SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB
(Mark One)
[x]  Quarterly  report under Section 13 or 15(d) of the Securities
     Exchange Act of 1934 For the quarterly period ended September 30, 1996

[ ]  Transition report under Section 13 or 15(d) of the Exchange Act
     For the transition period from            to

     Commission file number     0-26192

--------------------------------------------------------------------------------
                           Coda Music Technology, Inc.
--------------------------------------------------------------------------------
        (Exact Name of Small Business Issuer as Specified in its Charter)

 Minnesota                                            41-1716250
 (State or Other Jurisdiction of                      (I.R.S. Employer
 Incorporation or Organization)                       Identification No.)

                                 6210 Bury Drive
                       Eden Prairie, Minnesota 55346-1718
--------------------------------------------------------------------------------
                    (Address of Principal Executive Offices)

                                 (612) 937-9611
--------------------------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)


--------------------------------------------------------------------------------
              (Former Name, Former Address and Former Fiscal Year,
                          if Changed Since Last Report)

Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.

         Yes   X     No

As of November 6, 1996, there were 4,327,035 shares of Common Stock outstanding.

Transitional Small Business Disclosure Format (check one):

         Yes          No   X


<PAGE>



                          Part 1. Financial Information

                          Item 1. Financial Statements

                           Coda Music Technology, Inc.

                            Condensed Balance Sheets

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                              September 30, 1996     December 31, 1995
                    ASSETS

CURRENT ASSETS:

<S>                                                                            <C>                      <C>                      
   Cash and short-term investments                                             $  1,232,811             $  3,960,274
   Accounts receivable                                                              552,033                  405,528
   Inventories                                                                      999,003                  563,741
   Prepaid royalties                                                                107,856                   91,117
   Other current assets                                                              62,067                  124,676
                                                                                -----------              -----------
               Total current assets                                               2,953,770                5,145,336
EQUIPMENT, FURNITURE AND FIXTURES                                                   516,137                  466,592
REPERTOIRE DEVELOPMENT COSTS                                                        400,006                        -
OTHER ASSETS, principally patents and trademarks                                    213,820                   93,526
                                                                                -----------              -----------
                                                                               $  4,083,733             $  5,705,454
                                                                                ===========              ===========
  LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Current maturities of long-term debt                                        $          -             $      3,838
   Accounts payable                                                                 309,710                  339,554
   Accrued expenses                                                                 480,452                  582,398
   Deferred revenue                                                                 143,630                  122,692
                                                                                -----------              -----------
               Total current liabilities                                            933,792                1,048,482

SHAREHOLDERS' EQUITY                                                              3,149,941                4,656,972
                                                                                -----------              -----------
                                                                               $  4,083,733             $  5,705,454
                                                                                ===========              ===========

</TABLE>

            See accompanying notes to condensed financial statements



<PAGE>


                           Coda Music Technology, Inc.

                       Condensed Statements of Operations

                                   (Unaudited)


<TABLE>
<CAPTION>


                                                   ---------------------------------------  --------------------------------------
                                                         Quarter Ended September 30,           Nine Months Ended September 30,
                                                          1996                1995                 1996                1995

<S>                                                 <C>                   <C>                  <C>                  <C>   

NET REVENUES                                         $    1,209,440       $    1,360,966       $   3,756,532        $   3,565,615

COST OF SALES                                               482,817              332,960           1,335,433              837,209
                                                      --------------       --------------       -------------        -------------
GROSS PROFIT                                                726,623            1,028,006           2,421,099            2,728,406
                                                      --------------       --------------       -------------        -------------

OPERATING EXPENSES:
   Sales and marketing                                      592,830              578,834           2,071,453            1,676,621
   Product development                                      361,460              364,618             952,745            1,016,743
   General and administrative                               386,808              397,925           1,116,896            1,124,739
                                                      --------------       --------------       -------------        -------------
               Total operating expenses                   1,341,098            1,341,377           4,141,094            3,818,103
                                                      --------------       --------------       -------------        -------------
LOSS FROM OPERATIONS                                       (614,475)            (313,371)         (1,719,995)          (1,089,697)

