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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

|           |  |                                                                                  
|---------- |  | ---------------------------------------------------------------------------------
|(Mark One) | 
|           |  | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
|           |  | For the quarterly period ended March 31, 2002                                    
|           |  |                                                                                  
|           |  | Transition report under Section 13 or 15(d) of the Exchange Act                  
|           |  | For the transition period from     to                                            

|                       |         | 
|---------------------- | ------- | 
|Commission file number | 0-26192 | 
|                       |         | 

Net4Music Inc.

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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

(952) 937-9611



---

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



| |           
| | ----------
| | Yes X   No

As of April 25, 2002, there were 21,675,122 shares of Common Stock outstanding.

Transitional Small Business Disclosure Format (check one):



| |           
| | ----------
| | Yes
   NoX

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|                                                     |  |  |  |  |  |  |  | 
|---------------------------------------------------- |  |  |  |  |  |  |  | 
|Condensed Consolidated Balance Sheets               
|Consolidated Statements of Operations               
|Consolidated Statements of Cash Flows               
|Notes to Condensed Consolidated Financial Statements
|SIGNATURES                                          



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Net4Music Inc.
d/b/a MakeMusic! Inc.
Condensed Consolidated Balance Sheets(In thousands of U.S. dollars)

|                                                  |                                                |   |             |         |   |              |        |         |  
|------------------------------------------------- | ---------------------------------------------- | - | ----------- | ------- | - | ------------ | ------ | ------- | -
|                                                  |                                                |   | March 31,   |         |   | December 31, |       
|                                                  |                                                |   | 2002        |         |   | 2001         |       
|                                                  |                                                |   |             |         |   |              |       
|                                                  |                                                |   | (unaudited) |         |   | (Note)       |       
|Assets                                            |                                                |   |             |         |   |              |        |        
|Current assets:                                   |                                                |   |             |         |   |              |        |        
|                                                  | Cash and cash equivalents                      |   | $           | 2,095   |   |              | $      | 3,258   |  
|                                                  | Accounts receivable                            |   |             | 548     |   |              |        | 640     |  
|                                                  | Inventories                                    |   |             | 441     |   |              |        | 391     |  
|                                                  | Value added tax receivable                     |   |             | 143     |   |              |        | 172     |  
|                                                  | Prepaid expenses and other current assets      |   |             | 289     |   |              |        | 341     |  
|                                                  |                                                |   |             |         |   |             
|Total current assets                              |                                                |   | 3,516       |         |   |              | 4,802  |        
|Property and equipment, net                       |                                                |   | 1,027       |         |   |              | 1,099  |        
|Goodwill, net                                     |                                                |   | 5,830       |         |   |              | 17,330 |        
|Intangible assets, net                            |                                                |   | 3,859       |         |   |              | 4,380  |        
|Other non-current assets                          |                                                |   | 1,105       |         |   |              | 981    |        
|                                                  |                                                |   |             |         |   |             
|Total assets                                      |                                                | $ | 15,337      |         |   | $            | 28,592 |        
|                                                  |                                                |   |             |         |   |             
|Liabilities and shareholders equity              |                                                |   |             |         |   |              |        |        
|Current liabilities:                              |                                                |   |             |         |   |              |        |        
|                                                  | Accounts payable                               |   | $           | 562     |   |              | $      | 749     |  
|                                                  | Accrued expenses and other current liabilities |   |             | 911     |   |              |        | 1,095   |  
|                                                  | Current portion of long-term debt              |   |             | 289     |   |              |        | 254     |  
|                                                  | Current portion of capital lease obligations   |   |             | 73      |   |              |        | 172     |  
|                                                  | Reserve for product returns                    |   |             | 217     |   |              |        | 167     |  
|                                                  | Deferred Revenue                               |   |             | 63      |   |              |        | 63      |  
|                                                  |                                                |   |             |         |   |             
|Total current liabilities                         |                                                |   | 2,115       |         |   |              | 2,500  |        
|Long-term debt, net of current portion            |                                                |   | 348         |         |   |              | 354    |        
|Capital lease obligations, net of current portion |                                                |   | 13          |         |   |              | 10     |        
|Shareholders equity:                             |                                                |   |             |         |   |              |        |        
|                                                  | Common stock                                   |   |             | 217     |   |              |        | 209     |  
|                                                  | Additional paid-in capital                     |   |             | 57,609  |   |              |        | 57,686  |  
|                                                  | Subscription shares receivable                 |   |             | (23     | ) |              |        | (73     | )
|                                                  | Accumulated deficit                            |   |             | (43,996 | ) |              |        | (31,067 | )
|                                                  | Accumulated other comprehensive income         |   |             | (227    | ) |              |        | (277    | )
|                                                  | Deferred compensation                          |   |             | (719    | ) |              |        | (750    | )
|                                                  |                                                |   |             |         |   |             
|Total shareholders equity                        |                                                |   | 12,861      |         |   |              | 25,728 |        
|                                                  |                                                |   |             |         |   |             
|Total liabilities and shareholders equity        |                                                | $ | 15,337      |         |   | $            | 28,592 |        
|                                                  |                                                |   |             |         |   |             

