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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-QSB

|           |  |                                                                                                                              
|---------- |  | -----------------------------------------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                                                              
|x          |  | Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934For the quarterly period ended June 30, 2003

|  |  |                                                                                                                 
|- |  | ----------------------------------------------------------------------------------------------------------------
|o |  | Transition report under Section 13 or 15(d) of the Exchange
ActFor the transition period from ________to________

Commission file number 0-26192

|                                                                 
|-----------------------------------------------------------------
|MakeMusic! Inc.                                                  
|                                                                 
|(Exact Name of Small Business Issuer as Specified in its Charter)

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

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

|                                                
|------------------------------------------------
|(952) 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 |  | o

As of July 31, 2003, there were 3,356,330 shares of Common Stock outstanding.
Such amount reflects the number of shares of Common Stock outstanding after the
Companys one-for-ten reverse stock split, which became effective on January
16, 2003. All references in the accompanying financial statements to the number
of shares and per share amounts have been retroactively restated to reflect the
reverse split.

Transitional Small Business Disclosure Format (check one):

|    |  |   |  |    |  |  
|--- |  | - |  | -- |  | -
|Yes |  | o |  | No |  | x

1



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TABLE OF CONTENTS



|                                                                                              |                                                      |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                                                                
|ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                          
|                                                                                              | Condensed Consolidated Balance Sheets               
|                                                                                              | Consolidated Statements of Operations               
|                                                                                              | Consolidated Statements of Cash Flows               
|                                                                                              | Notes to Condensed Consolidated Financial Statements
|ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|ITEM 3. CONTROLS AND PROCEDURES                                                              
|PART 2. OTHER INFORMATION                                                                    
|Item 4. Submission of Matters to a Vote of Security Holders:                                 
|Item 6. Exhibits and Reports on Form 8-K.                                                    
|                                                                                              | SIGNATURES                                          
|                                                                                              | EXHIBIT INDEX                                       
|EX-31.1 Certification of CEO Pursuant to Sec. 302                                            
|EX-31.2 Certification of CFO Pursuant to Sec. 302                                            
|EX-32.1 Certification of CEO Pursuant to Sec. 906                                            
|EX-32.2 Certification of CFO Pursuant to Sec. 906                                            



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##### Table of Contents



MakeMusic! Inc.

INDEX

|        |  |                                                                                                         |  |         
|------- |  | ------------------------------------------------------------------------------------------------------- |  | --------
|        |  |                                                                                                         |  | Page No.
|        |  |                                                                                                         |  |         
|        |  | PART I. FINANCIAL INFORMATION                                                                           |  |         
|        |  |                                                                                                         |  |         
|Item 1. |  | Condensed Consolidated Financial Statements                                                             |  | 3       
|        |  |                                                                                                         |  |         
|        |  | Condensed Consolidated Balance Sheets
June 30, 2003 and December 31, 2002                               |  | 3       
|        |  |                                                                                                         |  |         
|        |  | Condensed Consolidated Statement of Operations
Three and six-month periods ended June 30, 2003 and 2002 |  | 4       
|        |  |                                                                                                         |  |         
|        |  | Condensed Consolidated Statement of Cash Flows
Six-month periods ended June 30, 2003 and 2002           |  | 5       
|        |  |                                                                                                         |  |         
|        |  | Notes to Condensed Consolidated Financial Statements                                                    |  | 6       
|        |  |                                                                                                         |  |         
|Item 2. |  | Managements Discussion and Analysis or Plan of Operation                                               |  | 9       
|        |  |                                                                                                         |  |         
|Item 3. |  | Controls and Procedures                                                                                 |  | 13      
|        |  |                                                                                                         |  |         
|        |  | PART II. OTHER INFORMATION                                                                              |  |         
|        |  |                                                                                                         |  |         
|Item 4. |  | Submission of Matters to a Vote of Security Holders                                                     |  | 14      
|        |  |                                                                                                         |  |         
|Item 6. |  | Exhibits and Reports on Form 8-K                                                                        |  | 14      
|        |  |                                                                                                         |  |         
|        |  | Signatures                                                                                              |  | 15      
|        |  |                                                                                                         |  |         
|        |  | Exhibit Index                                                                                           |  | 16      

2



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##### Table of Contents








|PART I. |  | FINANCIAL INFORMATION
|------- |  | ---------------------






|ITEM 1. |  | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|------- |  | -------------------------------------------




MakeMusic! Inc.
Condensed Consolidated Balance Sheets(In thousands of U.S. dollars)

