##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
  þ
    
    Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended September 30, 2007
 o
    
    Transition report under Section 13 or 15(d) of the Exchange Act
 For the transition period from  To
 Commission file number 0-26192
 MakeMusic, Inc.
 
 Minnesota
    
    41-1716250(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)
 
 
 
  þ o
 o þ
  o þ




---



##### 



MakeMusic, Inc.
 INDEX
 Page No.PART I. FINANCIAL INFORMATIONItem 1 Condensed Financial Statements
    
    
    3Condensed Balance Sheets
September 30, 2007 and December 31, 2006
    
    
    3Condensed Statement of Operations
Three and nine-month periods ended September 30, 2007 and 2006
    
    
    4Condensed Statements of Cash Flows
Nine-month period ended September 30, 2007 and 2006
    
    
    5Notes to Condensed Financial Statements
    
    
    6Item 2 Managements Discussion and Analysis or Plan of Operation
    
    
    10Item 3 Controls and Procedures
    
    
    15PART II. OTHER INFORMATIONItem 1 Legal Proceedings
    
    
    16Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    16Item 3 Defaults Upon Senior Securities
    
    
    16Item 4 Submission of Matters to a Vote of Security Holders
    
    
    16Item 5 Other Information
    
    
    16Item 6 Exhibits
    
    
    16Signatures
    
    
    17Exhibit Index
    
    
    18CertificationCertificationCertificationCertification
  2




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Condensed Financial Statements.
 MakeMusic, Inc.
 
 Condensed Balance Sheets
 (In thousands of U.S. dollars, except for share data)
 September 30,2007
    
    
    December 31,(Unaudited)
    
    
    2006AssetsCurrent assets:Cash
    
    $
    4,094
    
    
    $
    3,130Accounts receivable (net of allowance of $29
and $149 as of September 30, 2007 and December
31, 2006, respectively)
    
    
    1,483
    
    
    
    1,664Inventories
    
    
    370
    
    
    
    347Prepaid expenses and other current assets
    
    
    135
    
    
    
    199Total current assets
    
    
    6,082
    
    
    
    5,340Property and equipment, net
    
    
    787
    
    
    
    663Capitalized software products, net
    
    
    1,253
    
    
    
    954Goodwill, net
    
    
    3,630
    
    
    
    3,630Other non-current assets
    
    
    35
    
    
    
    39Total assets
    
    
    11,787
    
    
    
    10,626Liabilities and shareholders equityCurrent liabilities:Current portion of capital lease obligations
    
    
    56
    
    
    
    10Accounts payable
    
    
    486
    
    
    
    507Accrued compensation
    
    
    1,020
    
    
    
    1,066Other accrued liabilities
    
    
    159
    
    
    
    254Post contract support
    
    
    181
    
    
    
    181Reserve for product returns
    
    
    330
    
    
    
    429Current portion of deferred rent
    
    
    26
    
    
    
    25Deferred revenue
    
    
    1,484
    
    
    
    1,199Total current liabilities
    
    
    3,742
    
    
    
    3,671Capital lease obligations, net of current portion
    
    
    147
    
    
    
    15Deferred rent, net of current portion
    
    
    76
    
    
    
    96Shareholders equity:Common stock, $0.01 par value:Authorized shares  10,000,000Issued and outstanding shares  4,148,047 and 3,971,229
as of September 30, 2007 and December 31, 2006,
respectively
    
    
    41
    
    
    
    40Additional paid-in capital
    
    
    63,712
    
    
    
    62,896Accumulated deficit
    
    
    (55,931
    )
    
    
    (56,092
    )Total shareholders equity
    
    
    7,822
    
    
    
    6,844Total liabilities and shareholders equity
    
    $
    11,787
    
    
    $
    10,626
  3




---



##### Table of Contents



MakeMusic, Inc.
 
