  performance,  price  or other
selling  advantages,  the Company could be adversely  affected.  There can be no
assurance  that the  Company  will have the  resources  to  respond to market or
technological  changes,  or to compete  successfully in the future. In addition,
increasing  competition in the music software market could cause prices to fall,
which could  adversely  affect the  Company's  business,  operating  results and
financial condition.

Patents

     The Company has licensed,  on an exclusive world-wide basis for the life of
the patent,  from Carnegie  Mellon  University the use of the U.S.  patent which
covers the  automated  accompaniment  that listens to and follows  tempo changes
from a live  performance.  In order to maintain  exclusivity,  the Company  must
achieve  specified  requirements  and pay certain  minimum  royalties.  While no
assurances can be given, the Company believes that the requirements  will be met
and that any necessary modifications to the requirements can be made which would
be to the mutual benefit of both the Company and Carnegie Mellon University. The
Company is  currently in  compliance  with these  requirements.  The Company has
further  developed  this  technology  and  patented and filed for patents on the
additional   features.   The  Company  has  obtained  a  patent  that   protects
improvements  to the  user  control  of the  software,  certain  aspects  of the
repertoire file which enhance the following  capabilities  of the software,  and
miscellaneous  interface features of the product. A separate patent protects the
Company's cartridge encryption  methodology.  The Company has received notice of
allowance  of  a  patent  covering  enhancements  to  the  following  algorithm,
accompaniment  controls and repertoire data files.  The Company has filed for an
additional  patent which is currently pending and covers other important aspects
of the  Vivace  technology.  As a result  of the  additional  patented  features
developed  by the Company and the ability of the Company to develop an extensive
library of repertoire over the next several years,  the Company does not believe
that it will be materially  adversely affected by the expiration of the Carnegie
Mellon University patent in 2005.






<PAGE>



     The Company's  Finale  product is covered by three  separate  patents which
protect  the data  structure,  the  ability to enter  music into the  product by
tapping  tempo  with a pedal  device or  computer  keyboard,  and the  method of
automatically  assigning guitar  fingerboards to a notated chord.  These patents
are licensed from Wenger  Corporation on a  royalty-free,  exclusive,  worldwide
basis for the life of the patents.

Trademarks

     The  Company  owns the  registered  trademarks  in the  United  States  for
Coda(R), Finale(R), Finale Allegro(R),  Vivace(R), Intelligent Accompaniment(R),
Intelligent  Accompanist(R) and Personal Accompanist(R).  In addition, the names
Coda and Finale have been protected in some foreign  countries.  The Company has
applied  for   trademark   registration   in  the  U.S.   for  the  names  Vocal
Accompanist(TM),  and The Art of Music  Notation(TM).  In addition,  this report
contains references to trademarks owned by third parties.

Manufacturing

     Printing of user manuals and packaging and manufacture of related materials
are  performed  to  the  Company's  specifications  by  outside  subcontractors.
Customized  synthesizer boards for the original Vivace modular configuration are
purchased from E-mu Systems, Inc. ("E-mu"). The company sources AWE32 soundcards
from Creative Labs, Incorporated. Blank repertoire cartridges are purchased from
IVL  Technologies  Ltd. and cartridge  readers from TREC. The Company  currently
uses  Advanced  Duplication  Services,  Inc.  to perform  standard  copying  and
assembling services,  including copying the repertoire and Finale music notation
software discs, and assembling the Vivace and Finale product manuals,  disks and
other product literature into packages.

Employees

     As of December 31, 1996, the Company  employed 46 full-time  employees.  Of
these,  16 served in the product and repertoire  development  area, 7 in product
testing  and  end-user  support,  and 23 in  administrative  and  sales  related
activities. The Company believes that its relations with its employees are good.
None of the Company's employees is covered by a collective bargaining agreement.
In  addition,  the  Company  relies on  independent  contractors  to develop its
repertoire. The Company has had no difficulty contracting with these individuals
and believes that its relationships are good. Should the Company have difficulty
securing the services of such persons in the future,  it could adversely  affect
operations.

