SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB
(Mark One)
[X]      Quarterly  report under Section 13 or 15(d) of the Securities  Exchange
         Act of 1934 For the quarterly period ended June 30, 1998

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

         Commission file number     0-26192

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

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

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

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


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

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

         Yes   X     No

As of August 10, 1998, there were 6,199,732 shares of Common Stock outstanding.

Transitional Small Business Disclosure Format (check one):

         Yes          No   X




<PAGE>


                          Part 1. Financial Information

                          Item 1. Financial Statements

                           Coda Music Technology, Inc.

                            Condensed Balance Sheets

<TABLE>
<CAPTION>

                                                                                                   
                                                                                  June 30,             December 31,
                                                                                    1998                   1997
                                                                                 ----------            ------------
                                                                                 (Unaudited)

                                  ASSETS
<S>                                                                             <C>                     <C>   
CURRENT ASSETS:
   Cash and cash equivalents                                                    $  1,208,488            $  2,212,454
   Accounts receivable                                                               354,805                 477,960
   Inventories                                                                       454,026                 616,696
   Prepaid royalties                                                                 189,550                 181,105
   Other current assets                                                              186,747                  93,200
                                                                                ------------            ------------
               Total current assets                                                2,393,616               3,581,415
EQUIPMENT, FURNITURE AND FIXTURES                                                    281,145                 370,105
REPERTOIRE DEVELOPMENT COSTS                                                         726,154                 591,445
OTHER ASSETS                                                                          90,470                  88,279
                                                                                ------------            ------------
                                                                                $  3,491,385            $  4,631,244
                                                                                ============            ============
                   LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable                                                             $    253,508           $     294,398
   Accrued product repositioning (Note 4)                                            270,093                       -
   Accrued expenses                                                                  377,329                 389,885
   Deferred revenue                                                                  207,223                 202,603
                                                                                ------------           -------------
               Total current liabilities                                           1,108,153                 886,886

SHAREHOLDERS' EQUITY                                                               2,383,232               3,744,358
                                                                                ------------           -------------
                                                                                $  3,491,385           $   4,631,244
                                                                                ============           =============

            See accompanying notes to condensed financial statements

</TABLE>


<PAGE>


                           Coda Music Technology, Inc.

                       Condensed Statements of Operations

                                   (Unaudited)

<TABLE>
<CAPTION>



                                                             Quarter Ended June 30,                Six Months Ended June 30,
                                                          ---------------------------              -------------------------
                                                          1998                   1997              1998                 1997
                                                          ----                   ----              ----                 ----
<S>                                                   <C>                <C>                 <C>                 <C>   
NET REVENUES                                          $   1,154,640       $    1,014,583     $   2,715,124       $   2,632,055

COST OF SALES                                               190,480             303,710            568,314             761,958
                                                      -------------       -------------      -------------       -------------
GROSS PROFIT                                                964,160             710,873          2,146,810           1,870,097
                                                      -------------       -------------      -------------       -------------
OPERATING EXPENSES:
   Sales and marketing                                      407,794             445,465            949,433             987,373
   Product development                                      404,927             369,586            837,407             703,470
   General and administrative                               449,887             374,771            914,678             816,708
   Product Repositioning  (Note 4)                          176,000                   -            856,000                   -
                                                      -------------       -------------      -------------       -------------
               Total operating expenses                   1,438,609           1,189,822          3,557,517           2,507,551
                                                      -------------       -------------      -------------       -------------
LOSS FROM OPERATIONS                                       (474,449)           (478,949)        (1,410,706)           (637,454)

Interest Income, net                                         22,049              20,618             49,581              32,147
                                                      -------------       -------------      -------------       -------------
NET LOSS                                              $    (452,400)      $    (458,331)     $  (1,361,126)      $    (605,307)
                                                      =============       =============      =============       =============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
                                                          6,199,732           5,006,145          6,199,732           4,666,590
                                                      =============       =============      =============       ============= 

BASIC AND DILUTED NET LOSS PER SHARE                  $        (.07)      $        (.09)     $        (.22)      $        (.13)
                                                      =============       =============      =============       ============= 


            See accompanying notes to condensed financial statements

</TABLE>


<PAGE>


                           Coda Music Technology, Inc.

