SmartMusic subscriptions grow 57%

50% Increase in SmartMusic Revenue

8% Increase in Total Revenue

MINNEAPOLIS–(EMWNews)–MakeMusic, Inc. (Nasdaq: MMUS) today announced financial results for the

three months and six months ended June 30, 2008. Net revenues for the

three and six months ended June 30, 2008 were $2,601,000 and $6,223,000,

an 8% and 10% increase, respectively, compared to $2,403,000 and

$5,674,000 for the same periods last year. The company also announced

for the three and six months ended June 30, 2008 a net loss of $811,000

and $960,000, or $(0.17) and $(0.21) per basic and diluted share,

respectively. These results represent an increase over the reported net

loss of $705,000 and $869,000, or $(0.17) and $(0.22) per basic and

diluted shares, respectively, for the same periods last year.

The increase in net revenue during the second quarter and first half of

the year was attributable to continued growth in SmartMusic^®

revenue. SmartMusic revenue includes revenue from SmartMusic

subscriptions and accessories related to the SmartMusic product. Total

SmartMusic revenue increased by $288,000, or 50%, to $859,000 for the

three months ended June 30, 2008 compared to same period in 2007. Total

SmartMusic revenue for the six-month period ended June 30, 2008

increased by $582,000, or 50%, to $1,740,000 compared to the first six

months in 2007.

SmartMusic^®

subscriptions increased to 95,632 as of June 30, 2008, a 57% increase

over the June 30, 2007 subscription count of 61,028. As a result of the

increased base of subscriptions, SmartMusic subscription revenue

continues to represent an increasing share of the company’s revenue and

was $748,000 for the three months ended June 30, 2008, a 52% increase

over subscription revenue of $493,000 during the same period in 2007.

Subscription revenue was $1,449,000 for the six months ended June 30,

2008, a 49% increase over subscription revenue of $974,000 during the

same period in 2007.

Total schools using SmartMusic reached 8,165 as of June 30, 2008

compared to 6,205 as of June 30, 2007. Additionally, with the release of

SmartMusic 10.0 and SmartMusic Impact™ in

April 2007, the company began tracking and reporting Impact teachers.

Impact teachers are teachers who use Impact to deliver and manage

SmartMusic assignments to 50 or more students. As of June 30, 2008,

there were 538 Impact teachers and the average number of student

subscriptions per Impact teacher was 27. The number of SmartMusic site

licenses rose by 50 from March 31, 2008 through June 30, 2008, to reach

a total of 97 as of the end of the second quarter.

Commenting on second quarter results, Ron Raup, co-CEO, stated, “We

are pleased with the continued growth of our SmartMusic site licenses

and subscription sales. We continue to support this growth with ongoing

investment in repertoire development, especially targeting titles that

music directors are preparing for performance. During the second

quarter, we increased SmartMusic’s band and

orchestra content 30% by adding over two hundred full ensemble titles to

our SmartMusic repertoire. With the rising awareness of the benefits

SmartMusic and SmartMusic Impact offer today’s

music educator, we look forward to continued SmartMusic sales growth

during this fall’s back-to-school season.”

Notation revenue decreased by $123,000 to $1,625,000 when comparing the

three-month periods ended June, 2008 and 2007, and decreased by $120,000

to $4,182,000 when comparing the six-month periods ended June 30, 2008

and 2007. Notation revenue decreases are due to product release cycles.

Notation revenue for the three and six months ended June 30, 2007

included the release of Allegro® 2007 as well

as higher sales from the release of Finale Songwriter™

which was released late in 2006. New versions of these products have

historically been released biannually.

Gross profit for the three-month period ended June 30, 2008 increased by

$166,000 to $2,159,000 compared to the three months ended June 30, 2007,

and improved by $407,000 to $5,274,000 for the six months ended June 30,

2008 compared to the same period in 2007. The increase in gross profit

for the three and six months ended June 30, 2008 is primarily due to the

increase in revenues.

Operating expenses for the three-and six-month periods ended June 30,

2008 were $2,991,000 and $6,264,000, respectively, a 10% and 8% increase

from $2,723,000 and $5,792,000 for the same periods last year,

respectively. Development expenses for the three and six months ended

June 30, 2008 increased by $145,000 and $280,000, respectively, when

compared to the same periods last year. Development expenses continue to

increase due to staff increases in order to achieve numerous development

goals including expansion of SmartMusic^repertoire.

Sales and marketing expenses increased by $94,000 and $179,000 for the

three- and six- month periods ended June 30, 2008, respectively, when

compared to the same periods last year due to expansion of the direct

sales initiative.

General and administrative expenses increased by $29,000 and $13,000 for

the three- and six- month periods ended June 30, 2008, respectively,

when compared to the same periods last year. General and administrative

costs increased primarily as a result of payroll and benefits related

expenses which were offset by decreased consulting expenses. Consulting

expenses were higher in 2007 due to Sarbanes Oxley 404 implementation

and the adoption of FIN48, which occurred in the first quarter of 2007.