                              CAUTIONARY STATEMENTS

     The  Company  wishes to  caution  investors  that the  following  important
factors,  among  others,  in some cases have  affected  and in the future  could
affect the  Company's  actual  results of  operations  and cause such results to
differ materially from those anticipated in  forward-looking  statements made in
this document and elsewhere by or on behalf of the Company:

Uncertainty of Market Acceptance

     The Company's  initial Vivace product was introduced in 1994 and new Vivace
products  were  introduced  in 1996.  The Company  thus has a limited  operating
history from which  investors  might judge its ability to market at a profit its
Vivace  products.  The success of the Company will be highly dependent on market
acceptance of these products and the success of its distribution arrangements.




<PAGE>

Additional Capital

     The Company may seek additional capital through a new line of credit with a
bank, asset based lending or the sale of equity.  No assurance can be given that
such capital  will be available or available on terms  favorable to the Company.
The sale of equity interests would dilute the ownership of current shareholders.
If  additional  equity  funds are  obtained,  the Company  will  accelerate  the
development of repertoire and expand marketing  efforts to reach the student and
consumer markets for its products.

New Product Development

     Additional  development  work is required  for the  introduction  of Vivace
products for the orchestral and MIDI equipped instrument markets and to increase
the breadth of the Company's repertoire for Vivace products. No assurance can be
given that the Company's timetable for these development plans will be achieved,
that  sufficient  development  resources  will be available or that  development
efforts will be successful.

Dependence on Repertoire Sales and Development

     The Company's  future success is highly  dependent on its ability to obtain
significant  ongoing  repertoire  sales.  The Company has entered  into  license
agreements with leading music publishers,  which provide the Company with access
to musical titles for repertoire  development.  While the Company  believes that
its relationships with these publishers are good, there can be no assurance that
the Company will be able to maintain these  relationships  or make  satisfactory
arrangements to receive access to additional styles of music in a timely manner.
Although  the loss of a license  arrangement  with any one  publisher  would not
materially adversely affect the Company's  operations,  the lack of a sufficient
number and variety of musical  arrangements  would  greatly  limit the Company's
ability to market its Vivace products.

Operating Losses

     For the year ended  December 31, 1996,  the Company  incurred a net loss of
$1,771,046 and since inception has an accumulated deficit of $8,455,977.

Dependence on Key Personnel

     The Company is highly  dependent on a limited  number of key management and
technical  personnel.  The Company's future success will depend, in part, on its
ability  to attract  and  retain  highly  qualified  personnel.  There can be no
assurance  that the Company will be successful in hiring or retaining  qualified
personnel.  The loss of key personnel, or inability to hire and retain qualified
personnel,  could have an adverse  effect on the Company's  business,  financial
condition and results of operations.  The Company does not have  key-person life
insurance on any of its key personnel.

Dependence on Schools and Key Customers

     The  sale  of a  substantial  portion  of  the  Company's  Vivace  products
initially will be directed  toward  schools.  Budget  restrictions  may delay or
prohibit the  purchase of the  Company's  products by schools and certain  other
customers.  The Company's success will depend in part on its ability to sell its
Vivace  products to key schools which tend to establish  trends and standards in
music education and band performance.

Fluctuations in Operating Results

     The  Company  does not have a  significant  history  of sales of its Vivace
products; however, it believes that its results of operations may fluctuate as a
result  of the  purchasing  cycle of the  education  market  and the  timing  of
releases of new products and product  upgrades.  The degree of such fluctuations
will depend,  among other things,  on the  percentage of the Company's  revenues
from the education market.





<PAGE>


Competition

     Although  there are  other  musical  accompaniment  products,  the  Company
believes none have the  capability to listen to and follow the musician like the
Company's Vivace products.  There can be no assurance that others, such as large
electronic  and musical  instrument  manufacturers,  will not enter this market.
Competition in the sale of music notation  products such as the Company's Finale
products  occurs  principally  on the basis of price,  features and ease of use.
Some of the  companies  with which the Company may  compete  have  significantly
greater financial and other resources than the Company.

Dependence on Suppliers

     The Company is dependent on certain  suppliers  for delivery of  components
and assembly of its Vivace products. While the Company believes that alternative
suppliers are available,  any  interruption of supply from current vendors could
cause significant delays in the shipment of such products.

