##### Table of Contents



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 March 31, 2003                                    
|  |  |                                                                                  
|o |  | Transition report under Section 13 or 15(d) of the Exchange Act                  
|  |  | For the transition period from  to                                               
|  |  |                                                                                  
|  |  | Commission file number 0-26192                                                   

MakeMusic! Inc.

---

(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 April 18,
2002, 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



---

TABLE OF CONTENTS



|                                                                  |                                                                                                  |  |  |  |  |  |  | 
|----------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ |  |  |  |  |  |  | 
|                                                                  | PART I. FINANCIAL INFORMATION                                                                   
|Item 1. Condensed Consolidated Financial Statements              
|                                                                  | Condensed Consolidated Balance Sheets March 31, 2003 and December 31, 2002                      
|                                                                  | Condensed Consolidated Statement of Operations Three-month periods ended March 31, 2003 and 2002
|                                                                  | Condensed Consolidated Statement of Cash Flows Three-month periods ended March 31, 2003 and 2002
|                                                                  | Notes to Condensed Consolidated Financial Statements                                            
|Item 2. Managements Discussion and Analysis or Plan of Operation
|Item 3. Controls and Procedures                                  
|                                                                  | PART II. OTHER INFORMATION                                                                      
|Item 2. Changes in Securities                                    
|Item 4. Submission of Matters to a Vote of Security Holders      
|Item 6. Exhibits and Reports on Form 8-K                         
|                                                                  | Signatures                                                                                      
|                                                                  | Certifications                                                                                  
|                                                                  | Exhibit Index                                                                                   
|EX-3.1 Amended and Restated Articles of Incorp.                  
|EX-99.1 Certification of Chief Executive Officer                 
|EX-99.2 Certification of Chief Financial Officer                 



---



##### Table of Contents



MakeMusic! Inc.
 
INDEX

|        |  |                                                                                                  |  |         
|------- |  | ------------------------------------------------------------------------------------------------ |  | --------
|        |  |                                                                                                  |  | Page No.
|        |  |                                                                                                  |  |         
|        |  | PART I. FINANCIAL INFORMATION                                                                    |  |         
|        |  |                                                                                                  |  |         
|Item 1. |  | Condensed Consolidated Financial Statements                                                      |  | 3       
|        |  |                                                                                                  |  |         
|        |  | Condensed Consolidated Balance Sheets
March 31, 2003 and December 31, 2002                       |  | 3       
|        |  |                                                                                                  |  |         
|        |  | Condensed Consolidated Statement of Operations
Three-month periods ended March 31, 2003 and 2002 |  | 4       
|        |  |                                                                                                  |  |         
|        |  | Condensed Consolidated Statement of Cash Flows
Three-month periods ended March 31, 2003 and 2002 |  | 5       
|        |  |                                                                                                  |  |         
|        |  | Notes to Condensed Consolidated Financial Statements                                             |  | 6       
|        |  |                                                                                                  |  |         
|Item 2. |  | Managements Discussion and Analysis or Plan of Operation                                        |  | 8       
|        |  |                                                                                                  |  |         
|Item 3. |  | Controls and Procedures                                                                          |  | 11      
|        |  |                                                                                                  |  |         
|        |  | PART II. OTHER INFORMATION                                                                       |  |         
|        |  |                                                                                                  |  |         
|Item 2. |  | Changes in Securities                                                                            |  | 12      
|        |  |                                                                                                  |  |         
|Item 4. |  | Submission of Matters to a Vote of Security Holders                                              |  | 12      
|        |  |                                                                                                  |  |         
|Item 6. |  | Exhibits and Reports on Form 8-K                                                                 |  | 13      
|        |  |                                                                                                  |  |         
|        |  | Signatures                                                                                       |  | 13      
|        |  |                                                                                                  |  |         
|        |  | Certifications                                                                                   |  | 14      
|        |  |                                                                                                  |  |         
|        |  | Exhibit Index                                                                                    |  | 16      

