<PAGE>

                                    UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C. 20549

                                      FORM 10-Q

                 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934

                    For the quarterly period ended March 31, 1998

                                          OR

                ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the transition period from  _______ to _______

                            Commission File Number 0-27852

                             PLATINUM ENTERTAINMENT, INC.
                (Exact name of registrant as specified in its charter)

                    Delaware                       36-3802328
       (State or other jurisdiction of          (I.R.S. Employer
        incorporation or organization)          Identification No.)

                                2001 Butterfield Road
                            Downers Grove, Illinois 60515
             (Address of principal executive offices, including zip code)

                                    (630) 769-0033
                 (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 
                                  ----          ----

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:

  5,275,040 Shares of Common Stock, par value $.001 per share, at May 18, 1998

<PAGE>

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements.

PLATINUM ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
 

                                                                  MARCH 31          DECEMBER 31
                                                                    1998                1997
                                                                 (UNAUDITED)
ASSETS
Current assets:
<S>                                                               <C>                 <C>
   Cash                                                           $      15           $      11
   Accounts receivable, less allowances of
    $3,352 and $3,912, respectively                                  13,855              15,147
   Artist advances                                                    2,844               2,510
   Inventories, less allowances of $559
    and $590, respectively                                            5,160               4,997
   Other                                                                860                 948
                                                                  -----------------------------
Total current assets                                                 22,734              23,613

Artist advances, net of current amounts, less
   allowances of $13,409 and $12,936, respectively                      476                   -
Equipment and leasehold improvements, net                             1,213               1,079
Music catalog, less accumulated amortization of
   $980 and $784, respectively                                       18,624              18,820
Music publishing rights, less accumulated amortization
   of $354 and $308, respectively                                     3,623               3,519
Goodwill, less accumulated amortization of $346
   and $244, respectively                                             5,758               5,854
Equity investment in joint venture                                    2,638               2,468
Deferred financing fees, net                                            568                 631
Other                                                                 1,154               1,473
                                                                  -----------------------------
Total assets                                                      $  56,788           $  57,457
                                                                  -----------------------------
                                                                  -----------------------------

</TABLE>


                   See accompanying notes to financial statements.


                                          2

<PAGE>

PLATINUM ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>

                                                                   MARCH 31         DECEMBER 31
                                                                     1998              1997
                                                                 (UNAUDITED)
<S>                                                               <C>                 <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Revolving line of credit                                       $   2,200           $     800
   Current portion of bank debt                                       4,000               3,000
   Accounts payable                                                   4,267               4,256
   Accrued liabilities and other                                      2,461               3,423
   Reserve for future returns                                         4,564               6,301
   Royalties payable                                                  6,187               5,302
                                                                  -----------------------------
Total current liabilities                                            23,679              23,082

Bank debt, less current portion                                      16,000              17,000
Convertible subordinated debentures                                   5,000               5,000
                                                                  -----------------------------
Total liabilities                                                    44,679              45,082

Stockholders' equity:
Preferred Stock:
   Preferred Stock ($.001 par value); 10,000,000 shares
    authorized, no shares issued and outstanding                        -                   -  
   Series B Convertible Preferred Stock ($.001 par value);
    20,000 shares authorized, issued and outstanding                    -                   -  
   Series C Convertible Preferred Stock ($.001 par value);
    2,500 shares authorized, issued and outstanding                     -                   -  
Common Stock:
   Common Stock ($.001 par value); 40,000,000 shares authorized,
    5,275,040 shares issued and outstanding                               5                   5
Additional paid-in capital                                           58,808              58,216
Accumulated deficit                                                 (46,704)            (45,846)
                                                                  -----------------------------
Stockholders' equity                                                 12,109              12,375
                                                                  -----------------------------
Total liabilities and stockholders' equity                        $  56,788           $  57,457
                                                                  -----------------------------
                                                                  -----------------------------

</TABLE>
 

                    See accompanying notes to financial statements.


                                          3

<PAGE>

PLATINUM ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>

                                                                     QUARTER ENDED MARCH 31
                                                                --------------------------------
                                                                     1998               1997
                                                                           (UNAUDITED)
<S>                                                             <C>                 <C>
Gross product sales                                             $    13,665         $    13,027
Less: Returns and allowances                                         (3,500)             (4,304)
Less: Discounts                                                        (605)               (448)
                                                                --------------------------------
Net product sales                                                     9,560               8,275
Licensing, publishing and other revenues                                350                 336
                                                                --------------------------------
Net sales                                                             9,910               8,611

Cost of sales and services                                            5,527               3,927
                                                                --------------------------------

Gross profit                                                          4,383               4,684

Other operating expenses:
   Selling, general and administrative                                3,620               4,287
   Merger, restructuring and one-time costs                               -                 923
   Depreciation and amortization                                        495                 440
                                                                --------------------------------
                                                                      4,115               5,650
                                                                --------------------------------
Operating income                                                        268                (966)
Interest income                                                          19                   3
Interest expense                                                       (568)               (599)
Other financing costs                                                   (71)             (1,730)
Equity gain (loss)                                                      170                  (1)
                                                                --------------------------------
Net loss                                                               (182)             (3,293)

Less: Preferred dividend requirement                                   (675)                -  
                                                                --------------------------------

Loss applicable to common shares                                $      (857)        $    (3,293)
                                                                --------------------------------
                                                                --------------------------------
Basic and diluted loss per common share                         $     (0.16)        $     (0.64)

Weighted average number of common shares outstanding              5,275,040           5,171,439

</TABLE>
 

                   See accompanying notes to financial statements.