NOTE:The Balance Sheet at December 31, 2001 has been derived from the audited
financial statements at that date but does not include any of the information
and footnotes required by General Accepted Accounting Principles for complete
financial statements.

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Net4Music Inc.
d/b/a MakeMusic! Inc.
Consolidated Statements of Operations(In thousands of U.S. dollars, except per share data)

(Unaudited)

|                                                              |                                          |   |                         |       |  |      |            |       |  
|------------------------------------------------------------- | ---------------------------------------- | - | ----------------------- | ----- |  | ---- | ---------- | ----- | -
|                                                              |                                          |   | Quarter ended March 31, |      
|                                                              |                                          |   | 2002                    |       |  | 2001 |           
|                                                              |                                          |   |                         |       |  |      |           
|Net revenues                                                  |                                          | $ | 1,879                   |       |  | $    | 1,893      |      
|                                                              | Cost of revenues                         |   |                         | 302   |  |      |            | 412   |  
|                                                              |                                          |   |                         |       |  |     
|Gross profit                                                  |                                          |   | 1,577                   |       |  |      | 1,481      |      
|Operating expenses                                            |                                          |   |                         |       |  |      |            |      
|                                                              | Website development expenses             |   |                         | 319   |  |      |            | 342   |  
|                                                              | Content and product development expenses |   |                         | 570   |  |      |            | 714   |  
|                                                              | Selling and marketing expenses           |   |                         | 922   |  |      |            | 1,816 |  
|                                                              | General and administrative expenses      |   |                         | 1,204 |  |      |            | 2,141 |  
|                                                              | Restructuring charges                    |   |                         |      |  |      |            | 645   |  
|                                                              |                                          |   |                         |       |  |     
|                                                              |                                          |   | 3,015                   |       |  |      | 5,658      |      
|                                                              |                                          |   |                         |       |  |     
|Loss from operations                                          |                                          |   | (1,438                  | )     |  |      | (4,177     | )    
|                                                              | Interest expense                         |   |                         | 10    |  |      |            | (11   | )
|                                                              | Interest income                          |   |                         |      |  |      |            | 59    |  
|                                                              | Foreign exchange loss                    |   |                         |      |  |      |            | 1     |  
|                                                              |                                          |   |                         |       |  |     
|Loss before income tax                                        |                                          |   | (1,428                  | )     |  |      | (4,128     | )    
|Income tax                                                    |                                          |   | (1                      | )     |  |      | (1         | )    
|                                                              |                                          |   |                         |       |  |     
|Net loss before cumulative effect of
accounting change        |                                          | $ | (1,429                  | )     |  | $    | (4,129     | )    
|Cumulative effect of change in accounting
principle (FAS 142) |                                          |   | (11,500                 | )     |  |      |           |      
|                                                              |                                          |   |                         |       |  |     
|Net loss                                                      |                                          | $ | (12,929                 | )     |  | $    | (4,129     | )    
|                                                              |                                          |   |                         |       |  |     
|Basic and diluted loss per common share                       |                                          | $ | (0.56                   | )     |  | $    | (0.20      | )    
|Weighted average common shares outstanding                    |                                          |   | 23,167,995              |       |  |      | 20,868,757 |      

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MakeMusic Inc.
d/b/a MakeMusic! Inc.
Consolidated Statements of Cash Flows(In thousands of U.S. dollars)