2



---



##### Table of Contents






PART I




ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




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

|                                                                     |                                                                  |   |             |         |   |              |        |         |  
|-------------------------------------------------------------------- | ---------------------------------------------------------------- | - | ----------- | ------- | - | ------------ | ------ | ------- | -
|                                                                     |                                                                  |   | March 31,   |         |   | December 31, |       
|                                                                     |                                                                  |   | 2003        |         |   | 2002         |       
|                                                                     |                                                                  |   |             |         |   |              |       
|                                                                     |                                                                  |   | (unaudited) |         |   | (Note)       |       
|                                                                     |                                                                  |   |             |         |   |              |       
|Assets                                                               |                                                                  |   |             |         |   |              |        |        
|Current assets:                                                      |                                                                  |   |             |         |   |              |        |        
|                                                                     | Cash and cash equivalents                                        |   | $           | 2,025   |   |              | $      | 1,469   |  
|                                                                     | Cash-restricted                                                  |   |             |        |   |              |        | 390     |  
|                                                                     | Accounts receivable, net                                         |   |             | 492     |   |              |        | 400     |  
|                                                                     | Inventories                                                      |   |             | 336     |   |              |        | 324     |  
|                                                                     | Value added tax receivable                                       |   |             | 75      |   |              |        | 58      |  
|                                                                     | Prepaid expenses and other current assets                        |   |             | 105     |   |              |        | 185     |  
|                                                                     |                                                                  |   |             |         |   |             
|Total current assets                                                 |                                                                  |   | 3,033       |         |   |              | 2,826  |        
|Property and equipment, net                                          |                                                                  |   | 399         |         |   |              | 528    |        
|Goodwill, net                                                        |                                                                  |   | 3,630       |         |   |              | 3,630  |        
|Capitalized software products                                        |                                                                  |   | 703         |         |   |              | 732    |        
|Intangible assets, net                                               |                                                                  |   | 2,464       |         |   |              | 2,719  |        
|Other non-current assets                                             |                                                                  |   | 189         |         |   |              | 157    |        
|                                                                     |                                                                  |   |             |         |   |             
|Total assets                                                         |                                                                  | $ | 10,418      |         |   | $            | 10,592 |        
|                                                                     |                                                                  |   |             |         |   |             
|Liabilities and shareholders equity                                 |                                                                  |   |             |         |   |              |        |        
|Current liabilities:                                                 |                                                                  |   |             |         |   |              |        |        
|                                                                     | Accounts payable                                                 |   | $           | 565     |   |              | $      | 651     |  
|                                                                     | Accrued expenses and other current liabilities                   |   |             | 836     |   |              |        | 1,303   |  
|                                                                     | Revolving note payable                                           |   |             |        |   |              |        | 89      |  
|                                                                     | Convertible loans                                                |   |             |        |   |              |        | 419     |  
|                                                                     | Current portion of long-term debt and capital
leases obligations |   |             | 494     |   |              |        | 437     |  
|                                                                     | Reserve for product returns                                      |   |             | 299     |   |              |        | 219     |  
|                                                                     | Deposits                                                         |   |             |        |   |              |        | 390     |  
|                                                                     | Deferred revenue                                                 |   |             | 266     |   |              |        | 178     |  
|                                                                     |                                                                  |   |             |         |   |             
|Total current liabilities                                            |                                                                  |   | 2,460       |         |   |              | 3,686  |        
|Long-term debt and capital lease obligations,
net of current portion |                                                                  |   | 100         |         |   |              | 151    |        
|Shareholders equity:                                                |                                                                  |   |             |         |   |              |        |        
|                                                                     | Common stock                                                     |   |             | 34      |   |              |        | 22      |  
|                                                                     | Additional Paid-in Capital                                       |   |             | 61,522  |   |              |        | 58,278  |  
|                                                                     | Accumulated deficit                                              |   |             | (52,998 | ) |              |        | (50,877 | )
|                                                                     | Accumulated other comprehensive income                           |   |             | (135    | ) |              |        | (73     | )
|                                                                     | Deferred compensation                                            |   |             | (565    | ) |              |        | (595    | )
|                                                                     |                                                                  |   |             |         |   |             
|Total shareholders equity                                           |                                                                  |   | 7,858       |         |   |              | 6,755  |        
|                                                                     |                                                                  |   |             |         |   |             
|Total liabilities and shareholders equity                           |                                                                  | $ | 10,418      |         |   | $            | 10,592 |        
|                                                                     |                                                                  |   |             |         |   |             

NOTE:The Balance Sheet at December 31, 2002 has been derived from the audited
financial statements at 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.