                       Condensed Statements of Cash Flows

                        For the Six Months Ended June 30,

                                   (Unaudited)
<TABLE>
<CAPTION>


                                                                                                   1998                 1997
                                                                                                   ----                 ----
<S>                                                                                          <C>                 <C>   
OPERATING ACTIVITIES:
   Net loss                                                                                  $  (1,361,126)      $   (605,307)
   Adjustments to reconcile net loss to net cash used in operating activities-
         Depreciation and amortization                                                             268,630            266,441
         Change in current assets and liabilities:
            Accounts receivable                                                                    123,155            208,588
            Inventories                                                                            162,670            182,771
            Prepaid royalties                                                                       (8,445)            (6,140)
            Other current assets                                                                   (93,547)            (7,867)
            Accounts payable                                                                       (40,890)          (168,865)
            Accrued product repositioning (Note 4)                                                 270,093                  -
            Accrued expenses                                                                       (12,556)          (165,864)
            Deferred revenue                                                                         4,620            (19,642)
                                                                                              ------------        -----------
               Net cash used in operating activities                                              (687,396)          (315,885)
                                                                                              ------------        -----------   
INVESTING ACTIVITIES:
   Purchases of equipment, furniture and fixtures                                                  (26,754)           (40,966)
   Capitalized repertoire development cost                                                        (285,492)          (163,663)
   Net proceeds from sale of fixed assets                                                            2,667                  -
   Other assets, principally patents and trademarks                                                 (6,991)           (16,642)
                                                                                              ------------        -----------
              Net cash used in investing activities                                               (316,570)          (221,271)
                                                                                              ------------        -----------
FINANCING ACTIVITIES:
   Proceeds from sale of common stock, net of offering costs                                             -          2,277,468
                                                                                              ------------        -----------
               Net cash provided by financing activities                                                 -          2,277,468
                                                                                              ------------        -----------

NET DECREASE IN CASH AND SHORT-TERM INVESTMENTS                                                 (1,003,966)         1,740,312
                                                                                         

CASH AND SHORT-TERM INVESTMENTS, beginning of period                                             2,212,454          1,174,293
                                                                                              ------------        -----------
CASH AND SHORT-TERM INVESTMENTS, end of period                                               $   1,208,488       $  2,914,605
                                                                                              ============        =========== 


            See accompanying notes to condensed financial statements

</TABLE>


<PAGE>


                           Coda Music Technology, Inc.

                          Notes to Financial Statements

                                   (Unaudited)





Note 1     Accounting  Policies.  The  information  furnished  in this report is
           unaudited but reflects all  adjustments  which are necessary,  in the
           opinion of  management,  for a fair  statement of the results for the
           interim period.  The operating  results for the six months ended June
           30, 1998 are not necessarily  indicative of the operating  results to
           be expected for the full fiscal year. These statements should be read
           in  conjunction  with the Company's most recent Annual Report on Form
           10-KSB.

Note 2     Net  Loss  Per Common  Share.  Basic and  diluted net loss per common
           share was computed by dividing  the net loss by the weighted  average
           number of shares of Common Stock. In accordance with the requirements
           of Financial  Accounting  Standard No. 128, which the Company adopted
           as of December 31, 1997,  common stock equivalents have been excluded
           from the calculation as their inclusion would be antidilutive.

Note 3     New  Accounting  Pronouncement.  The Company will adopt in the fiscal
           year ending  December  31, 1998,  Statement  of Financial  Accounting
           Standards No. 131  "Disclosure  About  Segments of an Enterprise  and
           Related  Information"  (SFAS  131).  Management  is in the process of
           determining  the  impact of SFAS No. 131 on the  Company's  financial
           position, results of operations and footnote disclosures.

