SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                 F O R M 10-KSB
                ANNUAL REPORT PURSUANT TO SECTION l3 OR l5(d) OF
                       THE SECURITIES EXCHANGE ACT OF l934

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

        For the transition period from July 1, 1999 to December 31, 1999.
                         Commission file number 1-12635

                             ----------------------

                      PARADISE MUSIC & ENTERTAINMENT, INC.
           (Name of Small Business Issuer as specified in its charter)

           Delaware                                     13-3906452
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)

       53 West 23rd Street, New York, New York                    10010
       (Address of principal executive offices)           (Zip Code)

         Issuer's telephone number, including area code: (212) 590-2100

Securities registered under Section 12(b) of the Exchange Act:

<TABLE>
<CAPTION>
Title of each class                           Name of Each Exchange on Which Registered
-------------------                           -----------------------------------------
<S>                                                      <C>
Common Stock, par value $0.01 per share                  Boston Stock Exchange
                                                         Nasdaq Small Cap Market

Redeemable Common Stock Purchase Warrants                Boston Stock Exchange
                                                         Nasdaq Small Cap Market
</TABLE>

Securities registered pursuant to Section 12(g) of the Exchange Act:

                                      None

                             ----------------------

      Check whether the issuer (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 |_|

      Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained herein and will not be contained, to the best of
issuer's knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-KSB or any amendment to this Form
10-KSB. |_|

      The issuers revenues for the transition period from July 1, 1999 through
December 31, 1999 were $8,082,253

      The aggregate market value of voting and non-voting common equity held by
non-affiliates of the issuer on March 24, 2000 was approximately $12,671,305. On
such date, the last sale price of issuer's common stock was $2.53. Solely for
the purposes of this calculation, shares beneficially owned by directors,
officers and beneficial owners of in excess of 10% of the registrant's common
stock have been excluded, except shares with respect to which such persons
disclaim beneficial ownership. Such exclusion should not be deemed a
determination or admission by registrant that such persons are, in fact,
affiliates of registrant.

      As of March 24, 2000 there were 7,867,566 shares of common stock
outstanding.

                    DOCUMENTS INCORPORATED BY REFERENCE: None

Transitional Small Business Disclosure Format (check one)

      Yes |_|    No |X|
<PAGE>

                                     PART I

      The statements contained in this Annual Report that are not historical
facts are forward-looking statements. Such forward-looking statements may be
identified by, among other things, the use of forward-looking terminology such
as "believes," "expects," "may," "will," "should" or "anticipates" or the
negative thereof or other variations thereon or comparable terminology, or by
discussions of strategy that involve risks and uncertainties. These
forward-looking statements involve predictions. Our actual results, performance
or achievements could differ materially from the results expressed in, or
implied by, these forward-looking statements. Potential risks and uncertainties
that could affect our future operating results include, but are not limited to,
our need to raise additional capital, our history of losses, the high-risk
nature of the music and entertainment business and our dependence on some large
customers, as well as economic conditions.

ITEM 1. DESCRIPTION OF BUSINESS

General

      We are a music, film, and digital entertainment company focused on
supplying traditional and web-centric entertainment businesses with state-of-the
art, film, video, digital and music-related products, services and content. Our
products, content and services are offered through three operating groups,
namely:

      o     Paradise Film (including Straw Dogs and Picture Vision)
      o     Paradise Music (including Push Records, Paradise Records, Rave and
            All Access)
      o     Paradise Digital Entertainment

      Our Company is led by industry veterans, Jesse Dylan and M. Jay
Walkingshaw. Each of our operating companies is managed by well-known
professionals in their areas of operations.

      Here are the highlights of each of our business groups:

Paradise Film Group

      Straw Dogs employs a roster of well-known directors who produce television
commercials. The directors each have expertise in one or more commercial
categories. Straw Dogs has created and produced television commercials for
numerous national advertisers including Nike, Coca-Cola, Pepsi, Reebok,
Budweiser, Hallmark, 7-Up, General Motors, AT&T, Sprint, Chevrolet, McDonald's,
Disney, American Express and Mountain Dew. Many of the directors working for
Straw Dogs perform their services as independent contractors.

      Picture Vision produces music videos and music television specials for
numerous well-known musical artists. These artists include Whitney Houston,
Madonna, Anita Baker, Ray Charles, Van Morrison, Rod Stewart, Reba McEntire,
Billy Joel, Garth Brooks and Sting. Picture Vision also produces and directs
music television specials and long-form musical video programs, featuring
artists including Billy Joel, Faith Hill, Janet Jackson, Anita Baker, Hall &
Oates and Van Morrison. A recent special, "Garth Brooks ...In the Life of Chris
Gaines" was aired on NBC. Picture Vision has received numerous awards for its
productions.

      Both Straw Dogs and Picture Vision are paid on a contract fee basis with
profitability based upon accurate budgeting and efficient operations. Paradise
Film has assisted both our Paradise Music and Paradise Digital Entertainment
groups in providing services required for those operations. It is projected that
the operations of Paradise Digital Entertainment Group will expand rapidly based
on part on the support of Paradise Film Group.

Paradise Music Group

      This group operates in several niche areas of the music business. It
produces and delivers:

      o     original musical content, for television programs and motion
            pictures (Rave)
      o     records (on several music labels)


                                        1
<PAGE>

      o     music for advertising (Rave)
      o     musical artist management (All Access)

      Paradise Music has produced records for sale to the public. We have
partnered with V2 records in marketing and distributing a record for Blessid
Union of Souls. We will seek to produce additional records with V2 in the
future. We also have a distribution agreement with V2/BMG for the distribution
of records. We also have licensing, marketing and distribution and joint venture
agreements with independent record labels in a selected number of musical genres
including:

      o     Trippin' N Rhythm/Hardcastle Records - Smooth Jazz, Urban/Adult
            Contemporary and Smooth Jazz/NAC
      o     Jazzica - Smooth Jazz/NAC
      o     Mesa/Bluemoon Records-Worldbeat, Jazz, Pop/Rock, and Contemporary
            Jazz
      o     Kinetic Records - dance/trance DJ compilations.

      Rave produces music for commercials as well as original musical content
for programs and movies. Rave's composers created the theme music, as well as
the underscore, for Pokemon, the number one rated kids television series, the
2BA Master television series soundtrack album on Koch Records which was
certified to be a gold album with sales of over 500,000 units, the score for the
Warner Bros. feature film, Mewtwo Strikes Back and the score for the
direct-to-video animated feature, Pikachu's Winter Vacation. Rave has also
produced original compositions of advertising themes for clients such as Bounty
Fabric Softener, Pringles and Jif Peanut Butter.

      All Access provides comprehensive career management services for
established, as well as up and coming, music industry talent. Its current
clients include Darryl Hall & John Oates and Mosh Entertainment, LLC.

      Paradise Music receives revenues from contract services, percentage shares
and/or royalties from original musical scores and records and percentage fees
for artist management. Paradise Music has also provided services and business
opportunities for Paradise Film and Digital Entertainment Group.

Paradise Digital Entertainment

      Paradise Digital Productions was established in January 2000 to apply our
expertise in various aspects of traditional music and entertainment production
towards the creation, production and delivery of Internet-related content for
the digital and web-based entertainment markets. Paradise Digital Productions
has production and strategic relationships with Eruptor Entertainment, Inc., an
entertainment and leisure Internet destination site targeted at "Generation Y"
males and WireBreak.com, a digital entertainment destination site utilizing a
unique, highly-stylized synchronization of streaming, "made-for-the-web" video
and interactive animation. We are in the process of producing and filming
episodes two through six of the Jonni Nitro animated series, starring Olivia
D'Abo, for Eruptor.com. Also, having developed and produced an original pilot of
a "digital show" for WireBreak.com, we have recently been engaged to produce up
to 100 new episodes of the show. Additionally, in March we produced and webcast
the Yahoo Film Festival. We have entered into an alliance with Computer
Associates International Inc., a leading provider of Internet software
solutions, to combine their expertise in back-end software support with our
content designed for the digital entertainment market.

Cross Selling and Servicing

      Our Company is able to offer a broader range of services than most other
small independent companies in our industry by the availability of
cross-services within the Paradise Film, Paradise Music and Paradise Digital
Entertainment groups. These services have been structured to foster more
efficient business operations, lower costs and greater convenience to customers.
We have also been developing new business opportunities through the interaction
of our existing groups. This development lead to the launch of the Paradise
Digital Entertainment group which made substantial use of the resources provided
by Paradise Film and Paradise Music groups.


                                        2
<PAGE>

Plans for Expansion

      We have adopted a strategic plan to significantly expand our Company. Our
growth strategy focuses on three initiatives:

      o Fostering internal growth. We intend to internally grow our groups and
their operating units by expansion of their existing operations through the
addition of key talent including directors, recording artists, composers and
other individuals and the addition of other products and services. In connection
with this growth, we are also seeking attractive joint venture and partnership
opportunities to combine our strengths with those of others.

      o Acquisition of complementary businesses. The industries in which we are
active are fragmented and populated by many smaller organizations which can
benefit from the infrastructure and breadth of our operations. Consequently we
believe that we can structure attractive acquisition opportunities. We are
currently engaged in identifying such opportunities and are in discussions with
a number of companies to execute this strategy. Our most recent acquisition was
Mesa/Bluemoon Records.

      o Leveraging our core competencies. We plan to leverage the experience,
talent and accomplishments of existing groups into related business areas such
as digital media and other distribution avenues. Our traditional competencies in
the film and music industries provide the foundation for our introduction into
the digital entertainment industry. We have used our existing talents to build
our Digital Entertainment group and to enter into agreements to provide video
production services for content displayed over the Internet and broadband as
well as packaging of music content and information for distribution over the
Internet and broadband.

Recent Developments Since July 1, 1999

      There have been a number of developments in our business since July 1,
1999. These developments include:

      o     Acquisitions and Investments
      o     Financing Transactions
      o     Management Developments
      o     Changes in Consultants

Acquisitions and Investments

      o Acquisition of Straw Dogs. The Straw Dogs acquisition was completed on
December 16, 1999. In the acquisition we purchased, for 900,000 shares of common
stock, substantially all of the business and assets of the Straw Dogs business
of Consolidated Entertainment, LLC and assumed substantially all its
liabilities. Consolidated was owned and operated by Jesse Dylan and Craig
Rodgers. As part of the Straw Dogs acquisition, we also purchased, for 541,000
shares of common stock, all of the stock of a related entity owned by Jesse
Dylan. The shares issued were not registered under the Securities Act of 1933,
as amended. However, Messrs. Dylan and Rodgers have been granted standard
"piggyback" registration rights with respect to these shares.

      o Investment in Eruptor.com. In October 1999, we purchased from Eruptor
Entertainment, a branded internet portal that features a blend of original
content and e-commerce, one million shares of series A convertible preferred
stock for $1,000,000. Eruptor's management plans to produce original episodic
shows, which will be interactive and range from two-dimensional to
three-dimensional animation to live action. As part of the investment we were
given the opportunity to produce Eruptor projects in traditional media forms and
Eruptor was given the right to exploit certain Paradise projects in digital
media form via its internet site.

      o     Joint Venture Arrangements. The Company has also been active in
            establishing numerous joint venture relationships in its three
            operating groups in order to further develop its business.


                                        3
<PAGE>

            These ventures have been described in the previous sections in which
            we have discussed the business of Paradise Music and Paradise
            Digital Entertainment.

Financing Transactions

      In July 1999, investors represented by The Cassandra Group, Inc. purchased
an aggregate 970,880 shares of our common stock at a price of $4.25 per share or
$4,126,240 in the aggregate in a private transaction. We filed a Form S-3
registration statement covering the resale of these 970,880 shares, which was
declared effective by the SEC on July 29, 1999.

      In March 2000, the company completed a $3 million private senior
convertible subordinated financing with private equity funds BayStar Capital
L.P. and BayStar International Ltd. The notes are convertible at $2.375 per
share. In addition, we issued five-year warrants to purchase an additional
631,579 shares at an initial price of $2.6125 per share.

Management Developments

      o     Employment of M. Jay Walkingshaw. Effective on October 1, 1999 M.
            Jay Walkingshaw was appointed as our president and chief operating
            officer. He entered into an agreement through June 30, 2003, which
            provides for a base salary of $450,000 per year plus 600,000 options
            at $5.00 per share vesting one-third each on July 1, 2000, July 1,
            2001 and July 1, 2002, respectively. In addition, he was paid a
            signing bonus of $12,500 in October 1999.

      o     Termination of Jay Moloney. Effective on July 31, 1999 the
            employment agreement of Jay Moloney was terminated. He retained
            100,000 options exercisable at $3.00 per share and 125,000 options
            exercisable at $4.50 per share with both exercisable through July
            31, 2000. The options are now held by his estate.

      o     Hiring of Consultants. From time to time the Company issues warrants
            or options to purchase our shares to attract key individuals to
            enter into consulting or joint venture agreements. During the period
            from July 1, 1999 through December 31, 1999, 340,000 warrants were
            issued at prices ranging from $5.00 per share to $5.81 per share.
            These warrants have exercise periods ranging from 3 years to 6
            years.

      In January, 2000 we entered into a consulting agreement with Robert A.
      Buziak under which he is providing business advice, in addition to his
      services as a director, for the period January 26, 2000 through January
      25, 2001. Mr. Buziak received 25,000 two year warrants to purchase shares
      of common stock at $5.00 per share as compensation for his consulting
      services. The warrants vested and were exercisable as of the date of
      grant.

Changes in Consultants and Board

      In December 1999, the Company wrote off charges associated with a
consulting agreement with Dana Giachetto. Mr. Giachetto was retained in April
1999 to assist in identifying acquisition candidates, employee recruitment,
structuring transactions and financing to support the company's growth. As
compensation for these services, he received 200,000 shares of stock and
three-year warrants expiring in April 2002 to purchase 800,000 shares of common
stock at the following prices: 100,000 at $5.00 per share, 150,000 at $6.00 per
share, 150,000 at $7.00 per share, 150,000 at $8.00 per share, 125,000 at $9.00
per share and 125,000 at $10.00 per share. The Company valued the warrants and
stock issued at approximately $2,389,000. As of December 1999, the Company did
not anticipate any further transactions occurring under this agreement. The
write-off resulted in a one time charge of $330,000 for the remainder of prepaid
consulting expenses.

      On January 11, 2000, Brian Doyle, John Loeffler and Jon Small resigned as
members of the Board to devote their full time efforts to our operating
companies. The Board elected Robert A. Buziak as a Director on


                                        4
<PAGE>

the same date. The current Board consists of Chairman Jesse Dylan, Richard J.
Flynn, Thomas J. Edelman, Jeffrey Rosen and Robert A. Buziak.