3



---



##### Table of Contents






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

|                                                       |                                          |   |                        |       |   |      |           |       | 
|------------------------------------------------------ | ---------------------------------------- | - | ---------------------- | ----- | - | ---- | --------- | ----- | 
|                                                       |                                          |   | Quarter Ended March 31 |      
|                                                       |                                          |   | 2003                   |       |   | 2002 |          
|                                                       |                                          |   |                        |       |   |      |          
|NET REVENUE                                            |                                          | $ | 1,658                  |       |   | $    | 1,942     |      
|COST OF REVENUES                                       |                                          |   | 383                    |       |   |      | 365       |      
|                                                       |                                          |   |                        |       |   |     
|GROSS PROFIT                                           |                                          |   | 1,275                  |       |   |      | 1,577     |      
|OPERATING EXPENSES:                                    |                                          |   |                        |       |   |      |           |      
|                                                       | Website development expenses             |   |                        | 67    |   |      |           | 319   | 
|                                                       | Content and product development expenses |   |                        | 557   |   |      |           | 570   | 
|                                                       | Selling and marketing expenses           |   |                        | 1,041 |   |      |           | 922   | 
|                                                       | General and administrative expenses      |   |                        | 1,003 |   |      |           | 1,204 | 
|                                                       |                                          |   |                        |       |   |     
|Total operating expenses                               |                                          |   | 2,668                  |       |   |      | 3,015     |      
|                                                       |                                          |   |                        |       |   |     
|LOSS FROM OPERATIONS                                   |                                          |   | (1,393                 | )     |   |      | (1,438    | )    
|                                                       | Interest (expense) income, net           |   |                        | (726  | ) |      |           | 10    | 
|                                                       |                                          |   |                        |       |   |     
|Net loss before income tax                             |                                          |   | (2,119                 | )     |   |      | (1,428    | )    
|Income tax                                             |                                          |   | (2                     | )     |   |      | (1        | )    
|                                                       |                                          |   |                        |       |   |     
|Net loss before cumulative effect of accounting change |                                          |   | (2,121                 | )     |   |      | (1,429    | )    
|Cumulative effect of change in accounting principle    |                                          |   |                       |       |   |      | (11,500   | )    
|                                                       |                                          |   |                        |       |   |     
|Net loss                                               |                                          | $ | (2,121                 | )     |   | $    | (12,929   | )    
|                                                       |                                          |   |                        |       |   |     
|Basic and diluted loss per common share                |                                          | $ | (0.78                  | )     |   | $    | (5.58     | )    
|Weighted average common shares outstanding             |                                          |   | 2,724,209              |       |   |      | 2,316,846 |      

