##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 For the transition period from to
 0-26192
(Commission file number)
 MAKEMUSIC, INC.
  Minnesota
    
    41-1716250(State or Other Jurisdiction of 
Incorporation or Organization)
    
    (I.R.S. Employer
Identification No.)
 
 
 
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company þ
 o þ




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##### 



MakeMusic, Inc.
 INDEX
 Page No.PART I. FINANCIAL INFORMATIONItem 1 Condensed Financial Statements
    
    
    3Condensed Balance Sheets
June 30, 2008 and December 31, 2007
    
    
    3Condensed Statement of Operations
Three and six-month periods ended June 30, 2008 and 2007
    
    
    4Condensed Statements of Cash Flows
Six-month period ended June 30, 2008 and 2007
    
    
    5Notes to Condensed Financial Statements
    
    
    6Item 2 Managements Discussion and Analysis or Plan of Operation
    
    
    9Item 4T Controls and Procedures
    
    
    14PART II. OTHER INFORMATIONItem 1 Legal Proceedings
    
    
    15Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    15Item 3 Defaults Upon Senior Securities
    
    
    15Item 4 Submission of Matters to a Vote of Security Holders
    
    
    15Item 5 Other Information
    
    
    15Item 6 Exhibits
    
    
    15Signatures
    
    
    16Exhibit Index
    
    
    17EX-31.1EX-31.2EX-31.3EX-32.1EX-32.2EX-32.3
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PART I. FINANCIAL INFORMATION
 
 Item 1. Condensed Financial Statements.
 MakeMusic, Inc.
 
 Condensed Balance Sheets  (In thousands of U.S. dollars, except share data)
 June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    4,746
    
    
    $
    6,041Accounts receivable (net of allowance of $37 and $38 in
2008 and 2007, respectively)
    
    
    1,055
    
    
    
    1,491Inventories
    
    
    451
    
    
    
    332Prepaid expenses and other current assets
    
    
    294
    
    
    
    211Total current assets
    
    
    6,546
    
    
    
    8,075Property and equipment, net
    
    
    815
    
    
    
    730Capitalized software development costs, net
    
    
    2,209
    
    
    
    1,418Goodwill
    
    
    3,630
    
    
    
    3,630Other non-current assets
    
    
    18
    
    
    
    29Total assets
    
    
    13,218
    
    
    
    13,882Liabilities and Shareholders EquityCurrent liabilities:Current portion of capital lease obligations
    
    
    59
    
    
    
    57Accounts payable
    
    
    413
    
    
    
    427Accrued compensation
    
    
    1,089
    
    
    
    1,131Other accrued liabilities
    
    
    180
    
    
    
    184Post contract support
    
    
    169
    
    
    
    169Reserve for product returns
    
    
    469
    
    
    
    365Current portion of deferred rent
    
    
    27
    
    
    
    26Deferred revenue
    
    
    1,467
    
    
    
    1,702Total current liabilities
    
    
    3,873
    
    
    
    4,061Capital lease obligations, net of current portion
    
    
    102
    
    
    
    132Deferred rent, net of current portion
    
    
    55
    
    
    
    69Shareholders equity:Common stock, $0.01 par value:Authorized shares  10,000,000
      Issued and outstanding shares  4,634,529 and 4,517,803
in 2008 and 2007, respectively
    
    
    46
    
    
    
    45Additional paid-in capital
    
    
    65,544
    
    
    
    65,017Accumulated deficit
    
    
    (56,402
    )
    
    
    (55,442
    )Total shareholders equity
    
    
    9,188
    
    
    
    9,620Total liabilities and shareholders equity
    
    $
    13,218
    
    
    $
    13,882
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MakeMusic, Inc.
 
 Condensed Statements of Operations  (In thousands of U.S. dollars, except share and per share data)
 3 Months
    
    
    6 MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Notation revenue
    
    $
    1,625
    
    
    $
    1,748
    
    
    $
    4,182
    
    
    $
    4,302SmartMusic revenue
    
    
    859
    
    
    
    571
    
    
    
    1,740
    
    
    
    1,158Other revenue
    
    
    117
    
    
    
    84
    
    
    
    301
    
    
    
    214NET REVENUE
    
    
    2,601
    
    
    
    2,403
    
    
    
    6,223
    
    
    
    5,674COST OF REVENUES
    
    
    442
    
    
    
    410
    
    
    
    949
    
    
    