|                                                          |                                                      |   |             |         |              |   |        |         |  
|--------------------------------------------------------- | ---------------------------------------------------- | - | ----------- | ------- | ------------ | - | ------ | ------- | -
|                                                          |                                                      |   | June 30,    |         | December 31,
|                                                          |                                                      |   | 2003        |         | 2002        
|                                                          |                                                      |   |             |         |             
|                                                          |                                                      |   | (unaudited) |         | (Note)      
|Assets                                                    |                                                      |   |             |         |              |   |        |        
|Current assets:                                           |                                                      |   |             |         |              |   |        |        
|                                                          | Cash and cash equivalents                            |   | $           | 1,498   |              |   | $      | 1,469   |  
|                                                          | Cash-restricted                                      |   |             |        |              |   |        | 390     |  
|                                                          | Accounts receivable, net                             |   |             | 321     |              |   |        | 400     |  
|                                                          | Inventories                                          |   |             | 300     |              |   |        | 324     |  
|                                                          | Value added tax receivable                           |   |             | 93      |              |   |        | 58      |  
|                                                          | Prepaid expenses and other current assets            |   |             | 137     |              |   |        | 185     |  
|                                                          |                                                      |   |             |         |              |   |        |        
|Total current assets                                      |                                                      |   | 2,349       |         |              |   | 2,826  |        
|Property and equipment, net                               |                                                      |   | 327         |         |              |   | 528    |        
|Goodwill, net                                             |                                                      |   | 3,630       |         |              |   | 3,630  |        
|Capitalized software products                             |                                                      |   | 689         |         |              |   | 732    |        
|Intangible assets, net                                    |                                                      |   | 2,208       |         |              |   | 2,719  |        
|Other non-current assets                                  |                                                      |   | 167         |         |              |   | 157    |        
|                                                          |                                                      |   |             |         |              |   |        |        
|Total assets                                              |                                                      | $ | 9,370       |         |              | $ | 10,592 |        
|                                                          |                                                      |   |             |         |              |   |        |        
|Liabilities and shareholders equity                      |                                                      |   |             |         |              |   |        |        
|Current liabilities:                                      |                                                      |   |             |         |              |   |        |        
|                                                          | Accounts payable                                     |   | $           | 272     |              |   | $      | 651     |  
|                                                          | Accrued expenses and other current liabilities       |   |             | 1,040   |              |   |        | 1,303   |  
|                                                          | Revolving note payable                               |   |             | 111     |              |   |        | 89      |  
|                                                          | Convertible loans                                    |   |             |        |              |   |        | 419     |  
|                                                          | Current portion of long-term debt and capital leases |   |             | 632     |              |   |        | 437     |  
|                                                          | Reserve for product returns                          |   |             | 345     |              |   |        | 219     |  
|                                                          | Deposits                                             |   |             |        |              |   |        | 390     |  
|                                                          | Deferred Revenue                                     |   |             | 368     |              |   |        | 178     |  
|                                                          |                                                      |   |             |         |              |   |        |        
|Total current liabilities                                 |                                                      |   | 2,768       |         |              |   | 3,686  |        
|Long-term debt and capital leases, net of current portion |                                                      |   | 23          |         |              |   | 151    |        
|Shareholders equity:                                     |                                                      |   |             |         |              |   |        |        
|                                                          | Common stock                                         |   |             | 34      |              |   |        | 22      |  
|                                                          | Additional paid-in capital                           |   |             | 61,523  |              |   |        | 58,278  |  
|                                                          | Accumulated deficit                                  |   |             | (54,463 | )            |   |        | (50,877 | )
|                                                          | Accumulated other comprehensive income               |   |             |        |              |   |        | (73     | )
|                                                          | Deferred compensation                                |   |             | (515    | )            |   |        | (595    | )
|                                                          |                                                      |   |             |         |              |   |        |        
|Total shareholders equity                                |                                                      |   | 6,579       |         |              |   | 6,755  |        
|                                                          |                                                      |   |             |         |              |   |        |        
|Total liabilities and shareholders equity                |                                                      | $ | 9,370       |         |              | $ | 10,592 |        
|                                                          |                                                      |   |             |         |              |   |        |        

NOTE:The Balance Sheet at December 31, 2002 has been derived from the audited
financial statements as of that date but does not reflect all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements.

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

|                                                              |                                          |   |                        |     |                           |   |           |       |      |   |           |       |   |   |           |       |  
|------------------------------------------------------------- | ---------------------------------------- | - | ---------------------- | --- | ------------------------- | - | --------- | ----- | ---- | - | --------- | ----- | - | - | --------- | ----- | -
|                                                              |                                          |   | Quarter Ended June 30, |     | Six Months Ended June 30,
|                                                              |                                          |   |                        |     |                          
|                                                              |                                          |   | 2003                   |     | 2002                      |   | 2003      |       | 2002
|                                                              |                                          |   |                        |     |                           |   |           |       |     
|NET REVENUE                                                   |                                          | $ | 1,378                  |     |                           | $ | 1,417     |       |      | $ | 3,035     |       |   | $ | 3,358     |      
|COST OF REVENUES                                              |                                          |   | 322                    |     |                           |   | 364       |       |      |   | 704       |       |   |   | 728       |      
|                                                              |                                          |   |                        |     |                           |   |           |       |      |   |           |       |   |   |           |      
|GROSS PROFIT                                                  |                                          |   | 1,056                  |     |                           |   | 1,053     |       |      |   | 2,331     |       |   |   | 2,630     |      
|OPERATING EXPENSES:                                           |                                          |   |                        |     |                           |   |           |       |      |   |           |       |   |   |           |      
|                                                              | Website development expenses             |   |                        | 141 |                           |   |           | 257   |      |   |           | 209   |   |   |           | 536   |  
|                                                              | Content and product development
expenses |   |                        | 535 |                           |   |           | 597   |      |   |           | 1,091 |   |   |           | 1,145 |  
|                                                              | Selling and marketing expenses           |   |                        | 782 |                           |   |           | 941   |      |   |           | 1,823 |   |   |           | 1,925 |  
|                                                              | General and administrative expenses      |   |                        | 980 |                           |   |           | 1,104 |      |   |           | 1,984 |   |   |           | 2,308 |  
|                                                              |                                          |   |                        |     |                           |   |           |       |      |   |           |       |   |   |           |      
|Total operating expenses                                      |                                          |   | 2,438                  |     |                           |   | 2,899     |       |      |   | 5,107     |       |   |   | 5,914     |      
|                                                              |                                          |   |                        |     |                           |   |           |       |      |   |           |       |   |   |           |      
|LOSS FROM OPERATIONS                                          |                                          |   | (1,382                 | )   |                           |   | (1,846    | )     |      |   | (2,776    | )     |   |   | (3,284    | )    
|                                                              | Interest income/(expense), net           |   |                        | (6  | )                         |   |           | 2     |      |   |           | (732  | ) |   |           | 13    |  
|                                                              | Other income/(expense), net              |   |                        | (76 | )                         |   |           | (4    | )    |   |           | (76   | ) |   |           | (4    | )
|                                                              |                                          |   |                        |     |                           |   |           |       |      |   |           |       |   |   |           |      
|Net loss before income tax                                    |                                          |   | (1,464                 | )   |                           |   | (1,848    | )     |      |   | (3,584    | )     |   |   | (3,275    | )    
|Income Tax                                                    |                                          |   |                       |     |                           |   |          |       |      |   | (2        | )     |   |   | (2        | )    
|                                                              |                                          |   |                        |     |                           |   |           |       |      |   |           |       |   |   |           |      
|Net loss before cumulative effect of
accounting change        |                                          |   | (1,464                 | )   |                           |   | (1,848    | )     |      |   | (3,586    | )     |   |   | (3,277    | )    
|Cumulative effect of change in
accounting principle (FAS 142) |                                          |   |                       |     |                           |   |          |       |      |   |          |       |   |   | (11,500   | )    
|                                                              |                                          |   |                        |     |                           |   |           |       |      |   |           |       |   |   |           |      
|Net loss before income tax                                    |                                          | $ | (1,464                 | )   |                           | $ | (1,848    | )     |      | $ | (3,586    | )     |   | $ | (14,777   | )    
|                                                              |                                          |   |                        |     |                           |   |           |       |      |   |           |       |   |   |           |      
|Basic and diluted loss per common share                       |                                          | $ | (0.44                  | )   |                           | $ | (0.80     | )     |      | $ | (1.18     | )     |   | $ | (6.38     | )    
|Weighted average common shares
outstanding                    |                                          |   | 3,356,330              |     |                           |   | 2,316,846 |       |      |   | 3,042,016 |       |   |   | 2,316,846 |      