4



---



##### Table of Contents






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

|                                                                            |                                                         |                                           |        |                         |      |   |         |        |      |  
|--------------------------------------------------------------------------- | ------------------------------------------------------- | ----------------------------------------- | ------ | ----------------------- | ---- | - | ------- | ------ | ---- | -
|                                                                            |                                                         |                                           |        | Quarter Ended March 31, |     
|                                                                            |                                                         |                                           |        | 2003                    |      |   | 2002    |       
|                                                                            |                                                         |                                           |        |                         |      |   |         |       
|Operating activities                                                        |                                                         |                                           |        |                         |      |   |         |       
|Net loss                                                                    |                                                         | $                                         | (2,121 | )                       |      | $ | (12,929 | )     
|Adjustments to reconcile net loss to net cash used in
operating activities: |                                                         |                                           |        |                         |      |   |         |       
|                                                                            | Amortization of intangible assets                       |                                           |        | 319                     |      |   |         | 281    |     
|                                                                            | Depreciation and amortization of property and equipment |                                           |        | 137                     |      |   |         | 264    |     
|                                                                            | Amortization of deferred compensation                   |                                           |        | 39                      |      |   |         | 42     |     
|                                                                            | Impairment of intangible assets and goodwill            |                                           |        |                        |      |   |         | 11,500 |     
|                                                                            | Restructuring                                           |                                           |        | (137                    | )    |   |         | (64    | )   
|                                                                            | Interest on bridge loan and discount                    |                                           |        | 718                     |      |   |         |       |     
|                                                                            | Issuance of stock options and warrants for services     |                                           |        | 1                       |      |   |         | 3      |     
|                                                                            | Increase (decrease) in cash from:                       |                                           |        |                         |      |   |         |        |     
|                                                                            |                                                         | Accounts receivable                       |        |                         | (107 | ) |         |        | 117  |  
|                                                                            |                                                         | Inventories                               |        |                         | (12  | ) |         |        | (50  | )
|                                                                            |                                                         | Prepaid expenses and other current assets |        |                         | 50   |   |         |        | 74   |  
|                                                                            |                                                         | Accounts payable                          |        |                         | (95  | ) |         |        | (180 | )
|                                                                            |                                                         | Accrued liabilities and product returns   |        |                         | (267 | ) |         |        | (64  | )
|                                                                            |                                                         | Deferred Revenue                          |        |                         | 88   |   |         |        |     |  
|                                                                            |                                                         |                                           |        |                         |      |  
|Net cash used in operating activities                                       |                                                         |                                           | (1,387 | )                       |      |   | (1,006  | )     
|Net cash used by investing activities                                       |                                                         |                                           |        |                         |      |   |         |       
|Purchases of property & equipment                                           |                                                         |                                           | (8     | )                       |      |   | (116    | )     
|Capitalized development and other intangibles                               |                                                         |                                           | (28    | )                       |      |   |        |       
|                                                                            |                                                         |                                           |        |                         |      |  
|Net cash used by investing activities                                       |                                                         |                                           | (36    | )                       |      |   | (116    | )     
|Net cash provided (used) by financing activities                            |                                                         |                                           |        |                         |      |   |         |       
|Issuance of shares                                                          |                                                         |                                           | 2,120  |                         |      |   |        |       
|Collections of notes receivables from issuance of shares                    |                                                         |                                           |       |                         |      |   | 50      |       
|Payments on revolving note payable, net                                     |                                                         |                                           | (89    | )                       |      |   |        |       
|Increase in long-term debt                                                  |                                                         |                                           |       |                         |      |   | 40      |       
|Payments on long-term debt and capital leases                               |                                                         |                                           | (11    | )                       |      |   | (95     | )     
|                                                                            |                                                         |                                           |        |                         |      |  
|Net cash provided (used) by financing activities                            |                                                         |                                           | 2,020  |                         |      |   | (5      | )     
|Effect of exchange rate changes on cash                                     |                                                         |                                           | (41    | )                       |      |   | (36     | )     
|                                                                            |                                                         |                                           |        |                         |      |  
|Net increase (decrease) in cash and cash equivalents                        |                                                         |                                           | 556    |                         |      |   | (1,163  | )     
|Cash and cash equivalents, beginning of period                              |                                                         |                                           | 1,469  |                         |      |   | 3,258   |       
|                                                                            |                                                         |                                           |        |                         |      |  
|Cash and cash equivalents, end of period                                    |                                                         | $                                         | 2,025  |                         |      | $ | 2,095   |       
|                                                                            |                                                         |                                           |        |                         |      |  
|Supplemental disclosure of cash flow information                            |                                                         |                                           |        |                         |      |   |         |       
|Interest paid                                                               |                                                         | $                                         | 9      |                         |      | $ | 2       |       