                                          4

<PAGE>

PLATINUM ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                     QUARTER ENDED MARCH 31
                                                                  -----------------------------
                                                                     1998               1997
                                                                           (UNAUDITED)
<S>                                                               <C>                 <C>
OPERATING ACTIVITIES
Net loss                                                          $    (858)          $  (3,293)
Adjustments to reconcile net loss to net cash used in
 operating activities:
   Charge to provision for future returns                             1,586                   -
   Charge to provision for doubtful accounts                            -                   250
   Charge to provision for unrecoupable artist balances                 473                 457
   Depreciation and amortization                                        495                 440
   Deferred financing cost amortization                                  70                 827
   Equity (gain) loss from joint venture                               (170)                -  
Changes in operating assets and liabilities:
   Accounts receivable                                                1,292                (373)
   Inventories                                                         (163)               (692)
   Artist advances                                                   (1,283)               (651)
   Accounts payable                                                      11              (1,266)
   Accrued liabilities and other                                       (962)                 82
   Reserve for future returns                                        (3,323)               (891)
   Royalties payable                                                    885                 455
   Other                                                                338                 710
                                                                  -----------------------------
Net cash used in operating activities                                (1,609)             (3,945)

INVESTING ACTIVITIES
Cash in escrow                                                          -                (1,750)
Cash paid for acquisition                                              (150)            (26,583)
Purchases of equipment and leasehold improvements                      (229)                (78)
                                                                  -----------------------------
Net cash used in investing activities                                  (379)            (28,411)

FINANCING ACTIVITIES
Net proceeds from revolving line of credit                            1,400               7,806
Proceeds from bank debt                                                 -                25,000
Preferred dividend requirement                                          675                 -  
Deferred financing costs, net                                           -                  (459)
Other                                                                   (83)                -  
                                                                  -----------------------------
Net cash provided by financing activities                             1,992              32,347
                                                                  -----------------------------

Net increase (decrease) in cash                                           4                  (9)
Cash, beginning of quarter                                               11                  18
                                                                  -----------------------------
Cash, end of quarter                                              $      15           $       9
                                                                  -----------------------------
                                                                  -----------------------------

</TABLE>


                   See accompanying notes to financial statements.


                                          5

<PAGE>

PLATINUM ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)


1.   BASIS OF PRESENTATION

The financial statements included herein are unaudited and have been prepared 
in accordance with generally accepted accounting principles for interim 
financial reporting and Securities and Exchange Commission ("Commission") 
regulations.  In the opinion of management, the financial statements reflect 
all adjustments (of a normal and recurring nature) which are necessary to 
present fairly the financial position, results of operations and cash flows 
for the interim periods presented.  These financial statements should be read 
in conjunction with the audited consolidated financial statements and notes 
thereto for the seven months ended December 31, 1997 of Platinum 
Entertainment, Inc. ("Company") included in the Transition Report on Form 
10-K filed with the Commission on May 20, 1998.  The interim results presented 
are not necessarily indicative of the results that may be expected for any 
future quarter or for the year ending December 31, 1998.

2.   BASIC AND DILUTED LOSS PER COMMON SHARE

Basic loss per common share is based upon the net loss applicable to common 
shares after preferred dividend requirements and upon the weighted average of 
common shares outstanding during the period.  Diluted loss per common share 
adjusts for the effect of convertible securities, stock options and warrants 
only in the periods presented in which such effect would have been dilutive.  
Such effect was not dilutive in any of the periods presented herein.

3.   DEBT

On December 12, 1997, the Company entered a Credit Agreement with Bank of
Montreal.  Under the terms of the Credit Agreement, the Company has
$20,000 in bank debt with a three year term, due in quarterly installments
beginning June 1, 1998, bearing interest at the bank's base rate plus 1.0% per
annum, and a $10,000 available revolving line of credit, due in three years and
bearing interest at the bank's base rate plus 1/2 of 1.0% per annum.  The
Company had drawn $2,200 against the available line of credit as of March 31,
1998.  Borrowings under the revolving line of credit are limited to the
Borrowing Base, as defined, which is based upon eligible accounts receivable and
inventory.  The Credit Agreement contains certain financial covenants and is
secured by substantially all of the Company's assets.  Effective March 31, 1998,
the Credit Agreement was amended to appoint Harris Trust and Savings Bank as the
lender.  All other terms remained substantially unchanged.