Interest Income (Expense), net                               21,096               55,498             101,400               (3,649)
                                                      --------------       --------------       -------------        -------------
NET LOSS                                             $     (593,379)      $     (257,873)      $  (1,618,595)       $  (1,093,346)
                                                      ==============       ==============       =============        =============

WEIGHTED AVERAGE COMMON AND
 COMMON EQUIVALENT
 SHARES OUTSTANDING
                                                          4,326,867            4,218,636           4,291,536            3,603,527
                                                      ==============       ==============       =============        =============

NET LOSS PER COMMON AND 
 COMMON EQUIVALENT SHARE                             $        (0.14)      $        (0.06)      $       (0.38)      $       (0.30)
                                                      ==============       ==============       =============        ============  

</TABLE>

            See accompanying notes to condensed financial statements

                                       

<PAGE>


                           Coda Music Technology, Inc.

                       Condensed Statements of Cash Flows

                     For the Nine Months Ended September 30,

                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                                  1996               1995
<S>                                                                                         <C>                <C>          
OPERATING ACTIVITIES:
   Net loss                                                                                  $  (1,618,595)    $   (1,093,346)
   Adjustments to reconcile net loss to net cash used in operating activities-
         Depreciation and amortization                                                             259,462            211,376
         Change in current assets and liabilities:
            Accounts receivable                                                                   (146,505)            (5,950)
            Inventories                                                                           (435,262)            65,101
            Prepaid royalties                                                                      (16,739)           (11,242)
            Other current assets                                                                    62,609            (41,134)
            Accounts payable                                                                       (29,844)          (297,299)
            Accrued expenses                                                                      (101,946)           (12,038)
            Deferred revenue                                                                        20,938             75,579
                                                                                               ------------      -------------
               Net cash used in operating activities                                            (2,005,882)        (1,108,953)
                                                                                               ------------      -------------
INVESTING ACTIVITIES:
   Purchases of equipment, furniture and fixtures                                                 (289,359)          (131,893)
   Capitalized repertoire development cost                                                        (419,654)                 -
   Other assets, principally patents and trademarks                                               (120,294)                 -
                                                                                               ------------      -------------
              Net cash used in investing activities                                               (829,307)          (131,893)
                                                                                               ------------      -------------
FINANCING ACTIVITIES:
   Proceeds from initial public offering, net                                                            -          5,891,725
   Proceeds from exercise of stock options and warrants                                            111,564             16,000
   Proceeds from subordinated debt                                                                                    700,000
   Repayment of subordinated debt                                                                        -         (1,200,000)
   Repayment of short-term borrowings                                                                    -           (300,000)
   Repayment of long-term debt                                                                      (3,838)           (24,148)
                                                                                               ------------      -------------
               Net cash provided by financing activities                                           107,726          5,083,577
                                                                                               ------------      -------------
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS
                                                                                                (2,727,463)         3,842,731
                                                                                                

CASH AND SHORT-TERM INVESTMENTS, beginning of period                                             3,960,274            684,727
                                                                                               ------------      -------------
CASH AND SHORT-TERM INVESTMENTS, end of period                                               $   1,232,811     $    4,527,458
                                                                                               ============      =============
</TABLE>

            See accompanying notes to condensed financial statements
                                        


<PAGE>


                           Coda Music Technology, Inc.

                          Notes to Financial Statements

                                   (Unaudited)





Note 1     Accounting  Policies.  The information  furnished in this report is
           unaudited but reflects all  adjustments  which are necessary,  in the
           opinion of  management,  for a fair  statement of the results for the
           interim  period.  The  operating  results for the nine  months  ended
           September  30, 1996 are not  necessarily  indicative of the operating
           results to be expected  for the full fiscal  year.  These  statements
           should be read in  conjunction  with the Company's most recent Annual
           Report on Form 10-KSB.