(Unaudited)

|                                                                            |                                                         |                                           |         |                         |      |   |        |     |        |  
|--------------------------------------------------------------------------- | ------------------------------------------------------- | ----------------------------------------- | ------- | ----------------------- | ---- | - | ------ | --- | ------ | -
|                                                                            |                                                         |                                           |         | Quarter ended March 31, |     
|                                                                            |                                                         |                                           |         | 2002                    |      |   | 2001   |    
|                                                                            |                                                         |                                           |         |                         |      |   |        |    
|Operating activities                                                        |                                                         |                                           |         |                         |      |   |        |    
|Net loss                                                                    |                                                         | $                                         | (12,929 | )                       |      | $ | (4,129 | )  
|Adjustments to reconcile net loss to net cash used in
operating activities: |                                                         |                                           |         |                         |      |   |        |    
|                                                                            | Amortization of intangible assets                       |                                           |         | 281                     |      |   |        | 956 |       
|                                                                            | Depreciation and amortization of property and
equipment |                                           |         | 264                     |      |   |        | 179 |       
|                                                                            | Amortization of deferred compensation                   |                                           |         | 42                      |      |   |        | 39  |       
|                                                                            | Impairment of goodwill                                  |                                           |         | 11,500                  |      |   |        |    |       
|                                                                            | Restructuring                                           |                                           |         | (64                     | )    |   |        | 313 |       
|                                                                            | Issuance of stock options and warrants for services     |                                           |         | 3                       |      |   |        | 152 |       
|                                                                            | Increase (decrease) in cash from:                       |                                           |         |                         |      |   |        |     |       
|                                                                            |                                                         | Accounts receivable                       |         |                         | 117  |   |        |     | 4      |  
|                                                                            |                                                         | Inventories                               |         |                         | (50  | ) |        |     | 74     |  
|                                                                            |                                                         | Prepaid expenses and other current assets |         |                         | 74   |   |        |     | (64    | )
|                                                                            |                                                         | Accounts payable                          |         |                         | (180 | ) |        |     | 81     |  
|                                                                            |                                                         | Accrued expenses and other liabilities    |         |                         | (64  | ) |        |     | (1,129 | )
|                                                                            |                                                         |                                           |         |                         |      |  
|Net cash used in operating activities                                       |                                                         |                                           | (1,006  | )                       |      |   | (3,524 | )  
|Net cash provided (used) in investing activities                            |                                                         |                                           |         |                         |      |   |        |    
|Capitalized development cost and purchases of property
and equipment        |                                                         |                                           | (116    | )                       |      |   | (93    | )  
|Net purchases of short-term investments                                     |                                                         |                                           |        |                         |      |   | 517    |    
|                                                                            |                                                         |                                           |         |                         |      |  
|Net cash provided (used) in investing activities                            |                                                         |                                           | (116    | )                       |      |   | 424    |    
|Net cash (used) provided by financing activities                            |                                                         |                                           |         |                         |      |   |        |    
|Issuance of shares                                                          |                                                         |                                           |        |                         |      |   | 17     |    
|Collections of notes receivables from issuance of shares                    |                                                         |                                           | 50      |                         |      |   |       |    
|Increase in long-term debt                                                  |                                                         |                                           | 40      |                         |      |   |       |    
|Payments on long-term debt                                                  |                                                         |                                           | (95     | )                       |      |   | (148   | )  
|                                                                            |                                                         |                                           |         |                         |      |  
|Net cash used by financing activities                                       |                                                         |                                           | (5      | )                       |      |   | (131   | )  
|Effect of exchange rate changes on cash                                     |                                                         |                                           | (36     | )                       |      |   | (284   | )  
|                                                                            |                                                         |                                           |         |                         |      |  
|Net decrease in cash and cash equivalents                                   |                                                         |                                           | (1,163  | )                       |      |   | (3,515 | )  
|Cash and cash equivalents, beginning of period                              |                                                         |                                           | 3,258   |                         |      |   | 9,090  |    
|                                                                            |                                                         |                                           |         |                         |      |  
|Cash and cash equivalents, end of period                                    |                                                         | $                                         | 2,095   |                         |      | $ | 5,575  |    
|                                                                            |                                                         |                                           |         |                         |      |  
|Supplemental disclosure of cash flow information                            |                                                         |                                           |         |                         |      |   |        |    
|Interest paid                                                               |                                                         | $                                         | 2       |                         |      | $ | 173    |    
|                                                                            |                                                         |                                           |         |                         |      |  