4.   PREFERRED STOCK

On February 28, 1998, the Series B Convertible Preferred Stock accrued a
dividend of $600 and the Series C Convertible Preferred  Stock accrued a
dividend of $75, which is equal to 12% of the initial cost of the Stocks.  


                                          6
<PAGE>

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

     The information in this section should be read together with the
consolidated financial statements and notes thereto that are included elsewhere
in this filing.

OVERVIEW

     The Company is a full-service music company that produces, licenses,
acquires, markets and distributes high quality recorded music for a variety of
musical formats.  The Company produces recorded music products in the Adult
Contemporary, Gospel, Country, Urban/Dance, Classical/Themed Productions and
Blues music formats, primarily under its River North Records, CGI Records,
Intersound and House of Blues Music Co. labels. 

     The Company records revenues for music products when such products are
shipped to retailers.  In accordance with industry practice, the Company's music
products are sold on a returnable basis.  The Company's allowance for future
returns is based upon its historical returns, SOUNDSCAN data and the return rate
of the Company's third-party distributor, PolyGram Group Distribution, Inc.  
It is the Company's policy to inventory all returned product and
resell such product at market value. 

     A significant recurring funding requirement of the Company is for artist
and repertoire ("A&R") expenses, which include recording costs and advances to
artists.  The Company makes substantial payments each period for recording costs
and advances in order to maintain and enhance its artist roster.  These costs
are recouped from the artists' royalties, to the extent possible, from future
album sales.  Artist advances are capitalized as an asset when the current
popularity and past performance of the artist provides a sound basis for
estimating the probable future recoupment of such advances from earnings
otherwise payable to the artist.

     The Company primarily distributes internationally by means of licensing
arrangements.  The Company's international licensing arrangements are on a
country-by-country basis.  Revenues derived from the licensing of recorded
masters are calculated as a percentage of retail sales by the licensee net of
returns and are recognized by the Company upon notification of retail sales net
of returns by the licensee.


                                          7
<PAGE>

RESULTS OF OPERATIONS

     The following table sets forth, as a percentage of gross revenues, certain
items that are included in the Company's statements of operations for the
periods reflected below.  Operating results for any period are not necessarily
indicative of results for any future periods.

<TABLE>
<CAPTION>

                                                                    QUARTER ENDED MARCH 31
                                                     ----------------------------------------------------
                                                            1998                              1997
                                                           (IN THOUSANDS, EXCEPT PERCENTAGE AMOUNTS)
<S>                                                  <C>             <C>           <C>             <C>
Total gross revenues . . . . . .                     $14,015        100.0%         $13,363         100.0%

Less: Returns and allowances . .                      (3,500)       -25.0%          (4,304)        -32.2%
Less: Discounts. . . . . . . . .                        (605)        -4.3%            (448)         -3.4%
                                                     --------                      --------

Total net revenues . . . . . . .                       9,910         70.7%           8,611          64.4%

Cost of sales and services . . .                       5,527         39.4%           3,927          29.4%
                                                     --------                      --------

Gross profit . . . . . . . . . .                       4,383         31.3%           4,684          35.0%

Other operating expenses:
Selling, general and
  administrative expenses. . . .                       3,620         25.8%           4,287          32.1%
Merger, restructuring and
  one-time costs . . . . . . . .                           -            -              923           6.9%
Depreciation and amortization. .                         495          3.5%             440           3.3%
                                                     --------                      --------
                                                       4,115         29.3%           5,650          42.3%
                                                     --------                      --------
Operating income . . . . . . . .                         268          2.0%            (966)         -7.3%
Interest income. . . . . . . . .                          19          0.1%               3             -
Interest expense . . . . . . . .                        (568)        -4.1%            (599)         -4.5%
Other financing costs. . . . . .                         (71)        -0.5%          (1,730)        -12.9%
Equity gain (loss) . . . . . . .                         170          1.2%              (1)            -
                                                     --------                      --------
Net loss   . . . . . . . . . . .                        (182)        -1.3%          (3,293)        -24.7%
Less: Preferred dividends. . . .                        (675)        -4.8%               -             -
                                                     --------                      --------
Loss applicable to common shares. .                    ($857)        -6.1%         ($3,293)        -24.7%
                                                     --------                      --------
                                                     --------                      --------

</TABLE>


GROSS REVENUES

     Gross revenues increased $652,000 or 4.9% for the quarter ended March 31,
1998 compared to the comparable period of the prior year.  The Company increased
its revenues in all genres, with the exception of Gospel, for which the prior
year's first quarter experienced a significant one-time sale of National
Baptist's LET'S GO TO CHURCH direct to its member churches.  Gospel revenues for
the current quarter were flat over the prior year's first quarter exclusive of
this one-time sale.  Current quarter releases include the Urban compilation
BOOTY MIX 3. Current releases also include nine releases on the House of Blues
label, including JGB's (formerly the Jerry Garcia Band) WELCOME TO OUR WORLD and
Phoebe Snow's I CAN'T COMPLAIN, and numerous Gospel releases, including GMWA's
LIVE IN '97 and L.A. Mass Choir's BACK TO THE DRAWING BOARD.  