    807GROSS PROFIT
    
    
    2,159
    
    
    
    1,993
    
    
    
    5,274
    
    
    
    4,867OPERATING EXPENSES:Development expenses
    
    
    1,171
    
    
    
    1,026
    
    
    
    2,284
    
    
    
    2,004Selling and marketing expenses
    
    
    965
    
    
    
    871
    
    
    
    2,140
    
    
    
    1,961General and administrative expenses
    
    
    855
    
    
    
    826
    
    
    
    1,840
    
    
    
    1,827Total operating expenses
    
    
    2,991
    
    
    
    2,723
    
    
    
    6,264
    
    
    
    5,792LOSS FROM OPERATIONS
    
    
    (832
    )
    
    
    (730
    )
    
    
    (990
    )
    
    
    (925
    )Other, net
    
    
    27
    
    
    
    25
    
    
    
    36
    
    
    
    57Net loss before income tax
    
    
    (805
    )
    
    
    (705
    )
    
    
    (954
    )
    
    
    (868
    )Income tax expense
    
    
    6
    
    
    
    0
    
    
    
    6
    
    
    
    1Net loss
    
    $
    (811
    )
    
    $
    (705
    )
    
    $
    (960
    )
    
    $
    (869
    )Loss per common share:Basic
    
    
    (0.17
    )
    
    
    (0.17
    )
    
    
    (0.21
    )
    
    
    (0.22
    )Diluted
    
    
    (0.17
    )
    
    
    (0.17
    )
    
    
    (0.21
    )
    
    
    (0.22
    )Weighted average common shares outstanding:Basic
    
    
    4,634,529
    
    
    
    4,109,392
    
    
    
    4,605,993
    
    
    
    4,074,962Diluted
    
    
    4,634,529
    
    
    
    4,109,392
    
    
    
    4,605,993
    
    
    
    4,074,962
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MakeMusic, Inc.
 
 Condensed Statements of Cash Flows  (In thousands of U.S. dollars)
 6 MonthsEnded June 30,2008
    
    
    2007Cash flows from operating activitiesNet loss
    
    $
    (960
    )
    
    $
    (869
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    404
    
    
    
    289Stock based compensation
    
    
    231
    
    
    
    161Net change in assets and liabilities:Accounts receivable
    
    
    436
    
    
    
    707Inventories
    
    
    (119
    )
    
    
    (51
    )Prepaid expenses and other current assets
    
    
    (76
    )
    
    
    97Accounts payable
    
    
    (14
    )
    
    
    (277
    )Accrued liabilities and product returns
    
    
    45
    
    
    
    (189
    )Deferred revenue
    
    
    (235
    )
    
    
    1Net cash used in operating activities
    
    
    (288
    )
    
    
    (131
    )Cash flows from investing activitiesPurchases of property and equipment
    
    
    (279
    )
    
    
    (107
    )Capitalized software development and other intangibles
    
    
    (997
    )
    
    
    (305
    )Net cash used in investing activities
    
    
    (1,276
    )
    
    
    (412
    )Cash flows from financing activitiesProceeds from stock options and warrants exercised
    
    
    297
    
    
    
    509Payments on capital leases
    
    
    (28
    )
    
    
    (12
    )Net cash provided by financing activities
    
    
    269
    
    
    
    497Net decrease in cash and cash equivalents
    
    
    (1,295
    )
    
    
    (46
    )Cash and cash equivalents, beginning of period
    
    
    6,041
    
    
    
    3,130Cash and cash equivalents, end of period
    
    $
    4,746
    
    
    $
    3,084Supplemental disclosure of cash flow informationInterest paid
    
    $
    7
    
    
    $
    8Income taxes paid
    
    
    6
    
    
    
    0Other non-cash investment and financing activitiesEquipment acquired under capital lease
    
    
    0
    
    
    
    203
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MakeMusic, Inc.
 
