U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

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

For the fiscal year ended         June 30, 1998

Commission file number              1-12635

                      PARADISE MUSIC & ENTERTAINMENT, INC.
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                 (Name of small business issuer in its charter)

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

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

(Issuer's telephone number)     (212) 590-2100

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

Title of each class                    Name of each exchange on which registered
-------------------                    -----------------------------------------

Common Stock, par value $0.01 per share         Boston Stock Exchange
                                                NASDAQ

Redeemable Common Stock Purchase Warrants       Boston Stock Exchange
                                                NASDAQ

Securities registered under Section 12(g) of the Act:

                                      None

Check whether the issuer (1) filed all reports required to be filed by Sections
13 or 15(d) of the Exchange Act 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 |_|
<PAGE>

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant'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. |X|

The Issuer's revenues for the year ended June 30, 1998 were $13,593,426.

As of September 10, 1998, the aggregate market value of the voting and
non-voting common equity held by non-affiliates computed by reference to the
price at which the common equity was sold or the average bid and ask price of
such common equity on such date was $1,794,884. Solely for the purposes of this
calculation, shares held by directors, executive officers and stockholders of
the issuer that beneficially own more than 10% of the issuer's voting stock have
been excluded, except such shares, if any, with respect to which such persons
disclaim beneficial ownership. Such exclusion should not be deemed a
determination or admission by the issuer that such persons are, in fact,
affiliates of the registrant.

As of September 10, 1998, there were 2,255,431 shares of the registrant's common
stock outstanding.

Documents incorporated by reference: None

Transitional Small Business Disclosure Format (check one)

                    Yes |_|              No |X|
<PAGE>

PART I

ITEM 1.                       DESCRIPTION OF BUSINESS

General

The Company is engaged in various aspects of the music and entertainment
business. The Company's current businesses include: production of original
scores and advertising themes for television, radio and film; production of
music videos and specials for television; music artist management; and a record
label. Operations are conducted through four wholly-owned subsidiaries: John
Leffler Music Inc. d/b/a Rave Music and Entertainment ("Rave"), Picture Vision,
Inc. ("Picture Vision"), All Access Entertainment Management Group, Inc. ("All
Access") and Push Records, Inc. ("Push"). Through its subsidiaries, the Company
provides a range of services which management believes, are not provided by
other independent music companies. This combination of services is believed to
provide certain competitive advantages including the ability to offer lower
costs and greater convenience to customers.

On October 6, 1998, the Company entered into an investment agreement (the "Pines
Investment Agreement") with Pines International Resorts, Inc. ("Pines") pursuant
to which, among other things, Pines agreed to purchase 500,000 shares of the
Company's Common Stock in consideration for payment to the Company of $775,000
in tranches of $345,000 and $430,000, respectively. Under the terms of this
agreement, the Company will receive the first payment of $345,000 no later than
October 14, 1998. In addition, the Company has agreed to grant warrants to Pines
for the purchase of 350,000 shares of the Company's Common Stock at prices
ranging from $1.55 to $2.50 per share. The warrants became exercisable on
October 6, 1998 and expire at various dates through December 31, 1999. The
Company intends to file a Registration Statement on Form S-3 with the Securities
and Exchange Commission (the "Commission") with respect to the 500,000 shares
sold to Pines, the 350,000 warrants granted and 100,000 additional shares issued
to CCF Capital Group, Inc. ("CCF Capital"), the Company's financial advisor. In
accordance with the Pines Investment Agreement, Pines is required to pay to the
Company $430,000 within one week of the filing of such S-3 Registration
Statement. If Pines defaults on such obligation, the Company will experience
immediate and serious liquidity problems. If the Company fails to have an
effective Registration Statement covering the shares issued to Pines within 90
days following the payment by Pines of $345,000, a monthly penalty, at the
option of Pines, of $50,000 or the issuance of 100,000 shares of the Company's
Common Stock shall be imposed until the Registration Statement becomes
effective.

The Company is seeking additional equity and/or debt financing beyond the Pines
investment. There can be no assurance that such financing can be obtained on a
timely basis or even if obtained, that such financing would not substantially
dilute existing stockholders. If such financing cannot be obtained this will
have an immediate adverse impact on the ability of the Company to continue its
present operations. In addition, based on the losses and continued cash
requirements of the Company's record label and the amount of financing
available, substantial revisions and curtailments of this business may be
required. For additional information, see "Liquidity and Capital Resources" and
the Independent Auditors Report and Notes 3 and 13 to the consolidated financial
statements. It should be noted that all descriptions of the current business of
the Company should be considered in light of the current and continuing adverse
impact resulting from the existing liquidity problems.