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MakeMusic! Inc.
Consolidated Statements of Cash Flows(In thousands of U.S. dollars)
(Unaudited)

|                                                                            |                                                         |                                           |        |                           |      |      |         |        |      |  
|--------------------------------------------------------------------------- | ------------------------------------------------------- | ----------------------------------------- | ------ | ------------------------- | ---- | ---- | ------- | ------ | ---- | -
|                                                                            |                                                         |                                           |        | Six months ended June 30,
|                                                                            |                                                         |                                           |        |                          
|                                                                            |                                                         |                                           |        | 2003                      |      | 2002
|                                                                            |                                                         |                                           |        |                           |      |     
|Operating activities                                                        |                                                         |                                           |        |                           |      |      |         |       
|Net loss                                                                    |                                                         | $                                         | (3,586 | )                         |      | $    | (14,777 | )     
|Adjustments to reconcile net loss to net cash used in
operating activities: |                                                         |                                           |        |                           |      |      |         |       
|                                                                            | Amortization of intangible assets                       |                                           |        | 647                       |      |      |         | 798    |     
|                                                                            | Depreciation and amortization of property and equipment |                                           |        | 242                       |      |      |         | 342    |     
|                                                                            | Amortization of deferred compensation                   |                                           |        | 80                        |      |      |         | 82     |     
|                                                                            | Impairment of goodwill                                  |                                           |        |                          |      |      |         | 11,500 |     
|                                                                            | Interest on bridge loan and discount                    |                                           |        | 718                       |      |      |         |       |     
|                                                                            | Issuance of stock options and warrants for services     |                                           |        | 2                         |      |      |         | 7      |     
|                                                                            | Foreign currency translation loss recorded              |                                           |        | 145                       |      |      |         |       |     
|                                                                            | Increase (decrease) in cash from:                       |                                           |        |                           |      |      |         |        |     
|                                                                            |                                                         | Accounts receivable                       |        |                           | 52   |      |         |        | 521  |  
|                                                                            |                                                         | Inventories                               |        |                           | 24   |      |         |        | (98  | )
|                                                                            |                                                         | Prepaid expenses and other current assets |        |                           | 34   |      |         |        | 144  |  
|                                                                            |                                                         | Accounts payable                          |        |                           | (393 | )    |         |        | (292 | )
|                                                                            |                                                         | Accrued liabilities and product returns   |        |                           | 9    |      |         |        | 19   |  
|                                                                            |                                                         | Restructuring                             |        |                           | (141 | )    |         |        | (110 | )
|                                                                            |                                                         | Deferred revenue                          |        |                           | 190  |      |         |        | 65   |  
|                                                                            |                                                         |                                           |        |                           |      |      |         |       
|Net cash used in operating activities                                       |                                                         |                                           | (1,977 | )                         |      |      | (1,799  | )     
|Net cash used by investing activities                                       |                                                         |                                           |        |                           |      |      |         |       
|Purchases of property and equipment                                         |                                                         |                                           | (67    | )                         |      |      | (147    | )     
|Capitalized development and other intangible assets                         |                                                         |                                           | (74    | )                         |      |      | (66     | )     
|                                                                            |                                                         |                                           |        |                           |      |      |         |       
|Net cash used in investing activities                                       |                                                         |                                           | (141   | )                         |      |      | (213    | )     
|Net cash provided (used) by financing activities                            |                                                         |                                           |        |                           |      |      |         |       
|Issuance of shares                                                          |                                                         |                                           | 2,120  |                           |      |      | (3      | )     
|Collections of notes receivables from issuance of shares                    |                                                         |                                           |       |                           |      |      | 52      |       
|Payments on revolving note payable, net                                     |                                                         |                                           | 22     |                           |      |      | -       |       
|Increase in long-term debt and capital leases                               |                                                         |                                           | 14     |                           |      |      | 41      |       
|Payments on long-term debt and capital leases                               |                                                         |                                           | (9     | )                         |      |      | (136    | )     
|                                                                            |                                                         |                                           |        |                           |      |      |         |       
|Net cash provided (used) by financing activities                            |                                                         |                                           | 2,147  |                           |      |      | (46     | )     
|Effect of exchange rate changes on cash                                     |                                                         |                                           |       |                           |      |      | 44      |       
|                                                                            |                                                         |                                           |        |                           |      |      |         |       
|Net increase (decrease) in cash and cash equivalents                        |                                                         |                                           | 29     |                           |      |      | (2,014  | )     
|Cash and cash equivalents, beginning of period                              |                                                         |                                           | 1,469  |                           |      |      | 3,258   |       
|                                                                            |                                                         |                                           |        |                           |      |      |         |       
|Cash and cash equivalents, end of period                                    |                                                         | $                                         | 1,498  |                           |      | $    | 1,244   |       
|                                                                            |                                                         |                                           |        |                           |      |      |         |       
|Supplemental disclosure of cash flow information                            |                                                         |                                           |        |                           |      |      |         |       
|Interest paid                                                               |                                                         | $                                         | 23     |                           |      | $    | 5       |       
|                                                                            |                                                         |                                           |        |                           |      |      |         |       

