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, 1997

                          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. [ ]

Issuer's revenues for its most recent fiscal year:  $5,563,105

The  aggregate  market  value of the Common Stock held by  nonaffiliates  of the
Registrant  as of March 12,  1998 was  approximately  $9,783,177  based upon the
closing price of the Registrant's Common Stock on such date.

There were 6,199,732 shares of Common Stock outstanding as of March 12,1998.

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

                       DOCUMENTS INCORPORATED BY REFERENCE
Portions of the  Registrant's  Annual Report to Shareholders for the fiscal year
ended  December  31,  1997 are  incorporated  into Part II and  portions  of the
Registrant's  definitive  Proxy  Statement  for  its  1998  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 Company  intends to continue to
adapt  the  technology  for the  orchestral  and  MIDI-equipped  piano  keyboard
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  accompaniment  library.  Coda has  created  over  4,100
classical,  jazz and musical theatre  accompaniments  contained on approximately
500 cartridges  for use with the Vivace  product and plans to create  additional
accompaniments  covering a broad  spectrum of musical  genres,  instruments  and
skill levels.  In 1997, the Company  introduced  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
accompaniments 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. With the introduction of the CD-ROM format
for the Vivace  application,  the Company lowered the suggested retail price for
the  technology  to $199.  At this lower price  point,  the  Company  intends to
broaden  distribution to the dealer channel and expand distribution  channels to
better reach the student, adult hobbyist and professional musician markets.



<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  technology is currently  offered in a CD-ROM  format,  with
optional  hardware  accessories  available to enable the  technology  to work on
slower computers. 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 its own proprietary
technology and additional patented features, producing a marketable product.

         The  Intelligent  Accompaniment(R)  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 Accompaniments

         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
accompaniments.  The accompaniment 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 accompaniment
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  accompaniment  cartridge retails for $24.95 and typically contains 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.

         Coda  has   created   over   4,100   individual   classical   and  jazz
accompaniments  contained on approximately 500 cartridge products for its Vivace
Intelligent  Accompaniment product as well as accompaniments for the Belwin 21st


<PAGE>


Century  Elementary Band Method.  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  accompaniments  for Vivace products.
Further,  the Company plans to expand its library of  accompaniments  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 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.   The  agreement  provides  limited
restocking rights to Douglas Stewart.  In 1997 and 1996,  respectively,  Douglas
Stewart  returned  $110,000 and $32,000 related to the  introduction of upgraded
products.  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.

         Product  manuals are currently  available in German,  French,  Italian,
Dutch,  Japanese,  Spanish and Swedish.  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 18% and 20% of 1997 and 1996 revenues, respectively.

<PAGE>

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 had selected the education 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.  The dealer network currently  approximates 110 dealers.
This network sells to a significant  portion of the educational  institutions in
the U.S.  and  Canada.  In  addition,  the Company  has  distribution  in Japan,
Australia, Germany and the United Kingdom.

         In July 1997,  the  Company  authorized  catalog  distribution  through
selected catalog  companies.  In addition,  the Company began  distributing free
demonstration  CDs of the Vivace  product  through the  Company's  website.  The
Company anticipates expansion of these methods of distribution during 1998.

   Finale Music Notation Software Products

         Coda's  Finale  products are currently  sold through  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.  Effective
January  1,  1998,  the  Company  has  authorized  Thinkware,  a music  software
distributor, to distribute its products to all of these markets, except selected
large accounts and college  bookstores.  In 1997,  sales of products through the
channels of distribution now being served by Thinkware constituted approximately
25% of  Finale  product  sales.  The  Company  believes  that the unit  increase
resulting from this distribution will offset the price discounts offered.

         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.

         Coda currently  sells its Finale  products in over 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.

<PAGE>

Product Development

         During 1997 and 1996, the Company incurred $1,555,660 and $1,306,570 in
product  development  expenses.  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 been able to provide them in a CD-ROM format. 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 Accompaniments

         The Company  plans to expand its  support of Vivace  products by adding
more  titles  to  the  existing  accompaniment   catalog,   creating  additional
accompaniments  and generally  broadening the  accompaniment  library to include
other musical genres (such as popular,  rock and country).  Vivace accompaniment
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  accompaniment  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 accompaniments.

   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 for 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 $144.95.  In 1997, the Company
added  plug-in  capabilities  that permit the user to add  specialized  notation
features.  The Company  expects to allow  independent  third  parties to develop
additional  plug-in  capabilities  in the future to  augment  the  features  and
functions developed internally.

         In addition,  the Company will continue to explore  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.

         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.


<PAGE>


Competition

         The Company  knows of no other musical  accompaniment  product for band
instruments and vocalists that responds to the musician.  However,  a competitor
has recently  announced an  interactive  product for piano and  keyboards;  this
product  is not yet  available  through  general  distribution  and has not been
evaluated by the Company.  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 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.

         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.