 Condensed Statements of Operations
 (In thousands of U.S. dollars, except share and per share data)
  3 Months
    
    9 MonthsEnded September 30,
    
    Ended September 30,2007
    
    2006
    
    2007
    
    2006Notation Revenue
    
    
    3,514
    
    
    
    3,208
    
    
    
    7,816
    
    
    
    7,312Smart Music Revenue
    
    
    822
    
    
    
    621
    
    
    
    1,980
    
    
    
    1,558Other Revenue
    
    
    285
    
    
    
    196
    
    
    
    499
    
    
    
    389NET REVENUE
    
    
    4,621
    
    
    
    4,025
    
    
    
    10,295
    
    
    
    9,259COST OF REVENUES
    
    
    737
    
    
    
    540
    
    
    
    1,544
    
    
    
    1,307GROSS PROFIT
    
    
    3,884
    
    
    
    3,485
    
    
    
    8,751
    
    
    
    7,952OPERATING EXPENSES:Development expenses
    
    
    1,012
    
    
    
    901
    
    
    
    3,017
    
    
    
    2,623Selling and marketing expenses
    
    
    1,054
    
    
    
    1,051
    
    
    
    3,014
    
    
    
    3,088General and administrative expenses
    
    
    815
    
    
    
    720
    
    
    
    2,642
    
    
    
    2,497Total operating expenses
    
    
    2,881
    
    
    
    2,672
    
    
    
    8,673
    
    
    
    8,208INCOME/(LOSS) FROM OPERATIONS
    
    
    1,003
    
    
    
    813
    
    
    
    78
    
    
    
    (256
    )Interest Income
    
    
    33
    
    
    
    17
    
    
    
    99
    
    
    
    68Interest Expense
    
    
    (4
    )
    
    
    0
    
    
    
    (13
    )
    
    
    0Other income (expense), net
    
    
    (1
    )
    
    
    14
    
    
    
    (1
    )
    
    
    16Net income/(loss) before income tax
    
    
    1,031
    
    
    
    844
    
    
    
    163
    
    
    
    (172
    )Income tax
    
    
    (1
    )
    
    
    (1
    )
    
    
    (2
    )
    
    
    (9
    )Net Income/(Loss)
    
    
    1,030
    
    
    
    843
    
    
    
    161
    
    
    
    (181
    )Income/(Loss) per common share:Basic
    
    
    0.25
    
    
    
    0.22
    
    
    
    0.04
    
    
    
    (0.05
    )Diluted
    
    
    0.22
    
    
    
    0.19
    
    
    
    0.04
    
    
    
    (0.05
    )Weighted average common shares
outstanding:Basic
    
    
    4,134,706
    
    
    
    3,913,251
    
    
    
    4,095,096
    
    
    
    3,904,041Diluted
    
    
    4,597,155
    
    
    
    4,411,458
    
    
    
    4,537,427
    
    
    
    3,904,041
  4




---



##### Table of Contents



MakeMusic, Inc.
 
 Condensed Statements of Cash Flows
 (In thousands of U.S. dollars)
  9 Months EndedSeptember
    
    September2007
    
    2006Operating activitiesNet income (loss)
    
    
    161
    
    
    
    (181
    )Adjustments to reconcile net income (loss) to
net cash provided by operating activities:Depreciation and amortization of property,
equipment and capitalized software
    
    
    462
    
    
    
    299Issuance of options and warrants for services
    
    
    247
    
    
    
    239Net change in assets and liabilities:Accounts receivable
    
    
    181
    
    
    
    (488
    )Inventories
    
    
    (23
    )
    
    
    51Prepaid expenses and other assets
    
    
    68
    
    
    
    66Accounts payable
    
    
    (21
    )
    
    
    (164
    )Accrued liabilities and product returns
    
    
    (259
    )
    
    
    327Deferred revenue
    
    
    285
    
    
    
    157Net cash provided by operating activities
    
    
    1,101
    
    
    
    306Net cash used in investing activitiesPurchases of property & equipment
    
    
    (172
    )
    
    
    (463
    )Capitalized software and other intangibles
    
    
    (510
    )
    
    
    (389
    )Net cash used in investing activities
    
    
    (682
    )
    
    
    (852
    )Net cash provided by financing activitiesProceeds from stock options & warrants exercised
    
    
    570
    
    
    
    134Payments on long-term debt and capital leases
    
    
    (25
    )
    
    
    (16
    )Net cash provided by financing activities
    
    
    545
    
    
    
    118Net increase (decrease) in cash
    
    
    964
    
    
    
    (428
    )Cash, beginning of period
    
    
    3,130
    
    
    
    2,952Cash, end of period
    
    
    4,094
    
    
    
    2,524Supplemental disclosure of cash flow informationInterest paid
    
    
    13
    
    
    
    0Income taxes paid
    
    
    2
    
    
    
    9Other non-cash investment and financing activitiesEquipment acquired under capital lease
    
    
    203
    
    
    
    29
  5




---



##### Table of Contents



MakeMusic, Inc.
 