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MakeMusic! Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)



|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 six months ended June 30, 2003 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.                          
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|       |  | Certain amounts as presented in the 2002 financial statements, as
previously reported, have been reclassified to conform to the 2003
presentation.                                                                                                                                                                                                                                                                                                                                                                      
|      
|Note 2 |  | Impairment of Long Lived Assets.In September 2001, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standard No. 142, Goodwill and Other Intangible Assets (FAS 142),
effective for the first quarter of fiscal years beginning after December
15, 2001. Under FAS 142, goodwill and intangible assets deemed to have
indefinite lives are not amortized but will be subject to annual
impairment tests. Other intangible assets will continue to be amortized
over their useful lives.
|      
|       |  | In the first quarter of 2002, the Company completed its analysis of the
required transitional impairment test for goodwill upon adoption of FAS
142 and recorded an $11,500,000 goodwill impairment in the income
statement in the Cumulative effect of change in accounting principle.
In the fourth quarter of 2002, the Company performed its annual
impairment analysis of goodwill and recorded an impairment of $2,200,000
to 2002 operating income.                                                            
|      
|Note 3 |  | Restructuring Charges.In the fourth quarter 2002, the Company
announced plans to restructure its French operations by reducing
and moving the SmartMusic® website and administrative functions to
its Minneapolis location. A charge of $174,000 was booked to
accrued expenses for the restructuring in the quarter ended
December 31, 2002.                                                                                                                                                                           
|      
|       |  | The following table displays a roll-forward of the liabilities for
restructuring charges between December 31, 2002 and June 30, 2003.                                                                                                                                                                                                                                                                                                                                                                                   

|                                         |  |              |         |       |  |      |         |          |  |   |       | 
|---------------------------------------- |  | ------------ | ------- | ----- |  | ---- | ------- | -------- |  | - | ----- | 
|                                         |  | December 31, |         |       |  |      |         | June 30,
|                                         |  | 2002         |         | Usage |  | 2003
|                                         |  |              |         |       |  |     
|Non-Cash Items:                          |  |              |         |       |  |      |         |          |  |   |       | 
|Fixed asset write-off                    |  | $            | 23,500  |       |  | $    | 23,500  |          |  | $ |      | 
|Cash Items:                              |  |              |         |       |  |      |         |          |  |   |       | 
|Severance and related personnel expenses |  |              | 127,000 |       |  |      | 127,000 |          |  |   |      | 
|Legal and accounting                     |  |              | 23,500  |       |  |      | 17,800  |          |  |   | 5,700 | 
|                                         |  |              |         |       |  |      |         |          |  |   |       | 
|Total                                    |  | $            | 174,000 |       |  | $    | 168,300 |          |  | $ | 5,700 | 
|                                         |  |              |         |       |  |      |         |          |  |   |       | 