Proprietary Technology

     The Company is dependent  on  proprietary  technology.  A number of patents
have been  issued to or  licensed  by the  Company  and  additional  patents are
pending which cover various aspects of the Company's  products.  There can be no
assurance  that  the  Company's  proprietary  technology  will  provide  it with
significant  competitive  advantages,  that  other  companies  will not  develop
substantially  equivalent technology or that the Company will be able to protect
its patented and unpatented  technologies.  The Company could incur  substantial
costs in seeking  enforcement  of its  patents or in  defending  itself  against
patent  infringement  claims by others.  The Company is not aware of any patents
held by others that would  prohibit the use of technology  currently used by the
Company.  Further,  there can be no  assurance  that the Company will be able to
obtain or maintain patent  protection in the  international  markets in which it
intends to offer products.


ITEM 2.           DESCRIPTION OF PROPERTY

     The Company leases approximately 12,150 square feet of office and warehouse
space at 6210 Bury Drive, Eden Prairie,  Minnesota 55346, for current annual net
rent of approximately $70,000. This lease expires in November 1997.


ITEM 3.           LEGAL PROCEEDINGS

     The  Company  is not a party  to any  litigation  and is not  aware  of any
threatened litigation that would have a material adverse effect on its financial
condition or results of operations.


ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

     Not applicable.




<PAGE>









                                    PART II.

ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
                  MATTERS

     The information  required by Item 5 is incorporated  herein by reference to
the  section   entitled  "Common  Stock  Price  Ranges"  which  appears  in  the
Registrant's 1996 Annual Report to Shareholders.


ITEM 6.           MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
                  OPERATION

     The information  required by Item 6 is incorporated  herein by reference to
the  section  entitled  "Management's   Discussion  and  Analysis  of  Financial
Condition  and Results of  Operations"  which appears in the  Registrant's  1996
Annual Report to Shareholders.


ITEM 7.           FINANCIAL STATEMENTS

     The information  required by Item 7 is incorporated  herein by reference to
the  Financial  Statements,  Notes  thereto  and  Report of  Independent  Public
Accountants  thereon  which  appear in the  Registrant's  1996 Annual  Report to
Shareholders.


ITEM 8.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                  ACCOUNTING AND FINANCIAL DISCLOSURE

     None.




<PAGE>



                                    PART III

ITEM 9.           DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
                  PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
                  ACT

     The names  and ages of the  executive  officers  of the  Company  and their
positions and offices presently held are as follows:


Name                    Age             Position

John W. Paulson         49              Chief Executive Officer and Chairman
                                        of the Board of Directors

Ronald B. Raup          46              President, Chief Operating Officer and
                                        Director

Joan K. Berg            45              Chief Financial Officer and Secretary

Mark E. Dunn            48              Senior Vice President of Product
                                        Development

Julia D. Fraser         39              Vice President of Vivace Repertoire
                                        Development


     John W. Paulson has been Chief Executive  Officer and Chairman of the Board
of Directors of Coda since  December  1990.  From 1982 to 1990,  Mr. Paulson was
Chairman of Springboard  Software,  Inc., a publicly-held  company he founded to
develop and market educational and consumer software  products.  Springboard was
subsequently   purchased  by  Spinnaker   Software   Corp.   Prior  to  founding
Springboard, Mr. Paulson was a public school music teacher for nine years during
which time he taught  band,  keyboard and  electronic  music  classes.  He has a
Master  of Arts in Music  Education  from the  Eastman  School  of  Music,  is a
published  composer,  and has performed as a professional  musician for over ten
years. Mr. Paulson was recently elected to the NAMM Board of Directors.

     Ronald B. Raup has been President and Chief Operating Officer of Coda since
January 1, 1996, and served as Executive Vice President from August 1995 through
December  1995.  From  1977  through  1995,  Mr.  Raup was  employed  by  Yamaha
Corporation  of American and was Senior Vice  President  of Sales and  Marketing
from 1989 through  1995.  Mr. Raup served on the Yamaha Board of Directors  from
1990 to 1995.

     Joan K. Berg has been Chief  Financial  Officer of Coda since January 1995.
From  1986  to  1994,  Ms.  Berg  was  Vice  President  and  Controller  of  ADC
Telecommunications,  Inc., a manufacturer of telecommunications  equipment.  She
also has eight years of public accounting experience with Arthur Andersen LLP.