 Notes to Condensed Financial Statements
  Note 1
    
    Accounting Policies. The information
furnished in this report is unaudited but reflects all adjustments
that are necessary, in the opinion of management, for a fair
statement of the results for the interim period. The operating
results for the three and nine months ended September 30, 2007 are
not necessarily indicative of the operating results to be expected
for the full fiscal year. These statements should be read in
conjunction with our most recent Annual Report on Form 10-KSB.Note 2
    
    Net Income/(Loss) Per Share. Net income/(loss) per share was
calculated by dividing the net income/(loss) by the weighted
average number of shares outstanding during the period. The
following table summarizes the shares of stock included in
calculating earnings per share for the three and nine months ended
September 30, 2007 and 2006 respectively, in accordance with FASB
Statement 128 (SFAS 128), Earnings per Share:
 Three Months Ended
    
    Nine Months EndedSeptember 30
    
    September 302007
    
    2006
    
    2007
    
    2006Weighted-average
common shares
outstanding
    
    
    4,134,706
    
    
    
    3,913,251
    
    
    
    4,095,096
    
    
    
    3,904,041Dilutive effect of
stock options and
warrants
    
    
    462,449
    
    
    
    498,207
    
    
    
    442,331
    
    
    
    Equivalent average
common shares
outstanding 
diluted
    
    
    4,597,155
    
    
    
    4,411,458
    
    
    
    4,537,427
    
    
    
    3,904,041
 The effect of options and warrants are excluded for nine-month period ended September 30,
2006 because the effect is anti-dilutive.Note 3
    
    Income Tax Expense. We did not record a provision for income tax in the three- and
nine-month periods ended September 30, 2007 and 2006 as the provision is offset by a reduction
in the deferred tax valuation allowance. The only income tax expense recorded during the three
and nine months ended September 30, 2007 and 2006 was for minimum state income tax payments.
Due to the uncertainty regarding the realization of our deferred income tax assets and
specifically net operating loss carry-forwards, we have recorded a valuation allowance against
our deferred income tax assets for 2007 and 2006.On January 1, 2007, we implemented FASB Interpretation No. 48, Accounting for Uncertainty
in Income Taxesan Interpretation of FASB Statement 109 (FIN 48), which clarifies the
accounting for uncertainty in tax positions. This Interpretation provides that the tax
effects from an uncertain tax position can be recognized in our financial statements only
if the position is more likely than not of being sustained on audit, based on the
technical merits of the position. The provisions of FIN 48 were effective as of the
beginning of fiscal 2007, with the cumulative effect of the change in accounting principle
recorded as an adjustment to opening retained earnings. We completed our review of
uncertain tax positions during the quarter ended March 31, 2007 and recorded a FIN 48
reserve and corresponding reduction in our valuation allowance of approximately
$2,962,000. Due to the reduction in our valuation allowance, the adoption of FIN 48 did
not have an effect on net income for the three- or nine-month periods ended September 30,
2007 and no adjustment was made to opening retained earnings.Interest and penalties related to any uncertain tax positions would be accounted for as a
long term liability with the corresponding expense being charged to current period
non-operating expense. As of September 30, 2007, we have recognized no liability related
to interest or penalties. The total amount of
 6




---



##### Table of Contents



unrecognized tax benefits that, if recognized, would affect our effective tax rate is zero
based on the fact that we currently have a full reserve against our unrecognized tax
benefits.The following table summarizes the effect on our deferred tax asset for uncertain tax
positions which we have taken:
 January 1,
    
    
    FIN 48
    
    
    September 30,2007
    
    
    Reserve
    
    
    2007(In thousands)Deferred tax assets:Beginning Balance January 1, 2007 Deferred
Tax Asset
    
    $
    9,066
    
    
    $
    (2,962
    )
    
    $
    6,104Valuation allowance for deferred tax assets
    
    $
    (9,066
    )
    
    $
    2,962
    
    
    $
    (6,104
    )Ending balance September 30, 2007 Deferred
Tax Asset
    
    $
    0
    
    
    $
    0
    
    
    $
    0
 As of September 30, 2007, there are no open positions for which the unrecognized tax
benefits will significantly increase or decrease during the next twelve months.
Additionally, tax years still open for examination by Federal and major state agencies as
of September 30, 2007 are 2003-2006.Note 4
    