6



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|Note 4 |  | Revolving Note Payable.On August 5, 2002, the Company signed an
agreement for a one-year asset-based discretionary revolving note
of $500,000. The agreement allows the Company an advance of 75% of
domestic accounts receivable at an interest rate of prime + 4.75%
with a minimum interest charge of $3,000 per month with payments on
advanced receivables deposited directly to pay off the loan. As of
June 30, 2003, the balance of the advance was $111,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|Note 5 |  | Private Financing.On March 3, 2003, the Company announced that it
had completed a private placement of $3,015,000, which was approved
by shareholders on February 24, 2003. Of this amount, $750,000
represented proceeds received upon the sale of convertible bridge
loans on September 30, 2002. According to the bridge loan
agreement, holders of bridge loans were entitled to receive: (i)
warrants (Original Warrants) to purchase one additional share of
common stock for each converted share for $0.10 if a private
placement of at least $1.0 million was not completed by March 31,
2003; or (ii) warrants to purchase one additional share of common
stock for each converted share for $0.50 per share if the requisite
private placement was completed prior to March 31, 2003. In 2002,
the value attributed to the Original Warrants was recorded as a
debt discount and additional paid-in capital. For the year ended
December 31, 2002, interest expense of $44,000 was recorded as a
result of the value attributed to the Original Warrants.
|      
|       |  | Upon completion of the private placement, and concurrent bridge
loan conversion into 325,260 shares of common stock, the Company
issued warrants (Conversion Warrants) to holders of bridge loans
to purchase 325,260 shares of common stock for $0.50 per share.
These events resulted in $706,000 of interest expense being
recorded in the quarter ended March 31, 2003. Of this amount,
$356,000 was recorded to recognize the value attributed to the
Conversion Warrants upon their issuance and $350,000 was recorded
to amortize in full the discount originally recorded (and remaining
unamortized) on the bridge loan relating to their beneficial
conversion feature. An additional 49,549 warrants were issued to
an advisor who helped recruit investors for the private financing.
The warrants entitle the holder to exercise the warrants and
purchase shares of common stock for $1.90 per share at any time up
to ten years after issuance.                                                                                                      
|      
|       |  | In addition to the 325,260 shares issued to the bridge loan
holders, 707,814 shares were issued for the $2.265 million received
from investors at the full private placement price of $3.20. These
investors also received warrants to purchase 707,814 shares of
common stock for $3.20 per share. As of June 30, 2003, 3,356,330
shares of common stock were issued and outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|      
|Note 6 |  | Income Tax Benefit.Due to the uncertainty regarding the
realization of our federal deferred income tax assets and
specifically our net operating loss carry-forwards, we have
recorded a valuation allowance against our income tax benefit for
2002 and 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      
|Note 7 |  | Comprehensive Income (Loss).Effective April 30, 2003, the Company
completed its closing and liquidation of the France operations. As
of the effective date, accumulated comprehensive income
attributable to adjustments resulting from translation of the
France subsidiarys financial statements from its functional
currency to the Companys reporting currency was written off and a
$73,000 loss on liquidation of subsidiary was recorded. All future
translation effects on cash associated with these assets and
liabilities will be recorded as an operating expense.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

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|Note 8 |  | Common Stock and Loss Per Common Share.On January 16, 2003, the
Companys Board of Directors authorized and implemented a reverse stock split
(the Reverse Split) of MakeMusics issued, outstanding and authorized shares
of common stock at a ratio of one-for-ten. As a result of the Reverse Split,
one new share of common stock was deemed issued for every ten shares of common
stock held by stockholders of record as of January 16, 2003. All share and per
share amounts in the accompanying financial statements have been restated to
reflect the Reverse Split. Both basic and diluted net loss per share were
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.
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|Note 9 |  | Stock Options and Warrants.The Company accounts for
stock options under Accounting Principles Board
Opinion No. 25, under which the excess, if any, of
the quoted market price at the date of grant over the
amount an employee must pay to acquire the stock is
recognized as compensation expense. The following
table displays pro forma net income and earnings per
share as if the fair value based method of accounting
had been applied, as required by Statement of
Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensationand Statement of
Accounting Standards No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure:                                                                                                                                                    

|                                  |                                          |  |                                       |        |      |  |   |         |  
|--------------------------------- | ---------------------------------------- |  | ------------------------------------- | ------ | ---- |  | - | ------- | -
|                                  |                                          |  | Six Months Ended June 30,            
|                                  |                                          |  |                                      
|                                  |                                          |  | 2003                                  |        | 2002
|                                  |                                          |  |                                       |        |     
|                                  |                                          |  | (In thousands,
except per share data)
|Net loss:                         |                                          |  |                                       |        |      |  |   |        
|                                  | Net loss as reported                     |  | $                                     | (3,586 | )    |  | $ | (14,777 | )
|                                  | Stock compensation recorded under APB 25 |  |                                       | 81     |      |  |   | 86      |  
|                                  | Stock compensation under FAS 123         |  |                                       | (220   | )    |  |   | (261    | )
|                                  |                                          |  |                                       |        |      |  |   |        
|                                  | Pro forma net loss                       |  | $                                     | (3,725 | )    |  | $ | (14,952 | )
|                                  |                                          |  |                                       |        |      |  |   |        
|Basic and diluted loss per share: |                                          |  |                                       |        |      |  |   |        
|                                  | As reported                              |  | $                                     | (1.18  | )    |  | $ | (6.38   | )
|                                  | Pro forma                                |  | $                                     | (1.22  | )    |  | $ | (6.45   | )



|Note 10 |  | Subsequent Event.Effective July 17, 2003, the Company entered into
a loan and investment agreement whereby, effective September 1, 2003, it
can borrow from $500,000 to $1,000,000 with a maturity date on December
15, 2003. The Company may not prepay the note prior to its scheduled
maturity. Interest will accrue at an annual rate of twenty percent
calculated on a 360-day year and be payable in the form of warrants with
an expiration date of March 1, 2005 and an exercise price of $2.30. The
number of interest warrants to be issued is to be calculated based on a
valuation using Black Scholes. The Note shall be secured by the issuance
to the Investor of a security warrant with an exercise price of $2.27 and
a ten-year life. The number of security warrants to be issued is to be
calculated based on a valuation using Black Scholes. These warrants shall
not become exercisable unless and until an event of default occurs.
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- |  | -------------------------------------------------------------------------------------

General

MakeMusic! Inc. (MakeMusic! or the Company), a Minnesota corporation,
believes it is a world leader in music education technology whose mission is to
enhance and transform the experience of making, teaching and learning music.
Among its leading products are Finale®, one of the worlds best-selling music
notation software, and SmartMusic®, a complete music practice system that
features Intelligent Accompaniment® and one of the worlds largest interactive
accompaniment libraries.

The Company has incurred losses from operations since inception and has an
accumulated deficit of $54,463,000 as of June 30, 2003.

In our Form 10KSB filed with the Securities and Exchange Commission for
the year ended December 31, 2002, we identified critical accounting policies
and estimates for our business.