Note 2     Repertoire  Development Costs. During the first six months of 1996,
           the Company capitalized $419,654 of costs incurred in the development
           of repertoire.  Such costs had previously  been charged to expense as
           incurred  due to lack of sales  history.  These  costs are  amortized
           using the straight line method over the economic lives of the assets,
           not to exceed 5 years,  beginning  when the  repertoire  products are
           released.  Accumulated  amortization  totaled $19,648 as of September
           30, 1996.







<PAGE>




ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS



General

     The Company develops and markets proprietary music technology products that
enhance  music  learning  and  composition,   increase   productivity  and  make
practicing and performing music fun.

     Through 1994, the primary  business of the Company  consisted of enhancing,
marketing and selling Finale(R) products while developing Vivace(R) products. In
June 1994,  the first test markets of the Vivace  product were  launched.  After
receiving an encouraging  response from music educators and music students,  the
Company  began the process of building a dealer  network  commencing  in January
1995.  The  Company  anticipates  that  revenues  from the Vivace  product  will
increase as the dealer network expands and gains experience, as well as with the
introduction of stronger and more focused marketing  efforts by the Company.  In
December 1995, the Company announced new configurations of the Vivace product at
lower suggested retail prices together with upgraded  features which now include
an application for vocalists. The Company began shipment of these configurations
in the second quarter of 1996.  With a long-term  objective of  penetrating  the
amateur musician market, the Company intends to continue to adapt its product to
technologies  with lower costs and to expand the amount of repertoire  available
for use with the Vivace product.

     The Company has incurred losses from operations  since inception and has an
accumulated deficit of $8,303,526, as of September 30, 1996.

Results of operations

For the periods ended September 30, 1996 compared to the periods ended 
September 30, 1995

     Net Revenues.  Revenues of $1,209,440  for the quarter ended  September 30,
1996 were  $151,526  less than  revenues  for the third  quarter  of 1995.  This
decrease is  primarily  the result of not  releasing a new upgrade to the Finale
music notation product during the third quarter of 1996. In the third quarter of
1995, the Company released Finale 3.5, which contributed revenues of $226,718 in
that quarter. The decrease in Finale revenues is partially offset by an increase
in Vivace product revenues.  Revenues from Vivace products totaled approximately
$505,000 in the quarter ended  September 30, 1996 and included  revenue from the
shipment of approximately  478 modular systems and soundcard  application  units
and 7,566 repertoire cartridges.  In the third quarter of 1995, the Company sold
approximately 190 modular systems and 1,119 repertoire  cartridges  resulting in
total  Vivace  related  revenue  in the  quarter  ended  September  30,  1995 of
approximately $329,000.

     Revenues  for the nine months  ended  September  30,  1996 were  $3,756,532
compared to  $3,565,615  for the first nine  months of 1995,  an increase of 5%.
Vivace product  revenues  increased  $659,057 or 75% in this period while Finale
product  revenues  decreased 17%. The Company had 90 North American  dealers for
Vivace as of September  30, 1996 and  distributors  in Australia  and Japan.  At
September 30, 1995 the Company had approximately 40 dealers. The increase in the
number of dealers,  the  introduction  of the  soundboard  configuration  of the
product  and the vocal  features of the  application,  together  with  increased
emphasis  on  repertoire  sales all  resulted in the  increased  sales of Vivace
during 1996.

<PAGE>

     Gross profit.  The gross profit of $726,623 for the quarter ended September
30, 1996  represented  a gross profit margin of 60%. For the third quarter ended
September  30, 1995,  the gross profit margin was 76%. The decrease in the gross
margin percentage is primarily attributable to the higher mix of Vivace sales in
the 1996 quarter compared to 1995. During the third quarter of 1996, the Company
offered a special  promotion  whereby customers who purchased $995 of repertoire
received a soundcard  application at no charge.  The low margins  resulting from
this  promotion,  as well as the lower  margins on Vivace  products  compared to
Finale  products,  accounted  for the  decline  in the gross  margin  during the
quarter.