    Stock-Based Compensation.We currently offer a stock-based compensation plan to our
employees, directors and consultants. The Compensation Committee of the Board of Directors
administers these plans, and determines the persons eligible to receive awards and the number
of shares and/or options subject to each award, as well as the terms, conditions, performance
measures, and other provisions of the award. Readers should refer to Note 5 of our financial
statements in our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2006 for
additional information related to our stock-based compensation plans.We account for stock-based compensation arrangements with our employees and directors in
accordance with SFAS No. 123 (revised), Share-Based Payment (SFAS No. 123R). Under the
fair value recognition provisions of SFAS No. 123R we measure stock-based compensation
cost at the grant date based on the fair value of the award and recognize the compensation
expense over the requisite service period, which is generally the vesting period. For the
three months ended September 30, 2007 and 2006, we recognized $86,000 and $66,000,
respectively, and for the nine months ended September 30, 2007 and 2006, we recognized
$247,000 and $231,000, respectively, of expense related to stock-based compensation.
 7




---



##### Table of Contents



Stock OptionsDuring 2006 and 2007 we used the Black-Scholes option pricing model to estimate the fair
value of stock-based awards with the weighted average assumptions noted in the following
table.
 September 30
    
    September 30,2007
    
    2006Risk-free interest rate
    
    
    4.6
    %
    
    
    3.2
    %Expected life, in years
    
    
    2.6
    
    
    
    3.8Expected volatility
    
    
    78.8
    %
    
    
    87.7
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
 Expected volatility is based on the historical volatility of our share price in the period
prior to option grant equivalent to the expected life of the options. The expected term is
based on managements estimate of when the option will be exercised, which is generally
consistent with the vesting period. The risk-free interest rate for periods within the
contractual life of the option is based on the U.S. Treasury yield curve in effect at the
time of grant.The following table represents stock option activity for the nine months ended September 30,
2007:
 WeightedShares
    
    
    
    
    
    
    AverageReserved
    
    
    Plan
    
    
    Exercisefor Grant
    
    
    Options
    
    
    PriceOutstanding at December 31, 2006
    
    
    208,819
    
    
    
    671,495
    
    
    $
    3.81Granted
    
    
    (263,833
    )
    
    
    263,833
    
    
    $
    6.03Expired
    
    
    
    
    
    
    (7,800
    )
    
    $
    29.87Cancelled
    
    
    112,505
    
    
    
    (112,505
    )
    
    $
    4.15Exercised
    
    
    
    
    
    
    (101,917
    )
    
    $
    3.53Outstanding at September 30, 2007
    
    
    57,491
    
    
    
    713,106
    
    
    $
    4.33Outstanding Exercisable at September 30, 2007
    
    
    
    
    
    
    287,365
    
    
    $
    3.45
 At September 30, 2007 the aggregate intrinsic value of options outstanding was $2,113,000,
and the aggregate intrinsic value of options exercisable was $1,165,000. Total intrinsic
value of options exercised was $360,000 for the nine months ended September 30, 2007.At September 30, 2007 there was $471,000 of unrecognized compensation cost related to
nonvested share-based payments which is expected to be recognized over a weighted-average
period of 2.24 years.WarrantsAt September 30, 2007 there were a total of 554,328 warrants to purchase common stock
outstanding at a weighted average exercise price of $2.92; the warrants expire between 2008
and 2011.Note 5
    
    New and Pending Accounting Pronouncements.In September 2006, FASB issued Statement 157, Fair Value Measurements. This statement
defines fair value and establishes a framework for measuring fair value in generally
accepted accounting principles (GAAP). More precisely, this statement sets forth a standard
definition of fair value as it applies to assets or liabilities, the principal market (or
most advantageous market) for determining fair value (price), the market
 8