Note 4     Product Repositioning.   The Company  has developed SmartMusic Studio
           (TM), a  new  and  renamed  version  of  the Vivace(R)Practice Studio
           product.  In  connection  with this introduction, the Company will no
           longer need to utilize some of the hardware component  parts.  During
           the  first  quarter  of  1998,  the  Company  estimated the impact of
           returns,   exchanges   and   inventory  obsolescence  resulting  from
           this   product  repositioning  and  classified  the  net charge as an
           operating expense.  Additional expenses  from this repositioning were
           recorded during the second quarter due to higher than planned product
           returns.




<PAGE>




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


General

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

     The Company  acquired the Finale(R) music notation  product on December 31,
1992  and  enhanced  and  marketed   this  product   while   developing   Vivace
accompaniment  products.  In June  1994,  the first  test  markets of the Vivace
product  were  launched.  Technological  advancements  enabled  the  Company  to
dramatically  reduce  costs and  related  price  points in 1996 and again in the
fourth  quarter of 1997 when the  Company  began  shipping  the Vivace  Practice
Studio. In the first quarter of 1998, ongoing  advancements  enabled the Company
to develop a more cost effective  delivery mechanism for this technology and the
product line has been renamed SmartMusic(TM).

     SmartMusic  products  began  shipping  in the second  quarter of 1998,  and
include  the basic  software  application  at a nominal  sell price and the full
system sold under the name SmartMusic  Studio which includes  accessory items at
$99. These products are being marketed with a strategy to gain wide distribution
of the  software  which is expected  to drive  increased  sales  revenues of the
related song accompaniment products.

     The Company has incurred losses from operations  since inception and has an
accumulated deficit of $11,329,340 as of June 30, 1998.

Results of operations

For the periods ended June 30, 1998 compared to the periods ended June 30, 1997

     Net Revenues.  Revenues of  $1,154,640  for the quarter ended June 30, 1998
increased  $140,057,  or 14%,  over the  quarter  ended June 30,  1997.  The net
increase in revenues between the two periods reflects a 25% increase in revenues
from the Finale music notation  software  product and a 12% decrease in revenues
from the SmartMusic Studio (formerly Vivace Intelligent Accompaniment) products.

     Revenues  for the six months  ended  June 30,  1998 were  $2,715,124,  a 3%
increase  over revenues for the six months ended June 30, 1997.  Finale  product
revenues  increased  $156,180 or 8% in this period  while  SmartMusic  (formerly
Vivace) product revenues decreased $73,086 or 10%.

<PAGE>

     Finale  product  revenues  increased in both the quarterly and year to date
comparisons  due to the  release  of Finale 98 in June 1998 as  compared  to the
release of Finale 97 in November 1997.  Upgrade and new product revenues are the
greatest immediately after a new product is released.

     The Company's newly embraced strategy is to dramatically  expand the number
of  applications  in the  market  in  order  to  pursue  the  core  business  of
establishing  recurring  revenues  generated from repetitive sales of SmartMusic
accompaniments.  The elimination of cartridge readers  significantly reduced the
software cost and as a result, the sell price could be significantly reduced for
both  SmartMusic  application  software and  SmartMusic  Studio,  which includes
additional equipment for added features.  Under this strategy, while revenue for
SmartMusic  Products  decreased in both a quarterly and year to date  comparison
with the same periods last year,  actual units sold increased 222%. In addition,
over 13,500 SmartMusic Studio trial CD's have been distributed  through June 30,
1998. The number of  accompaniments  (formerly  referred to as repertoires) sold
for the six months ended June 30, 1998 increased 44%.