Competition

      Each of our business groups faces intense competition both for business
and for talent, executives and operating personnel. Paradise Film competes to
secure deals to produce television commercials as part of major national
advertising campaigns for products and services with household name recognition.
It also competes with others in all aspects of the offering of services for
music videos, music television specials and television programs. Many of our
competitors are substantially larger and better financed. Those competitors
include, among others, MJZ, Propaganda, and Radke Films. We also compete with
the other companies for the services of top commercial directors needed to
deliver commercials of the highest quality.

      In our Music Group we currently compete with numerous other businesses and
individuals who produce original music scores and advertising themes for
television, radio and film, produce music videos and specials for television and
provide management for music artists. Currently, the production of original
scores and advertising themes for television, radio and film, the production of
music videos and video specials for television, and music artist management are
carried out by individuals or small privately held niche companies. Generally,
each such individual or small company engages in only one of these businesses.
Many of these businesses and individuals have greater financial resources, and
in many instances longer operating histories, than we do. In our record
businesses we face intense competition for discretionary consumer spending from
numerous other record companies and other forms of entertainment offered by film
companies, video companies and others. We compete directly with other recorded
music companies, including the five major recorded music companies, which
distribute contemporary music, as well as with other record companies for
signing artists and acquiring music catalogs. Many of these competitors have
significantly longer operating histories, greater financial resources and larger
music catalogs than we do. Our ability to compete is dependent upon identifying
such markets, obtaining additional capital, signing and retaining successful
artists and introducing music products which are accepted by consumers.

Organization

      We were incorporated in the State of Delaware on July 18, 1996 and our
principal executive offices are located at 53 West 23rd Street, New York, New
York, 10010 and our telephone number is (212) 590-2100.

Employees/Independent Contractors

      As of December 31, 1999, we had 48 employees, 22 of whom were located at
our New York office, 9 of whom were located in Nashville, Tennessee and 17 of
whom were located in California. None of our employees is represented by a labor
union. We have not experienced any work stoppage and consider relations with our
employees to be good.

      As is customary in the music business, we also utilize the services of
artists, performers, composers, producers, engineers, roadies, booking agents
and others who are independent contractors. These independent contractors hire
out their services on an as needed basis and receive a set fee for the services.
The services performed by these independent contractors are not needed on a full
time basis. As a result, services of independent contractors are less expensive
than having full time employees perform these services.

ITEM 2. DESCRIPTION OF PROPERTY

      We lease office space at three locations. Our headquarters and commercial
music recording studios are located at 53 West 23rd Street in New York City
where we lease approximately 20,000 square feet, pursuant to a lease that
expires in July 2007. Our music video production business leases 2,050 square
feet of office space at 209 10th Avenue South in Nashville, Tennessee which
lease expires in August 2000. Our commercial production company


                                        5
<PAGE>

leases approximately 10,000 square feet at 8330 West Third Street, Los Angeles,
CA and approximately 2,500 square feet at 40 Wooster Street, New York, NY, on a
month to month basis. Our rent expense for the transition fiscal year was
approximately $227,000.

ITEM 3. LEGAL PROCEEDINGS

      Except for proceedings in the normal course of business, neither Paradise
nor any of our subsidiaries is a party to or involved in any material pending
legal proceedings.

ITEM 4. MATTERS SUBMITTED TO STOCKHOLDER VOTE

      A special meeting of stockholders was held on December 16, 1999. At the
meeting, the stockholders approved the acquisition of Straw Dogs and related
agreements including Employment Agreements with Jesse Dylan and Craig Rodgers,
respectively and the Non-Qualified Stock Options covering 750,000 shares for
Jesse Dylan and 100,000 shares for Craig Rodgers respectively.

       Votes For    Votes Against    Abstentions        Non-Votes

       3,141,750       51,298            6,420            53,420

      At the meeting, stockholders also approved a proposal to amend our 1996
stock option plan to increase the total number of shares available for options
granted under the plan from 1,500,000 to 3,000,000. The voting was as follows:

       Votes For    Votes Against    Abstentions        Non-Votes

       3,118,276       71,068           10,124            53,420

      At the meeting our stockholders also voted to approve a Consulting
Agreement with Jeffrey Rosen, one of the Corporation's outside directors,
including approval of the granting of three-year warrants to purchase 200,000
shares at a price of $5.25 per share. The voting was as follows:

       Votes For    Votes Against    Abstentions          Non-Votes

       3,180,921       62,912            9,055                 0

      Also at the meeting our stockholders voted to approve a Consulting
Agreement with Thomas J. Edelman, one of the Corporation's outside directors,
including approval of the granting of three-year warrants to purchase 100,000
shares at a price of $5.00 per share. The voting was as follows:

       Votes For    Votes Against    Abstentions            Non-Votes

       3,174,821       76,130           13,091                 0


                                        6
<PAGE>
                                    PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

      Our common stock began trading on the Nasdaq SmallCap Market and the
Boston Stock Exchange on January 22, 1997 under the symbol "PDSE" and "PMU,"
respectively. The high and low bid prices of our common stock (as reported by
Nasdaq and the Boston Stock Exchange) for each quarter since our initial public
offering were as follows:

                             Nasdaq SmallCap Market

            Period                          High             Low
            ------                          ----             ---

1999        01/01/99 - 03/31/99             $5-3/8           $1-1/4
            03/31/99 - 06/30/99             $7-3/4           $3-7/8
            07/01/99 - 09/30/99             $9-3/4           $3-7/8
            10/01/99 - 12/31/99             $5-1/4           $1-1/2

1998        01/01/98 - 03/31/98             $4               $2-13/16
            04/01/98 - 06/30/98             $3-3/4           $2
            07/01/98 - 09/30/98             $3               $1-1/8
            10/01/98 - 12/31/98             $2               $1/2

1997        01/22/97 - 03/31/97             $7               $5-3/8
            04/01/97 - 06/30/97             $5-7/8           $3-1/2
            07/01/97 - 09/30/97             $5-1/32          $3-5/8
            10/01/97 - 12/31/97             $6-3/8           $3

                              Boston Stock Exchange

            Period                          High             Low
            ------                          ----             ---

1999        01/01/99 -  3/31/99             $5-3/8           $1-1/8
            03/31/99 - 06/30/99             $7-1/8           $3-5/8
            07/01/99 - 09/30/99             $4-1/8           $4-1/8
            10/01/99 - 12/31/99             no activity      no activity

1998        01/01/98 - 03/31/98             $4               $2-13/16
            04/01/98 - 06/30/98             $3-5/8           $2
            07/01/98 - 09/31/98             $1-7/8           $1
            10/01/98 - 12/31/98             $1-1/2           $7/16

1997        01/22/97 - 03/31/97             $7               $5
            04/01/97 - 06/30/97             $6               $3
            07/01/97 - 09/30/97             $5-3/64          $3-5/8
            10/01/97 - 12/31/97             $6-3/8           $3

      The prices set forth above reflect interdealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions. The public market for our common stock is limited and the
foregoing quotations should not be taken as necessarily reflective of prices
which might be obtained in actual market transactions or in transactions
involving substantial numbers of shares.

      The approximate number of holders of record of our common stock was 43 as
of March 24, 2000. We believe that there are in excess of 500 round lot
beneficial owners of common stock whose shares are held in street name.

      We have never paid a dividend on our common stock. We anticipate that
future earnings, if any, will be retained for use in our business or for other
corporate purposes and we do not anticipate paying cash dividends.


                                        7
<PAGE>

Recent Sales of Unregistered Securities

      Except for those sales previously described on our Quarterly Reports on
Form 10-QSB for the period ended September 30, 1999, we did not issue any equity
securities during the fiscal period from July 1, 1999 through December 31, 1999
which were not registered under the Securities Act of 1933, as amended.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Summary of Events

      Our company has experienced a number of significant changes recently,
which we believe will lead to greater growth and opportunity. A number of these
developments will immediately affect our financial results and others (such as
some acquisitions) will take more time to have a significant impact as their
businesses develop and they are integrated into our operations:

      o     We raised approximately $9 million in equity and convertible debt
            financing since January 1999, $4 million of which was accomplished
            during the six months ended December 31, 1999 and $3 million during
            March 2000.
      o     We strengthened our Board of Directors by reducing the number of
            insiders and providing for experienced industry outsiders to advise
            us. Our first appointment was Robert A. Buziak in January 2000. Mr.
            Buziak is an experienced record company executive.
      o     We strengthened our management team with the addition of:
                  o     Jesse Dylan as our Chairman and CEO
                  o     M. Jay Walkingshaw as our President and COO
                  o     Bruce Boucher as our VP Finance
      o     We also formed and staffed a business development effort in order to
            identify opportunities and acquisition candidates in our core
            businesses and develop our digital business.
      o     Experienced executives run each of our divisions and we have
            refocused their responsibilities to focus solely on the operations
            of their divisions.
      o     We acquired Straw Dogs (December 1999) and related companies, which
            greatly expands our Television and Film Group. Straw Dogs had
            approximately $20 million in revenues for the year ended June 30,
            1999.
      o     We restructured our Music Group to focus on niche record labels
            rather than the pop market. This has the effect of reducing the
            amount of capital required as well as the risk. We made progress in
            developing our presence in the Smooth Jazz and Electronic genre and
            will shortly be moving into World Music among others. Our first
            release under this approach was "Jazzmasters III" a Paul Hardcastle
            Production that has sold in excess of 130,000 units since its
            release in June 1999.
      o     We acquired the Mesa/Blue Moon labels (March 2000), which are
            respected names in the World Music and Smooth Jazz areas
            respectively.
      o     We formed a joint venture with Kinetic Records to release albums in
            the emerging Electronic Music Genre. Our first release, Dave Ralph's
            "Tranceport II" was released in November 1999.
      o     We created Paradise Digital Productions (January 2000) in order to
            leverage our capabilities in the Film and Television areas into the
            emerging digital production market. We created a number of programs
            for both Eruptor and Wirebreak and in both cases additional
            productions will be forthcoming. We recently produced the Yahoo!
            Online Magazine Film Festival (March 22-23, 2000) in Los Angeles and
            the subsequent webcast.
      o     Our Rave subsidiary continues to supply the creative music for the
            expanding POKEMON franchise, with several new projects scheduled for
            the year 2000. During the first quarter of 2000, we also
            restructured our marketing and operational efforts in the theme
            music and jingle business.

Results of Operations for the six months ended December 31, 1999

      In aggregate revenues for the six months ending December 31, 1999
increased $2,303,222 or 40% compared to the six-month period ending December 31,
1998. The net loss was $1,296,243 for the six months ending December 31, 1999
compared to $1,344,737 for the six months ending December 31, 1998. A major
portion of the loss during the six months ending December 31, 1999, is $701,459
in non-cash expenses associated with warrants, and $105,000 in professional fees
associated with changing our fiscal year end. Earnings before interest, taxes
depreciation and amortization and run-cash consulting expense for the six months
ended December 31, 1999, excluding one-time charges described above, was a loss
of $410,200 compared to a loss of $1,352,411 for the six months ended December
31, 1998.

      Paradise Film revenues increased to $4,429,544 for the six months ended
December 31, 1999 from $4,103,985 for the six months ended December 31, 1998 an
increase of $325,559 or 7.9% (revenue from the acquisition of Straw Dogs is not
included). The increase in revenues is primarily due to an increase in the
number of television music specials and music videos produced during the six
months ended December 31, 1999.

      Paradise Film cost of sales decreased slightly to $3,299,034 for six
months ended December 31, 1999 from $3,369,926 for the six months ended December
31, 1998, a decrease of $70,892 or 2.1%. Gross profit as a percentage of
television and film production revenues increased to 25.5% for the six months
ended December 31, 1999. The increase was primarily attributable to the higher
gross profit percentage on the television music specials.

      Paradise Music revenues increased to $3,652,809 for the six months ended
December 31, 1999 from $1,675,146 for the six months ended December 31, 1998 an
increase of $1,977,663 or 118%. The increase in revenues is primarily due to the
increased sales generated from the Paul Hardcastle and JazzMasters III releases
through the company's joint venture with the adult contemporary jazz label,
Trippin' `N Rhythm Records, and the release of Tranceport II through the
company's joint venture with Kinetic Records. In addition there was an increase
in royalty and residual revenues from original music scores made for television
programs such as Pokemon. These increases in revenue are partially offset by the
reduction of concerts performed by artists under management. The recorded music
operation has been restructured to decrease operating overhead by having fewer
releases of new records and by forming joint ventures with other companies
willing to absorb the costs associated with the production, marketing and
promotion of records.

      Paradise Music cost of sales increased to $1,830,771 for six months ended
December 31, 1999 from $556,663 for six months ended December 31, 1998, an
increase of $1,274,108 or 229% The increase is due to greater overall album
sales when compared to the six months ended December 30, 1998. Gross profit as a
percentage of recorded music and artist management revenues was 50% for the six
months ended December 31, 1999 compared to 67% for the six months ended December
31, 1998. The decreased margin is due to the increase in sales of recorded music
product compared to higher margin artist management commissions in the prior
year.

      Paradise's marketing, selling, general and administrative expenses
increased to $3,599,107 for the six months ended December 31, 1999 from
$3,220,416 for the six months ended December 31, 1998, an increase of $378,691
or 11.8%. The increase is primarily attributable to fees associated with
services provided to Paradise pursuant to outside consulting arrangements with
regard to new business ventures and changing fiscal years. These fees were paid
predominately through the use of common stock purchase warrants.

      For the six months ending December 31, 1999, Paradise incurred a one-time
non-cash charge associated with writing off certain warrants. These warrants
were granted to an individual to assist in identifying acquisition candidates,
employee recruitment, structuring transactions and financing to support the
company's growth. As of


                                       8
<PAGE>

December 1999, the Company did not anticipate any further transactions occurring
under this agreement. The write-off resulted in a one time charge of $330,000
for the remainder of prepaid consulting expenses.

      Interest income increased to $71,775 for the six months ended December 31,
1999 from $25,537 for the six months ended December 31, 1998 an increase of
$46,238 or 181.1%. The increase resulted from additional investment balances
from Paradise's financing transactions during the last six month period ended
December 31, 1999.

      The Company's loss before income taxes decreased to $1,276,243 for the six
months ended December 31, 1999 from $1,341,737 for the six months ended December
31, 1998, a decrease of $65,495 or 4.9%. The decrease was primarily due to
increased profitability from the two operating segments as mentioned above.
These increases are partially offset by non-cash write-offs of certain warrants
and professional fees associated with changing our fiscal year.