     Mark E. Dunn has been Senior Vice President of Product  Development of Coda
since  October 1991.  For nine years prior to joining the Company,  Mr. Dunn was
Vice President of Product  Development for Springboard  Software,  Inc. and then
Spinnaker Software Corp. upon its acquisition of Springboard.

     Julia D. Fraser has been Vice President of Vivace Repertoire Development of
Coda since  March 1996.  From 1984 to 1996,  Ms.  Fraser was  employed by Alfred
Publishing Co., Inc., and was Vice President of Product Development from 1993 to
1996 and Vice President of Marketing from 1989 to 1993. She previously worked in
the retail and wholesale  sectors of the print music industry.  Ms. Fraser is on
the Executive Board of the Music Industry Conference.





<PAGE>


     The  information  required by Item 9 relating to directors is  incorporated
herein by reference to the section labeled "Election of Directors" which appears
in the  Registrant's  definitive  Proxy Statement for its 1997 Annual Meeting of
Shareholders.


ITEM 10.          EXECUTIVE COMPENSATION

     The information  required by Item 10 is incorporated herein by reference to
the section labeled "Executive  Compensation"  which appears in the Registrant's
definitive Proxy Statement for its 1997 Annual Meeting of Shareholders.

ITEM 11.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT

     The information  required by Item 11 is incorporated herein by reference to
the sections labeled "Principal Shareholders and Management Shareholdings" which
appear  in the  Registrant's  definitive  Proxy  Statement  for its 1997  Annual
Meeting of Shareholders.

ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The  information  required by Item 12 is  incorporated  by reference to the
section  labeled  "Certain  Transactions"  which  appears  in  the  Registrant's
definitive Proxy Statement for its 1997 Annual Meeting of Shareholders.


ITEM 13.          EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits.

                  See "Exhibit Index"  immediately  following the signature 
page of this Form 10-KSB.

         (b)      Reports on Form 8-K

                  No  reports  on Form 8-K were  filed  during  the last  fiscal
quarter of the Registrant's 1996 fiscal year.





<PAGE>



                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the Registrant
has caused this Report to be signed on its behalf by the undersigned,  thereunto
duly authorized.


                                             CODA MUSIC TECHNOLOGY, INC.


Dated: March 21, 1997                        By:  s/ Ronald B. Raup
                                                 Ronald B. Raup, President

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

                               (Power of Attorney)

     Each person whose signature  appears below constitutes and appoints JOHN W.
PAULSON and RONALD B. RAUP as true and lawful attorneys-in-fact and agents, each
acting alone, with full power of substitution and resubstitution, for him and in
his  name,  place  and  stead,  in any and all  capacities,  to sign  any or all
amendments to this Annual  Report on Form 10-KSB and to file the same,  with all
exhibits  thereto,  and  other  documents  in  connection  therewith,  with  the
Securities and Exchange  Commission,  granting unto said  attorneys-in-fact  and
agents,  each acting alone,  full power and authority to do and perform each and
every  act and  thing  requisite  and  necessary  to be done  in and  about  the
premises,  as  fully  to all  intents  and  purposes  as he might or could do in
person,  hereby ratifying and confirming all said  attorneys-in-fact and agents,
each acting alone, or his substitute or substitutes, may lawfully do or cause to
be done by virtue thereof.



Signature and Title                                              Date

                                                            March 21, 1997
s/ John W. Paulson
John W. Paulson, Chairman of the Board and Chief
Executive Officer (principal executive officer)

                                                            March 21, 1997
s/ Ronald B. Raup
Ronald B. Raup, President, Chief Operating Officer and
Director

                                                            March 21, 1997
s/ Joan K. Berg
Joan K. Berg, Chief Financial Officer (principal
financial and accounting officer)

                                                            March 21, 1997
s/ David A. Henderson
David A. Henderson, Director

                                                            March 21, 1997
s/ Gordon F. Stofer
Gordon F. Stofer, Director

                                                            March 21, 1997
s/ Larry A. Pape
Larry A. Pape, Director

                                                            March 21, 1997
s/ Karl T. Bruhn
Karl T. Bruhn, Director






<PAGE>



                           CODA MUSIC TECHNOLOGY, INC.
                                EXHIBIT INDEX FOR
                        FORM 10-KSB FOR 1995 FISCAL YEAR