     Gross  profit.  The gross profit of $964,160 for the quarter ended June 30,
1998 represented a gross profit margin of 83.5%. This is an increase of 36% over
the second  quarter of 1997,  when the gross  profit was  $710,873  with a gross
profit  margin of 70%.  Comparing  the first half of 1998 with the first half of
1997, the gross profit margins were 79% and 71%,  respectively.  The increase in
both  comparison  periods  can be  attributed  to  higher  gross  profit  margin
percentages  in both the Finale and  SmartMusic  product  lines due to decreased
product  costs.  Gross profit margin dollars also increased due to higher Finale
revenue  level in total and the  higher  percentage  of Finale  revenue to total
revenue in 1998 compared to 1997.

     Product  Repositioning.  The Company  announced in April 1998 that it would
introduce  SmartMusic  Studio,  a new and renamed version of the Vivace Practice
Studio product.  Because of changes in the hardware components required for this
product,  the Company established a reserve for excess and obsolete inventory in
the quarter ended March 31, 1998.  During the quarter  ended June 30, 1998,  the
Company  accepted  returns from music  retailers  with  inventory in stock.  The
Company recorded an additional $176,000 in the second quarter due to higher than
planned  product  returns.  The total  impact of returns and excess and obsolete
inventory are classified in the line item titled "Product  Repositioning" in the
accompanying statements of operations.

     Sales and marketing expenses. For the quarter ended June 30, 1998 sales and
marketing  expenses of $407,794 are 8% lower than for the quarter ended June 30,
1997.  Sales  and  marketing  expenses  for the  first  six  months of 1998 were
approximately  the same as the first six months of 1997. The largest category of
savings was salary and  commission  expense for the Smart  Music/Vivace  product
line.

<PAGE>

     Product development expenses.  Product development expenses of $404,927 for
the quarter  ended June 30, 1998 were $35,341  higher (10%) than for the quarter
ended June 30, 1997. For the six months ended June 30, 1998, product development
expenses of $837,407  were  $133,937  higher (19%) than for the six months ended
June 30,  1997.  The major reason for the increase in expense in both periods is
related to increased salary and outside contractor costs.

     General and Administrative  Expenses.  General and administrative  expenses
for the second quarter of 1998 were  $449,887,  up 20% when compared to $374,771
for the second quarter of 1997. General and administrative  expenses of $914,678
for the six months  ended June 30,  1998  increased  $97,970 or 12% over the six
months ended June 30, 1997.  This  increase in expenses is due to an increase in
recruiting  expenses  and legal fees for both  periods in 1998 when  compared to
1997 and reduced incentive compensation accruals in 1997.

     Interest  Income,  Net. The Company had net interest  income of $22,049 for
the quarter  ended June 30, 1998, up 7% when compared to $20,618 for the quarter
ended June 30, 1997.  For the first six months of 1998, the Company had interest
income of $49,581,  up 54% when  compared to $32,147 for the first six months of
1997. The higher interest income is attributable to the Company's higher average
cash and  investment  balances in 1998  compared to 1997, as well as to slightly
higher interest rates.  The Company's  financing is discussed  further under the
caption "Liquidity and Capital Resources".

     Net loss. The net loss of $452,400 for the quarter ended June 30, 1998 is a
slight  improvement  from the $458,331  loss in the quarter ended June 30, 1997.
For the six months ended June 30, 1998,  the Company's loss of $1,361,126 was an
unfavorable  change from the loss of $605,307 over the six months ended June 30,
1997.

      If the Product  Repositioning  expense  (see Note 4) is removed from 1998,
the comparisons improve  significantly:  the second quarter of 1998 would have a
net loss of $276,400,  an improvement of $181,931 or 40% over the second quarter
1997 loss of $458,331.  The first half of 1998 would have a loss of $505,126, an
improvement of $100,181 or 17% over the first half loss from 1997 of $605,307.

Liquidity and Capital Resources

     In May 1997,  the Company  received  net  proceeds of  $2,277,468  from the
private  placement of  1,872,697  shares of its common stock and the issuance of
warrants to purchase  936,357  shares of common  stock at a price of $2.00.  The
proceeds were invested in short-term securities.