---



##### Table of Contents



participants, inputs and the application of the derived fair value to those assets and
liabilities. The effective date of this pronouncement is for all full fiscal and interim
periods beginning after November 15, 2007. We are currently evaluating the impact of
adopting FASB Statement 157 on our financial statements.In February 2007, FASB issued Statement 159, The Fair Value Option for Financial Assets and
Financial Liabilities. This statement allows all entities to choose, at specified election
dates, to measure eligible items at fair value. Under this option, an entity will report
unrealized gains and losses on items for which the fair value option has been elected in
earnings. This statement is effective as of the beginning of the first fiscal year which
begins after November 15, 2007. Early adoption is permitted as of the beginning of the
fiscal year that begins on or before November 15, 2007 provided the company has also elected
to apply the provisions of FASB Statement No. 157, Fair Value Measurements. We are currently
evaluating the impact of adopting FASB Statement 159 on our financial statements.Note 6
    
    Subsequent Event.On November 2, 2007, LaunchEquity Acquisition Partners, LLC  Education Partners acquired
312,500 shares of common stock of the Company pursuant to the exercise of a warrant at an
exercise price of $3.20. The Company received a total of $1,000,000 in connection with this
warrant exercise.
 9




---



##### Table of Contents



Item 2. Managements Discussion and Analysis or Plan of Operation.
 Executive Overview
 ® ®
 ® ® ® ®
       10




---



##### Table of Contents



Results of Operations
  3 Months Ended September 30,
    
    
    
    
    
    
    9 Months Ended September 30,Incr
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Incr2007
    
    
    2006
    
    
    (Decr)
    
    
    %
    
    
    2007
    
    
    2006
    
    
    (Decr)
    
    
    %(In $ thousands)Notation revenue
    
    $
    3,514
    
    
    $
    3,208
    
    
    $
    306
    
    
    
    10
    %
    
    $
    7,816
    
    
    $
    7,312
    
    
    $
    504
    
    
    
    7
    %SmartMusic revenue
    
    
    822
    
    
    
    621
    
    
    
    201
    
    
    
    32
    %
    
    
    1,980
    
    
    
    1,558
    
    
    
    422
    
    
    
    27
    %Other revenue
    
    
    285
    
    
    
    196
    
    
    
    89
    
    
    
    45
    %
    
    
    499
    
    
    
    389
    
    
    
    110
    
    
    
    28
    %Net revenue
    
    
    4,621
    
    
    
    4,025
    
    
    
    596
    
    
    
    15
    %
    
    
    10,295
    
    
    
    9,259
    
    
    
    1,036
    
    
    
    11
    %Cost of revenues
    
    
    737
    
    
    
    540
    
    
    
    197
    
    
    
    37
    %
    
    
    1,544
    
    
    
    1,307
    
    
    
    237
    
    
    
    18
    %Gross profit
    
    
    3,884
    
    
    
    3,485
    
    
    
    399
    
    
    
    11
    %
    
    
    8,751
    
    
    
    7,952
    
    
    
    799
    
    
    
    10
    %Percentage of net sales
    
    
    84
    %
    
    
    87
    %
    
    
    
    
    
    
    
    
    
    
    85
    %
    
    
    86
    %Development expense
    
    
    1,012
    
    
    
    901
    
    
    
    111
    
    
    
    12
    %
    
    
    3,017
    
    
    
    2,623
    
    
    
    394
    
    
    
    15
    %Selling and marketing
    
    
    1,054
    
    
    
    1,051
    
    
    
    3
    
    
    
    0
    %
    
    
    3,014
    
    
    
    3,088
    
    
    
    (74
    )
    
    
    (2
    )%General administrative
    
    
    815
    
    
    
    720
    
    
    
    95
    
    
    
    13
    %
    
    
    2,642
    
    
    
    2,497
    
    
    
    145
    
    
    
    6
    %Total operating expense
    
    
    2,881
    
    
    
    2,672
    
    
    
    209
    
    
    
    8
    %
    
    
    8,673
    
    
    
    8,208
    
    
    
    465
    
    
    
    6
    %Operating income (loss)
    
    
    1,003
    
    
    
    813
    
    
    
    190
    
    
    
    23
    %
    
    
    78
    
    
    
    (256
    )
    
    
    334
    
    
    
    130
    %Other income
    
    
    28
    
    
    
    31
    
    
    
    (3
    )
    
    
    (10
    )%
    
    
    85
    
    
    
    84
    
    
    
    1
    
    
    
    1
    %Net income (loss)
before taxes
    
    $
    1,031
    
    
    $
    844
    
    
    $
    187
    
    
    
    22
    %
    
    $
    163
    
    
    
    ($172
    )
    