                                          8
<PAGE>

RETURNS AND ALLOWANCES

     Returns and allowances decreased $804,000 or 18.7% for the quarter ended 
March 31, 1998 compared to the comparable period of the prior year.  Returns 
and allowances for the current quarter as a percentage of gross product 
sales, less discounts, decreased to 26.8% compared to 34.2% for the first 
quarter of last year. During the first quarter of the prior year, the Company 
ceased relations with certain customers who consistently failed to pay on a 
timely basis, prompting an unusually high returns experience from these 
customers.  Excluding the effect of these customers, the returns and 
allowances for the prior year's quarter as a percentage of gross product 
sales, less discounts, was 21.5% compared to 26.8% for the current quarter.  
The increase in returns and allowances for the current period is due to the 
recent softness in the music retail market.  The Company is working 
internally as well as with certain of its customers to reduce high volumes of 
returns in the future.

DISCOUNTS

     Discounts increased $157,000 or 35.0% for the quarter ended March 31, 1998
compared to the comparable period of the prior year.  Discounts for the current
quarter as a percentage of gross product sales increased slightly to 4.4%
compared to 3.4% for the first quarter of last year.  This is due to a higher
number of new releases in the current period.  New releases through normal
retail channels typically incur a higher discount than both catalog sales and
sales through non-routine retail channels.

COST OF SALES AND SERVICES

     Cost of sales and services increased $1,600,000 or 40.7% for the quarter
ended March 31, 1998 compared to the comparable period of the prior year.  Cost
of sales and services for the current quarter increased to 55.8% of net
revenues, compared to 45.6% for the first quarter of last year.  This increase
is primarily due to significant production costs incurred for future releases,
by such artists as Taylor Dayne, The Band and Kansas, for which it is the
Company's policy to expense a portion of these costs as incurred.  See
"Overview."  This increase is also due to higher distribution and royalty costs
associated with selling the House of Blues product, for which there were nine
current quarter releases compared to two for the first quarter of last year.

GROSS PROFIT

     Gross profit decreased $301,000 or 6.4% for the quarter ended March 31,
1998 compared to the comparable period of the prior year.  Gross profit
decreased to 31.3% of gross revenues for the current quarter compared to 35.0%
for the first quarter of last year.  This decrease is primarily due to an
increase in the Company's historical returns experience during the current
quarter and significant production costs incurred on future releases.  


SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

     Selling, general and administrative expenses decreased $667,000 or 15.6% 
for the quarter ended March 31, 1998 compared to the comparable period of the 
prior year.  Selling, general and administrative expenses decreased to 25.8% 
of gross revenues for the current quarter compared to 32.1% for the first 
quarter of last year.  Cost savings can be attributed to management's 
continued focus on reducing costs throughout the Company's operations, 
especially in the areas of marketing and promotion.

OPERATING INCOME(LOSS)

     As a result of the factors described above, operating income was $268,000
for the current quarter compared to an operating loss of $966,000 in the first
quarter of last year.


                                          9
<PAGE>

INCOME TAXES

     No tax expense or benefit has been recorded through March 31, 1998 due 
to the Company's net operating loss carryforward and related valuation 
allowance, as required under generally accepted accounting principles.  
Pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, the 
Company's net operating loss carryforward of approximately $33,158,000 at 
December 31, 1997, expiring in years 2007 through 2012, is subject to annual 
limitations due to a change in ownership as a result of the initial public 
offering of the Company's Common Stock in March 1996.  Accordingly, 
approximately $12,349,000 of the net operating loss carryforward is subject 
to an annual limitation of approximately $2,200,000.  

OTHER FINANCING COSTS AND PREFERRED DIVIDENDS

     See "Capital Resources."

LOSS APPLICABLE TO COMMON SHARES

     The loss applicable to common shares for the current quarter totaled 
$857,000 compared to a loss applicable to common shares of $3,293,000 for the 
first quarter of last year.  The decrease in gross profit and the addition of 
preferred dividends in the current quarter partially offsets the lack of 
merger, restructuring and one-time charges experienced by the Company during 
the first quarter of last year relating to the acquisition of Intersound.