<PAGE>

     The Company has a $500,000 line of credit with a bank. Borrowings under the
line of  credit  bear  interest  at 1% over the  bank's  reference  rate and are
collateralized  by  all  of  the  accounts  receivable,  inventory  and  general
intangibles  of the  Company.  Among  other  requirements,  the  loan  agreement
requires  the  Company to maintain  minimum  levels of  tangible  net worth,  as
defined in the agreement.  While the agreement is in effect, the Company may not
incur additional indebtedness,  liquidate or merge the Company, pay dividends or
acquire any other entity  without the prior approval of the lender.  Further,  a
25% or more change in ownership of the Company  constitutes  an event of default
under the agreement. As of June 30, 1998 there were no borrowings under the line
of credit.

     Net cash used in operating  activities  totaled $687,396 for the six months
ended June 30, 1998.  In addition,  the Company  made capital  expenditures  for
repertoire  development costs of $285,492 in the six months ended June 30, 1998.
The sale and disposal of fixed assets  resulted in net proceeds of $2,667 in the
six months ended June 30, 1998.  During the six months ended June 30, 1997,  the
Company  used  cash  for  operating   activities   of  $315,885,   made  capital
expenditures  for  furniture,  equipment and fixtures of $40,966 and  repertoire
development of $163,663.

     The Company  anticipates  that total fixed asset capital  expenditures  for
1998 will approximate $120,000.  Capital expenditures for repertoire development
will be significantly  lower during the last six months as compared to the first
six  months  of  1998.   Management   believes   existing  cash  and  short-term
investments,  proceeds from line of credit borrowings,  and funds generated from
the sale of products will be sufficient to fund its capital expenditure, product
development  and  working  capital  requirements  through the  following  twelve
months.  Management  expects  that cash in excess of current  requirements  will
continue to be invested in investment grade interest-bearing securities.

Year 2000 Issue

     The software  products  which the Company  markets and sells do not use any
reference to dates that will require  modification  to recognize the  four-digit
year 2000. The Company's internal business systems will require  modification to
recognize  this date;  however,  such  modification  will be  handled  through a
routine  upgrade  to  existing  software,  and the cost of such  upgrade  is not
expected to be material.

Cautionary Statements

     The Company cautions investors that actual results of future operations may
differ from those  anticipated in forward looking  statements due to a number of
factors.  The Company has recently announced changes in technology and prices of
its Intelligent Accompaniment products and in the method of distribution.  There
is no history  from which to  predict  whether  the  changes  will  successfully
increase  revenues.  Investors  should  also  consider  the  potential  need for
additional  capital;  additional  development  work  required for new  products;
competition;  dependence on suppliers; and dependence on proprietary technology.
For a more  complete  description  of such factors see  "Cautionary  Statements"
under Item 1 of the Company's Form 10-KSB for the year ended December 31, 1997.



<PAGE>


                            PART 2. OTHER INFORMATION



Item 1.  Litigation

     The Company has been  served  with a complaint  dated  February 5, 1998 and
filed in United States District Court for the District of Massachusetts in which
Twelve Tone  Systems,  Inc.  seeks a declaratory  judgment that certain  patents
owned by and  licensed to the  Company are not  infringed  by Twelve  Tone.  The
patents relate to the Company's  Intelligent  Accompaniment(R)  technology.  The
Company believes that the patents are valid.



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

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

              (b)  Reports on Form 8-K: No reports on Form 8-K were filed by the
              registrant during the quarter ended June 30, 1998.



<PAGE>


                                   SIGNATURES



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



Date:  August 14, 1998                       CODA MUSIC TECHNOLOGY, INC.




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


                                            And: /s/  Barbara S. Remley
                                                 Barbara S. Remley,
                                                 Chief Financial Officer


<PAGE>





                                  EXHIBIT INDEX



                                   FORM 10-QSB



                              For the Quarter Ended

                                  June 30, 1998









Exhibit
Number            Description
   27             Financial Data Schedule (filed in electronic format only)