 Notes to Condensed Financial Statements
 Note 1
    
    Accounting Policies.The information
furnished in this report is unaudited but reflects all adjustments
that are necessary, in the opinion of management, for a fair
statement of the results for the interim period. The operating
results for three-month and six-month periods ended June 30, 2008
are not necessarily indicative of the operating results to be
expected for the full fiscal year. These statements should be read
in conjunction with our most recent Annual Report on Form 10-KSB.
 Note 2
    
    Net Loss Per Share.Net loss per share was calculated by dividing
the net loss by the weighted average number of shares outstanding
during the period. The following table summarizes the shares of
stock included in calculating earnings per share for the
three-month and six-month periods ended June 30, 2008 and 2007 in
accordance with FASB Statement 128 (SFAS 128), Earnings per
Share:
 Three Months Ended
    
    Six Months EndedJune 30
    
    June 302008
    
    2007
    
    2008
    
    2007Weighted-average
common shares
outstanding
    
    
    4,634,529
    
    
    
    4,109,392
    
    
    
    4,605,993
    
    
    
    4,074,962Dilutive effect of
stock options and
warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equivalent average
common shares
outstanding 
diluted
    
    
    4,634,529
    
    
    
    4,109,392
    
    
    
    4,605,993
    
    
    
    4,074,962
 The effect of options and warrants are excluded for the three-month and six-month periods
ended June 30, 2008 and 2007 because the effect is anti-dilutive.
 Note 3
    
    Income Tax Expense.We did not record a benefit for income tax in the three-month and
six-month periods ended June 30, 2008 and 2007 as the provision was offset by an increase in
the deferred tax asset valuation allowance. Due to the uncertainty regarding the realization
of our Federal deferred income tax assets and specifically the net operating loss
carry-forwards, we have recorded a valuation allowance against our deferred income tax assets
for 2008 and 2007.
 During the first quarter of 2007 we implemented FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxesan Interpretation of FASB Statement 109 (FIN 48), which
clarifies the accounting for uncertainty in tax positions. This Interpretation provides
that the tax effects from an uncertain tax position can be recognized in our financial
statements, only if the position is more likely than not of being sustained on audit,
based on the technical merits of the position. The provisions of FIN 48 were effective as
of the beginning of fiscal 2007, with the cumulative effect of the change in accounting
principle recorded as an adjustment to opening retained earnings. In the first quarter of
2007 we completed our review of uncertain tax positions and recorded a FIN 48 reserve and
corresponding reduction in our valuation allowance of approximately $2,962,000. Due to
the reduction in our valuation allowance the adoption on FIN 48 did not have an effect on
the net loss for the quarter ending March 31, 2007 and no adjustment was made to opening
retained earnings. Interest and penalties related to any uncertain tax positions would be
accounted for as a long term liability with the corresponding expense being charged to
current period non-operating expense. As of June 30, 2008 and June 30, 2007, we had
recognized no liability related to interest or penalties. The total amount of
unrecognized tax benefits that if recognized would affect our effective tax rate is zero
based on the fact that we currently have a full reserve against our unrecognized tax
benefits.
 As of June 30, 2008 the FIN 48 reserve and corresponding valuation allowance for 2003-2007
was $3,133,000. As of June 30, 2008 and June 30, 2007, there are no open positions for
which the unrecognized tax benefits will significantly increase or decrease during the
next twelve months.
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Additionally, tax years still open for examination by Federal and major state agencies as
of June 30, 2008 are 2004-2007.
 Note 4
    
    Stock-Based Compensation.We currently offer a stock-based compensation plan to our
employees, directors and consultants. These plans are administered by the Compensation
Committee of the Board of Directors, which recommends to the Board persons eligible to receive
awards and the number of shares and/or options subject to each award, the terms, conditions,
performance measures and other provisions of the award. Readers should refer to Note 5 of our
financial statements in our Annual Report on Form 10-KSB for the fiscal year ended December
31, 2007 and our 8-K filed on May 27, 2008 for additional information related to our stock
based compensation plans.
 We account for stock-based compensation arrangements with our employees and directors in
accordance with SFAS No. 123 (revised), Share-Based Payment (SFAS No. 123R). Under the
fair value recognition provisions of SFAS No. 123R we measure stock-based compensation
cost at the grant date based on the fair value of the award and recognize the compensation
expense over the requisite service period, which is generally the vesting period. For the
three months ended June 30, 2008 and 2007, we recognized $92,000 and $64,000,
respectively, and for the six months ended June 30, 2008 and 2007, we recognized $231,000
and $161,000, respectively, of expense related to stock based compensation.
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Stock Options
 We use the Black-Scholes option pricing model to estimate the fair value of stock-based
awards with the weighted average assumptions noted in the following table.
 June 30,
    
    June 30,2008
    
    2007Black-Scholes Model:Risk-free interest rate
    
    
    3.0
    %
    
    
    3.8
    %Expected life, in years
    
    
    3.5
    
    
    