Results of operations

For the periods ended June 30, 2003 compared to the periods ended June 30, 2002

Net Revenues.Net revenues of $1,378,000 for the quarter ended June 30,
2003 were $39,000, or 2.8%, lower than the quarter ended June 30, 2002. Net
revenues of $3,035,000 for the six months ended June 30, 2003 were $323,000 or
9.6% lower than for the six months ended June 30, 2002. Sales of products from
our Finale notation family of products for the second quarter 2003 were
$103,000, or 7.9%, lower than the second quarter 2002. For the six months
ended June 30, 2003, Finale notation product sales were $425,000, or 13.7%,
lower than the same period in 2002. The decrease in sales for the six-month
period ended June 30, 2003 compared to the prior period is primarily related to
the original release date of the annual Finale upgrade. The 2004 Finale
upgrade version has not been released compared to a June 2002 release for the
2003 version. Finale sales customarily are highest upon release of a new
version and decline throughout the year until the next release and therefore
sales in the quarter ended June 30, 2003 were lower than the prior year. The
next Finale Windows upgrade release is scheduled for August of 2003. The
decrease has been minimized due to increased upgrade campaigns to the
successful Finale 2003 product. Based on similar lengths of time in the
market, Finale 2003 is leading both Finale 2002 and the previously best-selling
Finale 2001. This overall positive life cycle result was achieved despite the
fact that Finale sales have also been negatively impacted because the Companys
Finale products are not yet compatible with the Macintosh OS X operating
system. The next Finale Macintosh upgrade release is scheduled for October
2003 and will run on a Macintosh OS X platform.

The overall decrease in notation software sales was partly offset by sales
of the SmartMusic subscription service. The SmartMusic subscription service
was launched in November 2001 for schools and June 2002 for home users.
Subscription service revenues are accounted for over the period of the
subscription. As of June 30, 2003, over 1,760 schools were subscribing to the
SmartMusic service with over 4,800 subscriptions. This is a net increase of
over 460 schools and 1,300 subscriptions since December 31, 2002 and an
increase of over 160 schools and 570 subscriptions since March 31, 2003. These
schools subscriptions correspond to recurring annual subscription revenue of
$166,000 to be recognized over the subscription period. The Companys
school-sponsored home subscription program, introduced in late October 2002,
had over 160 schools participating for a total of over 5,400 school-sponsored
home subscriptions, an
average of 33 students per school. This is an increase of approximately
110 schools and 3,450

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subscriptions since December 31, 2002 and 40 schools and
1,300 subscriptions since March 31, 2003. These school-sponsored home
subscriptions correspond to annual recurring revenue of $101,000 as of June 30,
2003. As of June 30, 2003, the Company had over 1,070 home subscribers, 530
more than at December 31, 2002 and 220 more than at March 31, 2003. The home
subscribers subscriptions correspond to recurring annual revenue of $106,000.
The total number of annual SmartMusic subscriptions as of June 30, 2003 was
over 11,300, generating an annual run rate (total revenue to be earned on
subscriptions over a twelve-month period) of $374,000 as of June 30, 2003, an
increase of 58% over the run rate as of December 31, 2002.

SmartMusic subscription revenues of $88,000 were recognized in the quarter
ended June 30, 2003, an increase of 29% over the quarter ended March 31, 2003,
a 98% increase over the quarter ended December 31, 2002, and a 744% increase
over the same quarter last year. For the six months ended June 30, 2003,
earned SmartMusic subscription revenue of $156,000 increased by 868% compared
to the six months ended June 30, 2002. In addition, deferred SmartMusic
subscription revenue, coming from annual subscription renewals and new
subscription programs, to be recognized over the balance of the current
subscription period was $200,000 as of June 30, 2003 compared to $46,000 at
June 30, 2002, an increase of $154,000, or 335%.

Gross Profit. Gross profit of $1,056,000 for the quarter ended June 30,
2003 was $3,000 or 0.3% higher than for the quarter ended June 30, 2002. Gross
profit of $2,331,000 for the six months ended June 30, 2003 was $299,000 or
11.4% lower than for the six months ended June 30, 2002. This decrease is
primarily due to the overall decrease in Finale sales mentioned above. The
lower percentage of Finale sales, a high margin product, in comparison to total
sales also caused a lower gross margin sales mix.

Selling and Marketing Expenses.Selling and marketing expenses were
$782,000 for the second quarter ended June 30, 2003, a 16.9% decrease from
selling and marketing expenses of $941,000 for the quarter ended June 30, 2002.
Selling and marketing expenses were $1,823,000 for the first six months of
2003, a 5.3% decrease from selling and marketing expenses of $1,925,000 for the
six months ended June 30, 2002. These decreases in comparison to prior periods
are primarily due to last years increased expenditures relating to marketing
campaigns for the June 2002 release of Finale 2003. However, the lower
Notation family selling and marketing expenditures in 2003 compared to 2002 are
partially offset by increased international marketing costs. Direct sales,
marketing, and technical support costs in 2003 for the SmartMusic subscription
product are also higher than in 2002.

Website Development Expenses.Website development expenses were $141,000
for the quarter ended June 30, 2003, a 45.1% decrease from website development
expense of $257,000 for the quarter ended June 30, 2002. For the six months
ended June 30, 2003, website development expenses of $209,000 were $327,000 or
61% lower than for the six months ended June 30, 2002. Website development
expenses consist primarily of expenses related to improvement of the design and
development of additional features for the MakeMusic!, Finale, and SmartMusic
websites and other underlying technology infrastructure. Personnel resources
have been reduced due to the closing of the Companys France operations and
consolidation of the SmartMusic® website and administrative functions in its
Minneapolis location. The Company plans to continue to refine the SmartMusic
subscription Internet distribution model and these expenses may increase as
Minneapolis resources are added.

