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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                              FORM 10-KSB/A (NO. 1)

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                          Commission File No.: 0-26192


                                 NET4MUSIC 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: (952) 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:  $1,454,000

The aggregate market value of the Common Stock held by nonaffiliates of the
Registrant as of March 30, 2001 was approximately $17,697,899 based upon the
closing price of the Registrant's Common Stock on such date.

There were 18,385,275 shares of Common Stock outstanding as of March 30, 2001.

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

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended December 31, 2000 are incorporated into Part II and portions of the
Registrant's definitive Proxy Statement for its 2001 Annual Meeting are
incorporated by reference into Part III.

Transitional Small Business Disclosure Format (check one).  YES      NO  X
                                                               -----   -----


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                                     PART I


ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

        Net4Music Inc. ("Net4Music" or the "Company"), a Minnesota corporation,
provides products to music educators, music makers and the music publishing
industry that enhance the processes of composing, distributing, teaching,
learning and playing music. Net4Music provides the technologies, products and
services to optimize the entire music maker supply chain. Net4Music believes it
is uniquely positioned to provide a range of independent yet complementary
products to the music industry in such areas as digital music rights and rights
management technologies, music notation software, accompaniments, and education
software and content. Net4Music is currently an international company with a
comprehensive set of rights to compositions, software and other technologies and
content, all of which Net4Music anticipates managing in such a way as to
significantly change the supply chain of creating, publishing, distributing,
teaching, learning and performing music.

TRANSACTION WITH NET4MUSIC S.A.

        Net4Music, formerly known as Coda Music Technology, Inc., changed its
name in October 2000 in connection with a transaction that resulted in the
combination of Net4Music's business with that of Net4Music S.A., a French
company. As a result of the transaction, Net4Music S.A. is now a majority-owned
subsidiary of Net4Music. Net4Music S.A. believes it is pioneering a
revolutionary approach to the publication, promotion, and distribution of sheet
music by providing digital distribution of the world's largest catalogue of
titles and offering associated services. Net4Music S.A. currently receives
revenues by selling, via its website, sheet music from the Net4Music.com
database both to consumers and to businesses, by providing online services to
musicians and from various operating alliances with other Internet websites.
Net4Music S.A.'s core business is focused on marketing quality digital sheet
music. In this regard, Net4Music S.A.'s strategy has allowed it to rapidly
become a competitive Internet-oriented company in the sheet music industry.
Building upon this core competency, Net4Music S.A.'s ultimate corporate mission
is to become a leading provider of a wide array of Internet-based products and
services enabling music publishers to adapt to the changes in the music
industry.

        The traditional structure of the music industry consists of multiple
segments, including production studios, publishers, distributors and labels. The
role of publishers is to promote the artists they represent and collect revenues
related to: (i) the sale of sheet music, (ii) the collection of performance
rights royalties, which they can obtain from collecting organizations such as
BMI in the USA and SACEM in France, (iii) the collection of mechanical rights
royalties, which they receive from labels when the labels



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distribute a CD and (iv) the collection of synchronization rights royalties
which are paid mostly by advertising and multi-media agencies as well as film
companies. Prior to the October 2000 transaction, Net4Music S.A. identified the
sheet music segment of the publishing industry as an inefficient market where
significant benefits will result from the use of the Internet to reshape the
traditional industry publishing and distribution chain. In addition to focusing
on correcting this perceived weakness, an important part of Net4Music's combined
business after the October 2000 transaction will be to further use the sheet
music Internet market segment as a platform to develop online publishing
services so that music makers can directly publish and distribute their music.
Net4Music S.A. ultimately wants to create a community where any artist can
publish, promote and distribute music in real time to an audience of millions.

        Net4Music believes that the transaction with Net4Music S.A. furthered
its strategic goal to grow and diversify its business. The Net4Music board of
directors endorsed the transaction with Net4Music S.A. after considering the
following factors, among others:

          o    Net4Music S.A.'s ability to further Net4Music's strategic goal to
               grow and diversify its operations, particularly with respect to
               its Internet business.

          o    The benefits and costs of Net4Music S.A.'s product and technology
               development efforts.

          o    Net4Music S.A.'s business, operations, earnings and financial
               condition, including its licensing relationships with music
               publishers, technological capabilities, capital levels and asset
               quality, on both an historical and prospective basis; the
               operating philosophy, competence, experience and integrity of
               Net4Music, S.A. and its management and its market share and
               growth prospects.

          o    Net4Music S.A.'s access to capital resources as compared to
               Net4Music's access.

          o    The perceived synergy between Net4Music S.A.'s product offerings
               and Net4Music's product offerings, including the perceived
               ability to improve the quality and scope of the companies'
               respective product offerings by integrating various aspects of
               each others products and services and the ability for Net4Music
               to leverage Net4Music S.A.'s Internet operations.

THE COMBINED COMPANIES

        Prior to its acquisition of Net4Music S.A., Net4Music was itself an
established company providing a wide range of music notation software,
accompaniments and education software and content that enhance the music making
experience and make learning music more fun and interactive. Net4Music believes
its acquisition of Net4Music S.A. will help it build upon its established
competitive position by improving and diversifying its product offerings and
improving the content offered in its software



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and education products, improving its Internet technology, creating strategic
relationships with major music publishers, expanding its customer base and
increasing the efficiency of its marketing efforts by improving cross-marketing
efforts for related and complementary products. Net4Music believes that it is
uniquely positioned to provide a range of independent yet complementary products
as a result of its acquisition of Net4Music S.A.

        Net4Music's goal is to help musicians make music and to establish new
standards in the music industry for musicians, including music publishing,
education, distribution and performance.

        Net4Music provides products that enhance the processes of composing,
distributing, teaching, learning and playing music. Net4Music is combining music
rights and technologies to create compelling online music making and music
education products that will be as useful and instructive as they are fun and
entertaining. These related product offerings will be marketed under the name
SmartMusic(R). SmartMusic is a Net4Music brand that refers to:

          o    Sheet music that is smart because you can customize it to have
               the key and solo instrument you want and then have it delivered
               electronically to your home.

          o    Accompaniments that are smart because they listen to you sing or
               play and follow your spontaneous tempo changes.

          o    Music practice tools that are smart because they make your
               practicing productive and fun!

          o    Music lessons that are smart because they hear what you do wrong
               and can teach you how to do it right.

        Customers benefit both from the value of each product and from the
integration between them. Net4Music's goals are to help musicians compose music
and to establish new standards in the music industry for musicians, including
music publishing, education, distribution and performance

        SHEET MUSIC THAT IS SMART. In 2001, SmartMusic(R) Viewer(TM) will offer
digital sheet music that makes published music readily accessible and more
valuable to the customer. This is because SmartMusic Viewer sheet music is
developed with Net4Music's proprietary Finale(R) music notation technology, the
music publishing industry standard. Once in the Finale file format, sheet music
can be archived on servers and delivered electronically to customers at home or
school via new channels of distribution and delivery systems. Customers can then
view and hear the music and even customize it to match their instrument and
preferred key.



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        ACCOMPANIMENTS THAT ARE SMART. SmartMusic will also provide customers
with accompaniment to their sheet music. SmartMusic offers Intelligent
Accompaniment(R) that listens to you sing or play through a microphone and
follows your spontaneous tempo changes. Intelligent Accompaniment allows you to
make music your way, to express yourself and project your personality into the
music. Only SmartMusic offers this patented Intelligent Accompaniment that has
won the support of Wynton Marsalis, James Galway and other leading musicians who
have demonstrated it at major conferences for musicians and music teachers.

        MUSIC PRACTICE TOOLS THAT ARE SMART. Intelligent Accompaniment is just
one of the key features of SmartMusic, a complete music practice system.
SmartMusic provides a tuner, metronome and vocal warm-ups. Musicians can
transpose the accompaniments, put difficult passages into practice loops and
listen to how their solo line is correctly played.

        At the heart of SmartMusic is a growing library of accompaniments for
over 5,000 titles and 50,000 skill development exercises. These range in
difficulty from beginner to hobbyist to professional and include genres such as
classical, jazz, music theater, pop, rock, spiritual, patriotic and educational.
The accompaniments, created by expert musicians, are great fun to play with and
take advantage of the Intelligent Accompaniment technology. They provide the
musical environment in which music makers can improve their skills most rapidly
while having fun.

        To support its technology and in order to strengthen its position in the
music market and to become a key resource, Net4Music has agreements with major
publishers and distribution sites. Net4Music distributes digitized sheet music
from more than 340 publishers through long-term license agreements. Net4Music's
agreements with major international publishers include:

          o    EMI Music Publishing, which owns the world's largest music
               catalog. Through various agreements between the two companies,
               Net4Music has gained full access to EMI's entire catalog in order
               to distribute and sell online to consumers digitized sheet music
               engraved by Net4music for EMI. These long-term agreements are
               non-exclusive. This agreement gives Net4Music access to a catalog
               of more than one million titles for online sales.

          o    Schott, which is based in Germany, is one of the world's largest
               publishers of classical music. Under this non-exclusive
               agreement, Net4Music will engrave and distribute digitized sheet
               music from Schott's best catalog, strengthening Net4Music's
               competitive position in the arena of online distribution of
               classical sheet music.

          o    Zomba is an independent music publishing company whose extensive
               catalog includes some of the leading artists and writers in the
               U.S. popular music scene today. This non-exclusive agreement
               gives Net4Music access to this repertoire and also an extensive
               list of Gospel/Christian music all of which will be engraved in
               Finale.



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          o    Boosey & Hawkes is a leading publisher of classical and
               educational music, with a unique status in the publishing of
               contemporary classical works. Under the terms of this
               non-exclusive agreement, Net4Music will digitize and engrave a
               number of works from Boosey & Hawkes' catalog in Finale, and
               distribute online. Other projects include working together to
               create new and existing educational works for use within the
               SmartMusic Studio environment.

        Music licensing rights provide publishers with $6.5 billion in revenues.
This industry is dominated by five major publishers, 40 large publishers and
another 2,000 or more small publishers. The sale of print music to music makers
accounts for $1 billion and is recognized as an underserved market. Publishers
serve over 150 million active music makers worldwide. In the U.S. alone, there
are 1,750 colleges graduating new music educators for the 115,000 K-12 schools
with music programs.

PRODUCTS

        SMARTMUSIC STUDIO. The SmartMusic Studio (formerly Vivace) technology is
currently offered in a CD-ROM format, with optional hardware accessories
available to enable the technology to work on slower computers. It will be
available in a subscription format in 2001 where all accompaniments will be
available for the price of a monthly subscription. The prototype technology upon
which the SmartMusic Studio system is based was patented by Carnegie Mellon
University and licensed to Net4Music. Net4Music then significantly enhanced the
prototype technology with its own proprietary technology and additional patented
features, producing a marketable product.

        The Intelligent Accompaniment software allows the user to start playing
at any point in a 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, 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.

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



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        SMARTMUSIC ACCOMPANIMENTS. The sale of a single SmartMusic Studio system
has the ability to generate multiple and ongoing sales of repertoire as
musicians build their own library of accompaniments. These accompaniments will
also be available digitally both for sale and for rent in a subscription
program. The current accompaniment delivery system consists of a computer floppy
disk. The accompaniment computer floppy disk will only work with our SmartMusic
Studio system and has been specially designed by us to protect against illegal
duplication. A typical accompaniment computer floppy disk retails for $24.95 and
usually contains more than one musical accompaniment. The digital delivery
system is planned for introduction in the fall of 2001.

        Net4Music has entered into license agreements with top music publishers.
These license agreements allow us to produce synthesized versions of musical
arrangements for use with the SmartMusic Studio system. Net4Music 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.

        Net4Music has created over 5,000 individual classical and jazz
accompaniments contained on approximately 500 computer floppy disks for its
SmartMusic Intelligent Accompaniment product as well as accompaniments for the
Belwin 21st Century Elementary Band Methods I, II and III. Net4Music made its
accompaniment selection based on a review of the most frequently performed
titles in American academic solo contests as well as popular titles of sheet
music sold at retail in the United States. These accompaniments vary in
complexity from easy to challenging and cover a broad range of musical genres
for almost all band instruments and voices. Net4Music intends to use its
relationships with key publishers and other sources to select the most popular
titles for development as accompaniments for SmartMusic Studio products.
Further, we plan to expand our library of accompaniments to cover a broad
spectrum of music genres, instruments and skill levels as well as international
preferences for music performance.

        FINALE NOTATION FAMILY. Net4Music believes it is a market leader in
music notation software with its Finale family of products for use with
Macintosh(R) and Windows(R) PC operating systems. Music notation software
enables a musician to enter musical data into a computer using either the
computer keyboard, a MIDI (musical instruments digital interference) equipped
electronic music keyboard or other MIDI equipped instruments 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
software have made such software the dominant method for composers, arrangers,
publishers and music teachers to create printed music.

        The Finale product is 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(TM) 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.



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        Net4Music also produces an Academic/Theological Edition of the Finale
product that is sold exclusively to schools, schoolteachers, college students
and churches at a suggested retail price of $275. This edition has also been a
key source of revenue and registered user base growth for us and it represents a
market that is continually being replenished with new student users.

        Product manuals are currently available in German, French, Italian,
Dutch and Japanese. The Company believes the international market is a key
growth opportunity as computer penetration increases worldwide. International
revenues, primarily from the sale of Finale products, represented 21.5% of
Net4Music sales in 2000.

        Finale Allegro(R) product, a value version of the powerful Finale music
notation software product, was introduced 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. We released Allegro 98 in 1998, the first
update since the product was first developed. With extensive MIDI capabilities,
Allegro is targeted to an audience that may not read music but needs to create
"lead sheets" for other musicians, and is therefore known as, "The MIDI User's
choice for music notation." The Allegro 2000 upgrade was introduced in February
2000 and is capable of exchanging files with both Finale 2000 and PrintMusic!
2000.

        We introduced the Finale PrintMusic!(TM) product for Windows in April
1999, an entry-level powerful music notation software product. The PrintMusic!
music notation software product retails for $69.95 and contains a subset of the
notation tools contained in the Finale and Finale Allegro products. The
PrintMusic! product allows us to offer an entry-level product to the retail
customer, thereby expanding the base of registered users and increasing the
potential for sales of notation software upgrades. Upgraded to Finale
PrintMusic! 2000 in November 1999, as a platform hybrid for Macintosh and
Windows, this product is targeted to a broader audience in the education and
general consumer marketplace.

        In November 2000 Net4Music introduced Finale Notepad, a downloadable
freeware introduction to the Finale Notation family. To date, 80,000 Notepad
files have been downloaded.