    3.3Expected volatility
    
    
    67.2
    %
    
    
    87.2
    %Dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
 Expected volatility is based on the historical volatility of our share price in the period
prior to option grant equivalent to the expected life of the options. The expected term is
based on managements estimate of when the option will be exercised which is generally the
mid-point between the vesting period and the term of the option. The risk-free interest
rate for periods within the contractual life of the option is based on the U.S. Treasury
yield curve in effect at the time of grant.
 The following table represents stock option activity for the six months ended June 30, 2008:
 Weighted
    
    
    WeightedShares
    
    
    
    
    
    
    Average
    
    
    AverageReserved for
    
    
    Plan
    
    
    Exercise
    
    
    RemainingGrant
    
    
    Options
    
    
    Price
    
    
    Contract LifeOutstanding at December 31, 2007
    
    
    55,160
    
    
    
    712,768
    
    
    $
    4.34Authorized
    
    
    550,000Granted
    
    
    (36,000
    )
    
    
    36,000
    
    
    $
    10.08Expired
    
    
    
    
    
    
    (15,410
    )
    
    $
    10.93Cancelled
    
    
    
    
    
    
    
    
    
    $
    0.00Exercised
    
    
    
    
    
    
    (6,000
    )
    
    $
    3.75Outstanding at June 30, 2008
    
    
    569,160
    
    
    
    727,358
    
    
    $
    4.49
    
    
    2.8 YearsOutstanding and exercisable at June 30, 2008
    
    
    
    
    
    
    356,849
    
    
    $
    3.97
    
    
    2.2 Years
 At June 30, 2008 the aggregate intrinsic value of options outstanding was $2,414,000 and the
aggregate intrinsic value of options exercisable was $1,388,000. Total intrinsic value of
options exercised was $33,000 for the six months ended June 30, 2008.
 At June 30, 2008 there was $422,000 of unrecognized compensation cost related to nonvested
share-based payments which is expected to be recognized over a weighted-average period of
1.9 years.
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Note 5
    
    New and Pending Accounting Pronouncements.
 In September 2006, FASB issued Statement 157, Fair Value Measurements. This statement
defines fair value and establishes a framework for measuring fair value in generally
accepted accounting principles (GAAP). More precisely, this statement sets forth a standard
definition of fair value as it applies to assets or liabilities, the principal market (or
most advantageous market) for determining fair value (price), the market participants,
inputs and the application of the derived fair value to those assets and liabilities. We
adopted FASB Statement 157 during the first quarter of 2008. There has been no impact on
our financial statements as a result of adoption.
 In February 2007, FASB issued Statement 159, The Fair Value Option for Financial Assets and
Financial Liabilities. This statement allows all entities to choose, at specified election
dates, to measure eligible items at fair value. Under this option, an entity will report
unrealized gains and losses on items for which the fair value option has been elected in
earnings. This statement is effective as of the beginning of the first fiscal year which
begins after November 15, 2007. We adopted FASB Statement 159 during the first quarter of
2008 and have not elected the permitted fair value measurement provisions of this statement.
 In December 2007, the FASB issued Statement No. 141 (revised 2007), Business Combinations
(SFAS 141R), which replaces FASB Statement No. 141. SFAS 141R establishes principles and
requirements for how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any non- controlling interest in the
acquiree and the goodwill acquired. The Statement also establishes disclosure requirements
that will enable users to evaluate the nature and financial effects of the business
combination. SFAS 141R is effective as of the beginning of an entitys fiscal year beginning
January 1, 2009. We are currently evaluating the impact of adopting SFAS 141R on our
financial statements.
 In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting
Principles. SFAS No. 162 identifies the sources of accounting principles and provides
entities with a framework for selecting the principles used in preparation of financial
statements that are presented in conformity with GAAP. The current GAAP hierarchy has been
criticized because it is directed to the auditor rather than the entity, it is complex, and
it ranks FASB Statements of Financial Accounting Concepts, which are subject to the same
level of due process as FASB Statements of Financial Accounting Standards, below industry
practices that are widely recognized as generally accepted but that are not subject to due
process. The Board believes the GAAP hierarchy should be directed to entities because it is
the entity (not its auditors) that is responsible for selecting accounting principles for
financial statements that are presented in conformity with GAAP. The adoption of FASB 162 is
not expected to have any impact on our financial position.
 