Fiscal Year Ended June 30, 1999 Compared to June 30, 1998

      Recorded music and artist management revenues decreased to $3,167,863 for
the fiscal year ended June 30, 1999 from $4,596,257 for the fiscal year ended
June 30, 1998 a decrease of $1,428,394 or 31.1%. The decrease in revenues is
primarily due to the reduction in sales volume of Daryl Hall and John Oates
album "Marigold Sky", in addition to a reduction of touring of artists under
management.

      Television and film production revenues decreased to $6,493,173 for the
fiscal year ended June 30, 1999 from $8,997,169 for the fiscal year ended June
30, 1998 a decrease of $2,503,996 or 27.8%. The decrease in revenues is
primarily due to a reduction in the number of television music specials produced
during the fiscal year ended June 30, 1999, partially offset by an increase in
royalty and residual revenues from original music scores made for television
programs such as Pokemon and Mr. Men.

      Cost of sales decreased to $6,305,511 for the fiscal year ended June 30,
1999 from $9,761,508 for fiscal year ended June 30, 1998, a decrease of
$3,455,997 or 35.4%. The decrease is due to fewer record releases and lower
overall album sales when compared to the prior year and a new distribution
agreement Push Records executed with V2 Records which reduced Push Record's
costs to produce and market the recordings and provides for a portion of the
profits from such recordings to be shared with V2.

      Paradise's marketing, selling, general and administrative expenses
increased to $7,101,023 for fiscal year ended June 30, 1999 form $6,828,087 for
the fiscal year ended June 30, 1998, an increase of $272,936 or 4%. The increase
in primarily attributable to fees associated with services provided to Paradise
pursuant to outside consulting arrangements with regard to liquidity and
acquisitions. These fees were paid predominately through the use of common stock
purchase warrants. The increase in marketing, sales, general and administrative
expenses were partially offset by decreases in other administration costs as a
result of staff reductions and other cost containment measures implemented.

      Interest income decreased to $37,569 for the fiscal year ended June 30,
1999 from $139,040 for the fiscal year ended June 30, 1999, a decrease of
$101,471 or 72.9% The decrease resulted from the use of proceeds from Paradise's
initial public offering during fiscal 1998, which were invested in interest
bearing accounts.

      Paradise's loss before income taxes increased to $3,707,929 for the fiscal
year ended June 30, 1999 from $2,857,129 for the fiscal year ended June 30,
1998, an increase of $850,800 or 29.8%. The increase was primarily due to the
decrease in gross profits realized by the two operating segments as mentioned
above, as well as one-time items that impacted fiscal operating results which
include, fees associated with the hiring of key management personnel to drive
Paradise forward in its new growth phase; certain charges relating to the
restructuring of the Push Records subsidiary; and a charge associated with the
termination of Push's record distribution agreement with BMG, precipitated by
its new joint venture with V2; all of which reflected efforts to recapitalized
and restructure Paradise's core businesses.

Liquidity and Capital Resource

      Net cash used in operating activities for the six months ended December
31, 1999 was $2,259,751. This was principally due to the operating loss for the
period combined with the increase in accounts receivables.

      Net cash used in investing activities for the six months ended December
31, 1999 was $1,350,259. This was principally due to acquisition costs
associated with the purchase of Straw Dogs, and the investment in Eruptor
Entertainment, Inc.

      Net cash provided by financing activities for the fiscal year ended
December 31, 1999 was $4,310,675, which is represented substantially by the net
proceeds from the sales of the Company's common stock, net of expenses

      Paradise has working capital of $1,758,492 and stockholders' equity of
$12,425,108 at December 31, 1999. In March 2000, the company completed a $3
million private senior convertible subordinated financing with private equity
funds BayStar Capital, L.P. and BayStar International Ltd. The notes are
convertible at $2.375 per share. In addition, we issued five-year warrants to
purchase an additional 631,579 shares at an initial price of $2.6125 per share.
The company believes that its cash, operating cash flows and its access to
capital markets, taken together, provide adequate resources to fund ongoing
operating requirements and capital expenditures related to the expansion of
existing businesses, future acquisitions and development of new projects for the
next twelve month period.

Year 2000 Compliance

      The widespread use of computer programs that rely on two-digit dates to
perform computation and decision-making functions may cause computer systems,
including systems and software used by our company and our websites, to
malfunction in the Year 2000, and may lead to significant business delays and
disruptions in our business and operations. We have completed our plan to
minimize the impact of this Year 2000 problem on our operations. The expense
incurred by Paradise to achieve compliance has not been material. To date, we
have not experienced any significant Year 2000 problems and, therefore, the risk
that any Year 2000 problems will occur in the future has diminished
significantly.

      In addition to our internal systems, several systems provided by third
parties are required for the operation of our services, any of which may contain
software code that still might prove not to be Year 2000 compliant. These
systems include server software used to operate our network servers, firewall,
security, monitoring and back-up software, as well as desktop PC applications
software. In most cases, we employ widely available software applications and
other products from leading third-party vendors, and expect that these vendors
will provide any required upgrades or modifications in a timely fashion.
However, any failure of third-party suppliers to provide Year 2000 compliant
versions of the products used by us could result in a temporary disruption of
our services or otherwise disrupt our operations. Although to date we have not
experienced any material disruptions in our operations, an undiscovered failure
to achieve Year 2000 compliance by third-party systems could result in


                                        9
<PAGE>

failure or inaccessibility of our services and could adversely affect our
business, financial condition and results of operations.

ITEM 7. FINANCIAL STATEMENTS

      See the index to our financial statements attached hereto.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

      On February 7, 2000, the Company dismissed Rothstein, Kass & Company, P.C.
as its principal accountant. The Company appointed Ernst & Young LLP as its
principal accountant effective as of February 7, 2000. This change in the
principal accountants was approved by the Board of Directors of the Company on
February 7, 2000.

      Rothstein, Kass & Company's report on the financial statements for June
30, 1999 and the year then ended and through the date of this report, contained
no adverse opinion or disclaimer of opinion, nor was modified as to uncertainty,
audit scope, or accounting principles. Rothstein Kass & Company's report on the
financial statements for June 30, 1998 and the year then ended contained no
adverse opinion or disclaimer of opinion, but it did contain an explanatory
paragraph as to the Company's ability to continue as a going concern.

      The Company is not, nor has ever been involved in any dispute or
disagreement about any matter of accounting principles or practices, financial
statement disclosure, audit scope or procedures, or any reportable events with
Rothstein, Kass & Company, P.C.

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT

      Our directors, executive officers and key executives of our operating
groups are as follows:

<TABLE>
<CAPTION>
                                                                                                    Principal Occupation or
Name                        Age     Director Since      Position with Company                       Employment, if Different
----                        ---     --------------      ---------------------                       ------------------------
<S>                         <C>     <C>                 <C>                                         <C>
Jesse Dylan                 34      January 1999        Chairman, Chief Executive
                                                        Officer and a director

M. Jay Walkingshaw          51                          President, Chief Operating Officer

Richard Flynn (2)           42      October 1996        Chief Financial Officer, Treasurer,
                                                        Secretary and a director

Jon Small (3)               53                          Chief Executive Officer of Picture
                                                        Vision

John Loeffler (3)           48                          Chief Executive Officer of Rave
                                                        Music, Chairman Emeritus

Brian Doyle (3)             43                          Chief Executive Officer of All
                                                        Access Management

Bruce Boucher               43                          Vice President Finance

Craig Rodgers               41                          Chief Executive Officer of Straw Dogs

Thomas J. Edelman (1)(2)    49      October 1996        Director                                    Chairman, Patina Oil & Gas
                                                                                                    Corporation
</TABLE>



                                       10

<PAGE>

<TABLE>
<S>                         <C>     <C>                 <C>                                         <C>
Jeffrey Rosen (1)(2)        44      January 1999        Director                                    General Manager,
                                                                                                    Davassee Enterprises

Robert Buziak               57      January 2000        Director                                    President, Buziak &
                                                                                                    Company, LLC

Craig Rodgers               41                          Chief Executive Officer of Straw Dogs
</TABLE>

---------------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
(3) Resigned from the Board January 11, 2000

      JESSE DYLAN has served as our Chief Executive Officer since July 1, 1999,
Chairman since April 1999 and as a director since January 1999. Prior to this,
Mr. Dylan served as president of Consolidated Entertainment LLC, d/b/a Straw
Dogs, a film and television production company, which he co-found in February
1998. Mr. Dylan has been engaged in the entertainment business for over five
years, as, among other things, a director of music videos and television
commercials. From 1994 through 1996, Mr. Dylan worked for H.K.M. Productions,
where he directed nationally acclaimed television commercials for numerous
national advertisers, including Coca-Cola, Pepsi, Nike, and Chase Manhattan. Mr.
Dylan began his directorial career at Propaganda Films where he directed music
videos for artists such as Lenny Kravitz, Tom Petty, and Tom Waits, for which he
received the Rolling Stone Magazine Award. Mr. Dylan, along with Craig Rodgers,
began Straw Dogs in February 1998 which has grown rapidly since its inception,
completed its first full fiscal year of operations with revenues reaching
approximately $19 million.

      M. JAY WALKINGSHAW has served as our President and Chief Operating Officer
since October 1, 1999. From 1990 to 1999, he was president of Walkingshaw &
Associates, Inc., an independent consulting firm. Earlier in his career he was a
member of the executive group which founded and developed Tri-Star Pictures,
Inc., serving as its Executive Vice President and Chief Financial Officer.
Originally formed as a partnership among the Coca Cola Company (Columbia
Pictures), Time Inc. (Home Box Office) and CBS, Tri-Star subsequently became a
public company and, later, merged with Columbia Pictures. Columbia Pictures was
later sold to Sony, Inc. Previously, Mr. Walkingshaw was with Home Box Office
("HBO") during its early development and dramatic growth stage. As HBO's Vice
President of Program Operations he was responsible for all financial and
operational matters dealing with programming, including network scheduling,
research, origination, etc. HBO is owned by Time Warner, Inc. Mr. Walkingshaw
also served as Vice President and Controller of Teleprompter Corporation, a
major cable system operator which was acquired by Westinghouse Broadcasting
Corp.

      RICHARD FLYNN has served as our Chief Financial Officer since February
1999, our Treasurer since December 1996, our Secretary since July 1996 and as a
director since October 1996. From September 1994 to September 1996, Mr. Flynn
was the managing co-owner of All Access Management. From September 1996, Mr.
Flynn has also been Vice President and General Manager of All Access Management,
and from February 1997 he has been Vice President and General Manager of PUSH
Records. From March 1990 until September 1994, Mr. Flynn served as General
Counsel to Horizon Entertainment and Management Group Inc. ("Horizon") and its
clients. Since 1983 Mr. Flynn has been a practicing attorney in New York State
specializing in entertainment, corporate and public sector law.

      JON SMALL served as a director and Executive Vice President from our
inception in July 1996 through January 11, 2000. Since September 1996, Mr. Small
has been the Chief Executive Officer of Picture Vision, an Emmy-award-winning
video and television program production company, which he also founded in 1984.
From 1984 to September 1996, Mr. Small had been the President of Picture Vision.
Picture Vision has produced a number of music videos for acclaimed artists,
several television specials and television commercials. Picture Vision has
grown, under Mr. Small's leadership, to become one of the leading independent
production companies currently in operation.

      JOHN LOEFFLER has served as our Chairman Emeritus since April 1999 and as
a director from our inception in July 1996 through January 2000. Mr. Loeffler
served as our Chairman of the Board and President from July 1996 through April
1999 and served as Chief Executive Officer from July 1996 through


                                       11
<PAGE>

December 1998. From 1986 to present, Mr. Loeffler has served as the Chief
Executive Officer of Rave Music, a company Mr. Loeffler founded approximately
twenty years ago, Mr. Loeffler, a talented musician in his own rights, has built
Rave Music into a premier creator of original scores and advertising themes for
television, radio and film. Because of Mr. Loeffler's vast experience in his
field, Rave Music's extensive client list has grown to include a large number of
well-known and leading advertisers in the world.

      BRIAN DOYLE served as a director from our inception in July 1996 through
January 2000. Mr. Doyle served as our Chief Executive Officer from December 1998
through April 1999 and as our Executive Vice President from July 1996 through
December 1998. In 1994 Mr. Doyle founded All Access Management, and from 1994 to
the present he has served as the President of All Access Management. Since 1996,
Mr. Doyle has also been the Chief Executive Officer of All Access Management.
Since February 1997, Mr. Doyle has also been the Chief Executive Officer of PUSH
Records. From 1991 to 1994, Mr. Doyle served as Chief Executive Officer and
President of Horizon. With over twenty years of experience in the artist
management field, Mr. Doyle has built All Access Management into a thriving
artist-friendly company guiding both well-established and up-and-coming artists
through their careers.

      CRAIG RODGERS has served as the CEO the Company's Straw Dogs subsidiary
since July 1, 1999. In 1998, Mr. Rodgers co-founded, along with Jesse Dylan,
Straw Dogs, where he served as its President. Previously, Mr. Rodgers worked for
eight years as an executive director at Gartner/Grasso/GLG Productions. During
his directorial career, Mr. Rodgers has worked with nearly all of the leading
directors in the television commercial production business, as well as the top
executives in the advertising industry. Mr. Rodgers is the recipient of numerous
industry honors, including the prestigious Directors Guild of America's,
Director of the Year award.

      BRUCE BOUCHER has served as the Vice President Finance since October 1999.
Mr. Boucher has over twenty years of corporate financial management and
financial consulting experience, and possesses an in-depth understanding in the
areas of business planning, cash management, financial control systems, mergers
and acquisitions, and new business development. From 1990 to 1999, Mr. Boucher
was president of JB Associates, an independent consulting firm. Earlier in his
career Mr. Boucher was a senior financial manager at Nutri/Systems, Inc.
responsible for cash management and the design, implementation, and financing
information technology systems. Mr. Boucher is a graduate of The Wharton School
of the University of Pennsylvania.

      THOMAS J. EDELMAN has served as a director since October 1996. Mr. Edelman
co-founded Snyder Oil Corporation and was its President and director from 1981
through February 1997. Since 1996, Mr. Edelman has served as Chairman and Chief
Executive Officer of Patina Oil & Gas Corporation. He is also Chairman of the
Board of Directors and Chairman of Range Resources Corporation, and is a
director of Petroleum Heat & Power Co., Inc. and Star Gas Corporation. From 1980
to 1981, Mr. Edelman was a Vice President of The First Boston Corporation.