RECENTLY ISSUED ACCOUNTING STANDARDS

     Statement of Financial Accounting Standards ("SFAS") No. 130, REPORTING 
COMPREHENSIVE INCOME, establishes standards for reporting and display of 
comprehensive income (i.e., foreign currency translation gains/losses and 
unrealized gains/losses on securities) and its components in a full set of 
general-purpose financial statements.  This Statement requires that an 
enterprise (a)  classify items of other comprehensive income by their nature 
in a financial statement and (b)  display the accumulated balance of other 
comprehensive income separately from retained earnings and additional paid-in 
capital in the equity section of a statement of financial position.  This 
Statement is effective for the Company's fiscal year ending December 31, 
1998.  The impact of SFAS 130 will not be material to the Company's financial 
disclosures.

     SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION, establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders.  Operating
segments are components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance.  This Statement is effective for the Company's fiscal year ending
December 31, 1998.  The impact of SFAS 131 is not expected to be material to the
Company's financial disclosures.

SEASONALITY

     The Company's results of operations are subject to seasonal variations.  
In accordance with industry practice, the Company records revenues for music 
product when such products are shipped to retailers.  The Company has 
historically experienced a decline in revenues and operating income during 
December, January and February due to the fact that retailers purchase 
products from the Company prior to December 1 in anticipation of holiday 
sales.  As a result, sales are traditionally lower during December and the 
post holiday period.  The acquisition of Intersound to some extent mitigates 
the seasonality of this period due to its history of new releases during 
January  and February.  

                                          10
<PAGE>

LIQUIDITY

     The Company's cash balances were $15,000 and $11,000 at March 31, 1998 and
December 31, 1997, respectively. Net cash used in operating activities was
$1,609,000 for the three months ended March 31, 1998. The uses reflect net cash
used to fund artist advances, attributable to releases by such artists as Taylor
Dayne, The Band and Kansas, and the impact of product returns as discussed
above.  The net cash provided by royalties payable arose primarily from the
current period sales of albums.  Royalties are not paid to the artist until all
advances made to the artist have been recouped by the Company.  Also, the
Company establishes and maintains reserves relative to royalty payments for a
period of approximately 18 to 24 months to allow for product returns activity as
royalties are not owed on returned product.

     Net cash used in investing activities for the three months ended March 31,
1998 included $229,000 for office equipment and computers and $150,000 for the
purchase of a classical music catalog from Fanfare Records.

     Net cash provided by financing activities for the three months ended 
March 31, 1998 was primarily monies drawn on the Company's line of credit 
with Harris Trust and Savings Bank. In addition, the first dividends owed the 
preferred stockholders were accrued during the current quarter.  See "Capital 
Resources."

     A significant recurring funding requirement of the Company is for A&R
expenses, which include recording costs and advances to artists.  The Company
makes substantial payments each period for recording costs and advances in order
to maintain and enhance its artist roster.  These costs are recouped from the
artists' royalties, to the extent possible, from future album sales.  Artist
advances are capitalized when the current popularity and past performance of the
artist provides a sound basis for estimating the probable future recoupment of
such advances from earnings otherwise payable to the artist.

     As a result of the seasonal nature of the business, an advance made in 
connection with the recently announced distribution agreement with Ichiban 
Records, scheduled term payment on the Company's bank debt, the funding of 
future releases and the acquisition of additional catalogs, the Company 
expects to fully utilize its available line of credit by the end of the 
second quarter of 1988. While management believes that available cash will be 
sufficient to meet the Company's capital requirements, there can be no 
assurrances. Historically, the Company has funded its operations and other 
activities from a variety of capital sources. Failure to obtain capital on 
terms favorable to the Company, or at all, could have a material adverse 
effect on the Company's business, results of operations and financial 
condition. See "Capital Resources."


CAPITAL RESOURCES

     Pursuant to an Investment Agreement dated October 12, 1997, as amended, 
on December 12, 1997 the Company issued and sold to certain parties (the 
"Purchasers"), for aggregate gross consideration of $20,000,000, 20,000 
shares of Series B Convertible Preferred Stock ("Series B Preferred Stock") 
and warrants to purchase 3,600,000 shares of Common Stock ("Purchaser 
Warrants").  The Company also issued and sold to a certain affiliate of the 
Company, for aggregate gross consideration of $2,500,000, 2,500 shares of  
Series C Convertible Preferred Stock ("Series C Preferred Stock") and 
warrants to purchase 450,000 shares of Common Stock (the "Affiliate 
Warrants").  The Series B Preferred Stock and the Series C Preferred Stock 
are collectively referred to as the "Preferred Stock." The values of the 
Series B and Series C Preferred Stocks are approximately $17,938,000 and 
$2,242,000, respectively.  The values of the Purchaser and Affiliate Warrants 
are $2,062,000 and $258,000, respectively.  These amounts, net of associated 
costs of approximately $2,128,000, are reflected in additional paid-in 
capital on the balance sheet.