        INTONATION TRAINER. Net4Music introduced Intonation Trainer in February
2000 at a retail price of $149.95. Intonation Trainer is an easy, yet powerful
program that actually teaches woodwind and brass students how to play in tune by
listening for and eliminating intonation beats within intervals and chords.

         WWW.NET4MUSIC.COM. We launched our comprehensive and fully operational
website on December 1, 1999. The site offers customer interaction in 5 languages
(French, English, Spanish, German and Italian) and 22 currencies, editorial
content and a musician's directory.



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        WWW.CODAMUSIC.COM. The Coda Music website promotes products and
e-commerce with mail-order fulfillment for upgrades and SmartMusic accessories
and also downloads of Finale Notepad.

        WWW.PARTITOR.COM. This site is an independent and complementary website
focused on mail order distribution, which has been fully operational since its
inception in 1998 and has been integrated with Net4Music after the acquisition
of Net4Music's European competitor, Informusique, in October 1999.

        DIGITAL COPYRIGHT PROTECTION SYSTEM. A proprietary technology developed
to create a Digital Right Management ("DRM") system capable of enhancing
copyright protection. With respect to the DRM, Net4Music has two pending patent
applications with the INPI and the U.S. Patent and Trademark Office relating to
the "System and process for the digital musical files publishing" and the
"Process for the remote publishing of musical scores".

        LARGE DATABASE OF DIGITIZED SHEET MUSIC. Net4Music's database is one of
the world's largest with respect to digitized sheet music, including music from
all genres. The music industry knowledge of the Net4Music team ensures the
quality of both the sheet music and the selection of titles.

        THE GUTENBERG SERVICE. This service is a standardized process based on
detailed proprietary specifications for automated input to Net4Music's large
database of digital sheet music, including the Net4Music engraving facility with
a staff of 70 in Madagascar.

        MEMBERSHIP. Each customer benefits from a membership, which enables him
or her to monitor in a web-enabled manner his or her personal data, his or her
public information entered in the directory, his or her wallet, and his or her
purchase and self-publication history.

        TECHNOLOGY INFRASTRUCTURE. The Net4Music website uses middle-range
industry standard Sun machines under the Solaris operating system. For
middleware, its systems use the Oracle Application Server to communicate and
ensure infrastructure scalability. Net4Music can relatively easily add new
machines as traffic increases, or as it adds new functionalities. The systems in
place use less than 10% of existing capacity with 10,000 visits a day and 50
concurrent users. Net4Music data are stored exclusively in Oracle 8i databases,
which is one of the latest versions of Oracle formal (PDF). Net4Music's DRM
system has been written in the well known C++ language. All these technological
choices place Net4Music at an advantage in a highly time-sensitive market
because Net4Music will not have to redesign its architecture or switch to more
powerful platforms to handle a large growth of traffic and download.



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        The Coda website uses Compaq Proliant Servers with Windows 2000 as an
operating system. It utilizes IIS 5.0 and Microsofts's Site Server 3.0 Commerce
Edition and data is stored in MS SQL 7.0 database. These technologies are
scalable and allow for increased traffic and download requests.

        SECURE WEBSITE. Net4Music's website is hosted by UUNet, one of the
global market leaders of web-hosting and connectivity, which puts Net4Music
directly on the largest Internet Backbone and provides total bandwidth
scalability. Net4Music system administrators use an external real time
supervision system that sends SMS messages in the event of any failure of
Net4Music's front office systems. All disks use fault tolerant RAID 5 technology
and daily back-ups are operated with tape and CD-ROMs kept in multiple
locations.

        THE PRODUCT STORE. Through the product store, musicians can search
products by key words, instruments, music genres, composers or artists and
publishers. A sample of each product can be previewed before purchase. For such
purposes, Net4Music has built an infrastructure which should enable it to
service a substantial growth of its site activities adequately and to ensure the
best available copyright protection for the musicians and publishers. The site
replies rapidly to questions and searchers.

        THE DIRECTORY. Net4Music has implemented a directory for musicians on
its website. In its directory, users can identify and promote themselves
(teachers, independent publishers, music school, DJs, stores, etc.) through a
web page that can be located through a search engine. They can link this page to
their own site or to their sheet music on Net4Music's website. They can also
earn discounts related to the group to which they belong to: retailer, teacher,
etc.

        THE ELECTRONIC WALLET. In addition to the CyberMut technology, the site
features proprietary secured micro-payment using most usual credit cards and an
"electronic wallet". This wallet can be loaded using credit cards, bank checks
or purchase orders and cash payments. Purchasing can be done in such a way that
volume discounts are automatically granted for the purchase of multiple copies
of the same score (e.g., for student groups). Payments must be made prior to
downloading and printing.

MARKETING, SALES AND DISTRIBUTION

        SmartMusic Studio products are currently being sold through domestic and
international distributors. Distributors service the music instrument retailers,
college bookstore and educational software markets. Net4Music is also selling
SmartMusic Studio products directly on the Internet and through its customer
service department. Finale products are sold through distributors, music
instrument retailers, mail order software retailers, and computer dealers.
Finale upgrades were sold on the Internet for the first time in 1999.



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        Net4Music believes it can significantly build on its Finale, Finale
Allegro and PrintMusic! software business by continuously expanding the
installed base of users and regularly providing them with upgrades, broadening
retail distribution, producing additional international versions of the products
and establishing the products as a means for electronic transmission of music.
Finale upgrades were introduced on both the Windows platform and Macintosh
platform in each of the last six years.

        Digital sheet music products are marketed on our site and through
distributor partners.

        A key marketing strategy of Net4Music is to deploy SmartMusic at key
partner sites that already have customers frequenting their sites. SmartMusic
creates the opportunity to strengthen their music makers community while sharing
in the revenues from SmartMusic sheet music sales and the recurring SmartMusic
Studio subscription fees. Offering SmartMusic is extremely easy for a partner
site since Net4Music projects SmartMusic onto their site from Net4Music servers
and handles all transactions including back office functions.

        Net4Music currently sells its products in over 125 countries around the
world. The products are distributed over our three Internet sites
(www.net4music.com, www.partitor.com, and www.codamusic.com) and by leading
music software distributors in each of the international markets that are
responsible for sales, marketing and technical support.

PRODUCT DEVELOPMENT

        Net4Music intends to continue to expand its current product offerings by
developing products for new applications and markets.

        WEBSITE. In 1999 Net4Music started focusing on the Internet. Website
development expense consists primarily of expenses required for design and
development of the Net4Music website and underlying technology infrastructure.
These expenses mainly include payments to third party service vendors and
personnel costs.

        CONTENT. Content development consists primarily of payroll and payments
to a third party for the engraving of digital sheet music. In 2000, the payroll
and payments to third parties for the development of repertoire for SmartMusic
accompaniments were added to content development.

        In general, Net4Music plans to continue developing the SmartMusic
Subscription model for distribution on its Internet and other Internet web
sites. We will also continue adding to the existing sheet music and SmartMusic
accompaniment catalogs, creating additional digital sheet music and
accompaniments. Sheet music development has limited risk and short development
cycles that typically range from 1 week to 3 months depending on approvals
required from licensing publishers. SmartMusic Accompaniment



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development has limited risk and short development cycles that typically range
from one to four months. We have established an expertise in both the
development of sheet music and accompaniments. For sheet music, Net4Music has
standardized the process based on detailed proprietary specifications for
automated input to Net4Music's large database of digital sheet music including
the Net4Music engraving facility with a staff of 60 in Madagascar. For
accompaniment development, we have created procedures 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, we need only look to the most popular titles in the large and
growing supply of musical compositions to develop additional SmartMusic
accompaniments.

        FINALE. Product development costs, or its related sales, are not
included in Net4Music's financial results prior to the transaction on October
19, 2000. However, prior to that date Coda, to maintain its competitive position
in the music notation marketplace, over the past six years 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 $149.95.

        In 2001, we are adapting our Finale products to allow online viewing,
customizing and transmission of musical scores via SmartMusic Viewer. 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, customize it, then purchase and print the score. We have
a beta version of such product. We believe the cost of developing a commercially
viable product is within our product development budget.

        FINALE ALLEGRO AND PRINTMUSIC! In 2000, Net4Music released upgrades for
both Finale Allegro and Finale PrintMusic!, both which are based on Finale. In
late 1999, Net4Music released Finale Notepad, a free introductory version of the
Finale Family Notation Products.

        INTONATION TRAINER. In early 2000, Net4Music released Intonation
Trainer, a product designed to help school band directors teach their students
to play better in tune. We intend to continue developing music education
products with our proprietary music technologies.

COMPETITION

        Net4Music currently competes with a few other specialized online sheet
music publication companies. With respect to the market for online sheet music
distribution, competition comes from a limited number of music websites and
traditional distributors, which currently partner with retailers or publishers.



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        With respect to the market for the preparation, enhancement and secure
distribution of digital sheet music, companies that are currently in similar or
potentially competing business are United States companies including:

          o    Sunhawk. Quoted on The Nasdaq Stock Market, Sunhawk has
               positioned itself as a provider of a digital rights management
               system that allows Internet users to download copyrighted
               material such as film, music, photographic images, and software
               for which the owners charge a fee. This technology relies on the
               "Solero" viewer provided by Sunhawk, and the associated
               proprietary format. Sunhawk has recently announced the intention
               to exit the digital sheet music market.

          o    Sheet Music Direct. The website is affiliated with sheet music
               distributors Hal Leonard Publishing Corporation and Music Sales
               Corporation. Sheet Music Direct has developed an Internet-based,
               purchase-on-demand delivery system for digital sheet music with a
               strong emphasis on popular music. Both companies have adopted
               Sibelius' Scorch technology for distribution of their digital
               sheet music. Sibelius is a UK based music notation software
               company with offices in the United States.

          o    Music Notes. This is a digital sheet music store and sheet music
               mail order company based in Wisconsin. The website launched in
               1999. Digital rights include Warner Bros Publications and Mel Bay
               Publications.

        The market for sheet music publication is dominated by three major
companies (Hal Leonard, Music Sales, Warner Bros Publications, a Warner Music
Group affiliate). In addition, mid-sized publishers often have in-house
publication services. These companies sell to wholesalers, which in turn supply
retailers. Some of them have initiated online sheet music distribution. However,
the proposed solutions are based mostly on mail-order. Today, approximately 100
websites offer sheet music in hard copy sold by mail order. They range in titles
offered from less than 20,000 to over 200,000.

        Net4Music believes that it has established a variety of competitive
advantages, which will discourage others from competing effectively in the
business of online sales and distribution of digital sheet music over the
Internet. These advantages include: technologies for encrypting and managing the
rights to digital content under a standard format developed by Net4Music; a
digital production process designed to create what could become the largest
digital sheet music catalog available; a method of digital distribution which
has been adopted by major international publishers (Net4Music has developed a
plug-in that enables a fast and secure download); a fully operational,
multi-lingual and multi-currency website; and a community of musicians through
its website's directory and editorial content features.



                                       12


<PAGE>   14


        Net4Music knows of no other musical accompaniment product for band
instruments and vocalists that responds to the musician with the exception of In
Concert(TM) by Cakewalk, which is an interactive product for MIDI keyboards.
Net4Music expects that SmartMusic products will also compete with conventional
music accompaniment products by Music Minus One by MMO Music Group, Inc. and MTS
120 by Roland Corporation. These products offer students the ability to play
along with prerecorded songs. They differ from the SmartMusic Studio product in
that they do not automatically adjust in real-time to the musician's changes in
tempo. Net4Music believes its SmartMusic system is unique because this product
listens to wind instruments and voice. In addition, Net4Music sells
accompaniments, while competitors sell only the applications. However, there can
be no assurance that competitors will not enter the market.

        The notation market is highly competitive and continues to have
established competitors such as Cakewalk and G-Vox. Further, new products are
continually being announced and introduced by companies such as NoteHeads
Musical Expert Systems and Sibelius Software LTD in 1999.

        Principal competitive factors in marketing Net4Music's SmartMusic and
Finale products include product features, quality, brand recognition, ease of
use, merchandising, access to distribution channels, retail shelf space and
price. We believe we compete effectively in these areas.

PATENTS

        Net4Music has licensed, on a worldwide basis for the life of the patent,
from Carnegie Mellon University ("CMU") the use of the U.S. patent, which covers
the automated accompaniment that listens to and follows tempo changes from a
live performance. Net4Music has further developed this technology and patented
additional features. Net4Music has obtained five patents, in addition to the CMU
patent, that protect improvements to the user control of the software, certain
aspects of the repertoire file which enhance the following capabilities of the
software, enhancements to the following algorithm, accompaniment controls and
repertoire data files and miscellaneous interface features of the product. As a
result of the additional patented features developed by Net4Music and the
ability of Net4Music to develop an extensive library of repertoire over the next
several years, Net4Music does not believe that it will be materially adversely
affected by the expiration of the CMU patent in 2005.

        Net4Music'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, which expire between 2008 and 2012.


                                       13


<PAGE>   15



        Net4Music SA has also filed in France with worldwide extension
applications for two patents directly linked with its Internet distribution
activities. The first patent application is for a process that provides for the
instantaneous availability of musical scores in all locations, with the
possibility of personalizing the published score while the second patent
application concerns an interactive system based on a network which permits
three categories of people (arrangers, authors and music players) to collaborate
and to create together a musical work.

TRADEMARKS

        Net4Music owns the registered trademarks in the United States for
Net4Music(TM), 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 Net4Music and Finale have been protected
in some foreign countries. Net4Music has applied for trademark registration in
the U.S. for the name Plug4Music(TM), Practice Studio(TM), SmartMusic(TM),
SmartMusic Studio(TM), SmartMusic Accompaniments(TM), Hyperscribe(TM), Finale
PrintMusic!(TM) and Intonation Trainer(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 our specifications by outside subcontractors.
Currently, BBI Computer Systems, Inc. ("BBI") provides key-disk protection for
accompaniment products. While BBI is not the only seller of copy disk
protection, Net4Music has a significant investment in incorporating their
protection mechanism into the accompaniment product inventory. We do not have
any material agreement with BBI. No other products are vendor specific.
Net4Music currently uses Advanced Duplication Services, Inc. to perform standard
copying and assembling services, including copying the accompaniment floppy
disks and other product software CD-ROM disks, and assembling the product
manuals, disks and other product literature into packages. Although our
relationship with outside subcontractors are important, we believe other sources
of such services are available in that our operations will not be materially
disrupted if we were to change service providers.