The Music Industry

The production of original scores and advertising themes for television, radio
and film; the production of music videos and specials for television and music
artist management are generally carried out by individuals or small privately
held companies. Usually, individuals or small companies engage in only one of
the foregoing businesses.

The record business, however, is dominated by divisions of six multi-billion
dollar international companies; Warner Bros., PolyGram, Sony, BMG, MCA/Universal
and Thorn EMI. These companies also have their own publishing divisions and
distribution systems. The remainder of the record business is comprised of
numerous small record companies, smaller distribution companies and smaller
publishing companies. The companies are called independents simply to
differentiate them from the six major companies. The Company believes that its
lower overhead structure provides the record label and its artists an
opportunity to share greater economic benefits than its competitors.

Most independent music companies specialize in only one aspect of the music
industry (such as niche-oriented record labels, jingles, video production,
artist management, concert promotion and genre-oriented publishing or
distribution). The Company believes that there is a significant opportunity for
consolidation among the smaller music companies which are increasingly
recognizing the need to adopt new strategies and form strategic alliances in
order to stay competitive.


                                      -1-
<PAGE>

Current Business

      Commercial Music

      The Company's commercial music production business is conducted through
      Rave, a company founded in 1986 by John Loeffler, the Chairman of the
      Company. Rave creates original scores and advertising themes for
      television, radio, and film. This business involves creating original
      music, hiring musicians, recording music in its in-house studios and
      submitting final, ready to use, compositions.

      The Company typically works with advertising agencies to help create the
      soundtracks for commercials. Once the Company has been solicited for its
      services it reviews the information provided by its client and produces a
      rough version of the proposed production ("demo"). The fees for producing
      a "demo" range from $750 to $2,000. The experience of the Company is that
      it is hired to produce finished soundtracks based on the demo less than
      15% of the time.

      The Company utilizes the services of musicians, singers and engineers who
      are independent contractors to work with the composer to produce the final
      soundtrack in the Company's recording studios. The fee for a final
      soundtrack typically ranges from $5,000 to $15,000. Creative/arranging
      fees and the fees of the musicians, singers, engineers and studio expenses
      are paid by the client. The Company retains its intellectual property
      rights in its musical compositions. Royalty and residual distributions are
      paid by Broadcast Music, Inc. ("BMI") or ASCAP to the Company, the
      composer and the performers for the various uses of the actual
      compositions. These residual fees can exceed the creative fees.

      The Company has six midi recording studios at its New York headquarters.
      The Company currently owns the equipment which includes a fully equipped
      midi room and mixing room and is used in the recording of sound tracks for
      television shows and commercials. The Company's four other recording
      studios contain digital mini recording equipment owned by independent
      contractors who work for the Company. The Company has an oral
      understanding with such independent contractors for the free use of this
      equipment when it is not in use.

      The Company believes that its commercial music business has begun to
      derive some creative benefits from the availability of resources of the
      Company's other businesses, but has not to date realized any economic
      benefit from such relationships. There can be no assurance when if at all,
      that such commercial opportunities will be realized. Through its
      relationships with various music artists, the music artist management
      business has provided the commercial music business with access to both
      well-known artists and artists whose style or sound might help the
      commercial music company generate new business.

      Video Production

      The Company's music video and television special production business is
      conducted through Picture Vision, a company founded in 1984 by Jon Small,
      an Executive Vice President of the Company. The Company produces music
      videos, used to promote music artists, as well as music specials and
      programs for television and cable networks. In connection with this
      business, the Company, utilizing both in-house capabilities and
      independent contractors, directs, produces, story-writes, art directs,
      scouts locations, produces special effects, edits, contracts, and manages
      the production.


                                      -2-
<PAGE>

      The Company produces music videos for record labels (revenues of
      $1,734,000), television specials, which became a more significant revenue
      generator in fiscal 1998 (revenues of $6,920,000) and has also produced a
      limited number of television commercials (revenues of $343,000), the
      production of which is similar in many ways to music video production.

      Music Artist Management

      The Company's music artist management services are provided by All Access,
      a company founded in 1994 by Brian Doyle and Richard Flynn, each an
      Executive Vice President of the Company. In the music industry, artist
      management means working with an artist in every facet of his or her
      career. For developing artists, the Company provides assistance in the
      following ways: building a support team for the artists (including an
      attorney, an accountant/business manager and booking agent); securing
      appropriate recording and publishing contracts; promoting sales of
      records; and developing touring opportunities. For established artists,
      the Company provides strategic planning to help maintain and advance the
      artists' careers in areas including touring, recording and record sales;
      publishing and ancillary uses of the artists music (such as motion picture
      sound tracks). The Company specializes in developing and implementing
      strategic plans for its artists that include personalized marketing and
      promotion strategies with continuous monitoring and follow through for
      each phase of the plan. Additionally, the Company acts as a liaison
      between its artists and their advisors and offers a full range of
      administrative support to its artists' careers.