      JEFFREY ROSEN has served as a director since January 1999. Since 1986, he
has served as the General Manager of Bob Dylan's various music-publishing
companies, managing the New York office and administering the publishing of Mr.
Dylan's musical compositions. During this time he has also acted as a consultant
to several entertainment companies, including Columbia Records, Sony Music, Time
Life Records and Time Life Home Video. Mr. Rosen is also on the board of
directors of The Association of Independent Music Publishers, and is a graduate
of the State University of New York at Oneonta, with a B.A. in Literature.

      ROBERT BUZIAK, has served as a director since January 2000. Mr. Buziak is
a 28 year veteran of the entertainment industry with strong ties to the music
sector. Mr. Buziak is a former President of RCA Records and Sony's TriStar Music
Group and since 1995 has been President of his own consulting firm. Buziak &
Company LLC is at the forefront of the converging fields of music,
entertainment, and technology, working with clients like, AT&T, TCI Music, and
Liberty Digital, as well as traditional music companies such as Zomba/Jive and
Jeff McClusky and Associates. He has also been a board member, advisory board
member, and consultant to several New Media, gaming, and Internet companies
including ConsumerNet, Paradigm Music Entertainment, Feed the Monster, I-Rock,
Click Radio and Music.com. He played an active role in the development and
eventual sale of Paradigm Music Entertainment to Liberty Media. Also, he sat on
the board of ConsumerNet which was acquired by 247 Media late last year.

Compliance with Section 16(a) of the Exchange Act

      Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires our officers and directors and holders of more than 10%
of our common stock (collectively "reporting Person") to file reports of initial
ownership, ownership and changes in ownership of the common stock with the
Securities and Exchange Commission within certain time periods and to furnish us
with copies of all such reports. For the transaction fiscal period ended
December 31, 1999 the following reports have not been filed on a timely basis:
Report on Form 5 of Thomas Edelman covering consulting warrants issued,
directors shares issued and gifts made during the transition fiscal period and
Report on Form 5 covering options and shares issued for year-end June 30, 1999;
and the; Report on Form 5 of Jeffrey Rosen covering consulting warrants issued
and directors shares issued during the transition fiscal period and Report on
Form 5 covering options and shares issued for the year-end June 30, 1999; and
the; Report on Form 5 of Jon Small covering options granted during the
transition fiscal period; and the; Report on Form 3 of Bruce Boucher for July
1999; and; Report on Form 4 of Richard Flynn, John Loeffler and Brian Doyle for
options granted in April 1999.

      Based solely on our review of copies and such reports furnished to us by
such Reporting Persons or on the written representations of such Reporting
Persons that no reports on Form 4 or 5 were required, except as set forth above
we believe that, during the transition fiscal period ended December 31, 1999 all
of the Reporting Persons complied with their Section 16(a) filing requirements.


                                       12
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

Summary Compensation Table

      The following table sets forth all compensation awarded to, earned by or
paid by Paradise or its subsidiaries during each of the last three fiscal years
to Jesse Dylan, our current Chief Executive Officer, and Brian Doyle, who served
as Chief Executive Officer from December 1998 through April 1999 and Executive
Vice President prior to December 1998, and John Loeffler who served as Chief
Executive Officer from July 1996 through December 1998 and Chairman and
President from December 1998 through April 1999, and each of the most highly
compensated executive officers, other than the persons who had served as Chief
Executive Officer during the fiscal year, whose annual base salary and bonus
compensation exceeded $100,000 (the "Named Executive Officers").

<TABLE>
<CAPTION>
                                                                                                     Long Term
                                                    Annual Compensation (1)                     Compensation Awards
                                       ----------------------------------------------     ----------------------------------
                                                                                                                 Securities
                                                                                             All Other           Underlying
Name and Principal Position            Year Ended June 30   Salary ($)      Bonus ($)     Compensation (2)         Options
---------------------------            ------------------   ----------      ---------     ----------------         -------
<S>                                        <C>               <C>            <C>                <C>                 <C>
Jesse Dylan                                Stub 1999 *       $375,000          --                --                750,000
Chief Executive Officer (since July            1999             --             --                --                   --
1999)                                          1998             --             --                --                   --
                                               1997             --             --                --                   --

Brian Doyle                                Stub 1999 *       $137,500          --              12,500                 --
Former Chief Executive                         1999           225,000        75,000            25,000              350,000
Officer (until April 1999)                     1998           300,000          --              28,000                 --
                                               1997           150,000       162,500             7,000                 --

John Loeffler                              Stub 1999 *       $162,500          --              12,500                 --
Former Chief Executive                         1999           225,000       100,000            25,000               50,000
Officer (until December 1998)                  1998           310,000          --              34,000                 --
                                               1997           150,000       191,000            34,000                5,000

Richard Flynn                              Stub 1999 *       $137,500          --              12,500                 --
Chief Financial Officer (since                 1999           225,000       100,000            18,000              350,000
December 1998)                                 1998           300,000          --              15,000                 --
                                               1997           150,000       162,500              --                   --

Jon Small                                  Stub 1999 *       $187,500          --              25,000               90,000
Executive Vice President                       1999           345,000       125,000            50,000               50,000
                                               1998           310,000       150,000            60,000                 --
                                               1997           150,000       189,000            36,000                5,000

Craig Rodgers                              Stub 1999 *       $175,000          --                --                100,000
Chief Executive Officer (since April           1999             --             --                --                   --
1999)                                          1998             --             --                --                   --
                                               1997             --             --                --                   --
</TABLE>


                                       13
<PAGE>

      o     Stub 1999 refers to the six month period July 1, 1999 through
            December 31, 1999.

(1)   We were incorporated in July 1996. Compensation for the period July 1 to
      December 31, 1999 and for the fiscal years ended June 30, 1999, 1998 and
      1997 represents amounts paid by Rave Music, Picture Vision, All Access
      Management and PUSH Records.

(2)   Includes amounts paid by us which we deemed to be for the benefit of such
      executive, including amounts paid for lodging, transportation, insurance,
      entertainment and other perquisites.

Option Grants in Transition Fiscal Period July 1, 1999 through December 31, 1999

      The following table sets forth, for each of the Named Executive Officers,
information regarding individual grants of options made during the transition
fiscal period July 1, 1999 through December 31, 1999.

<TABLE>
<CAPTION>
                                Individual Grants
--------------------------------------------------------------------------------------
          (a)             (b)           (c)              (d)                 (e)

                                    % of Total
                                     Options
                                     Granted to      Exercise or
                                    Employees in     Base Price
         Name           Granted     Fiscal Year        ($/Sh)          Expiration Date
         ----           -------     -----------        ------          ---------------
<S>                     <C>             <C>         <C>             <C>
   Jesse Dylan          750,000         47.2%           $5.00             06/30/09
   M. Jay Walkingshaw   600,000         37.7%           $5.00             06/30/09
   Brian Doyle             --             --              --                 --
   John Loeffler           --             --              --                 --
   Richard Flynn           --             --              --                 --
   Jon Small            140,000          8.8%       $5.00 -- 5.25   06/30/02 -- 06/30/09
   Craig Rodgers        100,000          6.3%           $5.00             06/30/09
</TABLE>

Aggregate Option/SAR Exercises; Fiscal 1999 Year End Option/SAR Values

      The following table provides information related to options exercised by
the Named Executive Officers during the transition fiscal period ended December
31, 1999 and the number and value of options held by them at December 31, 1999
which were then exercisable. No options were exercised during the fiscal year
ended June 30, 1999.


                                       14
<PAGE>

<TABLE>
<CAPTION>
                                                                 Number of Securities                    Value of Unexercised
                                                                Underlying Unexercised                  In the Money Options/
                                                                Options/SARs at FY-End                    SARs at FY-End (1)
                                                                ----------------------                    ------------------
                              Shares
                           Acquired on        Value
Name                       Exercise (#)      Realized      Exercisable        Unexercisable        Exercisable        Unexercisable
----                       ------------      --------      -----------        -------------        -----------        -------------
<S>                            <C>              <C>          <C>                <C>                  <C>                 <C>
Jesse Dylan                    --               --                --            750,000                   --                  --
M. Jay Walkingshaw             --               --                --            600,000                   --                  --
Brian Doyle                    --               --           350,000                 --                   --                  --
John Loeffler                  --               --            55,000                 --                   --                  --
Richard Flynn                  --               --           350,000                 --                   --                  --
Jon Small                      --               --            70,000             75,000                   --                  --
Craig Rodgers                  --               --                --            100,000                   --                  --
</TABLE>

---------------------------------------------------------
(1)   The last sale price on December 31, 1999 was $2.125

Directors' Compensation

      Pursuant to our Outside Directors Program, directors who are not employees
("Outside Directors") received non-qualified options to purchase 5,000 shares on
January 22, 1997 at $6 per share and are entitled to receive non-qualified
options to purchase 5,000 shares for each year of service, payable in advance on
July 1 of each year. The option exercise price is the closing bid price of the
common stock on the first trading day of each fiscal year. Accordingly, 5,000
options were granted at $4 on July 1, 1997, at $2.0625 on July 1, 1998 and at
$5.125 on July 1, 1999 to each Outside Director.

      In addition, Outside Directors are entitled to receive compensation in the
amount of $18,000 per annum, 100% payable in stock. Such amounts are payable
quarterly in arrears. For the transition fiscal period ended December 31, 1999,
persons who were Outside Directors during such fiscal year each received
2,118 shares of common stock.

      All directors are reimbursed for certain expenses in connection with
attendance at Board of Directors and Committee meetings. Other than with respect
to reimbursement of expenses, directors who are employees or officers or who are
associated with us do not receive compensation for service as directors.

Employment Agreements, Termination of Employment and Change in Control
Arrangements

      Mr. Dylan is employed as our Chairman and Chief Executive Officer, for a
five year term, commencing July 1, 1999 at an annual salary of $750,000. In
addition to his duties as the Chairman and Chief Executive Office, Mr. Dylan
directs commercial and other television projects. Mr. Dylan's compensation is to
be reviewed annually by our Compensation Committee with bonus awards or
increases in salary to be considered based on Mr. Dylan's and our overall
performance. He has received ten year options to purchase 750,000 shares of
common stock. The options vest ratably over a three year period (provided Mr.
Dylan is employed by us at that time), and have an exercise price of $5 per
share. Upon a change of control of the Company, Mr. Dylan will receive the
balance of his salary plus the vesting of all options granted to him.

      M. Jay Walkingshaw is employed as our president and chief operating
officer. He entered into an agreement through June 30, 2003 which provides for a
base salary of $450,000 per year plus 600,000 options at $5.00 per share vesting
one-third each on July 1, 2000, July 1 2001 and July 1 2002.In addition he was
paid a signing bonus of $12,500 in October 1999. Upon a change of control of the
Company, Mr. Walkingshaw has the right to terminate the agreement and receive
the balance of his salary and the vesting of all options granted to him.

      Brian Doyle, Richard Flynn and John Loeffler are each employed under
employment agreements dated July 1, 1997 as amended. Under the terms currently
in effect, each of the agreements terminates on June 30, 2001, although informal
understandings have been reached to extend the terms to June 30, 2002. For the
six month period ending December 31, 1999, Mr. Doyle and Mr. Flynn were paid at
the rate of $275,000 per annum and Mr. Loeffer was paid at the rate of $325,000
per annum.


                                       15
<PAGE>

In addition, each has been awarded a bonus of $100,000, $75,000 and $100,000
respectively. Future bonuses for John Loeffler will be at least $100,000 if the
profits before taxes of Rave exceed $500,000. Mr. Doyle is entitled to a bonus
of $100,000 if the profits before taxes of All Access exceed $500,000. All other
bonuses are in the discretion of the Board of Directors.

      Jon Small is employed as the President and Chief Executive Officer of
Picture Vision under an employment contract for a three year term which began on
July 1, 1999. His base salary for the first year is $375,000 (increasing to
$387,500 for the second year and $400,000 for the third year). He received a
bonus of $125,000 in the first year of the contract, and also entitled to a
bonus of $100,000 in each subsequent year of the contract that pretax income of
Picture Vision exceeds $500,000.

      Craig Rodgers is employed as Chief Executive Officer of Straw Dogs for a
three year term which began on July 1, 1999 at an annual salary of $350,000. Mr.
Rodgers' compensation is to be reviewed annually with bonus awards or increases
in salary to be considered based on his and Straw Dogs' overall performance. Mr.
Rodgers is entitled to receive an annual bonus of $100,000 per year if the
pre-tax profits of Straw Dogs at the end of each fiscal year are at least
$850,000.

      For the six month period ending December 31, 1999 and the year ending June
30, 1999, approximately $1,437,000 and $1,391,000 have been expensed under the
bonus plans and Executive Agreements, New Agreements and Employment Modification
Agreements and are included in marketing, selling, general and administrative
expenses.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The following table sets forth certain information as of March 24, 2000
regarding the share ownership of the company by (i) each person who is known to
us to be the record or beneficial owner of more than five percent (5%) of our
common stock; (ii) each director and each Named Executive Officer; and (iii) all
directors and executive officers as a group.

                                                                   Percentage of
                                                 Amount and Nature  Outstanding
                                                   of Beneficial       Shares
    Name and Address of Beneficial Owner (1)       Ownership (2)     Owned (3)
    ----------------------------------------       -------------     ---------

Named Executive Officers and Directors
Jesse Dylan                                         1,125,000 (4)       14.3%
Brian Doyle                                           514,250 (5)(6)     6.3%
Richard Flynn                                         514,250 (5)(6)     6.3%
John Loeffler                                         383,367 (6)(7)(8)  4.8%
Jon Small                                             364,000 (7)(9)     4.6%
M. Jay Walkingshaw                                     20,000 (10)        *
Thomas J. Edelman                                     215,570 (11)       2.7%
Jeffrey Rosen                                         209,458 (12)       2.6%
Craig Rodgers                                         453,250 (13)       5.8%
Robert Buziak                                          25,000 (14)        *
All executive officers and directors as
  a group (10 persons)                              3,824,145 (4)-(14)  42.3%

Beneficial Owners of in Excess of 5% (other
  than directors and named executive officers)
The Cassandra Group, Inc.
561 Broadway                                          538,272 (15)       6.8%
New York, New York 10012

Dana Giacchetto
561 Broadway                                        1,000,000 (10)      11.5%


                                       16
<PAGE>

New York, New York 10012

----------------------
*     Denotes less than 1%

(1)   The address of each beneficial owner identified is c/o Paradise Music &
      Entertainment, Inc., 53 West 23 Street, New York, NY 10010, except for (i)
      Thomas J. Edelman, which is c/o Patina Oil & Gas Corporation, 380 Madison
      Avenue, New York, NY 10017, (ii) Jesse Dylan and Craig Rodgers, which is
      c/o Straw Dogs, 8330 W. 3rd Street, Los Angeles, CA, 90048 (iii) Jeffrey
      Rosen, which is c/o Davasee Enterprises, 67 Irving Place, 11th Floor, New
      York, New York 10003, and (iv) Robert Buziak, which is c/o Buziak &
      Company, P.O. Box 2266 Marbledale, CT 06777.