EMPLOYEES

        As of December 31, 2000, Net4Music employed 205 full-time employees. Of
these, 76 resided in Europe, 69 in the United States and 60 in Madagascar. Those
based in Europe and the U.S. included the following positions: 16 in management
positions, 17 in website development, 14 in product development area, 29 in
content development and engraving activities, 17 in product testing and end-user
support, 29 in sales & marketing, and 23 in general and administrative. The
employees in Madagascar are engaged in producing sheet music. As of March 14,
2001, Net4Music announced the layoff of 28 employees (19 in France and 9 in
U.S.) relating to the elimination of duplicate staff and the realignment of
required content development levels. The announced decreases will be completed
over the next five months. Net4Music believes that its relations with its
employees are good. None of our employees are covered by a collective bargaining
agreement. In addition, Net4Music relies on independent contractors to develop
its repertoire. We have had no difficulty contracting with these individuals and
believe that our relationships are good. Should the Company have difficulty
securing the services of such persons in the future, it could adversely affect
operations.


                                       14


<PAGE>   16



LEGAL PROCEEDINGS

        Net4Music 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.

CAUTIONARY STATEMENTS

        The Private Securities Litigation Reform Act of 1995 (the "Reform Act")
provides a safe harbor for forward-looking statements made by us or on our
behalf. We have made, and may continue to make, various written or verbal
forward-looking statements with respect to business and financial matters,
including statements contained in this document, filings with the Securities and
Exchange Commission, and reports to stockholders. Forward-looking statements
provide current expectations or forecasts of future events and can be identified
by the use of terminology such as "believe," "estimate," "expect," "intend,"
"may," "could," "will," and similar words or expressions. Net4Music's
forward-looking statements generally relate to its growth strategy, financial
results, product development and sales efforts. Forward-looking statements
cannot be guaranteed and actual results may vary materially due to the
uncertainties and risks, known and unknown, associated with such statements.
Net4Music undertakes no obligations to update any forward-looking statements.
Net4Music wishes to caution investors that the following important factors,
among others, in some cases have affected and in the future could affect
Net4Music'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 Net4Music. It is not possible to
foresee or identify all factors that could cause actual results to differ from
expected or historic results. As such, investors should not consider any list of
such factors to be an exhaustive statement of all risks, uncertainties or
potentially inaccurate assumptions.

        WE MAY NEED ADDITIONAL CAPITAL. Net4Music believes that it has capital,
or access to capital, sufficient to meet its needs through the first quarter of
2002. Additional capital may be needed sooner if there is a significant change
in our business plan or operating results. There is no assurance that additional
capital will be available on terms favorable to us or at all.

        WE ARE DEPENDENT UPON OUR NEW PRODUCT DEVELOPMENT EFFORTS. Additional
development work is required to increase the breadth of our Internet business
and our repertoire for SmartMusic Studio products. There can be no assurance
that our timetable for any of our development plans will be achieved, that
sufficient development resources will be available or that development efforts
will be successful.


                                       15



<PAGE>   17



        WE ARE DEPENDENT UPON OUR INTERNET BUSINESS AND ACCOMPANIMENT SALES. The
market penetration for Net4Music products is, to a large extent, closely linked
to intensive use of the Internet. Particularly, we believe our ability to
increase our revenues is substantially related to our ability to increase
ongoing accompaniment sales through the Internet. As a result, our success
depends on continued growth in Internet use. A number of uncertainties related
to the Internet exist. If the Internet develops more slowly than projected or we
experience problems developing and maintaining our Internet operations, our
sales, operating results and financial condition could be adversely affected.

        WE ARE DEPENDENT UPON OBTAINING AND MAINTAINING LICENSE AGREEMENTS WITH
MUSIC PUBLISHERS, OF WHICH THERE IS A LIMITED NUMBER. The world market for sheet
music is highly concentrated among a limited number of publishers. Our contracts
with several major publishers are not all exclusive, which means that similar
agreements may be made with competitors or that the publishers themselves may
sell the same titles. Net4Music has also entered into license agreements with
leading music publishers that provide access to certain musical titles for
accompaniment development. While we believe that our relationships with these
publishers are good, there can be no assurance that we will be able to maintain
or expand these relationships. The lack of a sufficient number and variety of
musical arrangements would greatly the limit ability to market Internet products
and services and SmartMusic products.

        CERTAIN OF OUR PRODUCTS HAVE LIMITED AND FLUCTUATING SALES. Net4Music
has only recently begun sales of sheet music on the Internet and SmartMusic
Studio products have achieved only limited sales since their introduction. There
can be no assurance that Internet or SmartMusic Studio product sales will
achieve significantly higher levels. Further, Internet sales have fluctuated, as
have sales of Finale products, which are historically higher following the
release of product upgrades. We believe that results of operations may fluctuate
as a result of, among other things, the purchasing cycle of the education market
and the timing of releases of new products and product upgrades.

        THE RATE OF CONVERSION OF VISITS TO OUR WEBSITE INTO ORDERS FOR SHEET
MUSIC OR MIDI FILES REMAINS LOW AND THE DIFFERENCE BETWEEN THE TWO GROWTH CURVES
CONTINUES TO INCREASE. The average number of daily visits to our website is at
present approximately 8,000 resulting in approximately 80 orders for goods. The
number of visits to our web site has increased by 800% over the last five
months, whereas the number of orders for goods has increased by only 600% over
the same period. Should this trend continue in the medium term, sales forecasts
will need to be reduced and an adjustment made to the estimated gross sales.

        WE HAVE INCURRED OPERATING LOSSES IN THE PAST AND EXPECT SUCH LOSSES TO
CONTINUE. Net4Music has incurred operating losses since inception, and will
continue to incur such losses in the future. Such losses will include non-cash
expenses due to the amortization of goodwill and other intangible assets to be
recorded as a result of the transaction with Net4Music S.A. In order to continue
to develop our business and planned product and service offerings, we will be
required to devote additional amounts of capital to its development and
marketing efforts, among others things. There can be no assurance that we will
ever be able to operate profitably or provide an economic return to the
investors.



                                       16


<PAGE>   18


        WE FACE INTENSE COMPETITION. Competition in the digital sheet music
distribution is strong and may increase, particularly if the few major
traditional music distributors and publishers decide to become Internet
providers of digital sheet music. While competition for the SmartMusic Studio
products is limited, there can be no assurance that others, such as large
electronic and musical instrument manufacturers, will not enter this market.
Some of the companies with which we compete, and may compete in the future, have
significantly greater financial and other resources than our resources. Our
ability to continue to compete effectively will be substantially dependent upon
our ability to continue to improve our product offerings and Internet resources.
If such improvements and developments efforts do not materialize as intended, we
may lose our ability to differentiate our products from those of our
competitors. In addition, increasing competition in the music software market
could cause prices to fall and the volume of transactions to decline, either of
which could adversely affect our business, operating results and financial
condition.

        RAPID TECHNOLOGICAL CHANGES AND OBSOLESCENCE MAY ADVERSELY AFFECT OUR
BUSINESS. We operate in an industry greatly affected by technological changes.
While we are not currently aware of any significant technological changes that
may affect our current technology base, continued advancements in computer
software, hardware and network designs and formats may impact our ability to
effectively maintain our Internet-based sales efforts in a workable and
user-friendly format. For example, many of the PDFs (portable document files) in
our database may not be usable without modification if an incompatible
international format is adopted. Further, we could face market share losses
depending on the growth of the use of alternative technologies that transcribe
MIDI files into sheet music. Finally, the proprietary technology we license for
use in securing transactions (secure music distribution engine) with end users
will be effective for only a limited period by reason of technological change.
Net4Music must, therefore, devote new resources to improve or modify this
security system, which is a critical aspect of our ability to establish and
maintain relationships with music publishers. While we currently believe that we
have sufficient resources to address technological changes that may affect our
business, there can be no assurance that any such technological changes will not
prove too much for us to overcome in a cost-effective manner.

        ADDITIONAL GOVERNMENT REGULATION OF THE INTERNET MAY IMPAIR OUR ABILITY
TO FULLY DEVELOP AND UTILIZE THE INTERNET AS A MARKETING AND DISTRIBUTION
MEDIUM. Today, there are relatively few enacted laws specifically directed
towards online services, and the applicability and scope of such laws is still
uncertain as court interpretations are few. Currently, we do not believe their
impact materially affects the nature of our Internet operations. Applicability
to the Internet of existing laws governing issues such as property ownership,
copyrights and other intellectual property issues, taxation, libel, obscenity
and personal privacy is uncertain. In addition, because our services are
accessible worldwide, foreign jurisdictions may claim that we are required to
comply with their laws. Laws regulating Internet companies outside of the U.S.
may be less


                                       17


<PAGE>   19



favorable then those in the U.S. Compliance with foreign laws may require us to
change our business practices or restrict our service offerings to an extent
that may harm our financial results. Further, changes to existing laws or the
passage of new laws affecting the Internet could directly affect the way we do
business, create uncertainty on the Internet, reduce demand for our services,
increase the cost of doing business, or otherwise harm our business. Our failure
to comply with domestic or foreign laws could also subject us to penalties
ranging from fines to bans on our ability to offer our services.

        WE ARE DEPENDENT UPON CERTAIN KEY PERSONNEL. Net4Music is highly
dependent on a limited number of key management, including Sean Lafleur and John
Paulson, and technical personnel, including software programmers who are in
limited supply in the current labor market. The loss of key personnel, or
inability to hire and retain qualified personnel, could have an adverse effect
on our business, financial condition and results of operations.

        WE ARE DEPENDENT UPON PROPRIETARY TECHNOLOGY AND CANNOT ASSURE
PROTECTION OF SUCH TECHNOLOGY. There can be no assurance that our proprietary
technology will provide us with significant competitive advantages, that other
companies will not develop substantially equivalent technology or that we will
be able to protect our technologies. Net4Music could incur substantial costs in
seeking enforcement of its patents or in defending itself against patent
infringement claims by others. Further, there can be no assurance that we will
be able to obtain or maintain patent protection in the markets in which we
intend to offer products.

        INTERNATIONAL DEVELOPMENT PLANS ARE SUBJECT TO NUMEROUS RISKS. There can
be no guarantee that our international expansion efforts will be successful or
that we will be able to offset the cost of the resources allocated to such
efforts. Moreover, Net4Music could be faced with the risks inherent in any
international development, such as unpredictable changes in export restrictions,
barriers and customs rates; currency risks; the difficulty of managing foreign
operations; the differences in technological standards, payment terms and labor
laws and practices among countries; collection problems; political
instabilities; seasonal reductions in business, and unforeseen taxes. Such risk
factors could harm our international operations and, therefore, our business,
operating results and financial condition.

        THE MARKET PRICE OF OUR STOCK MAY EXPERIENCE VOLATILITY. We cannot
speculate as to the future market price of our Common Stock. Our Common Stock
has experienced, and may continue to experience, substantial price volatility
due to a number of factors, including fluctuations in operating results; changes
in recommendations by stock market analysts regarding us or our competitors;
developments in the industry; and general market conditions that may be
unrelated to our performance.



                                       18

<PAGE>   20



ITEM 2. DESCRIPTION OF PROPERTY

        The Paris location leases approximately 2,615 square feet of office
space at 24, Rue du President Wilson, 92300 Levallois-Perret, France, for
current annual net rent of approximately $56,000. This lease expires in June
2002. The Lyon location leases approximately 8,300 square feet of office space
at 20 c Boulevard Eugene Deruelle, 69432 Lyon Cedex 03, France, for current
annual net rent of approximately $86,000. This lease expires in November 2002.
The New York location leases approximately 2,500 square feet of office space at
130 William Street, Suite 503, New York, NY 10038, for current annual net rent
of approximately $62,000. This lease expires in October 2004. New York
operations are being discontinued April, 2001 and the Company plans to sublease
the location. The Minnesota location 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 $120,000. This lease expires in
March 2002.


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.


                                    PART II.

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

               During the fiscal year ended December 31, 2000, the Company
issued the following securities that were not registered under the Securities
Act of 1933 (the "Act").

PRE-ACQUISITION

        Effective March 24, 2000, Coda issued 5,257 shares of Common Stock to an
accredited investor upon the cashless exercise of a Warrant to purchase 9,616
shares at an exercise price of $2.00 per share. The shares were issued in
reliance on the exemption from registration provided by Section 3(a)(9) of the
Act.

        Effective May 18, 2000, Coda issued 9,616 shares of Common Stock to an
accredited investor upon the exercise of a Warrant to purchase the shares at an
exercise price of $2.00 per share. The shares were issued in reliance on the
exemption from registration provided by Section 4(2) of the Act.



                                       19


<PAGE>   21



        Effective June 9, 2000, Coda issued 38,462 shares of Common Stock to an
accredited investor upon the exercise of a Warrant to purchase the shares at an
exercise price of $2.00 per share. The shares were issued in reliance on the
exemption from registration provided by Section 4(2) of the Act.

        Effective October 10, 2000, Coda issued 60 shares of Common Stock to an
accredited investor upon the exercise of a Warrant to purchase the shares at an
exercise price of $2.00 per share. The shares were issuance in reliance on the
exemption from registration provided by Section 4(2) of the Act.

POST-ACQUISITION

        In November 2000, Net4Music Inc. issued an aggregate of 181,828 shares
of Common Stock to 12 accredited investors upon the cashless exercise of
warrants to purchase an aggregate of 460,659 shares of Common Stock at exercise
prices ranging from $1.729 to $2.00. The shares were issued in reliance on the
exemption provided by Section 3(a)(9) of the Act.

        In November 2000, Net4Music Inc. issued an aggregate of 358,253 shares
of Common Stock to 15 accredited investors upon the exercise of Warrants to
purchase the shares at exercise prices ranging from $1.729 to $1.745. The shares
were issued in reliance on the exemption from registration provided by Section
4(2) of the Act.

        The Company's Common Stock traded on the The Nasdaq SmallCap Market tier
of The Nasdaq Stock Market under the symbol COMT until October 19, 2000. As of
October 19, 2000, it trades under the symbol NMUS.

<TABLE>
<CAPTION>
                                             2000                1999
                                      -----------------     ---------------
                                        High       Low      High      Low
---------------------------------------------------------------------------
<S>                                    <C>        <C>       <C>      <C>
                      First Quarter     $5.41     $2.50     $2.13    $1.31
                -----------------------------------------------------------
       Common        Second Quarter     $4.25     $3.38      2.50     1.19
                -----------------------------------------------------------
        Stock         Third Quarter     $4.17     $3.50      6.00     2.41
                -----------------------------------------------------------
                     Fourth Quarter     $3.50     $2.25      3.88     2.19
---------------------------------------------------------------------------
</TABLE>

        As of December 31, 2000, there were approximately 200 shareholders of
record of the Company's Common Stock. In addition, the Company estimates that an
additional 1,500 shareholders own stock held for their accounts at brokerage
firms and financial institutions. The Company has never paid cash dividends on
any of its securities. The Company currently intends to retain any earnings for
us in its operations and does not anticipate paying cash dividends in the
foreseeable future. The Company's bank line of credit prohibits the payment of
dividends without prior approval of the lender.