5



---



##### Table of Contents






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 three months ended March 31, 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. 141, Business Combinations, and No. 142, Goodwill and Other
Intangible Assets, effective for the first quarter of fiscal years
beginning after December 15, 2001. Under the new rules, goodwill and
intangible assets deemed to have indefinite lives will no longer be
amortized but will be subject to annual impairment tests in accordance
with the Statements. Other intangible assets will continue to be
amortized over their useful lives.
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       |  | The Company completed its analysis of the required transitional
impairment test for goodwill upon adoption of FAS 142 and recorded
$11,500,000 goodwill impairment in the income statement in the
Cumulative effect of change in accounting principle in the first
quarter 2002.                                                                                                                                                                                                                                                                                                                   
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|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 March 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                               

|                                         |  |              |         |  |       |   |         |      |           |   |        | 
|---------------------------------------- |  | ------------ | ------- |  | ----- | - | ------- | ---- | --------- | - | ------ | 
|                                         |  | December 31, |         |  |       |   |         |      | March 31, |  
|                                         |  | 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  |  |       |   | 10,500  |      |           |   | 13,000 | 
|                                         |  |              |         |  |       |   |         |      |          
|Total                                    |  | $            | 174,000 |  |       | $ | 161,000 |      |           | $ | 13,000 | 
|                                         |  |              |         |  |       |   |         |      |          

6



---



##### Table of Contents



|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|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 325,251 shares of common stock, the Company
issued warrants (Conversion Warrants) to holders of bridge loans
to purchase 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.                                                                                                                                                                                                                                                                                                                                                                                            
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       |  | In addition to the 325,251 shares issued to the bridge loan
holders, 707,823 shares were issued for the $2.265 million received
from investors at the full private placement price of $3.20. As of
March 31, 2003, 3,356,330 shares of common stock were issued and
outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Note 6 |  | Loss Per Common Share. On January 3, 2003, the Companys Board of
Directors authorized a one-for-ten reverse stock split effective
January 16, 2003. All earnings per common share amounts, references
to common stock and stockholders equity amounts have been restated
as if the reverse stock split had occurred as of the earliest
period presented. Basic and diluted net loss per share was
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 7 |  | 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 8 |  | Comprehensive Income (Loss). The effect of foreign currency
translation resulted in a decrease of $62,000 to other comprehensive
income for the three months ended March 31, 2003 and an increase of
$50,000 for the three months ended March 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

7



---



##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 9  |  | Common Stock. 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 issued for every ten shares of common stock held by
stockholders of record as of January 16, 2002. All share and per share amounts
in the accompanying financial statements have been restated to reflect the
Reverse Split.                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Note 10 |  | 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:

|                                  |                                          |  |                                       |        |   |      |   |         |  
|--------------------------------- | ---------------------------------------- |  | ------------------------------------- | ------ | - | ---- | - | ------- | -
|                                  |                                          |  | Quarter Ended March 31,               |       
|                                  |                                          |  |                                       |       
|                                  |                                          |  | 2003                                  |        |   | 2002 |  
|                                  |                                          |  |                                       |        |   |      |  
|                                  |                                          |  | (In thousands, except per share date) |       
|Net loss:                         |                                          |  |                                       |        |   |      |   |        
|                                  | Net loss as reported                     |  | $                                     | (2,121 | ) |      | $ | (12,929 | )
|                                  | Stock compensation recorded
under APB 25 |  |                                       | 40     |   |      |   | 42      |  
|                                  | Stock compensation under FAS
123         |  |                                       | (134   | ) |      |   | (269    | )
|                                  |                                          |  |                                       |        |   |     
|                                  | Pro forma net loss                       |  | $                                     | (2,215 | ) |      | $ | (13,156 | )
|                                  |                                          |  |                                       |        |   |     
|Basic and diluted loss per share: |                                          |  |                                       |        |   |      |   |        
|                                  | As reported                              |  | $                                     | (0.78  | ) |      | $ | (5.58   | )
|                                  | Pro forma                                |  | $                                     | (0.81  | ) |      | $ | (5.68   | )






ITEM 2. MANAGEMENTS
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

General

MakeMusic! Inc. (MakeMusic! or the Company), a Minnesota corporation,
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®, the worlds best-selling music notation software,
and SmartMusic®, the complete music practice system that features Intelligent
Accompaniment® and the worlds largest interactive accompaniment library.