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Net4Music Inc.
d/b/a 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 which 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, 2002 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 2001 financial statements, as previously reported, have been
reclassified to conform to the 2002 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 has recorded $11,500,000 goodwill impairment in the income statement in the
Cumulative effect of change in accounting principle.                                                                                                                                                                                                                                                                                                                                         
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       |  | Goodwill resulting from the reverse merger with Coda in 2000 consist of the following (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

|                              |  |           |       |  |              |   |        | 
|----------------------------- |  | --------- | ----- |  | ------------ | - | ------ | 
|                              |  | March 31, |       |  | December 31, |  
|                              |  | 2002      |       |  | 2001         |  
|                              |  |           |       |  |              |  
|Goodwill                      |  | $         | 8,190 |  |              | $ | 19,690 | 
|Less accumulated amortization |  |           | 2,360 |  |              |   | 2,360  | 
|                              |  |           |       |  |              |  
|                              |  | $         | 5,830 |  |              | $ | 17,330 | 
|                              |  |           |       |  |              |  

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| |  | With the adoption of FAS 142 the Company ceased amortization of goodwill
as of January 1, 2002. The following table presents the results of the
Company for all periods presented on a comparable basis (in thousands):
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                    |  |                         |         |   |      |   |        |  
|--------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------ | -
|                                                    |  | Quarter ended March 31, |        
|                                                    |  | 2002                    |         |   | 2001 |  
|                                                    |  |                         |         |   |      |  
|Reported net loss attributed to
common shareholder  |  | $                       | (12,929 | ) |      | $ | (4,129 | )
|Add back goodwill amortization                      |  |                         |        |   |      |   | 492    |  
|                                                    |  |                         |         |   |      |  
|Adjusted net loss attributed to
common shares       |  | $                       | (12,929 | ) |      | $ | (3,637 | )
|                                                    |  |                         |         |   |      |  
|Basic and diluted net loss per share:               |  |                         |         |   |      |   |        |  
|Reported net loss attributed to
common shareholders |  | $                       | (0.56   | ) |      | $ | (0.20  | )
|Goodwill amortization                               |  |                         |        |   |      |   | 0.02   |  
|                                                    |  |                         |         |   |      |  
|Adjusted net loss attributed to
common shareholders |  | $                       | (0.56   | ) |      | $ | (0.18  | )
|                                                    |  |                         |         |   |      |  

|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 3 |  | Restructuring Charges. In 2001, the Company announced restructuring plans to eliminate redundant
responsibilities and cut excess costs and reduced the digital sheet music operations in its European
and Madagascar locations. As the result of these plans to reduce operating costs, Net4Music recorded
a restructuring charge of $1,172,000 in 2001. The remaining accrual relating to the restructure
charge is $97,000. The following table displays a roll-forward of the liabilities for restructuring
charges from December 31, 2001 to March 31, 2002 (in
thousands).

|                                         |  |              |         |  |       |   |        |      |           |   |        | 
|---------------------------------------- |  | ------------ | ------- |  | ----- | - | ------ | ---- | --------- | - | ------ | 
|                                         |  | December 31, |         |  |       |   |        |      | March 31, |  
|                                         |  | 2001         |         |  | Usage |   |        | 2002 |          
|                                         |  |              |         |  |       |   |        |      |          
|Severance and related
personnel expenses |  | $            | 67,000  |  |       | $ | 51,000 |      |           | $ | 16,000 | 
|Lease Termination                        |  |              | 94,000  |  |       |   | 13,000 |      |           |   | 81,000 | 
|                                         |  |              |         |  |       |   |        |      |          
|Total                                    |  | $            | 161,000 |  |       | $ | 64,000 |      |           | $ | 97,000 | 
|                                         |  |              |         |  |       |   |        |      |          

|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                            
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 4 |  | Loss Per Common Share. Basic and diluted net loss per common share was computed by dividing the net
loss by the weighted average number of shares of Common Stock outstanding plus 1,492,873 and 2,405,825
for the quarter ended March 31, 2002 and 2001, respectively. These shares are issuable under the put
and call agreement from the Coda reverse acquisition and deemed outstanding for purposes of loss per
share.
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                            
|Note 5 |  | Income Tax Expense. Because of net operating losses the Company has not incurred income tax expense.                                                                                                                                                                                                                                                                                                                       

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|       |  |                                                                                                                                  
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------
|Note 6 |  | Comprehensive Income (Loss). The effect of foreign currency translation is a $50,000 income for the
quarter ended March 31, 2002.