                                       20


<PAGE>   22



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

        The Company provides digital solutions to music educators, music makers
and the music publishing industry. These solutions include the sale of digital
sheet music, music notation software for music composition and software that
provides music accompaniment to make practicing and performing more fun.

        On October 19, 2000, Coda Music Technology, Inc. changed its name to
Net4Music Inc. in connection with its acquisition of Net4Music S.A. Under
Generally Accepted Accounting Principles ("GAAP"), the Net4Music S.A. and Coda
business combination was deemed to be a reverse acquisition of Coda by Net4Music
S.A. (See Notes 3 and 4 to the Financial Statements). According to GAAP, upon an
acquisition, the acquired company's results of operations are not included in
the acquirer's results of operations prior to the date of acquisition.
Therefore, the following discussions include the results of Coda only for the
period subsequent to October 19, 2000.

RESTATEMENT

Based on a Securities and Exchange Commission review, the consolidated financial
statements for year ended December 31, 2000 have been restated. The Company has
reduced the estimated useful lives of goodwill and certain identifiable
intangible assets and has not considered as a minority interest the shares in
our subsidiary, Net4Music S.A., that were not converted in the Coda reverse
acquisition. The effect of these changes on the 2000 statement of operations was
to increase the net loss by $720,000 to $11,831,000 and increase the net loss
per share to $(.96) from $(.94).

<TABLE>
<CAPTION>
                                                                  (In 000's)
                                                                 -----------
<S>                                                              <C>
Net loss as previously reported                                  ($11,111)
Increase in amortization expenses                                     205
Eliminate allocation of loss to minority interest                     515
                                                                 ----------
Net loss as restated                                             $(11,831)
</TABLE>



RESULTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2000 COMPARED TO THE YEAR ENDED DECEMBER 31,
1999

        NET REVENUE. Net revenue for the year ended December 31, 2000 were
$1,454,000 as compared to $299,000 for the year ended December 31, 1999. Net
revenue consists of software sales of $1,286,000 and the remainder consists
primarily of website sales and engraving services. Effective October 19, 2000
Net4Music S.A. and Coda Music Technology, Inc. entered in to a reverse
acquisition (See Note 4 to the financial statements) and as a result Coda Music
Technology, Inc. software sales are included effective October 20, 2000.
Software sales are sales of Coda products Finale, Finale Allegro, PrintMusic!,
SmartMusic Studio, SmartMusic Studio Applications and Intonation Trainer since
the date of the reverse acquisition. Sales for 1999 are solely those of
Net4Music S.A. and compare to Net4Music S.A. sales of $168,000 in 2000.



                                       21

<PAGE>   23



        Until early 2000, Net4Music generated most of its revenue from the
rental of interactive kiosks and the sale of prepaid cards. In 1999, Net4Music
decided to stop this activity; the last card for use at the kiosks was sold in
4th quarter, 2000. Currently, Net4Music is developing its Internet business.
Net4Music started to generate revenue from Internet operations in 2000. Website
sales revenue includes the sale of digital sheet music and MIDI files through
the Net4Music website and the sale of music books through the Partitor website.
Net4Music recognizes the gross amount of product sales and shipping revenues
when the product is delivered. Net4Music is currently focusing on growing its
Internet operations and anticipates a growing trend for its online product
sales.

        GROSS PROFIT (LOSS). Gross profit was $1,125,000 for the year ended
December 31, 2000 as compared to a negative gross profit of $(279,000) for the
year ended December 31, 1999. This reflects the Company's addition of Coda
software sales after the date of the reverse acquisition as described above and
increased Internet emphasis. Cost of sales for software sales include product
costs and royalties paid to publishers. Costs of sales related to online product
sales includes royalties paid to publishers, credit card fees and handling and
shipping for hard copies sold through the Partitor website. The negative gross
profit in 1999 relate primarily to kiosks, which were being phased out in 1999.
Cost of sales for kiosks consisted primarily of the royalties paid to publishers
and the cost of prepaid cards

        WEBSITE DEVELOPMENT. Website development expenses were $1,106,000 for
the year ended December 31, 2000 in comparison to $386,000 for the year ended
December 31, 1999. This reflects the change of direction for Net4Music in 1999
when it decided to start focusing on the Internet. Website development expense
continues to consist primarily of expenses required to improve the design and
develop additional features for the Net4Music website and other underlying
technology infrastructure. These expenses mainly include payments to third party
service vendors and personnel costs.

        CONTENT AND PRODUCT DEVELOPMENT. Content and product development
expenses totaled $1,226,000 for the year ended December 31, 2000 in comparison
to $310,000 for the year ended December 31, 1999. Development costs increased
due to the personnel costs for software development at Coda incurred after the
completion of the reverse acquisition on October 19, 2000 (See Note 4 of the
financial statements). Content development expenses also include personnel costs
and payments to a third party for the engraving of digital sheet music, which
increased in level from 1999 to 2000.

        SELLING AND MARKETING EXPENSES. Selling and marketing expenses were
$6,165,000 for the year ended December 31, 2000 in comparison to $1,173,000 for
the year ended December 31, 1999. Of the increase, 15% is from sales and
marketing expenses relating to the Coda software business after the October 19,
2000 reverse acquisition (See Note 4 of the financial statements). The remainder
of the increase reflects Net4Music's strong commitment to promote its Net4Music
website, which was launched in December 1999. Total selling and marketing
expenses primarily consist of marketing, advertising and promotion expenses,
business development and customer service activities and payroll.



                                       22


<PAGE>   24


        GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were $4,692,000 for the year ended December 31, 2000 in comparison to $2,366,000
for the year ended December 31, 1999. General and administrative expense
consists primarily of payroll and related expenses for executive and
administrative personnel, professional services expenses relating to financing
activities and other general corporate expenses. Increased expenses relate to
the addition of facilities as a result of the reverse acquisition effective
October 19, 2000, costs of being a global public company, amortization of
goodwill and depreciation of the write up in assets as a result of the reverse
aquisition (See Note 4 of the financial statements).

        INTEREST INCOME AND EXPENSE. Net interest income was $289,000 for the
year ended December 31, 2000 in comparison to a net $108,000 expense for the
year ended December 31, 1999. The increase relates to additional funding
obtained as a result of a private placement completed in May 2000. Interest
income consists of earnings on cash and cash equivalents.

        FOREIGN EXCHANGE LOSS. Net4Music recognized a foreign exchange loss of
approximately $55,000 and $1,000 for the years ended December 31, 2000 and
December 31, 1999, respectively, due to its international operations.

        INCOME TAX. Due to operating losses Net4Music recorded only a $1,000 and
$7,000 minimum tax for the years ended December 31, 2000 and 1999, respectively.

        LIQUIDITY AND CAPITAL RESOURCES. Net cash used in operating activities
totaled $9,981,000 for the year ended December 31, 2000 and $3,790,000 in 1999.
Net cash used in operating activities for both periods consisted primarily of
net losses of $10,422,000 net of depreciation and amortization in 2000 and
$4,374,000 net of depreciation and amortization in 1999. Increases in accounts
receivable, inventories, accounts payable, accruals for product returns, and
accrued liabilities in 2000 compared to 1999 primarily reflect the acquisition
of Coda in October 2000.

        Net cash used in investing activities was $1,354,000 for the year ended
December 31, 2000. Net cash used in investing activities for this period
consisted of capitalized costs related to the reverse acquisition of Coda Music
Technology ($552,000), purchases of property and equipment and intangibles
($750,000), and the net purchase of short-term investments ($74,000). Net cash
used in investing activities for the year ended December 31, 1999 was
$1,175,000, virtually all of which related to purchases of property and
equipment and intangibles.



                                       23


<PAGE>   25



        Cash provided by financing activities during the year ended December 31,
2000 totaled $16,477,000 and was $9,049,000 for the year ended December 31,
1999. The sources were primarily funds raised through private sales of
securities by Net4Music S.A, $16,855,000 in 2000 and $9,252,000 in 1999.

        Net4Music anticipates additional capital expenditures in connection with
its expected growth in operations and infrastructure. Net4Music will need to
continue to spend significant amounts for sales and marketing, advertising and
promoting its brands, content development and technology and infrastructure
development. On March 14, 2001, the Company announced a plan to streamline its
operations and reduce operating expenses. U.S. marketing and accounting support
operations are being consolidated into the Minneapolis office and the New York
office will be closed effective April 30, 2001. Workforce reductions in other
offices and other expense reductions are also planned. Workforce reductions are
expected to result in a restructuring charge of $285,000 in the first quarter of
2001.

        As of December 31, 2000, Net4Music had in cash and short-term
investments of $10.0 million and a VAT receivable of $1.0 million. Net4Music
currently anticipates that its available cash resources will be sufficient to
meet its anticipated cash needs for working capital and capital expenditures for
the next 12 months.

        NEW ACCOUNTING PRONOUNCEMENTS.  Refer to note 3 in the audited financial
statements.

ITEM 7. FINANCIAL STATEMENTS








                                       24


<PAGE>   26


                         Report of Independent Auditors







The Board of Directors and Shareholders
Net4Music Inc.

We have audited the accompanying consolidated balance sheets of Net4Music Inc.
and subsidiaries, as of December 31, 2000 and 1999 and the related consolidated
statements of operations, shareholders' equity and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of Net4Music Inc. and
subsidiaries as of December 31, 2000 and 1999 and the consolidated results of
their operations and their cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States of America.

As more fully described in Note 2, the December 31, 2000 financial statements
have been restated to reflect a reduction in the lives of certain intangible
assets and to correct an error in the application of generally accepted
accounting principles for minority interests.


                                       /s/ Ernst & Young LLP

Minneapolis, Minnesota
March 16, 2001, except for
   Note 2 as to which the
   date is August 20, 2001





                                       25


<PAGE>   27





                                 Net4Music Inc.

                           Consolidated Balance Sheets
              (In thousands of U.S. dollars, except per share data)

<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                             ----------------------
                                                               2000          1999
                                                             --------       -------
<S>                                                          <C>             <C>
ASSETS                                                       RESTATED
Current assets:
  Cash and cash equivalents                                  $  9,090        $4,106
  Short-term investments                                          917            --
  Accounts receivable (net of allowance of $118 and $279
    as of December 31, 2000 and 1999, respectively)               580            52
  Inventories                                                     312            --
  Prepaid expenses                                                452           165
  Other current assets                                            965           499
                                                             --------        ------
Total current assets                                           12,316         4,822

Property and equipment, net                                     1,710           567
Intangible assets, net                                         27,110           433

Other non-current assets                                          129            18




                                                             --------        ------
Total assets                                                 $ 41,265        $5,840
                                                             ========        ======
</TABLE>



                                       26


<PAGE>   28



<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                             ----------------------
                                                               2000          1999
                                                             --------       -------
<S>                                                          <C>            <C>
LIABILITIES AND SHAREHOLDERS' EQUITY                         RESTATED
Current liabilities:
  Accounts payable                                           $  1,427       $   836
  Reserve for product returns                                     169            --
  Accrued expenses and other current liabilities                1,781           539
  Deferred revenue                                                 42            --
  Current portion of long-term debt                               230           132
  Current portion of capital lease obligations                    572           339
  Advances received from shareholders                              --             1
                                                             --------       -------
Total current liabilities                                       4,221         1,847

Commitments and contingencies

Long-term debt, net of current portion                            501           426
Capital lease obligations, net of current portion                 208           568


Shareholders' equity:
  Common stock, $0.01 par value:
    Authorized shares - 65,000,000 and 30,000,000 in
      2000 and 1999, respectively
    Issued and outstanding shares - 18,384,275 in 2000            184            --
  Common stock:
    Ordinary shares, FRF 1 ($0.15) par value in 1999:
      Issued and outstanding shares - 4,711,044 in 1999            --         1,077
    Class A shares, FRF 1 ($0.15) par value in 1999:
      Issued and outstanding shares - 2,730,000 in 1999            --           540
  Additional paid-in capital                                   55,642         8,191
  Accumulated deficit                                         (18,656)       (6,825)
  Accumulated other comprehensive income                           83            65
  Deferred compensation                                          (918)          (49)
                                                             --------       -------
Total shareholders' equity                                     36,335         2,999
                                                             --------       -------
Total liabilities and shareholders' equity                   $ 41,265       $ 5,840
                                                             ========       =======
</TABLE>

See accompanying notes.



                                       27


<PAGE>   29


                                 Net4Music Inc.

                      Consolidated Statements of Operations
              (In thousands of U.S. dollars, except per share data)

<TABLE>
<CAPTION>

                                                             YEAR ENDED DECEMBER 31
                                                             ----------------------
                                                               2000          1999
                                                             --------      --------
                                                             RESTATED
<S>                                                          <C>           <C>
Net revenues                                                 $  1,454      $    299
Cost of sales                                                     329           578
                                                             --------      --------
Gross profit (loss)                                             1,125          (279)

OPERATING EXPENSES
Website development expenses                                    1,106           386
Content and product development expenses                        1,226           310
Selling and marketing expenses                                  6,165         1,173
General and administrative expenses                             4,692         2,366
Restructuring charges                                              --         1,201
                                                             --------      --------
                                                              (13,189)       (5,436)
                                                             --------      --------
Loss from operations                                          (12,064)       (5,715)

Interest expense                                                  (83)         (154)
Interest income                                                   372            46
Foreign exchange loss                                             (55)           (1)
                                                             --------      --------
Loss before income tax                                        (11,830)       (5,824)

Income tax                                                         (1)           (7)
                                                             --------      --------
Net loss                                                     $(11,831)     $ (5,831)
                                                             ========      ========

Basic and diluted loss per common share                      $  (0.96)     $  (1.47)
Weighted average common shares outstanding                  12,297,527     3,966,196
</TABLE>

See accompanying notes.



                                       28

<PAGE>   30



                                 Net4Music Inc.