The Company has incurred losses from operations since inception and has an
accumulated deficit of $52,998,000 as of March 31, 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.

8



---



##### Table of Contents



Results of Operations

For the period ended March 31, 2003 compared to the period ended March 31, 2002.

Net Revenues.Net revenues of $1,658,000 for the quarter ended March 31,
2003 were $284,000, or 15%, lower than the quarter ended March 31, 2002. Sale
of products from our Finale notation family of products for the first quarter
2003 were $330,000, or 18%, lower than the quarter ended March 31, 2002. This
decrease in sales compared to the prior period is primarily related to the
original release of the annual Finale upgrade being in June of 2002 compared to
August of 2001 in the previous year. Finale sales customarily are highest upon
release of a new version, and sales decline throughout the year until the next
release. Therefore, sales in the quarter ended March 31, 2003 were lower than
the prior year because they were later in the cycle of that years release.
Finale sales were also negatively impacted because the Companys Finale
products are not yet compatible with the Macintosh OS X operating system. The
next Finale release upgrade, scheduled for 2003, 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, 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 March 31, 2003, over 1,600 schools
were subscribing to the SmartMusic service with over 4,300 subscriptions. This
is a net increase of approximately 300 schools and 800 subscriptions since
December 31, 2002. These schools subscriptions correspond to recurring annual
subscription revenue of $161,000 to be recognized over the subscription period,
of which $29,000 was recorded as revenue in the quarter ended March 31, 2003.
The Companys school-sponsored home subscription program, introduced in late
October 2002, had over 120 schools participating for a total of over 4,100
school-sponsored home subscriptions. This is an increase of approximately 70
schools and 2,150 subscriptions since December 31, 2002. These
school-sponsored home subscriptions correspond to annual recurring revenue of
$86,000 as of March 31, 2003. As of March 31, 2003, the Company had over 850
home subscribers, 310 more than at December 31, 2002. The home subscribers
subscriptions correspond to recurring annual revenue of $89,000, of which
$24,000 was recorded as revenue in the quarter ended March 31, 2003. The total
number of annual SmartMusic subscriptions as of March 31, 2003 was over 9,200,
generating an annual run rate (total revenue to be earned on subscriptions over
a twelve-month period) of $336,000 as of March 31, 2003, an increase of 45%
over the run rate as of December 31, 2002 and 740% over the run rate as of
March 31, 2002. SmartMusic subscription revenues of $68,000 were recognized in
the quarter ended March 31, 2003, an increase of 53% over the quarter ended
December 31, 2002 and 1,092% over the quarter ended March 31, 2002. In
addition, deferred SmartMusic subscription revenue coming from the new
subscription programs, to be recognized over the balance of the current
subscription period, was $216,000 as of March 31, 2003 compared to $34,000 at
March 31, 2002, an increase of $182,000, or 535%.

Gross Profit.Gross profit of $1,275,000 for the quarter ended March 31,
2003 was $302,000, or 19%, lower than for the quarter ended March 31, 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 attributed to a lower gross margin sales mix.

Selling and Marketing Expenses.Selling and marketing expenses were
$1,041,000 for the first quarter ended March 31, 2003, a 13% increase from
selling and marketing expenses of $922,000 for the quarter ended March 31,
2002. The increase is primarily related to increased sales, marketing, and
technical support efforts for the SmartMusic subscription product.

9



---



##### Table of Contents



Increased efforts have also been allocated towards Finale notation sales
in international markets.

Website Development Expenses.Website development expenses were $67,000
for the quarter ended March 31, 2003, a 79% decrease from website development
expenses of $319,000 for the quarter ended March 31, 2002. Website development
expenses consist primarily of expenses related to improvement of the design and
development of additional features for the Coda 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 will increase as Minneapolis
resources are added, although at reduced levels.

Content and Product Development Expenses.Content and product development
expenses of $557,000 for the quarter ended March 31, 2003 were $13,000, or 2%,
lower than the quarter ended March 31, 2002. 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
of $1,003,000 for the quarter ended March 31, 2003 were $201,000, or 17%, lower
than the quarter ended March 31, 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.