(2)   Unless otherwise indicated, we believe that all persons named in the table
      have sole voting and investment power with respect to all shares of common
      stock beneficially owned by them. A person is deemed to be the beneficial
      owner of securities that can be acquired by such person within 60 days of
      March 24, 2000 upon the exercise of options, warrants or convertible
      securities.

(3)   Each beneficial owner's percentage ownership is determined by assuming (i)
      that options, warrants or convertible securities that are held by such
      person (but not those held by any other person) and which are exercisable
      within 60 days of March 24, 2000 have been exercised and converted, and
      (ii) 7,867,566 shares of common stock were outstanding, before any
      consideration is given to such options, warrants or convertible
      securities.

(4)   Includes 51% member interest in Consolidated Entertainment, LLC. Does not
      include non-qualified options to purchase 750,000 shares at an exercise
      price of $5 per share granted on July 1, 1999 which are not exercisable
      within 60 days from March 24, 2000.

(5)   Includes non-qualified options to purchase 300,000 shares at $5 per share
      granted on February 19, 1999.

(6)   Includes non-qualified options to purchase 50,000 shares of common stock
      at $5.25 per share granted on April 21, 1999.

(7)   Includes non-qualified options to purchase 5,000 shares granted in
      December 1996 at $6 per share.

(8)   Includes 18,600 shares owned by Mr. Loeffler's pension plan and 3,800
      shares owned by Mr. Loeffler's wife.

(9)   Includes non-qualified options to purchase 65,000 shares at $5.25 per
      share granted on July 1, 1999.

(10)  Does not include non-qualified options to purchase 600,000 shares at $5
      per share which are not exercisable within 60 days from March 24, 2000.

(11)  Includes (i) non-qualified options granted in December 1996 to purchase
      15,000 shares at $6 per share (ii) non-qualified options granted under the
      Directors Option Program of 5,000 shares each and on January 2, 1997, July
      1, 1997, July 1, 1998 and July 1, 1999 at exercise prices of $6, $4,
      $2.0625 and $5.125, respectively (an aggregate of 20,000 shares); and
      (iii) warrants to purchase 100,000 shares granted on April 8, 1999 at $5
      per share.

(12)  Includes (i) non-qualified options to purchase 5,000 shares at $5.125 per
      share granted under the Directors Option Program, and (ii) warrants to
      purchase 200,000 shares granted on April 23, 1999 at $5.25 per share.

(13)  Includes his 49% member interest in Consolidated Entertainment LLC. Does
      not include non-qualified options to purchase 100,000 shares at $5 per
      share granted on July 1, 1999, which are not exercisable within 60 days
      from March 24, 2000.

(14)  Includes warrants to purchase 25,000 shares granted on January 26, 2000 at
      $5 per share.

(15)  Cassandra does not directly own any shares of common stock, the shares
      being owned by Cassandra's various clients. Cassandra is a registered
      investment adviser which has discretionary power to dispose of the
      securities held in its clients accounts. Accordingly, by virtue of such
      discretionary power, pursuant to Rule 13d-3 promulgated under the

      Securities Exchange Act of 1934, as amended, Cassandra may be deemed to be
      the indirect beneficial owner of the shares held by the various account
      holders. Based on current transfer agent records the Company believes that
      the maximum number of shares of clients as to which Cassandra may have
      discretionary power is 538,272. Cassandra has not updated its 13G filing
      to confirm this information.

(16)  Does not include 100,000 which are held of record by Mr. Giachetto but are
      not beneficially owned by him. Does not include the shares deemed to be
      beneficially owned by Cassandra, a company which Mr. Giacchetto owns.
      Includes warrants to purchase 800,000 shares of common stock.

      Information contained here with regard to stock ownership was obtained
from our stockholders' list, filings with governmental authorities, or from the
named individual nominees, directors and officers. The persons identified in the
foregoing table disclaim beneficial ownership of shares owned or held in trust
for the benefit of members of their families or entities with which they may be
associated.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      On December 16, 1999, we acquired substantially all of the business and
assets of Straw Dogs for 900,000 shares of common stock, and assumed
substantially all the liabilities of Straw Dogs. Straw was owned and operated by
Jesse Dylan and Craig Rodgers. Mr. Dylan is our Chairman and Chief Executive
Officer and a director and


                                       17
<PAGE>

Craig Rodgers is the president of the Straw Dogs operating subsidiary. We have
also purchased, effective on December 16, 1999, all of the stock of Spur &
Buckle, an affiliated entity of Jesse Dylan for 541,000 shares of common stock.
Both of these were approved by stockholders. Upon consummation of the Straw Dogs
and Spur & Buckle transactions Mr. Dylan received (i) 1,000,000 shares of common
stock, (ii) a five year employment agreement with (a) an annual salary of
$750,000; (b) ten year non-qualified options to purchase 750,000 shares at $5
per share; and (c) an annual compensation review with bonus awards or salary
increases to be based on Mr. Dylan's performance and our overall performance.
Mr. Rodgers received (i) 441,000 shares of common stock, (ii) a three year
employment agreement with (a) an annual salary of $350,000; (b) ten year
non-qualified options to purchase 100,000 shares at $5 per share; and (c) an
annual compensation review with bonus awards or salary increases to be based on
Mr. Rodgers performance and overall performance.

      In April 1999 we entered into a financial consulting agreement with Dana
Giacchetto, Cassandra's President. Mr. Giacchetto is a beneficial owner of in
excess of 10% of our shares based upon including unexercised warrants. As
compensation for his consulting services. Mr. Giacchetto received 200,000 shares
of restricted common stock and three-year warrants to purchase 800,000 shares,
at the following prices: 100,000 at $5 per share, 150,000 at $6 per share,
150,000 at $7 per share, 150,000 at $8 per share, 125,000 at $9 per share and
125,000 at $10 per share.

      Effective October 1, 1999, we entered into an employment agreement with M.
Jay Walkingshaw through June 30, 2003 which provides for an annual salary at the
rate of $450,000 per year plus 600,000 options at $5 per share. The options vest
in one-third installments on July 1, 2000, July 1, 2001 and July 1, 2002. Mr.
Walkingshaw also received a signing bonus of $12,500 in October 1999.

      In April 1999, subject to shareholder approval which was obtained on
December 16, 1999, we entered into consulting agreements with our outside
directors Jeffery Rosen and Thomas Edelman. Mr. Edelman and Mr. Rosen have each
agreed to provide business advice to us, in addition to their services as
directors. Mr. Rosen will provide services for the period April 20, 1999 through
June 30, 2000, and will receive 200,000 three-year warrants which vest after one
year and which are exercisable at $5.25 per share. Mr. Edelman will provide
services for the period April 8, 1999 through June 30, 2000 and will receive
100,000 three-year warrants which vest after one year and which are exercisable
at $5 per share.

      We have a promissory note receivable with Mr. Loeffler which provided for
borrowings up to approximately $129,000, with interest at 8.5% per annum. The
promissory note is collateralized by 200,000 shares of the executive's common
stock of the company and provides for mandatory prepayments as defined in the
agreement. As of December 31, 1999, $70,878 is outstanding under this promissory
note.

The Company entered into a ten year lease with 8330 West Third Street, LLC, an
affiliate of Mr. Dylan and Mr. Rodgers for 10,147 square feet of space at the
rental rate of $2.25 per square foot per month. This rate is subject to
escalation in accordance with inflation after 5 years. The rental rate was
determined by an independent appraisal of market rate.

As described in the proxy statement dated November 10, 1999, for the special
meeting of stockholders held on December 16, 1999, at which the Straw Dogs
acquisition was approved, the Asset Purchase agreement between the Company and
Straw Dogs was supplemented by a letter agreement dated September 22, 1999. An
exhibit to the letter agreement set forth the agreed upon terms covering the
leasing of space by the Company from 8330 West Third Street, LLC.

8330 West Third Street, LLC, signed a promissory note payable to the Company,
dated December 16, 1999 which will reflect the full indebtedness owed the
Company. The note provides for monthly payments by 8330 West Third Street, LLC
to the Company pursuant to a ten year self amortizing payment schedule with
interest at prime plus 1% floating quarterly with a floor of 6% and capped at 12
1/2%. The payment obligation under the note has been acknowledged by Mr. Dylan
and Mr. Rodgers as their personal obligation as provided for in the Asset
Purchase Agreement.



                                       18
<PAGE>

ITEM 13.                  EXHIBITS AND REPORTS ON FORM 8-K

      (a)   Exhibits

     Exhibit
     Number                   Description
     ------ --------------------------------------------------------------------

      3.1   Certificate of Incorporation of the Registrant (1)
      3.2   Amended and Restated By-Laws of the Registrant (1)
      4.1   Specimen of Registrant's Common Stock Certificate (1)
      4.2   Specimen of Registrant's Warrant Certificate (1)
      4.3   Form of Representative's Warrant Agreement including form of Warrant
            (1)
      4.4   Form of Warrant Agreement between Registrant and Continental Stock
            Transfer and Trust Company (1)
      10.7  Form of The Registrant's 1996 Stock Option Plan (corrected version)
            (1)
      10.14 Lease Agreement dated as of October 21, 1996 between the Registrant
            and Twenty Third Street joint Venture, together with Escrow Letter
            dated December 11, 1996 (1)
      10.19 Distribution Agreement with BMG Music d/b/a BMG Entertainment and
            PUSH Records, Inc. (3)
      10.20 Lease Agreement dated July 10, 1997 between the Registrant and
            Twenty-third Street Joint Venture (3)
      10.23 Form of Service Agreement dated September 22, 1997 between Daryl
            Hall & John Oates and PUSH Records (3)
      10.24 Employment Agreement dated as of October 1, 1997 between Rave Music
            and Paul Hoffman (4)
      10.25 Employment Agreement dated as of July 1, 1997 among the Registrant,
            Rave Music and John Loeffler (4)


                                       19
<PAGE>

      10.26 Employment Agreement dated as of July 1, 1997 among the Registrant,
            All Access Management and Richard Flynn (4)
      10.27 Employment Agreement dated as of July 1, 1997 among the Registrant,
            PUSH Records and Brian Doyle (4)
      10.29 Employment Agreement Amended dated as of July 1, 1997 among the
            Registrant, Rave Music and John Loeffler (5)
      10.30 Employment Agreement Amended dated as of July 1, 1997 among the
            Registrant, All Access Management and Richard Flynn (5)
      10.31 Employment Agreement Amended dated as of July 1, 1997 among the
            Registrant, PUSH Records and Brian Doyle (5)
      10.34 Consulting Agreement dated as of January 15, 1998 between Registrant
            and Thomas J. Edelman (5)
      10.36 Outside Director Compensation Agreement dated January 15, 1998
            between Registrant and Thomas J. Edelman (5)
      10.38 Personal Services Agreement between PUSH Records and Bruce M. Somers
            and Nancy Free p/k/a/ Kidney Thieves (5)
      10.39 Form of Licensing Agreement dated November 4, 1997 between PUSH
            Records and Eagle Rock Entertainment, PLC. (5)
      10.40 Promissory Note and Stock Pledge Agreement dated December 31, 1997
            between Registrant and John Loeffler (6)
      10.42 Personal Services Agreement dated June 18, 1998 between PUSH Records
            and Legend Entertainment Corporation. (7)
      10.43 Promissory Note in the amount of $23,960 dated as of August 7, 1998
            between Registrant and Thomas Edelman. (7)
      10.44 Promissory Note in the amount of $90,000 dated as of July 1, 1998
            between Registrant and Thomas Edelman. (7)
      10.45 Promissory Note in the amount of $23,960 dated as of August 7, 1998
            between Registrant and Paul Thomas Cohen. (7)
      10.46 Employment Modification Letter Agreement dated as of September 24,
            1998 among Registrant and Messrs, Doyle, Flynn, Loeffler and Small.
            (7)
      10.47 Consulting Agreement dated April 21, 1999 between the Company and
            Dana Giacchetto (8)
      10.48 Warrant dated April 21, 1999 issued to Dana Giachetto (10)
      10.49 Consulting Agreement dated April 23, 1999 between the Company and
            Jeffrey Rosen (10)
      10.50 Warrant dated April 23, 1999 issued to Jeffrey Rosen (10)
      10.51 Consulting Agreement dated April 8, 1999 between Thomas Edelman and
            the Company (10)
      10.52 Warrant dated April 8, 1999 issued to Thomas Edelman (10)
      10.53 Interim Agreement between Paradise Music & Entertainment, Inc., and
            Jesse Dylan (incorporated by reference to the Company's 10-KSB filed
            on November 12, 1999).(11)
      10.54 Employment Agreement between Paradise Music & Entertainment, Inc.
            and Jesse Dylan (11)
      10.55 Asset Purchase Agreement dated September 23, 1999 by and among
            Paradise Music & Entertainment, Inc., Straw Dogs Acquisition Corp.,
            Consolidated Entertainment, LLC, Jesse Dylan and Craig Rodgers (11)


                                       20
<PAGE>

      10.56 Stock Purchase Agreement dated September 23, 1999 by and among
            paradise Music & Entertainment, Inc., Straw Dogs Acquisition Corp.
            and Jesse Dylan (11)
      10.57 Purchase Agreement between Eruptor Entertainment, Inc.,
            Cassandra/Chase Entertainment Partners, LLC, and Paradise Music &
            Entertainment, Inc.(11)
      10.58 Employment Agreement dated as of October 1, 1999 among M. Jay
            Walkingshaw and Paradise Music & Entertainment, Inc.(12)
      10.59 Employment Agreement dated as of July 1, 1999 among Jon Small,
            Picture Vision, Inc. and Paradise Music & Entertainment, Inc.(12)
      10.60 Consulting Agreement dated as of January 26, 2000 among Robert
            Buziak and Paradise Music & Entertainment, Inc.(12)
      10.61 Warrant dated January 26, 2000 issued to Robert Buziak
      21.1  Subsidiaries of Registrant (12)
      27.1  Financial Data Schedule. (12)

            (1)   Incorporated by Reference to the Company's Registration
                  Statement on Form SB-2 (Reg. No. 333-13941)which was declared
                  effective by the Securities and Exchange Commission on January
                  22, 1997.
            (2)   Filed with the Securities and Exchange Commission on March 17,
                  1997.
            (3)   Filed with the Securities and Exchange Commission on September
                  26, 1997.
            (4)   Filed with the Securities and Exchange Commission on November
                  14, 1997.
            (5)   Filed with the Securities and Exchange Commission on February
                  12, 199
            (6)   Filed with the Securities and Exchange Commission on May 15,
                  1998
            (7)   Filed with the Securities and Exchange Commission on October
                  8, 1998
            (8)   Filed with the Securities and Exchange Commission on February
                  16, 1999
            (9)   Filed with the Securities and Exchange Commission on May 17,
                  1999
            (10)  Filed with the Securities and Exchange Commission on September
                  28, 1999
            (11)  Filed with the Securities and Exchange Commission on November
                  12, 1999
            (12)  Filed herewith

      (b)   Reports on Form 8-K

            None


                                       21
<PAGE>

                                   SIGNATURES

      In accordance with the requirements of the Securities Exchange Act of
1934, as amended, the registrant caused this report to be signed on its behalf
by the undersigned thereunto duly authorized, in the city of New York, state of
New York on March 29, 2000.