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

General

Net4Music Inc. (Net4Music or the Company), a Minnesota corporation doing
business as MakeMusic! Inc., is a global supplier of software, services and
integrated solutions for musicians. Providing music notation software,
intelligent accompaniments and immediate access to digital sheet music, the
Company enhances music publishing, education, distribution and performance for
musicians across the globe.

The Company has incurred losses from operations since inception and has an
accumulated deficit of $43,996,000 as of March 31, 2002.

Results of operations

For the period ended March 31, 2002 compared to the period ended March 31, 2001

Net Revenues.Net revenues of $1,879,000 for the quarter ended March 31, 2002
were a $14,000 decrease over the quarter ended March 31, 2001. The slight
decrease is due to the decrease in SmartMusic Studio software and accompaniment
sales, which were not promoted by the Company while it developed and launched
the SmartMusic Studio subscription service. The SmartMusic Studio academic
version of the subscription service was introduced November 2001 and the home
version is scheduled to be introduced in late summer 2002. As a result, we
expect SmartMusic Studio revenues in late 2002 and in 2003 to begin increasing
from current levels. Notation sales increased 8% over the prior year quarter
ended March 31, 2001.

Gross profit.Gross profit of $1,577,000 for the quarter ended March 31, 2002
was a $96,000 or 6.5% increase over the quarter ended March 31, 2001. The
increase reflects the Companys strong notation product mix. Gross margins for
these products are higher than those for the SmartMusic Studio software and
accompaniment products.

Website development expenses.Website development expenses of $319,000 for the
quarter ended March 31, 2002 were a $23,000 or 6.7% decrease over the quarter
ended March 31, 2001. Prior year expenses reflect initial website development
of the sheet music website, while current year website development expense
consists primarily of expenses related to improvement of the design and
development of additional features for the SmartMusic Studio online
subscription service and other underlying technology infrastructure. In the
first quarter of 2001, the Company announced a restructuring of its operation
shifting personnel to focus into SmartMusic Studio subscription service
development, which has full impact in first quarter 2002 as opposed to 2001.

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Content and Product Development Expenses.Content and product development
expenses of $570,000 for the quarter ended March 31, 2002, were a $144,000 or
20% decrease over the quarter ended March 31, 2001. The decrease is due to the
discontinued sheet music content operations in Lyon and Madagascar, offset by
additional personnel and related costs for software and repertoire development
in preparation for deployment of the SmartMusic Studio subscription service.

Selling and Marketing Expenses.Selling and marketing expenses of $922,000 for
the quarter ended March 31, 2002, were $912,000 or a 50% decrease over the
quarter ended March 31, 2001. The decrease reflects the full impact of the
reduced workforce relating to the sheet music operations as a result of the
restructure announced on March 16, 2001, partially offset by the increase in
personnel costs to market Finale, PrintMusic and the new SmartMusic Studio
subscription service.

General and Administrative Expenses.General and administrative expenses of
$1,204,000 for the first quarter ended March 31, 2002, were $937,000 or a 44%
decrease over the quarter ended March 31, 2001. The decrease relates to actual
expense reductions as a result of the 2001 restructurings, the reduction of
amortization of license rights due to the write-off of $1.3 million license
rights in the 3rd and 4th quarter of 2001, and the non-amortization of goodwill
resulting from the adoption of FASB 142, Goodwill and Other Intangible Assets
(See Note 2).

Interest Income, Net.The Company had interest income of $10,000, net of
$1,000 interest expense for the quarter ended March 31, 2002. Net interest
income decreased $38,000, or 79%, when compared to the quarter ended March 31,
2001. Decreased interest income relates to lower cash investments.

Net Loss Before Cumulative Effect of Accounting Principle. The Company recorded
a net loss before cumulative effect of accounting principle of $1,428,000 for
the quarter ended March 31, 2002, compared with a net loss of $4,129,000 for
the quarter ended March 31, 2001. The reduced level of net loss is attributed
to factors that affect revenues and expenses as described above.

Cumulative Effect of Accounting Principle. The Company has recorded a
cumulative effect of accounting principle change 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 $12,928,000 or $.56 per basic and
diluted share for the quarter ended March 31, 2002 compared to net loss of
$4,129,000 or $0.20 per basic and diluted share for the quarter ended March 31,
2001.