Content and Product Development Expenses.Content and product development
expenses of $535,000 for the quarter ended June 30, 2003 were $62,000 or 10.4%
lower than for the quarter ended June 30, 2002. For the six months ended June
30, 2003, content and product

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development expenses of $1,091,000 were $54,000
or 4.7% lower than for the six months ended June 30, 2002. The decreases from
prior periods are due primarily to the closing of the Companys France
operations and elimination of the digital sheet music product. Content and
product development consists primarily of internal payroll and payments to
third parties for the development and ongoing maintenance of Finale notation
products, SmartMusic software, and SmartMusic accompaniments. The Company
continues to develop upgrades of the Finale product on a regular basis for the
Macintosh and Windows platforms.

General and Administrative Expenses.General and administrative expenses
were $980,000 for the second quarter ended June 30, 2003, a $124,000 or 11.2%
decrease from the second quarter ended June 30, 2002. General and
administrative expenses of $1,984,000 for the six months ended June 30, 2003
decreased $324,000 or 14% from the six months ended June 30, 2002. General and
administrative expenses consist primarily of payroll and related expenses for
executive and administrative personnel, professional services expenses relating
to financing activities, amortization of certain intangible assets with
definite lives, and other general corporate expenses. The decrease primarily
relates to actual expense reductions as a result of the closing of the
Companys France operations. Related restructuring costs were accrued in the
fourth quarter of the prior fiscal year. Other expense reductions compared to
prior periods include lower professional fees, lower hardware and software
expenses, and lower amortization of intangibles due to the write-off of the
employee workforce asset in the fourth quarter of 2002.

Interest Expense, Net.The Company had interest expense of $6,000, net of
$4,000 interest income for the quarter ended June 30, 2003. For the six months
ended June 30, 2003 the Company had interest expense of $732,000, net of $8,000
interest income. The majority of the interest expense was a non-cash charge
for warrants and beneficial conversion features of the bridge loan debt that
was converted to equity upon the private placement financing completed in the
quarter ended March 31, 2003 (see Note 5 to the financial statements). The
Company also records monthly interest expense relating to the revolving note
payable (see Note 4 to the financial statements).

Net Loss from Operations. The Company recorded a net loss from operations
of $1,382,000 for the quarter ended June 30, 2003, compared with a net loss of
$1,846,000 for the quarter ended June 30, 2002. For the six months ended June
30, 2003, the Company recorded a net loss from operations of $2,776,000
compared to a net loss from operations of $3,284,000 for the same period last
year. For the quarter, while gross profit remained flat, operating expenses
have been reduced by $461,000 compared to the same period last year. For the
six months ended June 30, 2003, lower gross profit of $299,000 was offset by a
reduction in operating expenses of $807,000.

Cumulative Effect of Accounting Principle. The Company recorded in the
first quarter 2002 a charge of $11,5000,000 related to the cumulative effect of
change in accounting principle relating to the impairment of goodwill recorded
from the reverse merger of Coda and Net4Music on October 19, 2000 (See Note 2).

Net Loss. The Company recorded a net loss of $1,464,000 or $0.44 per basic
and diluted share for the quarter ended June 30, 2003 compared to a net loss of
$1,848,000 or $0.80 per basic and diluted share for the quarter ended June 30,
2002. For the six months ended June 30, 2003, the Company recorded a net loss
of $3,586,000 or $1.18 per basic and diluted share as compared to a net loss of
$14,777,000 or $6.38 basic and diluted share for the same period last
year. In addition to the Companys decrease in operating expenses, the
decrease in net loss is primarily attributed to the non-recurrence of the
cumulative effect of the change in accounting principle described above. The
weighted average common shares for the quarter ended June 30, 2003 also

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increased by 1,039,484 shares, or 45%, compared to the quarter ended June 30,
2002 due to the bridge loan and private placement equity conversion described
in Note 5 of the Consolidated Financial Statements.

Liquidity and Capital Resources.Net cash used in operating activities
totaled $1,977,000 for the six months ended June 30, 2003 as compared to
$1,799,000 of cash used for operating activities in the six months ending June
30, 2002. While net loss from operations for the period is smaller in 2003
compared to 2002 due to the expense reductions noted above, the increase in
cash used for operating activities can be attributed to pay-downs of accounts
payable and accrued expenses and the timing of accounts receivable collections.
The primary reduction in accrued expenses related to payment of France accrued
restructuring costs, timing of audit fees, and payout of France unused vacation
and taxes triggered by staff reductions. Accounts receivable decreased by
$50,000 during the six months ended June 30, 2003, compared to a $521,000
decrease in the prior period; timing between sales and collections has remained
relatively stable since then.

Gross margins for the six months ending June 30, 2003 are slightly lower
compared to the same period last year due to sales mix. However, positive cash
flow from a net decrease in inventories of $24,000 was realized for the six
months ending June 30, 2003 compared to the expenditures of $98,000 for the
same period last year, when inventory was purchased for the release of Finale
2003. Also, deferred revenue for the six months ending June 30, 2003 increased
by $125,000 compared to the same period last year.

In total, Company cash increased by $29,000 for the six months ending June
30, 2003 primarily due to the private placement financing completed in February
2003. The financing yielded $2,120,000 in cash, net of related costs, in
addition to the bridge loan money that was received in 2002. Actual operating
cash usage is typically highest in the first and second quarters, with the
third quarter using the least cash or producing positive cash flow. These
fluctuations are created by the Finale notation product release cycle and the
cyclical impact of sales to schools as a result of the school year calendar.