                 Consolidated Statement of Shareholders' Equity
                (In thousands of U.S. dollars, except share data)

<TABLE>
<CAPTION>
                           COMMON STOCK                                          ACCUMULATED
                        ------------------   ADDITIONAL                             OTHER     SHAREHOLDERS'
                           TOTAL              PAID-IN   ACCUMULATED  DEFERRED   COMPREHENSIVE    EQUITY
                           SHARES    AMOUNT   CAPITAL     DEFICIT   COMPENSATION    INCOME      (DEFICIT)
                        -----------------------------------------------------------------------------------
<S>                     <C>         <C>      <C>       <C>         <C>          <C>           <C>
Balance at December 31,
  1998                   1,794,000   $ 457    $    44   $   (994)    $    --        $  17       $  (476)
  Issuance of ordinary
    shares at par value  2,917,044     620      2,698         --          --           --         3,318
  Issuance of Class A
    shares               2,730,000     540      5,394         --          --           --         5,934
  Deferred compensation         --      --         55         --         (55)          --            --
  Amortization of
    deferred
    compensation                --      --         --         --           6           --             6
  Comprehensive loss:
    Net loss                    --      --         --     (5,831)         --           --        (5,831)
    Translation
      adjustment                --      --         --         --          --           48            48
                                                                                               --------
    Comprehensive loss                                                                           (5,783)
                        ----------   -----    -------   ---------    -------        -----       -------
Balance at December 31,
  1999                   7,441,044   1,617      8,191     (6,825)        (49)          65         2,999
  Issuance of common
    shares               6,421,809   1,138     16,481         --          --           --        17,619
  Reverse acquisition
    with Coda            6,428,264  (2,552)    29,316         --          --           --        26,764
  Shares related to
    put and call
    agreements and
    reverse
    acquisition with
    Coda                (2,483,823)    (25)        25         --          --           --            --

  Deferred
    compensation  -
    unvested Coda
    options at October
    19, 2000                    --      --        423         --        (423)          --            --
  Exercise of stock
    options and
    warrants               552,581       6        633         --          --           --           639
  Issuance of stocks,
    stock options and
    warrants for
    services                24,400      --         80         --          --           --            80
  Deferred
    compensation -
    options granted
    below fair value            --      --        493         --        (493)          --            --
  Amortization of
    deferred
    compensation                --      --         --         --          47           --            47
  Comprehensive income:
    Net loss                    --      --         --    (11,831)         --           --       (11,831)
    Translation
      adjustment                --      --         --         --          --           18            18
                                                                                                -------
    Comprehensive loss                                                                          (11,813)
                        ----------   -----    -------   ---------    -------        -----       -------
Balance at December 31,
  2000 (Restated)       18,384,275   $ 184    $55,642   $(18,656)    $ (918)        $  83       $36,335
                        ==========   =====    =======   =========    =======        =====       =======

</TABLE>


See accompanying notes.



                                       29


<PAGE>   31





                                 Net4Music Inc.

                      Consolidated Statements of Cash Flows
                         (In thousands of U.S. dollars)


<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31
                                                                   ------------------------
                                                                      2000           1999
                                                                   ------------------------
                                                                    RESTATED
<S>                                                                 <C>            <C>
OPERATING ACTIVITIES
Net loss                                                            $(11,831)      $(5,831)
Adjustments to reconcile net loss to net cash used in operating
  activities:
  Amortization of intangible assets                                      995           201
  Depreciation and amortization of property and equipment                367         1,256
  Amortization of deferred compensation                                   47            --

  Issuance of stock options and warrants for services                     80            --
  Other                                                                                (51)
  Increase (decrease) in cash from:
    Accounts receivable                                                   99           146
    Inventories                                                          (83)           --
    Other current assets                                                (462)         (403)
    Prepaid expenses                                                    (201)         (143)
    Accounts payable                                                     342           459
    Advances from shareholders                                            (1)           --
    Accrued liabilities and product returns                              683           578
    Deferred revenue                                                     (16)           (2)
                                                                    --------       -------
Net cash used in operating activities                                 (9,981)       (3,790)

INVESTING ACTIVITIES
Purchases of property and equipment and intangibles                     (750)       (1,177)
Purchase of business                                                    (552)           --
Other                                                                     22             2
Net purchases of short-term investments                                  (74)           --
                                                                    --------       -------
Net cash used in investing activities                                 (1,354)       (1,175)

FINANCING ACTIVITIES
Cash proceeds from issuance of shares                                 16,855         9,252
Increase in long-term debt                                               571           213
Payments on long-term debt                                              (475)         (416)
Payments on capital leases                                              (474)           --
                                                                    --------       -------
Net cash provided by financing activities                             16,477         9,049

Effect of exchange rate changes on cash                                 (158)           --
                                                                    --------       -------
Net increase in cash and cash equivalents                              4,984         4,084
Cash and cash equivalents, beginning of year                           4,106            22
                                                                    --------       -------
Cash and cash equivalents, end of year                              $  9,090       $ 4,106
                                                                    ========       =======

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid                                                       $     83       $   151
                                                                    ========       =======

Non-cash transactions:
  Issuance of common stock for music distribution rights            $  1,403       $    --
                                                                    ========       =======
  Equipment purchased with capital leases                           $    347       $    --
                                                                    ========       =======
</TABLE>


See accompanying notes.


                                       30


<PAGE>   32


                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements


1. BUSINESS AND ORGANIZATION

Net4Music Inc., formerly known as Coda Music Technology, Inc. ("Coda"), and
subsidiaries (the "Company") is the result of the October 2000 reverse
acquisition of Coda and Net4Music S.A. The acquisition was accounted for as a
reverse acquisition with Net4Music S.A. treated as the accounting acquirer (see
Note 4). The financial statements of Net4Music S.A. are presented as the
historical financial statements of the Company for all periods presented. The
results of operations for Coda are included under purchase accounting from the
October 19, 2000 acquisition date forward.

Net4Music, S.A. was incorporated in France as a Societe Anonyme or corporation
in 1995, under the name `Interactive Musique Compagnie' ("IMC, S.A."), to
develop and distribute digital sheet music through interactive kiosks displayed
in specialized music stores. As of July 28, 1999, but effective January 1, 1999,
the Company changed its name from IMC S.A. to Net4Music, S.A., and merged with
its two 100%-owned subsidiaries, Euro Music Systems S.A. ("EMS") and Music
Writer Europe S.A. ("MWE").

With prepaid cards, users could acquire digital sheet music stored on
interactive kiosks and print when required. In 1999, Net4Music S.A. acquired the
business of its main competitor in France, Informusique. The major part of this
acquisition was its website, www.partitor.com. Net4Music S.A.'s activity then
evolved toward the Internet through the development of the website,
www.net4music.com, partly with Partitor technologies and the development of its
content through the negotiation of musical works distribution agreements with
publishers. Net4Music S.A. decided to stop its distribution activity through
interactive kiosks (see Note 3) in order to concentrate on the website
development officially launched in December 1999. The website provides editorial
and pedagogical information on music, and users can purchase downloadable sheet
music and MIDI files.

Coda, a division of Net4Music Inc., develops and markets proprietary music
technology products that enhance music learning and composition, increase
productivity and make practicing and performing music fun. Coda's innovative
products provide easy-to-use, efficient alternatives to traditional practice,
education and composition techniques. Product sales are via software sales
through traditional distribution channels and the Coda website.

2.  RESTATEMENT

Based on a Securities and Exchange Commission review, the consolidated financial
statements for year ended December 31, 2000 have been restated. The Company has
reduced the estimated useful lives of goodwill and certain identifiable
intangible assets and has not considered as a minority interest the shares in
our subsidiary, Net4Music S.A., that were not converted in the Coda reverse
acquisition. The effect of these changes on the 2000 statement of operations was
to increase the net loss by $720,000 to $11,831,000 and increase the net loss
per share to $(.96) from $(.94).



                                       31



<PAGE>   33



                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements



<TABLE>
<CAPTION>
                                                                     (In 000's)
                                                                     ---------
<S>                                                                  <C>
Net loss as previously reported                                       ($11,111)
Increase in amortization expenses                                          205
Eliminate allocation of loss to minority interest                          515
                                                                      --------
Net loss as restated                                                  $(11,831)
</TABLE>



3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION

Through October 19, 2000, the consolidated financial statements include the
accounts of Net4Music S.A. (or Predecessors) and its wholly-owned subsidiaries,
Net4Music New York Inc. incorporated in the U.S.A. and Notmad located in
Madagascar. From October 20, 2000, the consolidated financial statements include
the accounts of Net4Music, Inc. and its majority-owned subsidiaries following
the reverse acquisition of Coda and Net4Music S.A.

All significant intercompany accounts and transactions have been eliminated in
consolidation.

FOREIGN CURRENCY TRANSLATION

Assets and liabilities denominated in foreign currency are translated at the
current exchange rate as of the balance sheet date, and income statement amounts
are translated at the average monthly exchange rate. Translation adjustments
resulting from fluctuations in exchange rates are recorded as a component of
"Accumulated Other Comprehensive Income" in shareholders' equity. Gains and
losses from foreign currency transactions are not material.

REVENUE RECOGNITION

Software revenue is primarily derived from the sale of "off the shelf" products,
easily installed and used by the customer. Software revenue is recognized in
accordance with American Institute of Certified Public Accountants (AICPA)
Statement of Position (SOP) 97-2, "Software Revenue Recognition." Pursuant to
SOP 97-2, software revenue is recognized when all of the following conditions
are met: there is evidence of an agreement with the customer (normally a
purchase order), delivery has occurred, the total sales price is fixed and
determinable, collectibility is probable and any uncertainties with regard to
customer acceptance are insignificant.

Customers are entitled an upgrade if the Company launches a new version of a
software product within a specified period after a customer originally purchased
their software. In this event, the Company defers all revenue recognition for
products that were sold within the upgrade replacement window, until such time
that the upgrade is shipped.



                                       32


<PAGE>   34



                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements



3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenues from sheet music sales are recognized at the time of delivery. Rentals
of interactive kiosks were spread over the renting duration. Sales through
kiosks were discontinued in 1999.
Engraving services are generally contained within distribution agreements, and
music works are, in some cases, digitized by the Company and corresponding costs
charged to the publisher at the time of delivery.

Engraving services are generally contained within distribution agreements, and
music works are, in some cases, digitized by the Company and corresponding costs
charged to the publisher at the time of delivery.

RESTRUCTURING CHARGES

As a result of Net4Music S.A.'s management's decision in December 1999 to stop
its distribution activity through interactive kiosks, restructuring charges were
recorded consisting primarily of the write-off of capitalized leased interactive
kiosks and related development costs ($816,000) along with accrued interest on
lease contracts ($92,500). The restructuring activity rollforward as of December
31, 1999 and 2000 was as follows:

<TABLE>
<CAPTION>
                       Initial
                        Accrual         Usage        Dec 31, 1999         Usage       Dec 31, 2000
                       ---------      ---------      ------------        -------      ------------
<S>                    <C>            <C>            <C>                 <C>          <C>
Fixed Assets           $ 816,000      $(816,000)         $    --         $    --         $    --

Fixed assets -
Corporate

Development              175,000       (175,000)              --              --              --

Accrued
interest on
lease settlements         92,500         (4,500)          88,000         (55,000)         33,000

Other                    117,000       (117,000)              --              --              --
                      $1,200,500    $(1,112,500)         $88,000        $(55,000)       $ 33,000
</TABLE>


NET LOSS PER SHARE

Basic and diluted net loss per share was computed by dividing the net loss by
the weighted average number of common shares outstanding during the period. The
effect of options and warrants are excluded as their effect is anti-dilutive.


                                       33


<PAGE>   35



                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements


3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Weighted average shares used in the calculation of net loss per share are as
follows:

<TABLE>
<CAPTION>
                                                               2000          1999
                                                           ----------      ---------
<S>                                                        <C>             <C>
  Weighted average shares outstanding                      11,802,120      3,966,196
  Weighted average effect of shares issuable under put
    and call arrangements                                     495,407             --
  Net weighted average shares                              12,297,527      3,966,196
</TABLE>


All share and per share amounts for all periods have been restated to reflect
the 100-to-1 stock split approved by the shareholders in July 1999 and to
reflect the effects of the conversion of shares at a .78 conversion rate in the
reverse acquisition.

SEGMENT REPORTING

The Company operates predominantly in one industry segment, being the design,
development, support and marketing of digital solutions to music educators,
music makers and the music publishing industry. Net4Music Inc. provides the
technologies, products and services to optimize the entire music maker supply
chain.

INTANGIBLE ASSETS

Intangible assets consist primarily of capitalized development costs of
distribution methods, patent filing costs, goodwill and the identifiable
intangible assets acquired in the reverse acquisition.

WEBSITE DEVELOPMENT

Costs incurred in the development of the Company's web site are capitalized in
accordance with the Emerging Issues Task Force ("EITF") No. 00-02, Accounting
for Web Site Development Costs.

Application development stage costs are capitalized and amortized on a
straight-line basis over the useful life of the website, which is estimated at
three years. The estimated useful life is based on planned or expected
significant modifications of the site in response to the rapid rate of change in
the Internet industry and technology in general.

Website development expenses in the Statement of Operations are primarily
non-capitalized development costs and the amortization costs of capitalized
expenses as well as costs dedicated to site maintenance and minor improvements.
Costs of preliminary studies of the functional



                                       34


<PAGE>   36


                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements



3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


analysis and website post-implementation costs are expensed as incurred.

CONTENT DEVELOPMENT

Content development expenses for sheet music (the costs of entering and
engraving music under digital format) are expensed as incurred. Some
distribution agreements stipulate that the publisher pays for a portion of these
costs according to a contractual rate; these amounts are recorded as engraving
service revenues.

SOFTWARE DEVELOPMENT

Costs incurred in the development of software products are capitalized in
accordance with the Statement of Financial Accounting Standards ("SFAS") No. 86,
Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed. The capitalized amount represents costs of producing product masters
for new songs as technological feasibility has been established by the selling
of previous titles. When a title is available for release, expenditures related
to that title are no longer capitalized and the capitalized cost of the title is
amortized over a period based on the current and expected future revenue from
the product or the straight-line method, not to exceed three years. The Company
periodically evaluates whether events and circumstances have occurred that
indicate the remaining balance of software development expenses may not be
recoverable.

In 2000, the company capitalized approximately $2.3 million related to software
products allocated as the fair value acquired in the reverse acquisition with
Coda, which is discussed as part of goodwill and acquired identifiable
intangible assets.

REPERTOIRE DEVELOPMENT COSTS

The costs incurred in the development of repertoire software are capitalized in
accordance with the Statement of Financial Accounting Standards ("SFAS") No. 86,
Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed. As of December 31, 2000, the Company has capitalized $399,000 of costs
related to the development of repertoire software. These costs are amortized
over the greater of an amount based on the current and expected future revenues
from the software or the straight-line method, not to exceed three years,
beginning when the repertoire products are released. The Company periodically
evaluates whether events and circumstances have occurred that indicate the
remaining balance of repertoire development costs may not be recoverable.