<PAGE>


Trademarks

         The Company owns the  registered  trademarks  in the United  States for
Coda(R), Finale(R), Finale Allegro(R), The Art of Music Notation(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 name Practice  Studio(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, 1997, 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:

Distribution and Sales Level Issues

         The Company's  initial  Vivace  product was  introduced in 1994 and new
Vivace  products  were  introduced  in 1997 but the  Company has  achieved  only
limited sales of Vivace  products.  Initial  distribution was aimed primarily at
schools and made through a network of band and  orchestral  instrument  dealers.
More  recently,  the Company has also made sales through  catalog  companies and
direct sales through the Company's website.  The Company  anticipates  expanding
and utilizing new methods of distribution during 1998. No assurance can be given
that sales of Vivace products will achieve significantly higher levels.

         Effective  January 1, 1998 the  company  authorized  a  distributor  to
service Finale product retailers and dealers (other than selected large accounts
and college bookstore distributors).  In 1997, approximately 25% of total Finale
sales came from markets that may now be served by this distributor.  The Company
believes that the unit sales will increase and offset the price discount offered
to this distributor; however, no assurance can be given that such increases will
be achieved.



<PAGE>


Additional Capital

         The Company  believes  that  existing  cash and  proceeds  from line of
credit borrowings, together with funds generated from the sale of products, will
be sufficient to fund its capital  expenditure,  product development and working
capital  requirements  through 1998. If the Company does determine in the future
to seek additional capital through a new line of credit,  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.

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 Accompaniment Sales and Development

         The  Company's  future  success is highly  dependent  on its ability to
obtain  significant  ongoing  accompaniment  sales. The Company has entered into
license agreements with leading music publishers, which provide the Company with
access to  musical  titles  for  accompaniment  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, 1997,  the Company  incurred a net loss
of $1,512,237 and since inception has an accumulated deficit of $9,968,214.

Dependence on Key Personnel

         The Company is highly  dependent on a limited  number of key management
and technical  personnel,  including  software  programmers  that are in limited
supply in the current labor market. 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.

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

         The Company  knows of no other musical  accompaniment  product for band
instruments and vocalists that responds to the musician.  However,  a competitor
has recently  announced an  interactive  product for piano and  keyboards;  this
product  is not yet  available  through  general  distribution  and has not been
evaluated by the Company.  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 $85,000. This lease expires in November 2000.


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 1997 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  1997
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  1997 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             50     Chief Executive Officer and Chairman of the
                                   Board of Directors

Ronald B. Raup              47     President, Chief Operating Officer and
                                   Director

Joan K. Berg                46     Chief Financial Officer and Secretary

Mark E. Dunn                49     Senior Vice President of Product Development

Julia D. Fraser             40     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  also  serves on the  Board of  Directors  of the  National
Association of Music Merchants ("NAMM").

         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  and  compliance
with Section  16(a) of the Exchange Act is  incorporated  herein by reference to
the sections  labeled  "Election of  Directors"  and "Section  16(a)  Beneficial
Ownership  Reporting  Compliance"  which appear in the  Registrant's  definitive
Proxy Statement for its 1998 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  1998  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 1998 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 1998 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  1997 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 23, 1998                       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

s/ John W. Paulson                                               March 23, 1998
--------------------------------------
John W. Paulson, Chairman of the Board
and Chief Executive Officer
(principal executive officer)

s/ Ronald B. Raup                                                March 23, 1998
---------------------------------------
Ronald B. Raup, President, Chief 
Operating Officer and Director

s/ Joan K. Berg                                                  March 23, 1998
---------------------------------------
Joan K. Berg, Chief Financial Officer
(principal financial and accounting
officer)

s/ David A. Henderson                                            March 23, 1998
---------------------------------------
David A. Henderson, Director

s/ Gordon F. Stofer                                              March 23, 1998
---------------------------------------
Gordon F. Stofer, Director

s/ Larry A. Pape                                                 March 23, 1998
---------------------------------------
Larry A. Pape, Director

s/ Karl T. Bruhn                                                 March 23, 1998
---------------------------------------
Karl T. Bruhn, Director

s/ Benson K. Whitney                                             March 23, 1998
---------------------------------------
Benson K. Whitney, Director

<PAGE>


                           CODA MUSIC TECHNOLOGY, INC.
                                EXHIBIT INDEX FOR
                        FORM 10-KSB FOR 1997 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

10.12*  Employment Agreement between Registrant and Ronald B. Raup dated 
        January 1, 1996--incorporated by reference to Exhibit 10.12 to the
        Registrant's Form 10-KSB for the year ended December 31, 1995

10.13   Amendment No. 3 to License Agreement between the Registrant and Carnegie
        Mellon University dated August 28, 1996--incorporated by reference to
        Exhibit 10.1 to the Registrant's Form 10-QSB for the quarter ended 
        September 30, 1996

10.14   Second Amendment to Lease by and between Jorandcor, Inc. and the 
        Registrant

13      Portions of Annual Report to Shareholders for fiscal year ended 
        December 31, 1997 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.