The Company has continued to experience operating losses and a resulting
reduction in cash resources. The later Finale release will cause a reduction
in cash resources, which may require the Company, as a precautionary measure, to
utilize a short-term loan of $500,000  $1,000,000 available September 1, 2003,
that will have a maturity date of December 15, 2003 and be collateralized by
warrants which have an exercise price of $2.27 (see Note 10). At this time,
the Company does not expect to utilize a significant portion of this loan and
believes it will be able to pay back all outstanding borrowings from the loan
on the maturity date. Depending on the results of the new Finale upgrade
releases currently scheduled for the third quarter and October and the results
of SmartMusic sales during the back-to-school season, the Company may require
additional financing in 2004. If necessary for 2004 operations, management may
seek an additional short-term loan or additional equity financing or further
reduce expenses to provide cash resources until achieving positive cash flow.
Management expects to achieve positive cash flow in 2004 based on continued
growth of SmartMusic and Finale.

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|ITEM 3. |  | CONTROLS AND PROCEDURES
|------- |  | -----------------------

(a)  Evaluation of disclosure controls and procedures. After evaluating the
effectiveness of the Companys disclosure controls and procedures (as defined
in the Securities Exchange Act of 1934 (Exchange Act) Rules 13a-15(e) and
15d-15(e)) as of the end of the period covered by this quarterly report, our
chief executive officer and chief financial officer, with the participation of
the Companys management, have concluded that the Companys disclosure controls
and procedures are effective to ensure that information that is required to be
disclosed by the Company in reports that it files under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the rules of the Securities Exchange Commission.

(b)  Changes in internal controls. There were no changes in our internal
controls over financial reporting that occurred during the period covered by
this report that have materially affected, or are reasonably likely to
materially affect, the Companys internal control over financial reporting.

Cautionary Statements

This report 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, and similar words or expressions. Our
forward-looking statements in this release generally relate to our growth
strategy and expectations, our business goals, the future of the SmartMusic
Studio program, release of annual Finale upgrades, sufficiency of and ability
to obtain additional capital, product development, market introductions, 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. We caution 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
us or on our behalf. These factors include, but are not limited to, our need
for and ability to obtain additional capital; the market acceptance of our
products; our dependence upon new product development effort; our dependence on
releasing annual Finale upgrades; the success of our Internet business;
maintaining license agreements with a limited number of publishers; the limited
and fluctuating sales of certain of our products; the intense competition we
face; the rapid technological changes and obsolescence in our industry; the
changing governmental regulation we may face; the risks of doing business
internationally; our dependence on key personnel and the proprietary nature of
our technology; our expected continuing operating losses; the market volatility
of our stock; potential market delisting; other general business and economic
conditions; and those risks described from time to time in our reports to the
Securities and Exchange Commission (including our 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. We undertake no obligation to update publicly or revise
any forward-looking statements.

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|PART 2. |  | OTHER INFORMATION
|------- |  | -----------------






|Item 4. |  | Submission of Matters to a Vote of Security Holders:
|------- |  | ----------------------------------------------------



| | (a) |  | The annual meeting of the companys shareholders was
held on Wednesday, May 21, 2003.                                                                                                                                                                                                                        
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | At the annual meeting, a proposal to set the number of
directors at seven (7) was adopted by a vote of 2,365,299 shares
in favor, with 111,868 shares opposed and 6,264 shares
abstaining.                                                                                                                   
|
| | (c) |  | Proxies for the annual meeting were solicited pursuant
to Regulation 14A under the Securities Exchange Act of 1934. The
following persons were elected directors of the Company to serve
until the next annual meeting of shareholders and until their
successors shall have been duly elected and qualified:

|                    |  |           |           |                |  |  |        | 
|------------------- |  | --------- | --------- | -------------- |  |  | ------ | 
|                    |  | Number of |           | Number of     
|Nominee             |  | Votes For |           | Votes Withheld
|                    |  |           |           |               
|Philip Sean Lafleur |  |           | 2,393,616 |                |  |  | 89,815 | 
|John W. Paulson     |  |           | 2,393,762 |                |  |  | 89,669 | 
|Philippe Aubert     |  |           | 2,386,656 |                |  |  | 96,775 | 
|Timothy Bajarin     |  |           | 2,393,716 |                |  |  | 89,715 | 
|François Duliège    |  |           | 2,386,817 |                |  |  | 96,614 | 
|Martin Velasco      |  |           | 2,392,413 |                |  |  | 91,018 | 
|Benson K. Whitney   |  |           | 2,392,527 |                |  |  | 90,904 | 



| | (d) |  | At the annual meeting the shareholders approved the
MakeMusic! Inc. 2003 Equity Incentive Plan by a vote of 1,797,224
shares in favor, with 161,521 shares against, 2,425 shares
abstaining and 522,261 shares represented by broker nonvotes.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------






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



| |  |  | (a) Exhibits:See the attached Exhibit Index following signature
page.                                                                                   
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | (b) Reports on Form 8-K:On May 16, 2003, a Form 8-K was filed
issuing a press release dated May 13, 2003 announcing its first
quarter financial results.

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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 August 13, 2003 |  | MAKEMUSIC INC.
|                     |  |                |  |                                             
|                     |  |                |  |                                             
|                     |  | By:            |  | /s/ Philip Sean Lafleur                     
|                     |  |                |  |                                             
|                     |  |                |  | Philip Sean Lafleur, Chief Executive Officer
|                     |  |                |  |                                             
|                     |  |                |  |                                             
|                     |  | And:           |  | /s/ Barbara S. Remley                       
|                     |  |                |  |                                             
|                     |  |                |  | Barbara S. Remley, Chief Financial Officer  

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EXHIBIT INDEX

Form 10-QSB

Quarter ended June 30, 2003

|            |  |                                                                                                    
|----------- |  | ---------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                        
|            |  |                                                                                                    
|31.1        |  | 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.

16