                                       35


<PAGE>   37



                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements



3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


PATENTS AND TRADEMARKS

The Company capitalizes the costs associated with obtaining patents, trademarks
and Internet domain names. These costs are being amortized from 3 to 10 years
depending on their estimated useful lives.

GOODWILL AND ACQUIRED IDENTIFIABLE INTANGIBLE ASSETS

Goodwill, which represents the cost in excess of fair value of the tangible and
identified intangible assets of businesses acquired, is being amortized on a
straight-line basis over 10 years. The identified intangible assets acquired
consists mainly of the value of repertoire development costs, amortized over 3
years; software products, amortized over 5 years; Coda trade name, amortized
over 10 years; Coda website, amortized over 3 years; distributor/dealer network,
amortized over 5 years; acquired workforce, amortized over 3 years; and customer
lists, amortized over 5 years.

PROPERTY AND EQUIPMENT

Property and equipment are stated at their acquisition costs. They are
depreciated using the straight-line method over the estimated useful life of the
assets as follows:

<TABLE>
<CAPTION>
                                                                        PERIOD
                                                                     ------------
<S>                                                                  <C>
  Purchased software                                                      3 years
  Computer equipment                                                  3 - 5 years
  Furniture                                                          3 - 10 years
  Vehicles                                                                5 years
</TABLE>

Property and equipment held under capital lease are capitalized and depreciated
over the useful life of the asset in case of a contractual option to buy or over
the residual life of the lease contract.



                                       36


<PAGE>   38


                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements



3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


INVENTORIES

Inventories are stated at the lower of weighted average cost or market and
consist of finished products and components.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company reviews the long-lived assets, including identifiable intangibles
and associated goodwill, for impairment when events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. If
circumstances indicate that the fair value of the identified intangible assets,
based on discounted cash flows, may be less than the carrying value, the asset
will be written down to the value of estimated discounted future cash flows. The
discount rate will be based on the Company's current cost of capital.

Enterprise level goodwill not identified with specific asset groups is evaluated
for impairment if changes in market conditions or competitive position, changes
in technology, or loss of patent protection or profitability of significant
product lines indicate an impairment may have occurred. In that case, impairment
would be assessed using the estimated future cash flows of the enterprise. If
the residual fair value of the enterprise is less than the carrying value of
goodwill, an impairment charge will be recorded.

CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Cash equivalents consist of money market instruments with original maturities of
90 days or less. Cash equivalents and short-term investments are recorded at
cost, which approximates fair value. Short-term investments consisting of money
market funds are considered to be available for sale. Unrealized gains or losses
were immaterial at December 31, 2000 and 1999.

FAIR VALUE OF FINANCIAL INSTRUMENTS

At December 31, 2000, and 1999, the carrying values of current financial
instruments such as cash and cash equivalents, short-term investments, accounts
receivable, accounts payable, other current assets, accrued liabilities and
other current liabilities, as well as the current portion of long-term debt and
capital lease obligations, approximated their market values, based on the
short-term maturities of these instruments.

At December 31, 2000 and 1999, the market value of long-term debt approximates
its carrying value. Market value is determined using discounted future cash
flows at a market interest rate or other appropriate valuation method.



                                       37


<PAGE>   39


                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements



3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


INCOME TAXES

Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss or tax
credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
amounts of assets and liabilities recorded for income tax and financial
reporting purposes. Deferred tax assets are reduced by a valuation allowance
when management determines that it is more likely than not that some portion or
all of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and tax rates on
the date of enactment.

STOCK-BASED COMPENSATION

The Company has adopted the disclosure only provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation, but
applies Accounting Principles Board Opinion No. 25 ("APB 25") and related
interpretations in accounting for its stock plans. Under APB 25, when the
exercise price of an employee stock option equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.

USE OF ESTIMATES

Preparation of the Company's consolidated financial statements requires
management to make estimates and assumptions that affect reported amounts of
assets and liabilities and related revenues and expenses. Actual results could
differ from those estimates.

ADVERTISING

The Company expenses advertising costs as incurred. The Company expensed
$3,155,000 and $374,000 for the years ended December 31, 2000 and 1999,
respectively.

NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board ("FASB") issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
hedging activities. It requires an entity recognize all derivatives as either
assets or liabilities at fair value. This statement is effective for the Company
beginning January 1, 2001. Based upon the nature of the financial instruments
and hedging activities in effect as of December 31, 2000, this pronouncement
would not have a material impact on the Company's financial position or results
of operations.


                                       38


<PAGE>   40


                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements



4. BUSINESS ACQUISITIONS

INFORMUSIQUE ACQUISITION

In October 1999, the Company acquired Informusique, a French company focused on
mail order distribution, for $244,000. The acquisition was accounted for under
the purchase method of accounting. Accordingly, the purchase price has been
allocated to the acquired assets and liabilities based on fair values as of the
acquisition date. Capitalized site development costs were valued at $234,480 and
are being amortized over three years from the acquisition date. The historical
operations of Informusique were insignificant prior to the acquisition.

CODA REVERSE ACQUISITION

On October 19, 2000, the Company reorganized and completed a reverse acquisition
with Coda. From October 19, 2000, the consolidated financial statements include
the accounts of Coda and its subsidiaries.

In connection with the acquisition, Coda changed its name to Net4Music Inc. (the
"Company"). Although Net4Music S.A. and its subsidiaries became subsidiaries of
the Company as a result of this "reverse" acquisition, the transaction has been
accounted for as required under generally accepted accounting principles as a
purchase by Net4Music S.A. of the Company, with the books and records of the
Company being adjusted to reflect the historical operating results of Net4Music
S.A. and its subsidiaries.

In the transaction, certain shareholders of Net4Music S.A. received
approximately 11,379,000 shares of Coda common stock, certain Net4Music S.A.
option and warrant holders received Coda options and warrants, and the remaining
shareholders and option and warrant holders entered into a put and call
agreement. The put and call agreement provides that the parties to the agreement
can, at any time during the five-year period following the acquisition, require
the Company to acquire their shares of Net4Music S.A. in exchange for the
Company's stock based on the same conversion ratio applicable to the Net4Music
S.A. shares at the acquisition date. Additional paid-in capital includes the
shares held in the put and call agreement.

The purchase price of approximately $26,764,000, including the fair value of
Coda's common stock and its vested options and warrants at the acquisition date,
and acquisition-related costs of $1,234,000 have been allocated based on the
estimated fair value of the assets and liabilities of Coda deemed for accounting
purposes to have been acquired by Net4Music S.A. The excess purchase price
deemed paid by Net4Music S.A. for the net assets of Coda over the fair value of
those assets was $25,191,000 and is being amortized using the straight-line
method over a range of 3 to 10 years. The excess purchase price was allocated as
follows: goodwill--$19,678,000, software products--$2,304,000, Coda trade
name--$130,000, Coda website--$310,000,



                                       39



<PAGE>   41


                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements



4. BUSINESS ACQUISITIONS (CONTINUED)


distributor/dealer network--$1,440,000 and workforce and customer
lists--$1,330,000.

In connection with the reverse acquisition, the Company recorded $423,000 in
deferred compensation expense related to the intrinsic value of unvested Coda
options at the time of the reverse acquisition.

BUSINESS COMBINATIONS - PRO FORMA RESULTS

In accordance with generally accepted accounting principles, the operating
results of Coda have been included in the consolidated statements of operations
from the acquisition date. The pro forma unaudited results below assume the
acquisition occurred at the beginning of each of the periods ended December 31,
2000 and 1999 (in thousands, except share and per share data):

<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31
                                                          ----------------------------
                                                               2000          1999
                                                          ----------------------------
<S>                                                       <C>              <C>
  Net revenues                                            $     7,294      $    6,655
  Operating loss                                              (14,587)         (9,414)
  Net loss                                                    (14,303)         (9,459)
  Basic and diluted net loss per share                    $      (.82)     $    (1.19)
  Basic and diluted weighted average common shares         17,366,024       7,960,637
</TABLE>


The pro forma statements of operations reflect incremental amortization of
goodwill, interest expense and provisions for federal and state income taxes.

The pro forma results are not necessarily indicative of what actually would have
occurred if the acquisitions had been completed as of the beginning of each of
the periods presented, nor are they necessary indicative of future consolidated
results.


5. SUPPLEMENTAL BALANCE SHEET INFORMATION

INVENTORIES

Inventories consist of the following (in thousands):

<TABLE>
<S>                                                                         <C>
  Components                                                                $  420
  Finished goods                                                               138
  Reserve for obsolescence                                                    (246)
                                                                            ------
                                                                            $  312
                                                                            ======
</TABLE>



                                       40

<PAGE>   42


                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements



5. SUPPLEMENTAL BALANCE SHEET INFORMATION (CONTINUED)

PROPERTY AND EQUIPMENT

Property and equipment are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                               -------------------
                                                                 2000         1999
                                                               -------------------
<S>                                                            <C>          <C>
  Computer equipment and software                              $1,705       $  177
  Interactive kiosks                                            1,191        1,285
  Vehicles                                                         34           31
  Office furniture and other                                      432          110
  Fixed assets under construction                                  --          380
                                                               ------       ------
                                                                3,362        1,983
  Less accumulated depreciation and amortization                1,652        1,416
                                                               ------       ------
                                                               $1,710       $  567
                                                               ======       ======
</TABLE>

The Company has financed some of its equipment in Europe, especially the
interactive kiosks, through capital lease contracts. Capitalized lease costs in
property and equipment accounted for $1,651,000 and $1,286,000 as of December
31, 2000 and 1999, respectively. Following strategic decisions taken by the
Company in 1999 on its future development and the future of the kiosk activity,
the Company decided to fully depreciate the interactive kiosk assets and accrue
for future interest on corresponding lease contracts. Accumulated depreciation
of capital lease assets at December 31, 2000 and 1999 was $1,332,000 and
$1,286,000, respectively.

Average residual lifetime of lease contracts is 1.5 years. In case of an
anticipated termination, the Company owes all rent through the contracts'
termination dates, as well as a penalty equivalent to 25% of the rent for the
France locations.



                                       41

<PAGE>   43


                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements



5. SUPPLEMENTAL BALANCE SHEET INFORMATION (CONTINUED)

INTANGIBLE ASSETS

Goodwill and other intangible assets are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                               -------------------
                                                                 2000        1999
                                                               -------------------
<S>                                                            <C>          <C>
  Goodwill                                                     $19,678      $   --
  License rights                                                 1,639          --
  Repertoire development costs                                     399          --
  Software products                                              2,304          --
  Distributor/dealer network                                     1,440          --
  Capitalized website development costs                            822         422
  Workforce and customer lists                                   1,330          --
  Other intangible assets                                          611         129
                                                               -------      ------
  Total gross value                                             28,223         551
  Less accumulated amortization                                  1,113         118
                                                               -------      ------
                                                               $27,110      $  433
                                                               =======      ======
</TABLE>

In 2000, the Company entered into consulting, distribution and engraving
agreements. In conjunction with these agreements, the Company has recorded the
gross value of $1,639,000 paid for the rights granted.

6. DEBT

LINE OF CREDIT

The Company has a $500,000 line-of-credit agreement that expired on February 14,
2001. There were no borrowings outstanding as of December 31, 2000. Borrowings
under the agreement were limited to 75% of eligible accounts receivable plus 25%
of eligible inventories, as defined, bore interest at the bank's reference rate
(9.50% as of December 31, 2000) plus 1% and were collateralized by all of the
accounts receivable, inventories and general intangibles of the Company. The
loan agreement supporting the line of credit required the Company to maintain
certain levels of tangible net worth. While this agreement was in effect, the
Company could not incur additional indebtedness, liquidate or merge the Company,
pay dividends or acquire any other entity without the prior approval of the
lender.



                                       42


<PAGE>   44


                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements



6. DEBT (CONTINUED)

LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                               ------------------
                                                               2000          1999
                                                               ------------------
                                                                 (In thousands)
<S>                                                             <C>           <C>
  Conditional advance from ANVAR                                $510          $374
  Convertible bonds                                              128           138
  Bank loans                                                      93            46
                                                                ----          ----
  Total long-term debt                                           731           558
  Less current portion                                          (230)         (132)
                                                                ----          ----
                                                                $501          $426
                                                                ====          ====
</TABLE>

Conditional Advance from ANVAR

The outstanding balance from the "Agence Nationale pour la Valorisation de la
Recherche" ("ANVAR"), a French state-owned institution dedicated to the
financing of research and development activities of French companies, totaled
$510,000 and $374,000 at year-end 2000 and 1999, respectively. The agreement
with ANVAR contains repayment terms that have been used to classify the debt in
the financial statements. Although the Company anticipates receiving formal
forgiveness of the loans, such forgiveness will not be received until a study by
ANVAR that can last six months or more and has not been taken into account in
determining debt classification.

Convertible Bonds

In September 1996, the Company issued 9,000 convertible bonds to EUREFI for a
total of $175,600 in order to reinforce its equity and finance its growth.

These bonds are convertible by the holder, seven bonds giving a right on four
shares, from January 1, 2000 to the term of the debt at December 31, 2003. The
debt bears interest at 6% a year payable each half-year at June 30 and December
31. Debt can be reimbursed in three annual payments of 3,000 bonds from December
31, 2001. In case the bonds are not converted or are only partly converted, the
Company will have to pay a non-conversion penalty of 4% pro rata temporis at
term. EUREFI has agreed not to convert its bonds and the Company has accrued for
the non-conversion penalties.

Bank Loans

The Company has two term loans bearing interest at fixed rates. The average
interest rate was 3.6% and 5.8% at December 31, 2000 and 1999, respectively.
These loans are due in 2001. In



                                       43


<PAGE>   45


                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements



6. DEBT (CONTINUED)

2000, Coda entered into a $250,000 note payable with its bank bearing interest
at a fixed rate of 10%. The note requires monthly payments in the amount of
$8,085. At December 31, 2000, the outstanding balance on this note was $89,161.

Maturities of long-term debt outstanding at December 31, 2000 are as follows (in
thousands):

<TABLE>
<S>                                                                          <C>
  2001                                                                       $ 230
  2002                                                                         206
  2003                                                                         210
  2004                                                                          85
                                                                             -----
                                                                             $ 731
                                                                             =====
</TABLE>


7. SHAREHOLDERS' EQUITY

AUTHORIZED SHARES

The Company's Restated Articles of Incorporation authorized the issuance of
65,000,000 shares of $.01 par value capital stock. Of such authorized shares,
50,000,000 have been designated as common shares and 15,000,000 are undesignated
as of December 31, 2000.