Net Loss from Operations. The Company recorded a net loss from operations
of $1,393,000 for the quarter ended March 31, 2003, compared with a net loss of
$1,429,000 for the quarter ended March 31, 2002. Lower gross profit of
$302,000 was offset by a reduction in operating expenses of $347,000.

Interest Expense, Net.The Company had interest expense of $726,000, net
of $5,000 interest income for the quarter ended March 31, 2003. 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).

Cumulative Effect of Change in Accounting Principle. The Company recorded
in the first quarter of 2002 a cumulative effect of accounting principle charge
of $11,500,000 relating to the goodwill generated from the reverse merger of
Coda and Net4Music on October 19, 2000 (See Note 2).

Net Loss. The Company recorded a net loss of $2,121,000 or $0.78 per basic
and diluted share for the quarter ended March 31, 2003 compared to a net loss
of $12,929,000 or $5.58 per basic and diluted share for the quarter ended March
31, 2002. The decrease in net loss is attributed to the cumulative effect of
accounting change described above. The weighted average common shares for the
quarter ended March 31, 2003 also increased by 407,363 shares, or 18%, compared
to the quarter ended March 31, 2002 due to the bridge loan and private
placement

10



---



##### Table of Contents



equity conversion described in Note 5 of the Consolidated Financial
Statements.

Liquidity and Capital Resources.Net cash used in operating activities
totaled $1,387,000 for the three months ended March 31, 2003 compared to
$1,006,000 of cash used for operating activities in the three months ended
March 31, 2003. The increase in cash used for operating activities can be
attributed primarily to an increase in accounts receivable and decrease in
accrued expenses. Accounts receivable are higher due to large distributor
purchases at the end of March and the timing of receivables collections.
Accrued expenses and the reserve for product returns were reduced by $404,000
in the quarter ended March 31, 2003, $276,000 more than the reduction in the
quarter ended March 31, 2002. The primary factors were payment of France
accrued closing costs, timing of audit fees, larger bonus payments partly due
to foreign currency translation differences, and payout of France unused
vacation and taxes triggered by staff reductions.

In total, Company cash increased by $556,000 in the quarter ending March
31, 2003 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 lease 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 Company has taken steps to reduce costs and
believes the existing cash will be sufficient to finance operations through
2003 and until the Company achieves positive cash flow.




ITEM 3. CONTROLS AND PROCEDURES

(a)  Evaluation of disclosure controls and procedures. Our chief executive
officer and chief financial officer, after evaluating the effectiveness of the
Companys disclosure controls and procedures (as defined in the Securities
Exchange Act of 1934 Rules 13a-14c and 15-d-14(c)) as of a date (the 
Evaluation Date) within 90 days before the filing date of this quarterly
report, have concluded that as of the Evaluation Date, our disclosure controls
and procedures were adequate and designed to ensure that material information
relating to us and our consolidated subsidiary would be made known to them by
others within those entities.

(b)  Changes in internal controls. There were no significant changes in our
internal controls or to our knowledge, in other factors that could
significantly affect our internal controls and procedures subsequent to the
Evaluation Date.

Cautionary Statements

This report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
discuss 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, our financial results, our business goals, the future of the
SmartMusic Studio program, sufficiency of and ability to obtain additional
capital, product development, market introductions, and sales efforts. Any
statement that is not a historical fact, including estimates, projections,
future trends and the outcome of events that have not yet occurred, are
forward-looking statements. Forward-looking statements cannot be guaranteed
and actual results may vary materially due to the uncertainties

11



---



##### Table of Contents



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; the success of our Internet business and accompaniment sales efforts;
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.