 Item 2. Managements Discussion and Analysis or Plan of Operation
 Executive Overview
  
    
    Providing integrated technology, content and web services to enhance and expand how
music is taught, learned and prepared for performance.
    
    Providing music education content developers with a technology-enriched publishing
platform that leverages their copyrighted assets while simultaneously increasing the
content and value of the SmartMusic library.
    
    Offering software solutions for engraving and electronically distributing sheet
music.
 ® ®
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Results of Operations
  3 Months Ended June 30,
    
    
    6 Months Ended June 30,Incr
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Incr2008
    
    
    2007
    
    
    (Decr)
    
    
    %
    
    
    2008
    
    
    2007
    
    
    (Decr)
    
    
    %(In $ thousands)Notation revenue
    
    $
    1,625
    
    
    $
    1,748
    
    
    $
    (123
    )
    
    
    -7
    %
    
    $
    4,182
    
    
    $
    4,302
    
    
    $
    (120
    )
    
    
    -3
    %SmartMusic revenue
    
    
    859
    
    
    
    571
    
    
    
    288
    
    
    
    50
    %
    
    
    1,740
    
    
    
    1,158
    
    
    
    582
    
    
    
    50
    %Other revenue
    
    
    117
    
    
    
    84
    
    
    
    33
    
    
    
    39
    %
    
    
    301
    
    
    
    214
    
    
    
    87
    
    
    
    41
    %Net revenue
    
    
    2,601
    
    
    
    2,403
    
    
    
    198
    
    
    
    8
    %
    
    
    6,223
    
    
    
    5,674
    
    
    
    549
    
    
    
    10
    %Cost of revenues
    
    
    442
    
    
    
    410
    
    
    
    32
    
    
    
    8
    %
    
    
    949
    
    
    
    807
    
    
    
    142
    
    
    
    18
    %Gross profit
    
    
    2,159
    
    
    
    1,993
    
    
    
    166
    
    
    
    8
    %
    
    
    5,274
    
    
    
    4,867
    
    
    
    407
    
    
    
    8
    %Percentage of net sales
    
    
    83
    %
    
    
    83
    %
    
    
    
    
    
    
    
    
    
    
    85
    %
    
    
    86
    %Development expenses
    
    
    1,171
    
    
    
    1,026
    
    
    
    145
    
    
    
    14
    %
    
    
    2,284
    
    
    
    2,004
    
    
    
    280
    
    
    
    14
    %Selling and marketing
    
    
    965
    
    
    
    871
    
    
    
    94
    
    
    
    11
    %
    
    
    2,140
    
    
    
    1,961
    
    
    
    179
    
    
    
    9
    %General administrative
    
    
    855
    
    
    
    826
    
    
    
    29
    
    
    
    4
    %
    
    
    1,840
    
    
    
    1,827
    
    
    
    13
    
    
    
    1
    %Total operating expense
    
    
    2,991
    
    
    
    2,723
    
    
    
    268
    
    
    
    10
    %
    
    
    6,264
    
    
    
    5,792
    
    
    
    472
    
    
    
    8
    %Operating loss
    
    
    (832
    )
    
    
    (730
    )
    
    
    (102
    )
    
    
    -14
    %
    
    
    (990
    )
    
    
    (925
    )
    
    
    (65
    )
    
    
    7
    %Other income
    
    
    27
    
    
    
    25
    
    
    
    2
    
    
    
    8
    %
    
    
    36
    
    
    
    57
    
    
    
    (21
    )
    
    
    -37
    %Net loss before taxes
    
    $
    (805
    )
    
    $
    (705
    )
    
    $
    (100
    )
    
    
    -14
    %
    
    $
    (954
    )
    
    $
    (868
    )
    
    $
    (86
    )
    
    
    10
    %Income tax provision
    
    
    (6
    )
    
    
    0
    
    
    
    (6
    )
    
    
    0
    %
    
    
    (6
    )
    
    
    (1
    )
    
    
    (5
    )
    
    
    n/aNet loss
    
    $
    (811
    )
    
    $
    (705
    )
    
    $
    (106
    )
    
    
    -15
    %
    
    $
    (960
    )
    
    $
    (869
    )
    
    $
    (91
    )
    
    
    10
    %
 Comparison of the three-month and six-month periods ended June 30, 2008 to the three-month and
six-month periods ended June 30, 2007
 Net revenue.
 ®
 