     The gross  profit for the first nine months of 1996 was 64% compared to 77%
in the first nine  months of 1995.  The  decrease  principally  relates to lower
Vivace margins associated with price reductions which were announced in December
1995, and promotional pricing in connection with the $995 promotion described in
the previous paragraph.  It is expected that the gross profit percentage will be
higher  during the  fourth  quarter of 1996 as the high  margin  Finale  product
upgrades are expected to be released.

     Sales and  marketing  expenses.  For the quarter  ended  September 30, 1996
sales and marketing expenses of $592,830 are $13,996 higher than for the quarter
ended  September 30, 1995.  Sales and marketing  expenses of $2,071,453  for the
first nine months of 1996  increased  24% or $394,832 over the first nine months
of 1995.  This increase in spending is  attributable to attendance at more trade
shows in 1996 than in 1995 as well as costs incurred to train  approximately  70
specialists employed by our dealer network to sell Vivace products.

     Product development expenses.  Product development expenses of $361,460 for
the quarter ended September 30, 1996 were approximately  equal to the amount for
the  quarter  ended  September  30,  1995.  The Company  capitalized  repertoire
development  expenses of $143,605  during the quarter ended  September 30, 1996.
For the nine months ended September 30, 1996,  product  development  expenses of
$952,745 were $63,998 less than for the nine months ended September 30, 1995. In
addition,  the Company capitalized $419,654 of costs incurred in the development
of repertoire in 1996. The total costs related to the development of application
and  repertoire  products  increased as the Company  invested in developing  new
configurations  of the Vivace product with expanded  features,  including  vocal
accompaniment.  In addition,  the Company has  accelerated  the  development  of
repertoire  and broadened the types (vocal as well as  instrumental)  and genres
being offered (classical, jazz, musical theatre and pop).

     General and Administrative  Expenses.  General and administrative  expenses
for the third quarter of 1996 were  $386,808  compared to $397,925 for the third
quarter of 1995. General and administrative  expenses of $1,116,896 for the nine
months  ended  September  30, 1996 were  approximately  the same as for the nine
months ended  September 30, 1995.  The Company  intends to limit expense  growth
until revenue growth has accelerated.

     Interest  Income  (Expense),  Net. The Company had net  interest  income of
$21,096 for the quarter ended  September 30, 1996 compared to $55,498 during the
third  quarter  of 1995.  For the first nine  months of 1996,  the  company  had
interest income of $101,400  compared to net interest  expense of $3,649 for the
first nine months of 1995.  The Company's  financing is discussed  further under
the caption "Liquidity and Capital Resources".

     Net loss. The net loss of $593,379 for the quarter ended September 30, 1996
is a greater loss than reported in the quarter ended September 30, 1995. For the
nine months ended  September  30, the  Company's  loss of  $1,618,595  increased
$525,249 over the nine months ended  September 30, 1995. The changes in the loss
are attributable to the changes in revenues and costs described above.

<PAGE>

Liquidity and Capital Resources

     In July 1995,  the Company  received  net proceeds of  $5,891,725  from the
initial public  offering of 1,135,000  shares of its common stock.  The proceeds
were used to repay  subordinated debt and accrued interest totaling  $1,262,592,
and the remainder was invested in short-term securities.