     The Preferred Stock accrues dividends compounded at an annual rate of 12.0%
for the first year, 14.0% for the second year, 16.0% for the third year, 18.0%
for the fourth and fifth years and 20% at all times thereafter, of the purchase
price of the Preferred Stock, in preference to any dividends on any other class
of capital stock.  The Preferred Stock will be redeemable by the Company at any
time at a price equal to the purchase price paid by the Purchasers thereof plus
accrued and unpaid dividends.  The Preferred Stock will be convertible,
commencing two years from the date of issue, into shares of Common Stock at the
lesser of $5.9375 or the average of the daily closing price per share of Common
Stock for 30 consecutive trading days following the public release by the
Company of its consolidated earnings statement for the 1998 fiscal year;
provided that if shares of Common Stock are not then traded on any national
securities exchange or quoted on the Nasdaq Stock Market or a similar service,
the closing price for the foregoing purpose shall be deemed to be the fair value
of a share of Common Stock as determined in good faith by the Board of
Directors.  If the Board of Directors is unable to determine fair market value 


                                          11

<PAGE>

or if the holders of a majority of the outstanding shares of the Preferred Stock
disagree with the Board's determination, then fair market value will be
determined by an independent financial expert.  

     The number of shares of Common Stock which may be received upon exercise of
the Purchaser Warrants will be increased by an amount equal to 12.0% of the
shares initially underlying the Purchaser Warrants on each anniversary of the
original date of issuance of the Series B Preferred Stock, so long as any Series
B Preferred Stock remains outstanding.  The Common Stock underlying the
Purchaser and Affiliate Warrants may be purchased at an exercise price per share
of the lesser of $6.25 and 82.5% of the average of the daily closing price per
share of Common Stock for the 30 consecutive trading days following the public
release by the Company of its consolidated earnings statement for the 1998
fiscal year; provided that if shares of Common Stock are not then traded on any
national securities exchange or quoted on the Nasdaq Stock Market or a similar
service, the closing price for the foregoing purpose shall be deemed to be the
fair value of a share of Common Stock as determined in good faith by the Board
of Directors.  If the Board of Directors is unable to determine fair market
value or if the holders of a majority of the outstanding shares of the Preferred
Stock disagree with the Board's determination, then fair market value will be
determined by an independent financial expert.

     Convertible debentures in the aggregate principal amount of $5,000,000 that
were issued to Intersound in connection with the Intersound Acquisition on
January 31, 1997, mature on January 31, 2004 and bear interest at the seven-year
Treasury rate plus one percent per annum (6.7% at March 31, 1998) and are
convertible, in whole or in part, at any time prior to maturity into the
Company's Common Stock at a conversion price of $9.80 per share, subject to
adjustment as provided in the debentures.  

     On January 31, 1997, the Company entered a Credit Agreement with Bank of 
Montreal ("BMO"), individually and as agent, to provide a 90-day term loan in 
the amount of $25,000,000 and a 90-day revolving credit facility in the 
amount of $10,000,000 (the "Original Credit Facility").  The Original Credit 
Facility was extended through December 31, 1997 and was refinanced on 
December 12, 1997 as discussed below.  Financing costs associated with the 
Original Credit Facility from January 31, 1997 through December 31, 1997 
approximated 9% of the total facility.  The interest incurred on the Original 
Credit Facility was initially LIBOR plus 6% and was increased to LIBOR plus 
9% effective August 1, 1997.

     On December 12, 1997, the Company refinanced the Original Credit 
Facility with the net proceeds from the issuance of the Preferred Stock and 
Warrants and an amended credit agreement with BMO (the "Amended Credit 
Facility").  Under the terms of the Amended Credit Facility, the Company has 
$20,000,000 in bank debt with a three year term, due in quarterly 
installments beginning June 1, 1998, bearing interest at the bank's base rate 
plus 1.0% per annum, and a $10,000,000 available revolving line of credit, 
due in three years and bearing interest at the bank's base rate plus 1/2 of 
1.0% per annum.  The Company had drawn $2,200,000 against the available line 
of credit as of March 31, 1998. Borrowings under the revolving line of credit 
are limited to the Borrowing Base, as defined, which is based upon eligible 
accounts receivable and inventory.  The Amended Credit Facility contains 
certain financial covenants and is secured by substantially all of the 
Company's assets.  Effective March 31, 1998, the Amended Credit Facility was 
amended to appoint Harris Trust and Savings Bank as the lender.  All other 
terms remained substantially unchanged.

     The Company issued to BMO a warrant to purchase approximately 259,000 
shares of Common Stock at an exercise price of $.01 per share in connection 
with the Original Credit Facility.  The value of the warrants amounted to 
$1,240,000, which is included in additional paid-in capital.  The warrants 
expire on January 31, 2002.