PART II. OTHER INFORMATION

|        |  |                   
|------- |  | ------------------
|Item 1. |  | Legal Proceedings:
|        |  |                   
|        |  | None              




|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item 2. |  | Changes in Securities: In February 2003, the Company
issued 1,033,074 additional shares of common stock in a
private placement. Of this amount, 707,823 shares were
issued at a price of $3.20, together with warrants to
purchase on equal number of shares at $3.20 per share. The
remaining 325,251 shares were issued at a price of $2.40
per share to holders of bridge loans issued in September
2002 that were converted concurrent with the private
placement, together with warrants to purchase an equal
number of shares at $0.50 per share. The private placement
was made in reliance upon exemptions from registration set
forth in Section 4(2) of the Securities Act of 1933, as
amended (the Act), and Regulation D adopted pursuant to
the Act.
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Item 3. |  | Defaults upon Senior Securities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        |  | None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               




|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item 4. |  | Submission of Matters to a Vote of Security Holders:As described more
fully in Note 5 to the Companys unaudited condensed consolidated
financial statements in this report, on February 24, 2003 the Company held
a special meeting of shareholders. At the special meeting, shareholders
of record as of January 6, 2003 were asked to approve the private sale of
up to 1,996,236 shares of common stock to various investors, including
existing shareholders and management of the Company. Shareholders
approved the sale of the securities by a vote of 1,130,753 in favor,
78,777 against, 2,740 abstaining and 0 broker non-votes. A total of
1,212,270 shares,

12



---



##### Table of Contents



|        |  |                                                                                                                                                                 
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |  | or 55.9%, of shares entitled to vote were represented at the special
meeting. No other matters were presented for a vote of shareholders
at the special meeting.
|        |  |                                                                                                                                                                 
|Item 5. |  | Other Information:                                                                                                                                              
|        |  |                                                                                                                                                                 
|        |  | None                                                                                                                                                            




|        |  |                                                                                                                      
|------- |  | ---------------------------------------------------------------------------------------------------------------------
|Item 6. |  | Exhibits and Reports on Form 8-K                                                                                     
|        |  |                                                                                                                      
|        |  | (a) Exhibits: See the attached exhibit index.                                                                        
|        |  |                                                                                                                      
|        |  | (b) Reports on Form 8-K: No reports on Form 8-K were filed by the
registrant during the quarter ended March 31, 2003.






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 May 12, 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   

13



---



##### Table of Contents






Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Philip Sean Lafleur, Chief Executive Officer, certify that:

1.     I have reviewed this quarterly report on Form 10-QSB of MakeMusic!
Inc.;

2.     Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3.     Based on my knowledge, the financial statements, and other financial
information included in the quarterly report, fairly present in all material
respects the financial condition, results of operation and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:



| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;



| |                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) Evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filling date of this
quarterly report (the Evaluation Date); and



| |                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5.     The registrants other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):



| |                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and



| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and

6.     The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|      |  |              |  |     |  |                                                
|----- |  | ------------ |  | --- |  | -----------------------------------------------
|Date: |  | May 12, 2003 |  | By: |  | /s/ Philip Sean
Lafleur
Chief Executive Officer

14



---



##### Table of Contents



Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Barbara S. Remley, Chief Financial Officer, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-QSB of MakeMusic!
Inc.;                                                                                                                                                                                                                                                      
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other
financial information included in the quarterly report, fairly present
in all material respects the financial condition, results of operation
and cash flows of the registrant as of, and for, the periods presented
in this quarterly report;                     
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                         

a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;

b) Evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filling date of this
quarterly report (the Evaluation Date); and

c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;



|5. |  | The registrants other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrants auditors and
the audit committee of registrants board of directors (or persons
performing the equivalent functions):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and



|6. |  | The registrants other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|      |  |              |  |     |  |                                              
|----- |  | ------------ |  | --- |  | ---------------------------------------------
|Date: |  | May 12, 2003 |  | By: |  | /s/ Barbara S.
Remley
Chief Financial Officer

15



---



##### Table of Contents






EXHIBIT INDEX
 
Form 10-QSB
 
Quarter ended March 31, 2003

|            |  |                                                                                                    
|----------- |  | ---------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                        
|            |  |                                                                                                    
|3.1         |  | Amended and Restated Articles of Incorporation.                                                    
|            |  |                                                                                                    
|99.1        |  | Certification of Chief Executive Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|            |  |                                                                                                    
|99.2        |  | Certification of Chief Financial Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.

16