                          PARADISE MUSIC & ENTERTAINMENT, INC.


                          By /s/ Jesse Dylan
                             -------------------------------------------------
                             Jesse Dylan
                             Chairman of the Board and Chief Executive Officer

      In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates below.

Signature                  Title                                      Date
---------                  -----                                      ----


/s/ JESSE  DYLAN           Chairman of the Board and              March 29, 2000
-----------------------    Chief Executive Officer
Jesse Dylan                (Principal Executive Officer)
                           and Director


/S/ RICHARD FLYNN          Chief Financial Officer, Treasurer,    March 29, 2000
-----------------------    Secretary (Principal Financial and
Richard Flynn              Accounting Officer) and Director


/S/ M. JAY WALKINGSHAW     Chief Operations Officer, President    March 29, 2000
-----------------------
M. Jay Walkingshaw


/S/ THOMAS J. EDELMAN      Director                               March 29, 2000
-----------------------
Thomas J. Edelman


/s/ JEFFREY ROSEN          Director                               March 29, 2000
-----------------------
Jeffrey Rosen


/s/ Robert Buziak          Director                               March 29, 2000
-----------------------
Jeffrey Rosen


                                       22
<PAGE>

              PARADISE MUSIC & ENTERTAINMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                    CONTENTS

INDEPENDENT AUDITORS' REPORTS                                                F-2

CONSOLIDATED FINANCIAL STATEMENTS

   CONSOLIDATED BALANCE SHEET                                                F-4

   CONSOLIDATED STATEMENTS OF OPERATIONS                                     F-5

   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                           F-6

   CONSOLIDATED STATEMENTS OF CASH FLOWS                                     F-7

   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                F-9


                                       F-1
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
Paradise Music & Entertainment, Inc.

We have audited the accompanying consolidated balance sheet of Paradise Music &
Entertainment, Inc. and Subsidiaries as of December 31, 1999, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the six months ended December 31, 1999. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Paradise Music &
Entertainment, Inc. and Subsidiaries as of December 31, 1999, and the results of
their operations and their cash flows for the six months ended December 31,
1999, in conformity with accounting principles generally accepted in the United
States.

                                                           /s/ Ernst & Young LLP

New York, New York
March 30, 2000


                                       F-2
<PAGE>

                          Independent Auditors' Report

Board of Directors and Stockholders
Paradise Music & Entertainment, Inc.

We have audited the accompanying consolidated statement of operations,
stockholder's equity and cash flows of Paradise Music & Entertainment, Inc. and
Subsidiaries for the years ended June 30, 1999 and 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Paradise Music & Entertainment, Inc. and Subsidiaries for the years ended June
30, 1999 and 1998, in conformity with generally accepted accounting principles.

                                                Rothstein, Kass & Company, P.C.

Roseland, New Jersey
August 10, 1999


                                       F-3
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET
                                December 31, 1999

<TABLE>
<S>                                                                <C>               <C>
                                     ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                                        $  1,631,307
  Accounts receivable                                                 4,784,582
  Prepaid expenses and other current assets                             838,782
                                                                   ------------

   Total current assets                                                              $  7,254,671

PROPERTY AND EQUIPMENT, net                                                             2,055,100

OTHER ASSETS:
  Goodwill                                                            7,068,256
  Investment, at cost                                                 1,000,000
  Security deposits and other                                           543,260
                                                                   ------------

                                                                                        8,611,516
                                                                                     ------------

                                                                                     $ 17,921,287
                                                                                     ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accrued payroll and related expenses                             $    337,494
  Accounts payable and accrued expenses                               5,158,685
                                                                   ------------

   Total current liabilities                                                         $  5,496,179

COMMITMENTS

STOCKHOLDERS' EQUITY:
  Preferred stock, $.01 par value,
   authorized 5,000,000 shares, none issued                                  --
  Common stock, $.01 par value,
   authorized 75,000,000 shares,
   issued and outstanding 7,863,330 shares                               78,633
  Capital in excess of par value                                     21,356,812
  Note receivable, stockholder                                          (64,082)
  Accumulated deficit                                                (8,946,255)
                                                                   ------------

Total stockholders' equity                                                             12,425,108
                                                                                     ------------

                                                                                     $ 17,921,287
                                                                                     ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       F-4
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                             Six Months Ended                  Years Ended
                                                                                December 31                      June 30,
                                                                       ----------------------------    ----------------------------
                                                                           1999            1998            1999             1998
                                                                       ------------    ------------    ------------    ------------
                                                                                       (Unaudited)
<S>                                                                    <C>             <C>             <C>             <C>
REVENUES                                                               $  8,082,353    $  5,779,131    $  9,661,036    $ 13,593,426
                                                                       ------------    ------------    ------------    ------------

OPERATING EXPENSES
  Cost of sales                                                           5,129,805       3,925,989       6,305,511       9,761,508
  Marketing, selling, general and administrative                          3,599,107       3,220,416       7,101,023       6,828,087
  Non-cash consulting expense in connection with warrants                   701,459              --              --              --
                                                                       ------------    ------------    ------------    ------------

    Total operating expenses                                              9,430,371       7,146,405      13,406,534      16,589,595
                                                                       ------------    ------------    ------------    ------------

LOSS FROM OPERATIONS                                                     (1,348,018)     (1,367,274)     (3,745,498)     (2,996,169)

INTEREST INCOME                                                              71,775          25,537          37,569         139,040
                                                                       ------------    ------------    ------------    ------------

LOSS BEFORE INCOME TAXES                                                 (1,276,243)     (1,341,737)     (3,707,929)     (2,857,129)

INCOME TAXES                                                                 20,000           3,000           6,000          12,000
                                                                       ------------    ------------    ------------    ------------

NET LOSS                                                               $ (1,296,243)   $ (1,344,737)   $ (3,713,929)   $ (2,869,129)
                                                                       ============    ============    ============    ============

BASIC AND DILUTED LOSS PER COMMON SHARE                                $      (0.21)   $      (0.57)   $      (0.98)   $      (1.29)
                                                                       ============    ============    ============    ============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
 USED IN COMPUTING BASIC AND DILUTED
 LOSS PER COMMON SHARE                                                    6,251,482       2,349,899       3,802,805       2,230,042
                                                                       ============    ============    ============    ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       F-5
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                            Common Stock            Capital in                                              Note
                                    ----------------------------     Excess of        Accumulated     Subscription      receivable,
                                        Shares          Amount       Par Value          Deficit        receivable       stockholder
                                    ------------    ------------    ------------     ------------     ------------     ------------
<S>                                    <C>          <C>             <C>              <C>              <C>
<C>
BALANCES, July 1, 1997                 2,228,333    $     22,283    $  5,752,317     $ (1,066,954)    $         --     $   (129,600)

COMMON STOCK, issued to
 outside directors and
 executive officer                        16,810             168          39,832

WARRANTS GRANTED FOR                                                      71,017
 SERVICES

INITIAL PUBLIC OFFERING                                                   (1,667)
 EXPENSES

NET LOSS                                                                               (2,869,129)
                                    ------------    ------------    ------------     ------------     ------------     ------------

BALANCES, June 30, 1998                2,245,143          22,451       5,861,499       (3,936,083)                         (129,600)

SALES OF COMMON STOCK, net
of expenses                            2,276,249          22,763       2,352,600                          (100,000)

COMMON STOCK, issued to
 outside directors, consultants,
 vendors and employees                   824,325           8,243       1,527,892

WARRANTS GRANTED FOR
 SERVICES                                                              2,069,498

PAYMENTS OF NOTE
 RECEIVABLE                                                                                                                  58,722

NET LOSS                                                                               (3,713,929)
                                    ------------    ------------    ------------     ------------     ------------     ------------

BALANCES, June 30, 1999                5,345,717          53,457      11,811,489       (7,650,012)        (100,000)         (70,878)

SALES OF COMMON STOCK,net
of expenses                            1,072,879          10,729       4,210,675

COMMON STOCK, issued to
 outside directors                         3,734              37          17,983

ISSUANCE OF COMMON STOCK AND
WARRANTS IN CONNECTION
WITH ACQUISITION                       1,441,000          14,410       6,780,450

PAYMENTS OF SUBSCRIPTION
 RECEIVABLE                                                                                                100,000

PAYMENTS OF NOTE
 RECEIVABLE                                                                                                                   6,796

REMEASUREMENTS OF WARRANTS
 GRANTED FOR SERVICES                                                 (1,463,785)

NET LOSS                                                                               (1,296,243)
                                    ------------    ------------    ------------     ------------     ------------     ------------

BALANCES, December 31, 1999            7,863,330    $     78,633    $ 21,356,812     $  8,946,255     $         --     $    (64,082)
                                    ============    ============    ============     ============     ============     ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       F-6
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                       Six Months Ended December 31,        Years Ended June 30,
                                                                        ---------------------------     ---------------------------
                                                                            1999            1998            1999            1998
                                                                        -----------     -----------     -----------     -----------
                                                                                        (Unaudited)
<S>                                                                     <C>             <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                                               $(1,296,243)    $(1,344,737)    $(3,713,929)    $(2,869,129)
 Adjustments to reconcile net loss to net cash
  used in operating activities:
   Depreciation and amortization                                            131,348          14,863         199,727         753,015
   Loss on disposal of branch operation                                                                      89,646
   Non-cash consulting expense in connection with warrants                  701,459
   Provision for returns                                                                                                    588,500
   Common stock issued and warrants granted to outside
    directors, consultants, vendors and employees                            18,020         119,578         867,119         111,017
   Changes in operating Assets and Liabilities:
   (Increase) decrease in restricted cash                                                   359,113         464,603        (464,603)
   (Increase) decrease in accounts receivable                            (1,293,196)         17,822          (4,335)     (1,342,846)
   Increase in prepaid expenses and other current assets                   (391,983)       (348,613)       (141,528)       (200,860)
   (Increase) decrease security deposits and other                          263,477                        (187,707)
   Decrease in other assets                                                                  11,155          26,826
   Decrease in deferred revenues                                                           (135,524)       (266,636)       (234,437)
   Increase (decrease) in accrued payroll and related expenses             (153,507)       (135,064)        338,402        (221,991)
   Increase (decrease) in accounts payable and accrued expenses            (239,126)        162,169         (42,267)      1,383,675
                                                                        -----------     -----------     -----------     -----------

NET CASH USED IN OPERATING ACTIVITIES                                    (2,259,751)     (1,279,238)     (2,370,079)     (2,497,659)
                                                                        -----------     -----------     -----------     -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Payments for property and equipment                                       (136,183)        (26,147)       (152,224)     (1,243,932)
 Restricted cash                                                                            350,000         350,000        (350,000)
 Acquisition costs, net of cash acquired                                   (220,872)                        (95,000)
 Payments for security deposits                                                            (192,804)
 Investment in Eruptor                                                   (1,000,000)
 Note receivable, officer                                                     6,796          57,522          58,722        (129,000)
                                                                        -----------     -----------     -----------     -----------

NET CASH PROVIDED BY (USED IN)
 INVESTING ACTIVITIES                                                    (1,350,259)        188,571         161,498      (1,722,932)
                                                                        -----------     -----------     -----------     -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from sale of common stock, net of expenses                      4,210,675         187,905       2,275,363          (1,667)
 Proceeds from common stock to be issued                                                    600,000
 Proceeds from subscription receivable                                      100,000
 Proceeds from note payable                                                                  48,020
                                                                        -----------     -----------     -----------     -----------

NET CASH PROVIDED BY (USED IN)
 FINANCING ACTIVITIES                                                     4,310,675         835,925       2,275,363          (1,667)
                                                                        -----------     -----------     -----------     -----------

NET INCREASE (DECREASE) IN CASH                                             700,665        (254,742)         66,782      (4,222,258)

CASH, beginning of period                                                   930,642         863,860         863,860       5,086,118
                                                                        -----------     -----------     -----------     -----------

CASH, end of period                                                     $ 1,631,307     $   609,118     $   930,642     $   863,860
                                                                        ===========     ===========     ===========     ===========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       F-7
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>
                                                                      Six Months Ended December 31,        Years Ended June 30,
                                                                      ----------------------------      --------------------------
                                                                         1999              1998            1999             1998
                                                                      -----------      -----------      ----------      ----------
                                                                                                (Unaudited)
<S>                                                                   <C>              <C>              <C>             <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION,
 cash paid during the year for income taxes                           $        --      $     5,430      $       --      $    7,092
                                                                      ===========      ===========      ==========      ==========

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
 AND FINANCING ACTIVITIES:

 Conversion of liabilities into common stock                          $        --      $        --      $  481,750      $       --
                                                                      ===========      ===========      ==========      ==========

 Warrants granted for services                                        $   213,000      $        --      $2,256,764      $       --
                                                                      ===========      ===========      ==========      ==========

 Common stock subscribed                                              $        --      $ 2,028,175      $2,256,764      $       --
                                                                      ===========      ===========      ==========      ==========

 Net assets acquired for stock and warrants                           $ 6,701,215      $        --      $       --      $       --
                                                                      ===========      ===========      ==========      ==========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       F-8
<PAGE>

              PARADISE MUSIC & ENTERTAINMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS:

      Paradise Music & Entertainment, Inc. ("Paradise") was formed in July 1996.
      We are a music and entertainment company focused on supplying traditional
      and web-centric entertainment businesses with state-of-the art, film,
      video, digital and music-related products, services and content. Our
      products, content and services are offered through three operating groups,
      namely:

      Paradise Film includes Straw Dogs Acquisition Corporation (Straw Dogs) a
      video production company incorporated in April 1999 in Delaware and
      Picture Vision, Inc. ("Picture Vision") a video production company
      incorporated in Tennessee). Straw Dogs was acquired in late December 1999.
      The operation of Straw Dogs will be included in operations from January 1,
      2000.