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##### Table of Contents



Gross profit.
  Development expense.
 12




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##### Table of Contents



Selling and marketing expense.
 General and administrative expense.
 Operating loss.
 Net loss.
 Liquidity and capital resources.
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Item 4T. Controls and Procedures
 Evaluation of disclosure controls and procedures
 Changes in internal controls
 Forward Looking and Cautionary Statements
 The preceding discussion and analysis should be read in conjunction with the financial statements
and notes thereto appearing elsewhere in this report. Managements Discussion and Analysis may
contain forward-looking statements within the meaning of the Private Securities Litigation Reform
Act of 1995. Forward-looking statements provide current expectations or forecasts of future events
and can be identified by the use of terminology such as believe, estimate, expect, intend,
may, could, will, anticipate, and similar words or expressions. The forward-looking
statements in this report generally relate to: our intent to achieve significant growth in the
music education industry; our expectations relating to future cash flows; our expectations
regarding strength of operations, our customer base and industry partnerships; our intent to focus
specific marketing activities on SmartMusic and Impact; our expectations regarding future
subscription growth for SmartMusic; our expectation that amortization will increase as we add
additional products and repertoire to SmartMusic; our belief that development costs will increase
due to improvements to our SmartMusic product; and our belief that sales and marketing expense will
increase during 2008. Forward-looking statements cannot be guaranteed and actual results may vary
materially due to the uncertainties and risks, known and unknown, associated with such statements.
MakeMusic cautions investors that many important factors have affected, and in the future could
affect our actual results of operations and cause such results to differ materially from those
anticipated in forward-looking statements made in this release and elsewhere by MakeMusic or on its
behalf. These factors include, but are not limited to: unforeseen capital demands; the market
acceptance of Finale, SmartMusic, SmartMusic Impact and other products; the maintenance of
strategic partnerships and customer relationships; our ability to license titles from music
publishers; the success of our SmartMusic subscription business; the limited and fluctuating sales
of certain of our products; the intense competition that we face; the rapid technological changes
and obsolescence in software industry; our dependence on key personnel and the proprietary nature
of our technology; other general business and economic condition ,including the impact of current
economic conditions on school and individual budgets; 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
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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 do not
intend to update publicly or revise any forward-looking statements.
 
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
    NOMINEE
    
    FOR
    
    WITHHELDJeffrey A. Koch
    
    
    3,873,125
    
    
    
    140,489John W. Paulson
    
    
    4,008,472
    
    
    
    5,142Ronald B. Raup
    
    
    4,011,989
    
    
    
    1,625Keith A. Fenhaus
    
    
    4,011,989
    
    
    
    1,625Robert B. Morrison
    
    
    4,008,489
    
    
    
    5,125Graham Richmond
    
    
    3,970,167
    
    
    
    43,447Michael Skinner
    
    
    3,991,151
    
    
    
    22,463
  FOR
    
    AGAINST
    
    ABSTAIN
    
    BROKER NON-VOTE2,058,236
    
    
    163,580
    
    
    
    13,068
    
    
    
    1,778,730
  FOR
    
    AGAINST
    
    ABSTAIN
    
    BROKER NON-VOTE4,009,874
    
    
    1,540
    
    
    
    2,200
    
    
    
    0
 
 Item 5. Other Information
  
 Item 6. Exhibits
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SIGNATURES
  Date: August 8, 2008
    MAKEMUSIC, INC.By:
    /s/ John W. PaulsonJohn W. Paulson, co-Chief Executive Officer(Principal Executive Officer)


| |                                              |                          |  | 
| | -------------------------------------------- | ------------------------ |  | 
| | And:                                         | /s/ Ronald Raup          | 
| | Ronald Raup, co-Chief Executive Officer      |                         
| | (Principal Executive Officer)                |                         
|
| | And:                                         | /s/ Karen L. VanDerBosch | 
| | Karen L.VanDerBosch, Chief Financial Officer |                         
| | (Principal Financial Officer)                |                         
|




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EXHIBIT INDEX
 Form 10-Q
 The quarterly period ended June 30, 2008
 Exhibit No.
    
    Description10.1
    
    Equity Incentive Plan, as amended on May 21, 2008 
incorporated by reference to Exhibit 10.1 to the Registrants
form 8-K filed May 27, 2008.31.1*
    
    Certification of co-Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of co-Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.3*
    
    Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of co-Chief Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    Certification of co-Chief Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.3*
    
    Certification of Chief Financial Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith. 17