     The Company's near and long-term capital requirements depend on numerous
factors, including the rate at which the Company grows and acquires new artists
and products.  The Company has various on-going needs for capital, including
working capital for operations, artist advances and project development costs
and capital expenditures to maintain and expand its operations.  In addition, as
part of its strategy, the Company evaluates potential acquisitions of music
catalogs, publishing rights and labels.  The Company may in the future
consummate acquisitions which may require the Company to make additional capital
expenditures, and such expenditures may be significant.  Future acquisitions, as
well as other on-going 


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<PAGE>

capital needs, may be funded with institutional financing, seller financing
and/or additional equity or debt offerings.  The Company currently does not have
any material commitments for capital expenditures for the next twelve months. 
However, the Company is currently engaged in a review of accounting and
operating software packages to achieve further economies of scale.  The
selection, acquisition and implementation of this software, along with the
related consulting services, is expected to cost between $600,000 and $800,000.

     On December 12, 1998 the Company issued a Warrant to Purchase 50,000 
shares of Common Stock in connection with the consummation of Preferred Stock 
with Warrants Issuance (the "Harnick Warrants"). The exercise price of the 
Harnick Warrants is $6.25. The Harnick Warrant expires on December 12, 2007.

     On February 25, 1998, the Company issued Warrants to purchase 50,000 
shares of Common Stock to GHW & Associates, LLC, (the "GHW Warrant") at an 
exercise price of $6.25. The Company also issued a Warrant to Purchase 50,000 
shares of Common Stock to Andrew B. Lipsher (the "Lipsher Warrant") at an 
exercise price of $6.25. Both the GHW Warrant and the Lipsher Warrant 
represent payments for services provided to the Company relative to investor 
relations and strategic planning. The GHW Warrants and the Lipsher Warrants 
expire on February 25, 2008.

     Stockholders' equity at March 31, 1998 totaled $12,109,000 compared to
$12,375,000 at December 31, 1997.  This decrease of $266,000 or 2.2% is due to
net losses experienced by the Company during the three months ended March 31,
1998 and additional costs related to the preferred stock with warrants issuance.

INFLATION

     The impact of inflation on the Company's operating results has been
moderate in recent periods, reflecting generally lower rates of inflation in the
economy.  While inflation has not had a material impact on operating results,
there is no assurance that the Company's business will not be affected by
inflation in the future.
     
SAFE HARBOR PROVISION

     This filing contains certain forward-looking statements (within the 
meaning of the Private Securities Litigation Reform Act of 1995) that involve 
substantial risks and uncertainties.  When used in this filing, the words 
"anticipate," "believe," "estimate" and "expect" and similar expressions as 
they relate to the Company or its management are intended to identify such 
forward-looking statements.  A number of important factors could cause the 
Company's actual results, performance or achievements for fiscal 1998 and 
beyond to differ materially from those expressed in such forward-looking 
statements. Reference is made to the Company's prior filings with the 
Securities and Exchange Commission, in particular the "Risk Factors" section 
of the Company's Prospectus dated March 12, 1996, for a discussion of certain 
of such factors.  These factors include, without limitation, commercial 
success of the Company's repertoire, charges and costs related to 
acquisitions, relationships with artists and producers, attraction and 
retention of key personnel, general economic and business conditions and 
enhanced competition and new competitors in the recorded music industry. 

YEAR 2000 TECHNOLOGY PREPAREDNESS

     The Company is currently working to resolve the potential impact of the
year 2000 on the processing of time-sensitive information by its computerized
information systems.  Year 2000 issues may arise if computer programs have been
written using two digits (rather than four) to define the applicable year.  In
such cases, programs that have time-sensitive logic may recognize a date using
"00" as the year 1900 rather than the year 2000, which could result in
miscalculations or system failures.  Management is in the process of completing
a review of significant software and equipment used in the Company's operations
and, to the extent practicable, in the operations of its key business partners,
in order to determine if any year 2000 risks exist that may be material to the
Company as a whole.  This process includes an assessment of year 2000 risks and
the identification of practical remediation measures that could be taken on a
timely basis to alter, validate or replace time-sensitive software and
equipment.  Management has already begun implementing certain of these measures
and intends to complete its remediation efforts prior to any anticipated
material impact on its computerized information systems.  Costs of addressing
potential problems have not been material to date and, based on preliminary
information, are not currently expected to have a material adverse impact of the
Company's financial position, results of operations or cash flows in future
periods.  However, if the Company or its significant customers or vendors are
unable to resolve such processing issues in a timely manner, it could result in
a material adverse effect.  Accordingly, management plans to devote the
resources it concludes are appropriate to resolve all significant year 2000
issues in a timely manner.


                                          13

<PAGE>

PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS.