As of December 31, 1999, the authorized, issued and outstanding share capital of
Net4Music S.A. consisted of 6,039,800 ordinary shares and 3,500,000 Class A
shares at a nominal value of FRF 1. In April and May 2000, respectively,
Net4Music S.A. issued 905,290 shares of Class A and 5,357,100 of Class B common
stock. The additional Class A shares were issued in exchange for licensing
rights to distribute music works.

In July through October 2000, Net4Music, S.A. issued 449,501 shares of Class B
stock in exchange for cash, generating a share capital increase of $1,200,000.
In October 2000, the Company converted Class A and Class B shares into ordinary
shares. Also in October 2000, 1,521,649 warrants were exercised, generating a
share capital increase of $200,000.





                                       44



<PAGE>   46


                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements




7.  SHAREHOLDERS' EQUITY (CONTINUED)

These shares of Net4Music S.A. were converted to Net4Music, Inc. shares at a
rate of .78 shares of Net4Music, Inc. for each shares of Net4Music S.A.:

<TABLE>
<CAPTION>
                                                                      Net4Music converted shares
                                            Net4Music S.A. pre        prior to shares affected
      Date of Issuance:                     acquisition shares        by the put/call agreement
      -----------------                     ------------------        --------------------------
<S>                                         <C>                       <C>
April 2000                                         905,290                      706,126
May 2000                                         5,357,100                    4,178,577
July 2000                                          349,501                      272,220
October 2000                                       100,000                       78,000
October 2000                                     1,521,649                    1,186,886

Total shares issued prior to
the reverse acquisition                                                       6,421,809
</TABLE>


In December 2000, the Company entered into an agreement in which it will issue
up to 150,827 warrants to purchase the Company's common stock at $.01 per share
to a strategic partner for the non-exclusive distribution rights of 2,500 of its
titles. The warrants are earned based on the ratio of titles received by the
Company to 2,500. In December 2000, the Company issued 12,066 warrants and
recognized an expense in the amount of $37,000 pursuant to the contract. In
January 2001, the Company issued an additional 48,265 warrants related to this
contract.

Also in December, the Company issued 24,400 shares of common stock and 15,600
options to purchase common stock to certain third parties for advisory services
and distribution rights. Accordingly, the Company recognized expenses of $43,000
related to these issuances.

CODA REVERSE ACQUISITION

In connection with the October 19, 2000 reverse acquisition with Coda Music
Technology, Inc., certain Net4Music S.A. shareholders received 11,379,030 shares
of Coda common stock in exchange for 14,588,500 shares of its ordinary stock.
Shareholders' equity was reclassified as of that date to account for this
exchange in which Net4Music S.A. was treated as the acquiring company under
purchase accounting. Certain holders of Net4Music S.A. options and warrants also
converted their rights to comparable Coda options and warrants at that time. The
remaining Net4Music S.A. shareholders and option and warrant holders retained
their common stock interests in Net4Music S.A. with a put and call agreement
permitting conversion of those shares, options or warrants at any time within
five years into "Coda common stock" at the same conversion ratio applicable at
the acquisition date. Such remaining shares, options and warrants,



                                       45


<PAGE>   47


                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements



7. SHAREHOLDERS' EQUITY (CONTINUED)

if converted, would be the equivalent of 3,328,347 shares of Coda common stock.
The shares subject to the put and call arrangement are considered to be
contingently issuable and are classified within shareholders' equity because the
parent is considered to have retained the risks and rewards of ownership.

The 6,428,264 existing shares of Coda outstanding immediately prior to the
acquisition date were valued at $3.75 per share for the purpose of applying
purchase accounting and are reflected as such in the Consolidated Statement of
Shareholders' Equity. Also included in the purchase price was the fair value of
all vested Coda options. The intrinsic value of all unvested Coda options was
recorded as deferred compensation in shareholders' equity and will be amortized
to compensation expense over the remaining vesting period.

STOCK OPTIONS AND WARRANTS

Prior to the Coda reverse acquisition, Net4Music S.A. had granted options and
warrants in 1999 and 2000, to employees, directors, external consultants and
licensors as follows:

<TABLE>
<CAPTION>
                   GRANTEE                     ORDINARY    WEIGHTED-AVERAGE
                                                SHARES      EXERCISE PRICE
-------------------------------------------------------------------------------
<S>                                            <C>          <C>    <C>
  Employees/directors                          2,325,968     FRF   6.54
  Consultants                                    466,019     FRF   5.35
                                              ----------
  Balance at December 31, 1999                 2,791,987     FRF   6.34
  Granted                                      8,143,131     FRF   5.47
  Exercised                                   (1,521,649)    FRF   1.00
  Canceled                                    (5,536,437)    FRF   3.17
  Converted to Coda options                     (705,475)    FRF   8.19
  Converted to Coda warrants                    (905,290)    FRF  25.00
                                              ----------

  Balance at October 19 and December 31,
    2000                                       2,266,267     FRF   7.51
                                              ----------

                                              ==========
</TABLE>


In connection with the Coda reverse acquisition, certain option and warrant
holders converted their rights into Coda options or warrants based on the
acquisition conversion price rate of .78 and under the same terms as their
original rights. The remaining option and warrant holders retained their right
to purchase Net4Music S.A. shares with a put and call agreement as described
above. Options and warrants for 2,266,267 Net4Music S.A. shares at an average
exercise price of FRF 7.51 ($1.23) remain outstanding at December 31, 2000 under
put and call agreements.


                                       46

<PAGE>   48



                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements



7.  SHAREHOLDERS' EQUITY (CONTINUED)

The Company has a stock option plan pursuant to which options for up to
2,675,000 shares of its common stock may be issued to its key employees and
directors. The options vest over periods of up to six years and are granted at
prices that must be at least equal to the stock's fair market value at the grant
date. The Company also has granted nonqualified stock options to certain of its
directors, European employees and consultants. These options vest over periods
of up to five years and have been granted at prices at least equal to the
stock's fair market value at the grant date.

In connection with the Coda reverse acquisition, all Coda stock options remained
outstanding under their original terms.

The following summarizes activity under the Net4Music Inc. stock option plan:

<TABLE>
<CAPTION>
                                                                           WEIGHTED-AVERAGE
                                     EMPLOYEE   NON-EMPLOYEE                   EXERCISE
                                      OPTIONS      OPTIONS   TOTAL OPTIONS      PRICE
                                   --------------------------------------------------------
<S>                                <C>          <C>          <C>           <C>
  Coda options outstanding at
    October 19, 2000, date of          738,033           --      738,033       $1.90
    reverse acquisition
  Net4Music S.A. options converted     307,676      242,595      550,271        1.35
  Granted                              847,800       15,600      863,400        2.17
  Exercised                            (12,500)          --      (12,500)       1.38
  Canceled                             (65,533)          --      (65,533)       1.31
                                     ---------      -------    ---------       -----
  Outstanding at December 31, 2000   1,815,476      258,195    2,073,671       $1.89
                                     =========      =======    =========       =====
</TABLE>

The weighted-average fair value of options granted during 2000 and 1999 was
$1.60 and $.35, respectively.



                                       47

<PAGE>   49



                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements



7.  SHAREHOLDERS' EQUITY (CONTINUED)

The following summarizes information about stock options outstanding at December
31, 2000:

<TABLE>
<CAPTION>
                           OPTIONS OUTSTANDING                 OPTIONS EXERCISABLE
                ------------------------------------------ -----------------------------
                                  WEIGHTED-     WEIGHTED-                    WEIGHTED-
                  OUTSTANDING      AVERAGE      AVERAGE       EXERCISABLE    AVERAGE
    RANGE OF      AT DECEMBER     REMAINING     EXERCISE      AT DECEMBER    EXERCISE
EXERCISE PRICES    31, 2000         TERM         PRICE        31, 2000       PRICE
---------------------------------------------------------- -----------------------------
<S>               <C>             <C>          <C>            <C>            <C>
$  .88 - $1.00       414,348      3.79 years     $  .91          371,323      $  .90

  1.01 -  2.00       876,323      5.17 years       1.59          427,489        1.58

  2.01 -  3.00       654,800      5.07 years       2.57          154,885        2.44

  3.01 -  4.00        93,700      5.20 years       3.38           53,794        3.29

  4.00 -  4.50        34,500      4.14 years       4.14           12,250        4.17
                   ---------                                   ---------
  Total            2,073,671      4.85 years      $1.89        1,019,741      $ 1.56
                   =========                                   =========
</TABLE>

The Company accounts for stock options under Accounting Principles Board Opinion
No. 25, under which no compensation cost has been recognized. The fair value of
grants to the Company's employees and directors was estimated at the grant date
using the following assumptions: no expected dividend yield; risk-free interest
rates of 6.0% and 4.45%; expected lives of 7 and 5 years; and estimated
volatility of .632. Had compensation cost for these options been determined
consistent with the fair value method of SFAS No. 123, Accounting for
Stock-Based Compensation, the net loss and loss per share would have been
increased to the following pro forma amounts:

<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                             -----------------------
                                                               2000          1999
                                                             -----------------------
<S>                                                          <C>            <C>
  Net loss:
    As reported                                              $(11,831)      $(5,831)
    Pro forma                                                 (12,347)       (5,900)
  Basic and diluted loss per share:
    As reported                                                  (.96)        (1.47)
    Pro forma                                                   (1.00)        (1.49)
</TABLE>


In 2000, the Company granted options to purchase 585,000 shares at prices
between $1.64 and $2.63 per share when fair value of the Company's stock was
$2.81, resulting in deferred compensation of approximately $493,000.

In connection with certain financing and other transactions prior to the Coda
reverse acquisition, Coda had issued warrants to purchase shares of common stock
at prices between $1.25 and $4.50 per share, exercisable over periods of five to
seven years from the grant date. These warrants remain outstanding after the
Coda reverse acquisition. Warrants previously granted by Net4Music S.A. to
purchase 452,645 shares of common stock were converted to warrants for 353,063
"Coda shares" as part of the Coda reverse acquisition at the conversion rate of
 .78.



                                       48

<PAGE>   50



                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements



7.  SHAREHOLDERS' EQUITY (CONTINUED)

Total warrants of 790,192 are outstanding at December 31, 2000 that allow the
 warrant holders to purchase 476,129 shares of common stock at a weighted
 average exercise price of $7.16. The warrants expire as follows: 2001 --
 678,126, 2002 - 70,000, 2005 - 30,000, 2010 - 12,066.
 .
8. COMMITMENTS

CAPITAL LEASE OBLIGATIONS

Future minimum lease payments under capital lease obligations due for the years
ending December 31 are as follows (in thousands):

<TABLE>
<CAPTION>
<S>                                                                          <C>
  2001                                                                       $  595
  2002                                                                          205
  2003                                                                            5
  2004                                                                            5
  2005                                                                            3
                                                                             ------
  Total minimum lease payments                                                  813
  Less amount representing interest                                              33
                                                                             ------
  Present value of net minimum lease payments                                   780
  Less current portion                                                          572
                                                                             ------
  Long-term portion                                                          $  208
                                                                             ======
</TABLE>

OPERATING LEASES

The Company leases office and warehouse space and certain equipment under
operating leases through 2004.

Future minimum lease payments under these leases for the year ending December
31, 2000 are as follows (in thousands):

<TABLE>
<S>                                                                         <C>
  2001                                                                      $  344
  2002                                                                         355
  2003                                                                          80
  2004                                                                          56
  2005                                                                          35
                                                                            ------
  Total minimum lease payments                                              $  870
                                                                            ======
</TABLE>

Rent expense for the years ended December 31, 2000 and 1999 was $230,000 and
$39,750, respectively.


                                       49



<PAGE>   51


                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements



8. COMMITMENTS (CONTINUED)

LICENSING AND EXCLUSIVITY AGREEMENTS

The Company has entered into license agreements for the distribution of music
publishing catalogues, which require payments based on the sale of its products.
The Company's Coda Division has entered into license and exclusivity agreements
that require payments based on sales of its software products and
accompaniments.

Payments to licensors are included in cost of sales in the consolidated
statement of operations and were $33,350 and $24,500 for the years ended
December 31, 2000 and 1999, respectively.

Minimum royalties related to a significant licensor are as follows:

<TABLE>
<S>                                                                        <C>
  2001                                                                     $  65,800
  2002                                                                        48,800
  2003                                                                        48,800
  2004                                                                        48,800
  2005                                                                        34,800
                                                                           ---------
  Total                                                                    $ 247,000
                                                                           =========
</TABLE>

Royalty expense, including amounts related to the agreement referred to above,
totaled approximately $16,000 since the Coda reverse acquisition in the year
ended December 31, 2000 and is reflected as a component of cost of sales in the
accompanying statements of operations.

9. EMPLOYEE BENEFIT PLAN

As required by French law, the Company contributes to mandatory pension plans
covering all French employees. Payments are based upon salaries and made to
state-owned institutions. In France, legislation also requires that lump sum
retirement benefits be paid to employees in service with the Company at their
retirement date, based upon their years of service and compensation at
retirement. The obligation related to these retirement benefits was immaterial
at December 31, 2000 and 1999.

401(K) SAVINGS PLAN

The Company has established a 401(k) savings plan for the benefit of qualified
U.S. employees. Under the plan, qualified employees may elect to defer up to 20%
of their compensation, subject to a maximum limit determined by the Internal
Revenue Service. The Company, at the discretion of the Board of Directors, may
elect to make additional contributions. The Company made no contributions to the
plan in fiscal 2000.


                                       50


<PAGE>   52



                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements



10. INCOME TAXES

Loss before income taxes includes the following components:

<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                             ----------------------
                                                               2000          1999
                                                             ----------------------
                                                                 (In thousands)
<S>                                                          <C>            <C>
  France                                                     $ (6,163)      $(4,782)
  United States                                                (5,667)       (1,042)
                                                             --------       -------
                                                             $(11,830)      $(5,824)
                                                             ========       =======
</TABLE>

The tax effects of temporary differences at an assumed effective annual rate of
38% (France, 41%) are shown in the following table:

<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                              -----------------------
                                                                2000          1999
                                                              -----------------------
                                                                 (In thousands)
<S>                                                           <C>             <C>
  Loss carryforwards                                          $  9,700        $ 1,831
  Research and development credits                                 367             --
  Inventory                                                        428            271
  Depreciation and amortization                                    167             --
  Other accruals                                                   126             --
  Valuation allowance for deferred tax assets                   (9,240)        (2,102)
                                                              --------        -------
  Net deferred tax assets                                        1,548             --
  Deferred tax liability:
    Software development costs                                     138             --
    Intangible assets                                            1,410             --
                                                              --------        -------
  Total deferred tax liabilities                                 1,548             --
                                                              --------        -------
  Net deferred taxes                                          $     --        $    --
                                                              ========        =======
</TABLE>

Realization of deferred tax assets is dependent upon the generation of
sufficient future taxable income. Management has determined that sufficient
uncertainty exists regarding the realizability of the net deferred tax assets
and, accordingly, has fully reserved the net deferred tax assets of the Company.