      The Company has a variety of sources for new artists. The Company receives
      numerous referrals from within the industry due to its reputation in the
      music artist management business. Recorded music companies prefer to work
      with "known entities" and will recommend management companies to newly
      acquired artists who are unrepresented. Music industry attorneys, who
      often work with unsigned artists, are also a source of referrals. Likewise
      business managers, accountants, producers and occasionally publishing
      companies serve as sources of referrals. In addition, the Company's
      representatives spend a good deal of time in small clubs and local music
      venues listening to new music and following up industry leads. The Company
      receives approximately five to ten "demo" tapes a month through referrals
      and directly from artists in search of management. Various members of the
      staff will listen to these tapes searching for the "better" talent. Only
      when the Company identifies what it believes to be an exciting prospect
      will the Company consider pursuing that artist. The Company generally will
      hear an artist four or five times in live performances before deciding to
      sign such artist. The Company's philosophy is to develop a relationship
      with artists before actually signing them. This relationship building
      process can take up to six months before it is mutually agreed that the
      artist is ready for management. The artist must demonstrate a willingness
      to listen to management, to take advice and direction, and to pursue his
      or her career diligently.

      The leading commercially successful artists typically have an exclusive
      arrangement with a management company. A few management companies have
      under contract a large number of artists (more than 10). The majority of
      management companies have a relatively small number of artists under
      contract (less than 10). The balance of the industry consists of a number
      of very small companies that principally represent a number of unsigned
      artists. To maximize client service and minimize overhead, it is the
      intention of the Company to maintain a roster of eight to ten artists
      (with three or four established artists and four or five developing
      artists). In addition, as the Company builds relationships with new
      artists, the Company may be working with up to six additional unsigned
      artists who are not generating income.


                                      -3-
<PAGE>

      The Company currently manages the careers of six music artists and/or
      music groups including Fat, Coward, Kim Sozzi, Hall & Oates, Daryl Hall
      and Mosh Productions. For providing its services, the Company is paid
      commissions typically ranging from 15% to 20% of the entertainment related
      gross earnings (less certain minimal standard industry costs) of its
      clients. The Company's policy, in accordance with industry practice, is to
      pay up to 5% of commissions received to certain non-executive employees
      who either identify, develop and/or manage such artists. With respect to
      music artist management, the Company's most well known artists are Hall
      and Oates and Daryl Hall. In accordance with industry practice, the
      Company typically does not enter into written management contracts with
      the artists it represents. However, the Company does adhere to agreed upon
      fee structures with its artists and in the future will try to enter into
      written agreements with certain of its artists to the extent practicable.

      The Company believes that its music artist management business has begun
      to derive some marketing benefits from its affiliation with the Company's
      other business. Existing and potential clients of the Company's music
      artist management business may find the television commercial
      opportunities provided by the Company's commercial music division to be
      attractive. Additionally, with music videos becoming such an important
      promotional tool for artists, being able to provide music video production
      services gives the music artist management business an advantage in
      soliciting potential clients. There can be no assurance that such
      commercial opportunities will be realized.

Independent Record Label

      General

      In February 1997, the Company incorporated its record label Push to
      operate in the recorded music industry as a contemporary label featuring
      alternative and adult contemporary artists. Push is under the direction of
      Brian Doyle and Richard Flynn and will, to the extent practicable, utilize
      the in-house recording studios and video production services of the
      Company. Until it can support a higher level of overhead, Push will, to
      the extent practicable, use the existing resources of the Company,
      particularly those employed in its artist management services business.

      Currently Push has entered into agreements with (i) Daryl Hall and John
      Oates, who have recorded "Marigold Sky", which was released in late
      September 1997, (ii) Luxx, who have recorded their first album titled
      "Luxx" which was released in the third quarter of fiscal 1998, (iii)
      Kidney Thieves, who have recorded their first album entitled "Trickster",
      which was released in July 1998 and (iv) Blessid Union of Souls who are
      scheduled to release an album in fiscal 1999. Push has entered into a
      North American manufacturing and distribution agreement with BMG Music
      d/b/a BMG Entertainment ("BMG"). The agreement with Daryl Hall and John
      Oates grants Push the exclusive right to distribute the "Marigold Sky"
      album (worldwide) and grants the Company two consecutive options for two
      additional albums in the event certain sales criteria are met with respect
      to the previous album. Sales criteria for "Marigold Sky" has been met.