     The Company  has a $500,000  line of credit with a bank which has been used
to finance its working  capital  requirements  and which will expire on February
16, 1997 if not renewed.  During 1995, the Company borrowed up to $300,000 under
this line of credit, which balance was repaid in February 1995. Borrowings under
the line of credit bear  interest at 1% over the bank's  reference  rate and are
collateralized  by all of  the  accounts  receivable,  inventories  and  general
intangibles  of the  Company.  Among  other  requirements,  the  loan  agreement
requires the Company to maintain  tangible net worth of $3,000,000 as defined in
the  agreement.  While the  agreement  is in effect,  the  Company may not incur
additional  indebtedness,  liquidate  or merge the  Company,  pay  dividends  or
acquire any other entity  without the prior approval of the lender.  Further,  a
25% or more change in ownership of the Company  constitutes  an event of default
under the agreement. As of September 30, 1996 there were no borrowings under the
line of credit.

     Net cash  used in  operating  activities  totaled  $2,005,882  for the nine
months  ended  September  30,  1996.  In  addition,  the  Company  made  capital
expenditures  for  furniture,  equipment  and  fixtures  of $289,359 in the nine
months ended September 30, 1996. The Company used cash for operating  activities
of $1,108,953 and made capital  expenditures  of $131,893 during the nine months
ended September 30, 1995.

     The Company anticipates that capital expenditures for 1996 will approximate
$350,000.  Management believes existing cash and short-term investments together
with funds  generated  from the sale of products  will be sufficient to fund its
capital  expenditure,  product  development  and  working  capital  requirements
through  1996.  Management  expects that cash in excess of current  requirements
will be invested in investment grade interest-bearing securities.

     Management  believes that  additional  capital  beyond its cash and current
line of credit may be required  in 1997  depending  upon levels of revenues  and
product development expenditures. Additional capital may be sought through a new
line of credit  with a bank,  asset  based  lending  or the sale of  equity.  No
assurance can be given that such capital will be available or available on terms
favorable to the Company.


Cautionary Statements

     As provided for under the Private Securities Litigation Reform Act of 1995,
the Company wishes to caution  investors that the following  important  factors,
among  others,  in some cases have  affected  and in the future could affect the
Company's  actual  results  of  operations  and  cause  such  results  to differ
materially  from those  anticipated in  forward-looking  statements made in this
document and elsewhere by or on behalf of the Company.

     The Company's  initial Vivace product was introduced in 1994 and new Vivace
products  were  introduced  in 1996.  The Company  thus has a limited  operating
history from which  investors  might judge its ability to market at a profit its
Vivace  products.  The success of the Company will be highly dependent on market
acceptance of these products and the success of its  distribution  arrangements.
Investors  should also  consider:  the potential  need for  additional  capital;
additional development work required for new products;  dependence on repertoire
sales and  development;  the  Company's  dependence  on sales to schools and key
customers;  fluctuations in operating results related to the introduction of new
products and upgrades;  competition;  dependence on suppliers; and dependence on
proprietary  technology.   For  a  more  complete  description  see  "Cautionary
Statements"  under  Item 1 of the  Company's  Form  10-KSB  for the  year  ended
December 31, 1995.


<PAGE>



                            PART 2. OTHER INFORMATION





Item 6.       Exhibits and Reports on Form 8-K.

              (a)  Exhibits: See Exhibit Index on page following Signature page.

              (b)  Reports on Form 8-K: No reports on Form 8-K were filed by the
                   registrant during the quarter ended September 30, 1996.



<PAGE>




                                   SIGNATURES





Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.





Date:  November 6, 1996              CODA MUSIC TECHNOLOGY, INC.


                                     By: /s/ Ronald B. Raup
                                        Ronald B. Raup, President and
                                        Chief Operating Officer


                                     And: /s/ Joan K. Berg
                                         Joan K. Berg, Chief Financial Officer

























<PAGE>




                                  EXHIBIT INDEX



                                   FORM 10-QSB

                              For the Quarter Ended
                               September 30, 1996




                                                                               
Exhibit                                                                        
Number            Description                                                  

    10.1         Amendment No. 3 dated 8/28/96 to License Agreement
                  dated 6/10/92 between the Registrant and
                  Carnegie Mellon University

     11           Statement re: computation of earnings per share
 
     27           Financial Data Schedule
                  (filed in electronic format only)