      Paradise Music includes Push Records , Inc. ("Push") a record label which
      was incorporated in Delaware, John Loeffler Music, Inc. (which operates
      under the name of Rave Music and Entertainment) ("Rave") a creator of
      music scores and advertising themes for television and radio, incorporated
      in New York, and All Access Entertainment Management Group, Inc. ("All
      Access"), a musical artist management company incorporated in New York)

      Paradise Digital Entertainment includes Paradise Digital Productions,
      Inc., which is incorporated in Delaware.

      In February 2000, the Board of Directors of the Company approved a change
      in the Company's year end from June 30 to December 31. The accompanying
      financial statements are for the transition period from July 1, 1999 to
      December 31, 1999. Unaudited comparable data for the six months ended
      December 31, 1998 has been presented in the accompanying financial
      statements.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

      Principles of Consolidation - The consolidated financial statements
      include the accounts of Paradise and its wholly-owned subsidiaries, All
      Access, Picture Vision, Rave, Push and Straw Dogs (collectively the
      "Company"). All significant intercompany accounts and transactions have
      been eliminated in consolidation.

      Revenue Recognition - Commercial music production revenues and the related
      production costs are recognized upon acceptance of the music production by
      the client. Royalty and residual income which relates to musical
      compositions used in television series are recognized when earned and the
      amount can be reasonably estimated. All other royalty and residual income
      is recognized when received as it cannot be reasonably estimated. For
      projects which are short in duration, (primarily less than one month)
      video production revenues and related production costs are recorded upon
      completion of the video. For projects that have a longer term, video
      production revenues and related production costs are recorded using the
      percentage-of-completion method which recognizes income as work on the
      project progresses. In accordance with industry custom, the Company
      currently operates its music artist management business based on oral
      agreements with certain artists and customers. Pursuant to these
      arrangements the Company receives up to 20% of the gross revenues received
      in connection with artist entertainment related earnings less certain
      standard industry costs. Record label revenues are recognized in
      accordance with the provisions of the various distribution agreements.
      Certain record costs are capitalized as recoverable from future revenues
      and amortized over the expected life of the records, to the extent there
      is reasonable assurance that these costs will be recoverable from future
      sales. The Company is accounting for these costs in accordance with
      Statement of Financial Accounting Standards ("SFAS") No. 50 "Financial
      Reporting in the Record and Music Industry."

      Cash and Cash Equivalents - The Company considers all highly liquid
      investments with maturities of three months or less when purchased to be
      cash equivalents. The Company maintains its cash in bank deposit accounts
      which, at times, may exceed federally insured limits. The Company has not
      incurred any losses in such accounts and believes it is not exposed to any
      significant credit risk on cash.


                                       F-9
<PAGE>

              PARADISE MUSIC & ENTERTAINMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

      Property and Equipment - Property and equipment is stated at cost less
      accumulated depreciation and amortization. Depreciation and amortization
      is computed as follows:

                                             Estimated
               Asset                        Useful Lives      Principal Method
               -----                        ------------      ----------------

      Furniture, fixtures and equipment        5-7 Years       Straight-line
      Leasehold improvements               Term of Lease       Straight-line
                                             or 10 years
                                    whichever is shorter

      Impairment of Long Lived Assets - Impairment losses on long-lived assets
      (including goodwill) is recognized when events and circumstances indicate
      that the undiscounted cash flows estimated to be generated by these assets
      are less than the carrying amounts of those assets.

      Investment - Investments in nonmarketable equity securities in which the
      Company owns less than a 20% interest and where it cannot exercise
      significant influence over the operations of the investee, are accounted
      for using the cost method. The Company periodically evaluates the
      recoverability of investments recorded under the cost method and
      recognizes loss if a decline in value is determined to be other than
      temporary.

      Stock Warrants - Stock warrants issued for goods and services are
      accounted for in accordance with Emerging Issues Task Force (EITF) 96-18,
      Accounting for Warrants that are Issued to other than Employees for
      Acquisition, or in Conjunction with Selling Goods and Services.
      Accordingly warrants subject to vesting based on performance, will be
      valued each reporting period until vested. The portion of the value
      related to the completed term of the related agreement is expensed, and
      the remaining non-cash deferred consulting expense is amortized over the
      remaining term of the agreement. The value of such related warrants may be
      subject to adjustment until such time that the warrant is nonforfeitable,
      fully vested and exercisable.

      Income Taxes - Deferred income tax assets and liabilities are computed for
      differences between the financial statement and tax bases of assets and
      liabilities that will result in taxable or deductible amounts in the
      future, based on enacted tax laws and rates applicable to the periods in
      which the differences are expected to affect taxable income. Valuation
      allowances are established, when necessary, to reduce the deferred income
      tax assets to the amount expected to be realized.

      Loss Per Common Share - Basic earnings per share excludes dilution and is
      computed by dividing loss applicable to common stockholders by the
      weighted average number of common shares outstanding for the period.
      Diluted earnings per share reflects the potential dilution that could
      occur if securities or other contracts to issue common stock were
      exercised or converted into common stock or resulted in the issuance of
      common stock that then shared in the earnings of the entity. Diluted loss
      per common share is the same as basic loss per common share for all
      periods presented. Unexercised stock options to purchase 2,707,500 and
      1,062,500 shares of the Company's common stock at December 31, 1999 and
      June 30, 1999, respectively, were not included in the computations of
      diluted earnings per common share because their effect would have been
      antidilutive as a result of the Company's losses.

      Fair Value of Financial Instruments - The fair value of the Company's
      assets and liabilities which qualify as financial instruments under SFAS
      No. 107 "Disclosures about fair value of financial instruments,"
      approximate the carrying amounts presented in the consolidated balance
      sheet.

      Use of Estimates - The preparation of consolidated financial statements in
      conformity with generally accepted accounting principles requires
      management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities and disclosure of contingent assets and

      liabilities at the date of the consolidated financial statements and the
      reported amounts of revenues and expenses during the reporting period.
      Actual results could differ from those estimates.


                                      F-10
<PAGE>

              PARADISE MUSIC & ENTERTAINMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      Reclassification - Certain amounts from prior period financial statements
      have been reclassified to conform to current year classification

NOTE 3 - STRAW DOGS ACQUISITION

      The Straw Dogs acquisition was completed on December 16, 1999. In the
      acquisition we purchased, for 900,000 shares of common stock and warrants
      for 250,000 shares of common stock at $5.81, substantially all of the
      business and assets of the Straw Dogs business of Consolidated
      Entertainment, LLC and assumed substantially all its liabilities.
      Consolidated was owned and operated by Jesse Dylan and Craig Rodgers. As
      part of the Straw Dogs acquisition, we also purchased, for 541,000 shares
      of common stock, all of the stock of a related entity owned by Jesse
      Dylan. The shares issued were not registered under the Securities Act of
      1933, as amended. However, Messrs. Dylan and Rodgers have been granted
      standard "piggyback" registration rights with respect to these shares.

      The total purchase price of $7.1 million has been allocated to the
      following assets and liabilities:

                                             (in thousands)

                    Current Assets                    2,906
                    Other Assets                      1,273
                    Goodwill                          7,068
                    Current liabilities               4,167

      The following unaudited pro format condensed consolidated financial
      information for the six months ended December 31, 1999 and the year ended
      June 30, 1999, is presented to show the results of the company, as if the
      Straw Dogs acquisition had occurred at the beginning of the periods
      presented. The pro forma results include certain adjustments, including
      increased amortization related to goodwill, and are not necessarily
      indicative of what the results would have been had the transactions
      actually occurred on the aforementioned dates.

<TABLE>
<CAPTION>
                                                   Six months ended        Year ended
                                                   December 31, 1999     June 30, 1999
                                                   -----------------   -----------------
<S>                                                    <C>                 <C>
Net revenues                                           $ 17,102,531        $ 29,467,429
Net loss                                                 (2,021,133)         (3,400,256)
Basic and diluted earnings (loss) per common share     $      (0.32)       $      (0.65)
</TABLE>

NOTE 4 - PROPERTY AND EQUIPMENT:

      At December 31, 1999, property and equipment consists of the following:

      Furniture, fixtures and equipment                     $1,332,464
      Leasehold improvements                                 1,429,137
                                                            ----------
                                                             2,761,601
      Less accumulated depreciation and amortization          (706,501)
                                                            ----------
                                                            $2,055,100
                                                            ==========

NOTE 5 - NOTE RECEIVABLE, STOCKHOLDER:

      The Company has a promissory note receivable from a stockholder/officer
      which provides for borrowings of approximately $129,000, bearing interest
      at 8.5% per annum. The promissory note is collateralized by 200,000 shares
      of the officers' common stock of the Company and allows for mandatory
      repayments as defined in the note. This note has been paid down to
      approximately $64,000.


                                      F-11
<PAGE>

              PARADISE MUSIC & ENTERTAINMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES:

      At December 31, 1999, accounts payable and accrued expenses consists of
      the following:

         Accounts payable                                  $   1,636,359
         Credit line payable                                   1,566,360
         Accrued director profit participation                   568,122
         Other                                                 1,387,844
                                                           -------------

                                                           $   5,158,685
                                                           =============

NOTE 7 - INCOME TAXES:

      The provision for income taxes consists of state and local taxes.

      At December 31, 1999, the Company recorded deferred federal, state and
      local income tax assets aggregating approximately $3,540,000 arising from
      net operating loss carryforwards ($2,910,000) and issuance of warrants
      ($630,000). A valuation allowance of approximately $3,540,000 has been
      recorded, since management has no assurance that the tax benefit will be
      realized.

      At December 31, 1999, the Company has federal net operating loss
      carryforwards of approximately $7,262,929, which expire beginning in 2012.

      The following reconciles income tax benefit computed at the federal
      statutory rate to the actual provision for income taxes.

                                         Six Months Ended             Year Ended
                                        12/31/99  12/31/98   06/30/99  06/30/98
                                        ---------------------------------------

      Tax benefit computed at federal
        statutory rate                    (34.0%)  (34.0%)    (34.0%)    (34.0%)
      State and local taxes                 2.0       --         --         --
      Valuation allowance                  34.0     34.0       34.0       34.0
                                        ---------------------------------------
                                            2.0%      --         --         --
                                        =======================================

NOTE 8 - COMMITMENTS:

      The Company has leases for office facilities which expire in various years
      through July 2007. Rent expense for the six months ended December 31, 1999
      and 1998 (unaudited) and years ended June 30, 1999 and 1998 was
      approximately $139,000, $145,000 and $247,000 and $322,000, respectively.

      The aggregate future minimum annual rental payments are as follows:

      Year ending December 31,
                   2000                                 $   623,400
                   2001                                     573,400
                   2002                                     564,000
                   2003                                     564,000
                   2004                                     564,000
             Thereafter                                   2,325,000
                                                        -----------
                                                        $ 5,213,800
                                                        ===========


                                      F-12
<PAGE>

              PARADISE MUSIC & ENTERTAINMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - COMMITMENTS (CONTINUED):

      The Company has employment agreements with seven of its executives, which
      provide for various compensation and bonus arrangements. For the six
      months ended December 31, 1999 and 1998 approximately $1,437,000 and
      $695,000, respectively, has been expensed under the bonus plans and
      employment agreements. For the year ended June 30, 1999 and 1998
      approximately $1,391,000 and $1,480,000, respectively has been expensed
      under the bonus plans and employment agreements. Expenses of $3,525,000
      are expected in the year ending December 31, 2000. These costs are
      included in marketing, selling, general and administrative expenses.

      The Company has agreed to pay each of its outside directors $18,000 per
      year, payable quarterly in the Company's common stock valued on the last
      day of the applicable quarter. During the six months ended December 31,
      1999 and year ended June 30, 1999, the Company charged to operations
      $9,000 and $45,000, respectively, pursuant to this agreement.

NOTE 9 - ECONOMIC DEPENDENCY:

      Approximately $2,204,000 and $2,986,000 of television and film production
      revenues for the six months ended December 31, 1999 and 1998 respectively,
      were derived from one and 3 customers respectively. Approximately
      $5,340,000 and $7,705,000 of television and film production revenues for
      fiscal year ended June 30, 1999 and 1998, respectively, were derived from
      4 and 3 customers respectively. For the six months ended December 31, 1999
      and 1998, approximately $140,000 and $279,000, respectively was owed in
      the aggregate to the Company related to these revenues. For the fiscal
      year ended June 30, 1999 and 1998, approximately $122,000 and $96,000,
      respectively was owed in the aggregate to the Company related to these
      revenues.

NOTE 10 - STOCKHOLDERS' EQUITY:

      In April 1999, the Company entered into a consulting agreement. The
      consultant was to assist the Company through June 30, 2000 in a range of
      areas including identifying acquisition targets, structuring transactions,
      employment issues and financings to support the Company's growth and
      operations. As compensation for these services, the consultant received
      200,000 shares of restricted common stock (which were subsequently
      registered with the Securities and Exchange Commission in July 1999) and
      three-year warrants to purchase 800,000 shares of common stock at the
      following prices: 100,000 at $5.00 per share, 150,000 at $6.00 per share,
      150,000 at $7.00 per share, 150,000 at $8.00 per share, 125,000 at $9.00
      per share and 125,000 at $10.00 per share. The Company valued the warrants
      and stock issued at approximately $2,389,000. At June 30, 1999,
      approximately $1,939,000 remained unamortized. During the period July 1,
      1999 through December 31, 1999, $412,600 of these expenses were applied to
      financing transactions. The company does not anticipate additional
      transactions occurring under this agreement. Therefore, at December 31,
      1999 the Company recorded a charge of $330,000 to operations.

      In connection with an employment agreement, the Company issued options to
      purchase 100,000 shares of common stock which vested immediately and are
      exercisable at $3.00 per share. For the fiscal year ended June 30, 1999,
      the Company recorded an expense of $100,000 related to this transaction.


                                      F-13
<PAGE>

              PARADISE MUSIC & ENTERTAINMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      In July 1999, investors represented by The Cassandra Group, Inc, purchased
      970,880 shares of common stock at a price of $4.25 per share or $4,126,240
      in the aggregate. The Company subsequently registered these shares in
      addition to 266,500 shares previously unregistered of common stock with
      the Securities and Exchange Commission.

      In December 1999, The Board of Directors and stockholders approved an
      increase of shares of common stock available for issuance under the option
      plan from 1,500,000 to 3,000,000 shares. This increase was approved on
      December 16, 1999 by the stockholders.

      In December 1999, the stockholders approved an agreement to acquire the
      assets of Consolidated Entertainment, LLC d/b/a Straw Dogs and 100% of the
      common stock of Spur & Buckle, Inc., for an aggregate of 1,441,000 shares
      of restricted common stock.