     During March 1997, the Company and K-tel International, Inc. ("K-tel") 
signed a purchase and sale agreement (the "K-tel Agreement") pursuant to 
which the Company agreed to acquire K-tel's worldwide music business assets, 
except for K-tel's European and former Soviet Union music business, through 
the purchase of the stock of K-tel International (USA), Inc. and Dominion 
Music, Inc., both wholly-owned subsidiaries of K-tel (the "K-tel 
Acquisition").  The Company deposited $1,750,000 in escrow in accordance with 
the K-tel Agreement.  During September 1997, the Company terminated the K-tel 
Agreement alleging that K-tel materially breached the K-tel Agreement. On 
September 12, 1997, K-tel filed a Complaint against the Company for 
declaratory judgment in the District Court of Hennepin County, Fourth 
Judicial District, State of Minnesota, seeking the escrowed funds.  K-tel 
subsequently filed an Amended Complaint on October 2, 1997, seeking the 
escrowed funds as well as unspecified damages for the Company's alleged 
breach of the K-tel Agreement, breach of a related confidentiality agreement, 
fraud, defamation and promissory estoppel.  On October 6, 1997, the Company 
removed K-tel's state court action to the United States District Court for 
the District of Minnesota, Fourth Division and counterclaimed for declaratory 
and other relief on December 10, 1997.  The Company is seeking $1,750,000 in 
escrowed funds and another $1,750,000 in contractually agreed "reimbursement" 
because K-tel has materially breached the K-tel Agreement.  In the 
alternative, Platinum is seeking rescission of the Purchase Agreement and 
return of the escrowed funds because K-tel fraudulently induced it to enter 
into the Purchase Agreement.  Platinum has moved to dismiss K-tel's fraud, 
defamation and promissory estoppel claims.  A hearing on this motion occurred 
on May 19, 1998, and no decision has been rendered.  The parties have 
exchanged documents, responded to interrogatories and have begun to take 
depositions.  Platinum intends to vigorously defend the lawsuit and prosecute 
its counterclaims against K-tel.  The Company reserved the full escrowed 
amount during the seven months ended December 31, 1997. 

     During November 1997, JCSHO, Inc., a Minnesota corporation, formerly known
as Intersound, Inc. ("JCSHO"), filed a complaint against the Company in the
District Court of Minnesota, Fourth Division.  JCSHO alleges breach of contract
by the Company with regard to the convertible subordinated debentures in the
aggregate principal amount of $5,000,000 (the "Convertible Subordinated
Debentures") issued by the Company to JCSHO in connection with the Intersound
Acquisition.  JCSHO alleges that the Company is in default on its obligations
under the Convertible Subordinated Debentures due to failure to make certain
payments under the Convertible Subordinated Debentures at a defined default
interest rate.  JCSHO is seeking damages in the amount of $5,000,000 and costs,
disbursements and attorney's fees.  The Company believes that JCSHO's
allegations are without merit and intends to vigorously defend this litigation. 

     The Company is not a party to any other material litigation.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

A.  Exhibits.

   4.1   Warrant to Purchase 50,000 shares of Common Stock of the Registrant 
         issued to GWH & Associates, LLC, dated February 25, 1998.
   4.2   Warrant to Purchase 50,000 shares of Common Stock of the Registrant 
         issued to Andrew Lipsher, dated February 25, 1998.
  10.1   First Amendment to Credit Agreement dated as of December 12, 1997,
         among the Registrant, Harris Trust and Savings Bank, as Administrative
         Agent and the Lenders party thereto, dated March 31, 1998.
  10.2   Revolving Credit Note issued by the Registrant in the principal amount
         of $10,000,000, dated March 31, 1998.
  10.3   Term Credit Note issued by the Registrant in the principal amount of
         $20,000,000, dated March 31, 1998.
  10.4   First Amendment to Pledge Agreement dated as of December 12, 1997,
         among the Registrant, its subsidiaries and Bank of Montreal, dated as
         of March 31, 1998.
  10.5   First Amendment to Security Agreement and First Amendment to Security
         Agreement Re:  Intellectual Property, each dated as of December 12,
         1997, among the Registrant, its subsidiaries and Bank of Montreal,
         dated March 31, 1998.
  10.6   Second Amendment to Credit Agreement dated as of December 12, 1997, 
         among the Registrant, Harris Trust and Savings Bank, as 
         Administrative Agent and the Lenders party thereto, dated May 20, 
         1998.
  27.    Financial Data Schedule.

B.  Form 8-K.

               On February 26, 1998, a Form 8-K was filed by the Registrant
     announcing the change in fiscal year of the Registrant from May 31 to a
     calendar year.


                                          14

<PAGE>

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934,
Platinum Entertainment, Inc. has duly caused this filing to be signed on its
behalf by the undersigned, thereunto duly authorized, on this 20th day of May,
1998.

                                   PLATINUM ENTERTAINMENT, INC.



                              By:  /s/ STEVEN DEVICK
                                   ---------------------------------------------
                                   Steven Devick
                                   Chairman of the Board, President and Chief 
                                   Executive Officer


                              By:  /s/ DOUGLAS C. LAUX
                                   ---------------------------------------------
                                   Douglas C. Laux
                                   Chief Financial Officer
                                   (Principal Financial and Accounting Officer)


                                          15