    $
    335
    
    
    
    195
    %Income tax provision
    
    
    (1
    )
    
    
    (1
    )
    
    
    0
    
    
    
    0
    %
    
    
    (2
    )
    
    
    (9
    )
    
    
    7
    
    
    
    77
    %Net Income (loss)
    
    $
    1,030
    
    
    $
    843
    
    
    $
    187
    
    
    
    22
    %
    
    $
    161
    
    
    
    ($181
    )
    
    $
    342
    
    
    
    189
    %
 Comparison of the three-month and nine-month periods ended September 30, 2007 to the three-month
and nine-month periods ended September 30, 2006
 Net Revenues.
 11




---



##### Table of Contents



®
     Gross Profit.
 Development Expenses.
 12




---



##### Table of Contents



Sales and Marketing Expenses.
 General and Administrative Expenses.
 Net Income (Loss) from Operations
 Net Income (Loss)
 Liquidity and Capital Resources
    13




---



##### Table of Contents



14




---



##### Table of Contents



Item 3. Controls and Procedures.
 Evaluation of disclosure controls and procedures
 Changes in internal controls
 Forward Looking and Cautionary Statements
 The preceding discussion and analysis should be read in conjunction with the financial statements
and notes thereto appearing elsewhere in this report and the audited consolidated financial
statements and notes thereto and Managements Discussion and Analysis or Plan of Operation
contained in our annual report on Form 10-KSB for the fiscal year ended December 31, 2006.
Managements Discussion and Analysis may contain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. 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, anticipate, and similar words
or expressions. The forward-looking statements in this report generally relate to our intent to
achieve significant and continued growth in the music education software industry; our expectations
relating to SmartMusic 10.0, including expansion of the repertoire for that product and its ability
to facilitate the transfer of assignments from teachers to students; our intent to increase our
investment in repertoire development for SmartMusic 10.0; our intent to expand our sales and
marketing initiative and expectation that expenses related thereto will increase; our anticipated
expansion into new geographic markets; our anticipated launch of new products; our belief that cash
flows will remain sufficient to finance operations; and our expectation to conserve adequate cash
or seek additional debt or equity financing if cash flows do become insufficient to finance our
operations. 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. MakeMusic
cautions investors that many important factors have affected, and in the future could affect our
actual results of operations and cause such results to differ materially from those anticipated in
forward-looking statements made in this release and elsewhere by MakeMusic or on its behalf. These
factors include, but are not limited to: our possible need for and ability to obtain additional
capital; the market acceptance of Finale, SmartMusic, SmartMusic Impact and other products; our
ability to successfully identify, establish and maintain new strategic relationships that will
allow us to enter new geographic markets; the success of our sales and marketing initiatives; our
dependence upon new product development efforts, including repertoire development; our dependence
on releasing annual Finale upgrades; the maintenance of strategic relationships; the success of
MakeMusics SmartMusic subscription business; maintaining license agreements with a limited number
of publishers; the limited and fluctuating sales of certain of our products; the intense
competition MakeMusic faces; the rapid technological changes and obsolescence in software industry;
MakeMusics dependence on key personnel and the proprietary nature of our technology; other general
business and economic conditions; and those risks described from time to time in MakeMusics
reports to the Securities and Exchange Commission (including its Annual Report on Form 10-KSB). 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 of the risks, uncertainties or potentially inaccurate assumptions
that investors should take into account when making investment decisions. Shareholders and other
readers are cautioned not to place undue reliance on forward-looking statements, which speak only
as of the date on which they are made. MakeMusic undertakes no obligation to update publicly or
revise any forward-looking statements.
 15




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
  16




---



##### Table of Contents



SIGNATURES
  Date: November 9, 2007
    
    MAKEMUSIC, INC.By:
    
    /s/ John W. PaulsonJohn W. Paulson, Chief Executive Officer(Principal Executive Officer)And:
    
    /s/ Karen L. VanDerBoschKaren L.VanDerBosch, Chief Financial Officer(Chief Financial Officer)
 
 17




---



##### Table of Contents



EXHIBIT INDEX
 Form 10-QSB
 The quarterly period ended September 30, 2007
 Exhibit No.
    
    Description31.1*
    
    Certification of Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of Chief Executive Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.32.2*
    
    Certification of Chief Financial Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
 
 *Filed herewith.
 18