      In April 1999, the Company entered into agreements for financial
      consulting services related to proposed acquisitions and other special
      projects with its outside Board members. The agreements expire in June
      2001 and require the Company to issue an aggregate of 300,000 warrants to
      purchase the Company's common stock at exercise prices ranging from $5.00
      to $5.25 per share. The warrants vest after one year and expire in two
      years. For the six months ended December 31, 1999 and fiscal year ended
      June 30, 1999, the Company recorded expense of approximately $171,270 and
      $10,000 under these agreements.

      During 1999, the Company entered into consulting agreements with various
      consultants for professional and financial services. The consultants will
      be compensated for their services through the issuance of an aggregate of
      245,000 warrants to purchase the Company's common stock. The warrants
      typically vest after one year and have exercise prices ranging from $4.00
      to $10.00 per share. The warrants were valued at approximately $240,000.
      For the six months ended December 31, 1999 and fiscal year ended June 30,
      1999, the Company recorded expense of approximately $83,507 and $35,000
      under these agreements.

      In connection with option plans and outstanding warrants, 7,429,000 shares
      of common stock are reserved at December 31, 1999.

NOTE 11 - INVESTMENT

      In October 1999, the Company purchased one million shares of series A
      convertible preferred stock in Eruptor Entertainment for $1,000,000, of
      which $900,000 was paid in cash and the balance by converting a prior loan
      advance. The preferred stock is convertible on a one-to-one basis into
      shares of Eruptor's common stock. There are currently 2.1 shares of
      convertible preferred and 8 million shares of common stock outstanding for
      Eruptor.

      Eruptor's management plans original episodic shows which will be
      interactive and range from two-dimensional to three-dimensional animation
      to live action. Additionally, under the agreement Paradise has the
      opportunity to produce Eruptor projects in traditional media forms and
      Eruptor will exploit Paradise projects in digital media form via its
      Internet site.

NOTE 12 - STOCK OPTIONS: -


                                      F-14
<PAGE>

              PARADISE MUSIC & ENTERTAINMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      On October 8, 1996, the Board of Directors adopted and the stockholders
      approved the Option Plan. The Option Plan provides for the granting of
      incentive stock options ("ISOs") within the meaning of Section 422 of the
      Internal Revenue Code of 1986, as amended (the "Code"), non-qualified
      stock options ("NQSOs") and/or Stock Appreciation Rights (SARs) to certain
      directors, agents and employees of, and consultants to the Company. The
      purpose of the Option Plan is to attract and retain exemplary employees,
      agents, consultants and directors. Options and SARs granted under the
      Option Plan may not be exercisable for terms in excess of 10 years from
      the date of grant. In addition, no options or SARs may be granted under
      the Option Plan later than 10 years after the Option Plan's effective
      date. The total number of shares of Common Stock with respect to which
      options and SARs will be granted under the Option Plan is 3,000,000. The
      shares subject to and available under the Option Plan may consist, in
      whole or in part, of authorized but unissued stock or treasury stock not
      reserved for any other purpose. Any shares subject to an option or SAR
      that terminates, expires or lapses for any reason, and any shares
      purchased pursuant to an option and subsequently repurchased by the
      Company pursuant to the terms of the option, shall again be available for
      grant under the Option Plan. At December 31, options under the Option Plan
      to purchase 2,562,500 shares of common stock are outstanding, none of
      which have been exercised

      As part of The Option Plan, the Board of Directors set aside for Outside
      Directors an aggregate of 100,000 stock options to eligible directors of
      the Company. Each eligible director receives 5,000 stock options per
      annum, subject to adjustment, for his services on the Board on each July
      1. The options are exercisable at the fair market value of the common
      stock on the last date preceding the date of grant. The maximum term of
      the stock options is 5 years and the stock options may be exercised at any
      time for a period of 5 years after the date of grant. At December 31,
      1999, options to purchase 45,000 of common stock were outstanding, none of
      which have been exercised.


                                      F-15
<PAGE>

              PARADISE MUSIC & ENTERTAINMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - STOCK OPTIONS (CONTINUED):

      The activity in the Option Plan and the Program are as follows:

                                                                 Exercise
                                                                  Price
                                                                  Per Share
                                                               ------------
                                               Number of
                                                Options            Range
                                             -------------     ------------
      Balance outstanding,
       July 1, 1997                                35,000     $        6.00

      Granted                                     117,500       2.63 - 6.00

      Cancelled                                     8,500              4.03
                                             -------------     ------------

      Balance outstanding,
       June 30, 1998                              144,000       2.63 - 6.00

      Granted                                   1,000,000       2.06 - 5.25

      Cancelled                                    81,500       2.06 - 6.00
                                             -------------     ------------

      Balance outstanding,
       June 30, 1999                            1,062,500     $ 2.06 - 6.00
                                             =============     ============

      Granted                                   1,595,000       5.00 - 5.25

      Cancelled                                        --                --
                                             -------------     ------------

      Balance outstanding,
       December 31, 1999                        2,657,500     $ 2.06 - 6.00
                                             =============     ============
      Exercisable
       December 31, 1999                        1,341,779     $ 2.06 - 6.00
                                             =============     ============

      The Company has adopted the disclosure requirements of SFAS No. 123,
      "Accounting for Stock-Based Compensation". The Company applies Accounting
      Principles Board Opinion No. 25 and related interpretations in accounting
      for its Option Plan and Program. Had compensation for the Company's stock
      options been determined based on the fair value at the grant dates,
      consistent with the provisions of SFAS No. 123, the Company's consolidated
      net loss and loss per common share would have been adjusted to the pro
      forma amounts indicated below:

<TABLE>
<CAPTION>
                                               Six months ended  Year ended      Year ended
                                                 December 31,     June 30,        June 30,
                                               --------------------------------------------
                                                     1999           1999           1998
                                               --------------   ------------   ------------
<S>                                              <C>            <C>            <C>
      Net loss:
        As reported                              $  1,296,243   $ (3,713,929)  $ (2,869,129)
        Pro forma                                  (2,880,909)    (4,205,673)    (2,975,323)

      Basic and diluted loss per comon share:
        As reported                              $      (0.21)  $      (0.98)  $      (1.29)
        Pro forma                                       (0.46)         (1.11)         (1.33)
</TABLE>

Approximately 1,575,000 of the options granted are not part of the Option Plan,
leaving a balance of 1,867,500 additional options that can be granted under the
Plan.


                                      F-16
<PAGE>

              PARADISE MUSIC & ENTERTAINMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - STOCK OPTIONS (CONTINUED):

      The fair value of each option grant is estimated on the grant date using
      the Black-Scholes option pricing model with the following assumptions for
      grants for the six months ended December 31, 1999 and years ended June 30,
      1999 and 1998: risk-free interest rate 5.0%, no dividend yield, expected
      life of 5 years and expected volatility of 108.5%, 115.2% and 44.0%
      percent, respectively.

NOTE 13 - STOCK WARRANTS

      The following table summarizes common stock warrant activity:

                                                              Exercise
                                                Shares         Prices
                                             ------------   ------------
      Warrants outstanding at July 1, 1997      1,146,000   $       7.20

      Granted                                      80,500   $       4.03
                                             ------------   ------------

      Warrants outstanding at                   1,226,500   $  4.03-7.20
       June 30, 1998

      Granted                                   1,052,500   $ 4.00-10.00
                                             ------------   ------------

      Warrants outstanding at
       June 30, 1999                            2,279,000   $ 4.00-10.00

      Granted                                     590,000   $  5.00-5.81

                                             ------------   ------------

      Warrants outstanding at
       December 31, 1999                        2,869,000   $  4.00-7.20
                                             ============   ============

NOTE 14 - RETIREMENT PLANS

      Profit Sharing Plan

      Effective July 1, 1997, the Company formed a Profit Sharing Plan (the
      "Plan") covering substantially all employees who meet certain eligibility
      requirements. The Company can contribute, on a discretionary basis, up to
      3% of the employees base salary to the Plan. For the six months ended
      December 31, 1999 and 1998, and the years ended June 30, 1999 and June
      1998, profit sharing expense was approximately $800 and $7,000 and $13,000
      and $38,000, respectively.

      401(k) Plan

      Effective July 1, 1997, the Company formed a 401(k) plan covering
      substantially all employees. Employees can contribute up to 15% of their
      annual base salary, not to exceed $10,000 in 1999 and 1998. The Plan does
      not provide for a Company match.


                                      F-17
<PAGE>

              PARADISE MUSIC & ENTERTAINMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - INFORMATION CONCERNING BUSINESS SEGMENTS

      Segment information listed below reflects the two principal business units
      of the Company during the six months ended December 31, 1999 and 1998
      (unaudited) and fiscal year ended June 30, 1999 and 1998. Each segment is
      managed according to the products or services provided to the respective
      customers and segment information is reported on the basis of reporting to
      the Company's Chief Operating Decision Maker (CODM).

      There has been a restructuring when comparing to historical categories.
      Rave previously was categorized with television and film production
      (Paradise Film). Rave is now categorized with Paradise Music (recorded
      music and artist management). We have re-categorized historical results to
      comply with our current organization structure. The Digital Entertainment
      Group was established in January 2000 and will be reflected in future
      business segment reports.


      Six months ended December 31, 1999:

<TABLE>
<CAPTION>
                                                        Paradise            Paradise
                                                          Music               Film            Corporate         Consolidated
                                                       ------------       ------------       ------------        ------------
<S>                                                    <C>                <C>                <C>                 <C>
      Revenues                                         $  3,652,809       $  4,429,544       $         --        $  8,082,353
      Interest income                                           170              9,975             61,630              71,775
      Depreciation and amortization                          36,947             13,486             80,915             131,348
      Pre tax income (loss)                                 702,033            532,512         (2,510,788)         (1,276,243)
      Additions to long lived assets                         28,782              2,101            105,300             136,183
      Total assets                                        2,036,904          5,571,047         10,313,336          17,921,287
</TABLE>


                                      F-18
<PAGE>

              PARADISE MUSIC & ENTERTAINMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - INFORMATION CONCERNING BUSINESS SEGMENTS (CONTINUED):

<TABLE>
<CAPTION>
      Six months ended December 31, 1998 (unaudited)

                                                       Paradise            Paradise
                                                         Music               Film             Corporate          Consolidated
                                                     ------------        ------------        ------------        ------------
<S>                                                  <C>                 <C>                 <C>                 <C>
      Revenues                                       $  1,675,146        $  4,103,985        $         --        $  5,779,131
      Interest income                                       1,697              13,594              10,246              25,537
      Depreciation and amortization                         7,334               4,545               2,984              14,863
      Pre tax income (loss)                              (703,893)             67,524            (705,368)         (1,341,737)
      Additions to long lived assets                       15,100                  --              11,047              26,147
      Total assets                                      1,220,922             874,092           1,529,168           3,624,182

<CAPTION>
      Fiscal year ended June 30, 1999:

                                                       Paradise            Paradise
                                                         Music               Film             Corporate          Consolidated
                                                     ------------        ------------        ------------        ------------
<S>                                                  <C>                 <C>                 <C>                 <C>
      Revenues                                       $  3,167,863        $  6,493,173        $         --        $  9,661,036
      Interest income                                       2,360              21,934              13,275              37,569
      Depreciation and amortization                        48,205              16,562             134,960             199,727
      Pre tax income (loss)                            (1,186,693)            334,926          (2,856,162)         (3,707,929)
      Additions to long lived assets                       33,811              13,636             104,777             152,224
      Total assets                                      1,141,589           1,024,766           3,081,654           5,248,009

<CAPTION>
      Fiscal year ended June 30, 1998:

                                                       Paradise            Paradise
                                                         Music               Film             Corporate          Consolidated
                                                     ------------        ------------        ------------        ------------
<S>                                                  <C>                 <C>                 <C>                 <C>
      Revenues                                       $  4,596,257        $  8,997,169        $         --        $ 13,593,426
      Interest income                                       3,317              20,267             115,456             139,040
      Depreciation and amortization                       684,134              14,794              54,087             753,015
      Pre tax income (loss)                            (2,033,814)            433,325          (1,256,640)         (2,857,129)
      Additions to long lived assets                      167,491              47,725           1,028,716           1,243,932
      Total assets                                      1,069,065           1,285,719           1,767,051           4,121,835
</TABLE>


                                      F-19
<PAGE>

NOTE 16 - RELATED PARTY TRANSACTIONS

      The Company entered into a ten year lease with 8330 West Third Street,
      LLC, an affiliate of Mr. Dylan and Mr. Rodgers for 10,147 square feet of
      space at the rental rate of $2.25 per square foot per month. This rate is
      subject to escalation in accordance with inflation after 5 years. The
      rental rate was determined by an independent appraisal of market rate.

      As described in the proxy statement dated November 10, 1999, for the
      special meeting of stockholders held on December 16, 1999, at which the
      Straw Dogs acquisition was approved, the Asset Purchase agreement between
      the Company and Straw Dogs was supplemented by a letter agreement dated
      September 22, 1999. An exhibit to the letter agreement set forth the
      agreed upon terms covering the leasing of space by the Company from 8330
      West Third Street, LLC.

      8330 West Third Street, LLC, signed a promissory note payable to the
      Company dated December 16, 1999 which will reflect the full indebtedness
      owed the Company. The note provides for monthly payments by 8330 West
      Third Street, LLC to the Company pursuant to a ten year self amortizing
      payment schedule with interest at prime plus 1% floating quarterly with a
      floor of 6% and capped at 12 1/2%. The payment obligation under the note
      has been acknowledged by Mr. Dylan and Mr. Rodgers as their personal
      obligation as provided for in the Asset Purchase Agreement.

              PARADISE MUSIC & ENTERTAINMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17 - SUBSEQUENT EVENTS:

      On March 7, 2000, we entered into a $3,000,000 private convertible
      subordinated note financing with BayStar Capital, L.P. and BayStar
      International, Ltd. (individually the "Buyer" and collectively the
      "Buyers"). The financing was made in the form of Paradise Senior
      Subordinated Convertible Notes, convertible at $2.375 per share, plus five
      year warrants to purchase an additional 631,579 shares at an initial price
      of $2.6125 per share. The Buyers are private equity investment funds that
      invest primarily in privately placed and/or individually negotiated
      securities of publicly traded and late stage private companies. The
      Buyer's investment portfolios include technology companies in the
      broadband media, Internet and wireless industries. In connection with this
      financing transaction, we executed a Securities Purchase Agreement, a
      Registration Rights Agreement, and a Note and a Warrant Agreement with
      each Buyer.


                                      F-20