Liquidity and Capital Resources.Net cash used in operating activities totaled
$1,006,000 for the quarter ended March 31, 2002 as compared to $3,524,000 of
cash used for operating activities in the quarter ended March 31, 2001, a 70%
decrease. The significant reduction in cash usage from operations for the three
months period ended March 31, 2002 compared to 2001 is attributed to the
closing the New York facility and the reduction of European operations, which
included sales and marketing expense reductions; personnel reductions for sales
and marketing, website development and content development; and general related
administrative expense

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reductions. Cash usage was also affected by build up of inventories and the
pay down of accrued expenses and other liabilities, partially offset by more
aggressive accounts receivable collection. In addition, the Company made
capital investments of $116,000 in the quarter ended March 31, 2002, a 25%
increase from the quarter ended March 31, 2001 related to the website
development expenses for the SmartMusic Studio subscription service.

The Company has continued to experience operating losses and a resulting
reduction in cash resources. Management has taken steps to reduce costs
significantly through workforce reductions and other expense reductions. Based
on these changes management believes that existing cash, together with funds
generated by product sales, will be sufficient to fund operations through the
end of the first quarter 2003. Management expects to seek additional equity
financing or further reduce expenses to provide cash resources beyond that
date.

Cautionary Statements

The Private Securities Litigation Reform Act of 1995 (the Reform Act)
provides a safe harbor for forward-looking statements made by us or on our
behalf. We have made, and may continue to make, various written or verbal
forward-looking statements with respect to business and financial matters,
including statements contained in this document, filings with the Securities
and Exchange Commission, and reports to stockholders. Forward-looking
statements provide current expectations or forecasts of future events and can
be identified by the use of terminology such as believe, estimate,
expect, intend, may, could, will, and similar words or expressions.
Net4Musics forward-looking statements generally relate to its growth strategy,
sufficiency of cash, financial results, product development and sales efforts.
Forward-looking statements cannot be guaranteed and actual results may vary
materially due to the uncertainties and risks, known and unknown, associated
with such statements. Net4Music undertakes no obligations to update any
forward-looking statements. Net4Music wishes to caution investors that many
important factors, in some cases have affected and in the future could affect
Net4Musics actual results of operations and cause such results to differ
materially from those anticipated in forward-looking statements made in this
document and elsewhere by or on behalf of Net4Music. These factors include,
but are not limited to, our need for additional capital; our dependence upon
new product development efforts, our Internet business and accompaniment sales;
maintaining license agreements with a limited number of publishers; the limited
and fluctuating sales of certain of our products; our expected continuing
operating losses; 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; the market volatility
of our stock; potential market delisting and other general business and
economic conditions. 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 risks, uncertainties or potentially inaccurate
assumptions.


9Table of Contents

PART 2. OTHER INFORMATION

|        |  |                                                      |  | 
|------- |  | ---------------------------------------------------- |  | 
|Item 1. |  | Legal Proceedings:                                  
|       
|        |  | None                                                
|        |  |                                                      |  | 
|Item 2. |  | Changes in Securities:                              
|        |  |                                                      |  | 
|        |  | None                                                
|        |  |                                                      |  | 
|Item 3. |  | Defaults upon Senior Securities:                    
|        |  |                                                      |  | 
|        |  | None                                                
|        |  |                                                      |  | 
|Item 4. |  | Submission of Matters to a Vote of Security Holders:
|        |  |                                                      |  | 
|        |  | None                                                
|        |  |                                                      |  | 
|Item 5. |  | Other Information:                                  
|        |  |                                                      |  | 
|        |  | None                                                
|        |  |                                                      |  | 
|Item 6. |  | Exhibits and Reports on Form 8-K                    



| | (a) |  | Exhibits:None                                                                                                   
| | --- |  | ----------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Reports on Form 8-K:No reports on Form 8-K were filed by the
registrant during the quarter ended March 31, 2002.

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##### Table of Contents






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 6, 2002 |  | MAKEMUSIC INC. |                                                                            
|     
|      |             |  |                | By:      s/ Philip Sean LafleurPhilip Sean Lafleur, Chief Executive Officer | 
|     
|      |             |  |                |                                                                             | 
|     
|      |             |  |                | And:    s/ Barbara S. RemleyBarbara S. Remley, Chief Financial Officer      | 

11