                                       51

<PAGE>   53


                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements




10. INCOME TAXES (CONTINUED)

NET OPERATING LOSSES

At December 31, 2000, the Company has net operating loss carryforwards (NOLs)
and research and development credits which may be used to offset otherwise
future taxable income with the following expiration dates:

<TABLE>
<CAPTION>
                                                                        RESEARCH AND
                                         NET OPERATING LOSS              DEVELOPMENT
                                   ------------------------------      --------------
                                    NET4MUSIC S.A.                         CREDITS
                                        FRANCE             U.S.             U.S.
                                   --------------------------------------------------
                                                      (In thousands)
<S>                                 <C>               <C>                <C>
  2001                                 $      63       $      --           $    -
  2002                                        17              --                -
  2003                                        26              --                -
  2004                                     4,035              --                -
  2005                                     5,870               2                -
  2006                                        --              38                -
  2007                                        --             243               13
  2008                                        --             825               72
  2009                                        --           1,586               90
  2010                                        --           2,128               47
  2011                                        --           2,192               43
  2012                                        --           1,736               38
  2018                                        --             770               46
  2019                                        --             754               18
  2020                                        --           4,499               --
                                       ---------       ---------           ------
                                       $  10,011       $  14,773           $  367
                                       =========       =========           ======
</TABLE>

Included in the U.S. NOLs are those of Net4Music S.A.'s subsidiary with federal
and state NOLs of approximately $4,600,000 which begin to expire in 2019. These
loss carryforwards can only be used by the entity that has generated the
corresponding tax losses.


                                       52


<PAGE>   54


                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements




10. INCOME TAXES (CONTINUED)

At December 31, 2000, approximately $9.5 million of the Company's NOLs have a
full valuation allowance and when realized will result in a reduction of
goodwill associated with the Coda acquisition. Section 382 of the Internal
Revenue Code restricts the annual utilization of these NOLs incurred prior to a
change in ownership. Such a change in ownership has occurred in connection with
the Coda reverse acquisition, thereby potentially restricting the NOLs available
to the Company. The Company has yet to determine whether any limitation on these
NOLs exists at December 31, 2000. The Company's subsidiary in New York has also
generated approximately $4.6 million in NOLs that may also be subject to Section
382 limitations due to the significant changes in control of Net4Music S.A. in
the previous year. There can be no assurance that certain of the Company's NOLs
will be available for use in the future.

A reconciliation of income taxes computed using the U.S. statutory rate (34%) to
the effective income tax rate included in the statement of operations is as
follows:

<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                             ----------------------
                                                               2000         1999
                                                             ----------------------
                                                                 (In thousands)
<S>                                                          <C>           <C>
  Income tax computed at the statutory rate                  $(4,022)      $(1,980)
  State taxes, net of calculated federal income tax             (237)          (42)
    benefit
  Unused tax loss carryforwards and valuation reserve          4,120         2,003
  Permanent differences                                          304           280
  Effect of higher tax rates in France                          (164)         (313)
  Other                                                           --            59
                                                             -------       -------
  Effective income tax expense                               $     1       $     7
                                                             =======       =======
</TABLE>

11. LITIGATION

In the ordinary course of business, the Company can be party to legal actions,
proceedings or claims. Corresponding costs are accrued when it is more likely
than not that loss will be incurred and the amount can be precisely or
reasonably estimated. The Company is not a party to any material claim or
proceeding.

12. RELATED PARTY TRANSACTIONS

As of December 31, 1998, Net4Music, S.A. received advances from several
shareholders for a total of $104,000. These advances bore interest at an annual
rate of 6% and were repaid during 1999 and 2000.



                                       53

<PAGE>   55


                                 Net4Music Inc.
                   Notes to Consolidated Financial Statements




13. SEGMENT AND GEOGRAPHIC DATA

The Company operates predominantly in one industry segment, being the design,
development, support and marketing of digital solutions to music educators,
music makers and the music publishing industry. The Company provides the
technologies, products and services to optimize the entire music maker supply
chain.

During 2000, the Company had sales of approximately $183,000 to a major
customer. Accounts receivable from this customer were approximately $92,000 at
December 31, 2000. There were no major customers in 1999.

Net revenues for 2000 included software sales of $1,286,000 and internet sheet
music, engraving and kiosk rental revenues of $168,000 compared to 1999 sales of
engraving and kiosk revenues of $299,000. Software sales began in October 2000
with the reverse acquisition of Coda.

The geographic distributions of the Company's revenue and long-lived assets are
summarized in the following table (in thousands):

<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                              ----------------------
                                                                2000          1999
                                                              ----------------------
<S>                                                           <C>            <C>
  Net sales:
    North America                                             $  1,142       $    --
    Europe                                                         211           299
    Asia                                                            66            --
    Other                                                           35            --
                                                              --------       -------
                                                              $  1,454       $   299
                                                              ========       =======

  Long-lived assets:
    North America                                             $ 26,495       $   146
    Europe                                                       2,659           872
                                                              --------       -------
                                                              $ 29,154       $ 1,018
                                                              ========       =======
</TABLE>


                                       54

<PAGE>   56




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

        Previously reported in the Company's Form 8-K filed November 13, 2000.



                                    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:

<TABLE>
<CAPTION>
Name                                         Age                        Position
-------------------------------------------  ---         -------------------------------------------
<S>                                         <C>          <C>
Francois J. Duliege                          44          Chairman of the Board of Directors

Philip Sean Lafleur                          38          Chief Executive Officer (Effective 1-16-01)

John W. Paulson                              53          President of the Coda Division

Barbara S. Remley                            48          Chief Financial Officer, Treasurer and
                                                         Secretary
</TABLE>

        FRANCOIS J. DULIEGE joined Net4Music SA in March 1999 and was elected to
the Board of Directors subsequent to the transaction on October 19, 2000. Prior
to joining Net4Music, Francois held several international positions with
information technology companies. After 12 years at Computervision, where his
last assignment was Worldwide Vice President for the PC Business Unit, he became
Vice President and General Manager of Europe, Middle East and Africa for UB
Networks. He then joined Nat Systems as President of Worldwide Operations.
Francois graduated from INSA and holds an MBA from [CESMA].

        PHILIP SEAN LAFLEUR joined Net4Music Inc. in November 2000 as Chief
Operating Officer and a director and became Chief Executive Officer in January
2001. Prior to joining Net4Music, Sean held the position of Vice President for
European Internet Operations for Trader.com. In 1990 Mr. Lafleur joined
Bertelsmann, where for nine years he held a variety of positions including
Deputy Marketing Manager France Loisirs(Paris), President of Quebec Loisirs
(Montreal), and Executive Director of Music and Multimedia Operations and
Foreign Subsidiaries for France Loisirs. In this last position, Mr. Lafleur
acted as Chairman of the Music Expert Committee for Bertelsmann's European book
and music clubs. Mr. Lafleur holds a BS honors degree in Physics from U.B.C.
Vancouver, Canada. After beginning his career as a Business Analyst for McKinsey
& Co in Toronto, Mr. Lafleur went on to obtain an Honors MBA from INSEAD
(Fontainebleu).



                                       55



<PAGE>   57


        JOHN W. PAULSON joined Coda Music Technology, Inc. in 1990. Coda was
renamed to Net4Music Inc. effective with the transaction on October 19, 2000.
Mr. Paulson was Chief Executive Officer and Chairman of the Board of Directors
of Coda from December 1990 to the transaction on October 19, 2000. As of October
20, 2000 Paulson became President of the Coda Division of Net4Music Inc. and was
elected to the Board of Directors. 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. Prior to founding
Springboard, Mr. Paulson was a public school music teacher for nine years. 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.

        BARBARA S. REMLEY has been Chief Financial Officer of Net4Music since
May 1998. In 1997 and 1998 Ms. Remley consulted for various entities. From 1992
to 1997, Ms. Remley held various titles including President, Chief Operating
Officer and Chief Financial Officer of Garment Graphics, Inc., a designer,
marketer and distributor of licensed sports apparel, which filed a Chapter 11 in
1997 and was subsequently converted to a Chapter 7. She also has ten years of
public accounting experience with Ernst & Young (formerly Ernst & Ernst).

        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 Company's definitive Proxy
Statement for its 2001 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 Company's
definitive Proxy Statement for its 2001 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 Company's definitive Proxy Statement for its 2001 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 Company's definitive
Proxy Statement for its 2001 Annual Meeting of Shareholders.



                                       56

<PAGE>   58



ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

        (a)    Exhibits.

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

                                   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.


                                       Net4Music Inc.

Dated:  March 31, 2001                 By: /s/Philip Sean Lafleur
                                           -------------------------------------
                                           Philip Sean Lafleur, Chief Executive
                                           Officer

        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
PHILIP SEAN LAFLEUR and BARBARA S. REMLEY 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.

<TABLE>
<CAPTION>
SIGNATURE AND TITLE                                                           DATE
-------------------                                                           ----
<S>                                                                       <C>

/s/ Philip Sean Lafleur                                                   March 31, 2001
------------------------------------------------------------
Philip Sean Lafleur, Chief Executive Officer and Director
(principal executive officer)

/s/ Barbara S. Remley                                                     March 31, 2001
------------------------------------------------------------
Barbara S. Remley, Chief Financial Officer (principal
financial and accounting officer)

/s/ Francois J. Duliege                                                   March 31, 2001
------------------------------------------------------------
Francois J. Duliege, Chairman of the Board
</TABLE>


                                       57


<PAGE>   59


<TABLE>
<CAPTION>
SIGNATURE AND TITLE                                                           DATE
-------------------                                                           ----
<S>                                                                       <C>

/s/ William Avery                                                         March 31, 2001
------------------------------------------------------------
William Avery, Director

/s/ Timothy P. Bajarin                                                    March 31, 2001
------------------------------------------------------------
Timothy P. Bajarin, Director

/s/ Benoist Grossmann                                                     March 31, 2001
------------------------------------------------------------
Benoist Grossmann, Director

                                                                          March 31, 2001
------------------------------------------------------------
Patrick Revenu, Director

/s/ Claude J. Poletti                                                     March 31, 2001
------------------------------------------------------------
Claude J. Poletti, Director

/s/ John W. Paulson                                                       March 31, 2001
------------------------------------------------------------
John W. Paulson, Director

/s/ Martin Velasco                                                        March 31, 2001
------------------------------------------------------------
Martin Velasco, Director

/s/ Benson K. Whitney                                                     March 31, 2001
------------------------------------------------------------
Benson K. Whitney, Director
</TABLE>



                                       58

<PAGE>   60


                                 NET4MUSIC INC.
                                EXHIBIT INDEX FOR
                        FORM 10-KSB FOR 2000 FISCAL YEAR

<TABLE>
<CAPTION>
EXHIBIT
 NUMBER                                     DESCRIPTION
--------                                    -----------
<S>            <C>
3.1            Amended and Restated Articles of Incorporation--incorporated by reference
               to Exhibit 3(i) to the Registrant's Form 8-K filed November 3, 2000

2.1            Stock Purchase Agreement, dated August 11, 2000, by and among the
               Registrant, Net4Music S.A. and certain shareholders of Net4Music S.A. -
               incorporated by reference to Exhibit 2.1 to the Registrant's Registration
               Statement on Form S-4, Reg. No. 333 43660

2.2            Put and Call Agreement entered into by the Registrant and certain
               shareholders and option and warrant holders of Net4Music S.A. -
               incorporated by reference to Exhibit 2.2 to the Registrant's Registration
               Statement on Form S-4, Reg. No. 333-43660

2.3            Shareholder Voting Agreement entered into by the Registrant and certain
               shareholders of the Registrant -- incorporated by reference to Exhibit 2.3
               to the Registrant's Registration Statement on Form S-4, Reg. No. 333-43660

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           License Agreement dated June 10, 1992 between the Registrant and Carnegie
               Mellon University, including Amendments 1 and 2--incorporated by reference
               to Exhibit 10.11 to the Registrant's Form SB-2 Registration Statement,
               Reg. No. 33-92212C

10.4           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

10.5*          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
</TABLE>



                                       59

<PAGE>   61



<TABLE>
<CAPTION>
EXHIBIT
 NUMBER                                     DESCRIPTION
--------                                    -----------
<S>            <C>
10.6           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

10.8           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 10-QSB for the quarter ended September
               30, 1996

10.9           Second Amendment to Lease by and between Jorandcor, Inc. and the
               Registrant--incorporated by reference to Exhibit 10.14 to the Registrant's
               Form 10-KSB for the year ended December 31, 1997

10.10          Amendment No. 4 to License Agreement between the Registrant and Carnegie
               Mellon University dated December 30, 1998 - incorporated by reference to
               Exhibit 10.10 to the Registrant's Form 10-KSB for the year ended December
               31, 1998

10.11          Loan Agreement dated February 14, 1999 between the Registrant and
               Riverside Bank - incorporated by reference to Exhibit 10.11 to
               the Registrant's Form 10-KSB for the year ended December 31, 1998

10.12          Amendment dated February 14, 2000 to Loan Agreement dated February 14,
               1999 between the Registrant and Riverside Bank - incorporated by reference
               to Exhibit 10.12 to the Registrant's Form 10-KSB for the year ended
               December 31, 1999

10.13          Third Amendment to Lease by and between Jorandcor, Inc. and the Registrant
               - incorporated by reference to Exhibit 10.1 to the Registrant's Form
               10-QSB for the quarter ended March 31, 2000

10.14          Amendment dated March 1, 2000 to Loan Agreement dated February 14, 1999
               between the Registrant and Riverside Bank - incorporated by reference to
               Exhibit 10.2 to the Registrant's Form 10-QSB for the quarter ended March
               31, 2000

10.15*         Employment Agreement dated October 19, 2000 between the Registrant and
               John W. Paulson

10.16*         Employment Agreement dated October 19, 2000 between the Registrant and
               Francois Duliege
</TABLE>


                                       60

<PAGE>   62



<TABLE>
<CAPTION>
EXHIBIT
 NUMBER                                     DESCRIPTION
--------                                    -----------
<S>            <C>

21             Subsidiaries of the Registrant:
                       Net4Music S.A. (a French corporation)
                       Net4Music (New York) Inc. (a Delaware corporation)
                       Notmad SARL (a Madagascar corporation)
                       Musify Inc. (a Delaware corporation)

23.1           Consent of Ernst & Young LLP, independent public accountants

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

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



                                       61