During the six-month period ended June 30, 2008 the company used

$288,000 of cash in operating activities compared to $131,000 in the

comparable period of 2007. The increase in cash used in the first six

months of 2008 compared to the same period in 2007 is primarily the

result of the increased operating loss for the 2008 period. Net cash

used in investing activities was $1,276,000 for the six months ended

June 30, 2008, versus $412,000 cash used in investing activities for the

comparable period in 2007. The increase is primarily due to the increase

in capitalization of software development, mainly for repertoire

development. Net cash provided by financing activities was $269,000

during the first six months of 2008 and $497,000 during the first six

months of 2007. This change is primarily due to stock option and warrant

activity.

About MakeMusic, Inc.

MakeMusic®, Inc., a Minnesota corporation, is

a world leader in music technology whose mission is to enhance and

transform the experience of making, teaching, learning, and performing

music. For 20 years, Finale® has been the

industry standard in music notation software. It has transformed the

process by which composers, arrangers, musicians, teachers, students,

and publishers create, edit, audition, print, and publish musical

scores. Additionally, MakeMusic is the creator of SmartMusic®,

the complete practice tool for band, orchestra, and choir and SmartMusic

Impact™, a web-based grade book that makes it

easy to manage, grade, and document assignments for every student.

Further information about the company can be found at www.makemusic.com.

Cautionary Statements

Certain statements found in this release may constitute

forward-looking statements as defined in the U.S. Private Securities

Litigation Reform Act of 1995. Forward-looking statements reflect the

speaker’s current views with respect to

future events and financial performance and include any statement that

does not directly relate to a current or historical fact. Our

forward-looking statements in this release relate continued SmartMusic

sales growth during this fall’s back to

school season and our investment in repertoire development.

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. Examples of risks and uncertainties for

MakeMusic include, but are not limited to, the impact of emerging and

existing competitors, our ability to hire and retain effective sales

agents and successfully implement our marketing and sales strategies,

errors in management estimates with respect to the seasonality of our

business, fluctuations in general economic conditions including

changes in discretionary spending, 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). Investors should not

consider any list of such factors to be an exhaustive statement of all

of the risks, uncertainties or potentially inaccurate assumptions

investors should take into account when making investment decisions.

Shareholders and other readers should not place undue reliance on “forward-looking

statements,” as such statements speak only as

of the date of this release. We do not intend to update publicly or

revise any forward-looking statements.

MakeMusic, Inc.
Condensed Statements of Operations
(In thousands of U.S. dollars, except share and per share data)
(Unaudited)
		3 Months								6 Months
		Ended June 30,								Ended June 30,
			2008				2007				2008				2007
Notation revenue		$	1,625			$	1,748			$	4,182			$	4,302
SmartMusic revenue			859				571				1,740				1,158
Other revenue			117				84				301				214
NET REVENUE			2,601				2,403				6,223				5,674
COST OF REVENUES			442				410				949				807
GROSS PROFIT			2,159				1,993				5,274				4,867
OPERATING EXPENSES:
Development expenses			1,171				1,026				2,284				2,004
Selling and marketing expenses			965				871				2,140				1,961
General and administrative expenses			855				826				1,840				1,827
Total operating expenses			2,991				2,723				6,264				5,792
LOSS FROM OPERATIONS			(832	)			(730	)			(990	)			(925	)
Other, net			27				25				36				57
Net loss before income tax			(805	)			(705	)			(954	)			(868	)
Income tax expense			6				0				6				1
Net loss		$	(811	)		$	(705	)		$	(960	)		$	(869	)
Loss per common share:
Basic			(0.17	)			(0.17	)			(0.21	)			(0.22	)
Diluted			(0.17	)			(0.17	)			(0.21	)			(0.22	)
Weighted average common shares outstanding:
Basic			4,634,529				4,109,392				4,605,993				4,074,962
Diluted			4,634,529				4,109,392				4,605,993				4,074,962

MakeMusic, Inc.
Condensed Balance Sheets
(In thousands of U.S. dollars, except share data)
Assets		June 30,				December 31,
		2008				2007
		(Unaudited)
Current assets:
Cash and cash equivalents		$	4,746			$	6,041
Accounts receivable (net of allowance of $37 and $38 in
2008 and 2007, respectively)			1,055				1,491
Inventories			451				332
Prepaid expenses and other current assets			294				211
Total current assets			6,546				8,075
Property and equipment, net			815				730
Capitalized software development costs, net			2,209				1,418
Goodwill			3,630				3,630
Other non-current assets			18				29
Total assets			13,218				13,882
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of capital lease obligations			59				57
Accounts payable			413				427
Accrued compensation			1,089				1,131
Other accrued liabilities			180				184
MakeMusic, Inc. Karen L. VanDerBosch, 952-906-3690 Chief Financial Officer [email protected] Major Newsire & Press Release Distribution with Basic Starting at only $19 and Complete OTCBB / Financial Distribution only $89 Get Unlimited Organic Website Traffic to your Website  TheNFG.com now offers Organic Lead Generation & Traffic Solutions