Exhibit                                                                    
Number                               Description                         

3.1       Restated Articles of Incorporation--incorporated by reference to
          Exhibit 3.1 to the Registrant's Form SB-2 Registration Statement,
          Reg. No. 33-92212C

3.2       Bylaws--incorporated by reference to Exhibit 3.2 to the
          Registrant's Form SB-2 Registration Statement, Reg. No. 33-
          92212C

10.1      Lease dated October 23, 1992 between the Registrant and
          Jorandcor, Inc.--incorporated by reference to Exhibit 10.1 to the
          Registrant's Form SB-2 Registration Statement, Reg. No. 33-
          92212C

10.2*     1992 Stock Option Plan--incorporated by reference to Exhibit
          10.3 to the Registrant's Form SB-2 Registration Statement, Reg.
          No. 33-92212C

10.3      Loan Agreement dated May 5, 1995 between the Registrant and
          Riverside Bank and related waivers dated May 30, 1995 and June
          6, 1995--incorporated by reference to Exhibit 10.4 to the
          Registrant's Form SB-2 Registration Statement, Reg. No. 33-
          92212C

10.4      Registration Rights Agreement dated May 26, 1994 between the
          Registrant, John G. Kinnard and Company, Incorporated and
          holders of Series B Convertible Preferred Stock--incorporated by
          reference to Exhibit 10.6 to the Registrant's Form SB-2
          Registration Statement, Reg. No. 33-92212C

10.5      License Agreement dated June 10, 1992 between the Registrant
          and Carnegie Mellon University--incorporated by reference to
          Exhibit 10.11 to the Registrant's Form SB-2 Registration
          Statement, Reg. No. 33-92212C

10.6      License Agreement dated December 31, 1992 between the
          Registrant and Wenger Corporation--incorporated by reference to
          Exhibit 10.12 to the Registrant's Form SB-2 Registration
          Statement, Reg. No. 33-92212C

10.7*     Form of Nonqualified Stock Option Agreement for Options
          Granted Outside the 1992 Stock Option Plan--incorporated by
          reference to Exhibit 10.13 to the Registrant's Form SB-2
          Registration Statement, Reg. No. 33-92212C

10.8      Letter Agreement between the Registrant and IVL Technologies
          Ltd. dated June 15, 1992--incorporated by reference to Exhibit
          10.14 to the Registrant's Form SB-2 Registration Statement, Reg.
          No. 33-92212C






<PAGE>



10.9      OEM Standard Products Quotation Terms and Conditions
          between the Registrant and E-mu Systems, Inc. dated September
          10, 1992--incorporated by reference to Exhibit 10.15 to the
          Registrant's Form SB-2 Registration Statement, Reg. No. 33-
          92212C

10.10     Educational Software Distribution Agreement dated July 26, 1991
          between the Registrant and The Douglas Stewart Company--
          incorporated by reference to Exhibit 10.17 to the Registrant's
          Form SB-2 Registration Statement, Reg. No. 33-92212C

10.11*    Amendments to Employment and Stock Option Agreements
          between the Registrant and Craig Evanich dated November 30,
          1995--incorporated by reference to Exhibit 10.11 to the Registrant's
          Annual Report on Form 10-KSB for the fiscal year ended December 31,
          1996.

10.12*    Employment Agreement between Registrant and Ronald B. Raup
          dated January 1, 1996--incorporated by reference to Exhibit 10.12 to
          the Registrant's Annual Report on Form 10-KSB for the fiscal year
          ended December 31, 1996.

10.13     Amendment No. 3 to License Agreement between the Registrant
          and Carnegie Mellon University dated August 28, 1996

11        Statement re computation of pro forma per share earnings

13        Portion of Annual Report to Shareholders for fiscal year ended
          December 31, 1996 incorporated herein by reference

23        Consent of Arthur Andersen LLP, independent public accountants

24        Power of Attorney (included on the "Signatures" page of this
          Form 10-KSB)

27        Financial Data Schedule

---------------------

*        Indicates a management  contract or  compensatory  plan or  arrangement
         required to be filed as an exhibit to this Form 10-KSB.