      To date, Push has required substantial cash resources in the development
      of its business and has experienced substantial operating losses. It is
      anticipated that additional cash investments and continued losses will be
      required before the longer term viability of Push can be determined. Based
      on the current liquidity problems being experienced by the Company, severe
      revisions and curtailments in the operations of Push could be implemented
      in the near future. Unless independent joint venture or other funding
      sources can be obtained for Push, there can be no assurance as to the
      continuing operations of Push. The description which follows as to the
      current operations of Push is subject in its entirety to such liquidity
      concerns.


                                      -4-
<PAGE>

      Production

      Average music production costs for the Company's releases have been and
      are expected to continue to be below what the Company believes to be the
      industry average. The Company believes that the savings result from the
      willingness of its artists to forego the substantial advances and other
      benefits paid to the top recording artists by the major music companies in
      consideration for such artists' receiving greater royalty participations
      then are typically offered by competing labels. In addition, savings may
      result from utilizing its integrated video and commercial production
      facilities. It is also important to note that most independent music
      companies do not have the facilities and services which the Company
      currently owns and can provide. Consequently, the Company believes that it
      can achieve a cost advantage over other small independent music companies.
      The Company also tries to keep production costs low by utilizing producers
      and musicians with whom the Company has relationships.

      As an artist gains recognition, it is common practice to allocate larger
      production budgets to their subsequent releases. The Company will follow
      this strategy on a selective basis.

      Manufacturing and Distribution

      Typical distribution for an independent recorded music company is through
      independent distributors. The major recorded music company-owned companies
      offer national distribution, consistent market visibility, accounts
      receivable and collection administration. Independent distributors offer
      similar services, but normally on a much smaller scale.

      In August 1997, Push entered into a three year agreement with BMG (a major
      recorded music company-owned branch system) to provide distribution and
      manufacturing services within the United States, its territories and
      possessions and Puerto Rico for all sound recordings derived from masters
      owned or controlled by Push. BMG is under no obligation to provide
      promotional support under this agreement.

      Push successfully negotiated worldwide distribution agreements in
      connection with Daryl Hall & John Oates album "Marigold Sky". Management
      will seek to negotiate foreign distribution and/or licensing agreements in
      other territories not covered by the BMG agreement for future record
      releases if management believes that one or more of its albums can be sold
      profitably in foreign markets or that such distribution strategically
      positions the Company for future sales.

      Promotion

      The Company has, and will continue to, market its releases by funding the
      touring activities of its recording artists, particularly with respect to
      newer artists. For all of the Company's recording artists, but especially
      in the case of acts such as Luxx and Kidney Thieves that have little or no
      preexisting fan base, touring activity may increase demand for the
      artists' records in areas in which the artists perform. Such increased
      demand, if realized, helps the Company's radio promotion staff and
      consultants to convince local radio stations that there is an audience for
      the record in areas where the acts are performing. Increased radio play,
      if developed can increase attendance at the artists' live performances or
      generate even more local retail demand for the records. There can be no
      assurance that such marketing activities will result in any additional
      sales.


                                      -5-
<PAGE>

      The traditional and most effective means of promoting recorded music is by
      radio air play. Obtaining radio air play for a new release is an extremely
      competitive process. The trend by radio stations to focus more on
      particular music formats has made it easier for independent producers to
      target those stations most likely to air a specific recording. Independent
      radio promoters are often hired to gain air play and, in certain markets,
      they are quite effective in gaining air play for a release. Public and
      college radio stations are useful venues for lesser known artists. Music
      videos are also a vital means of promoting artists and records.

      Songs that are aired on a major radio station are chosen by the program
      director, often in conjunction with a format consultant. Once a recording
      is aired, the amount of repeat play it receives depends upon listener
      requests and feedback, as well as actual sales data. Since listener
      response and sales depend in large measure on how often a release is
      aired, building a commercial hit depends on an ongoing cycle of air play
      and sales. Nurturing this cycle requires constant marketing attention and
      careful coordination with advertising, concert schedules and other
      promotional activities. Other promotional tools include print advertising,
      retail promotions, concert tours and appearances on television talk shows.
      Additionally, getting music video airplay on MTV or VH-1 or other video
      stations or programs, or on their niche oriented programs, is also
      essential to the success of a recording music artist and their records.

      The key to finding an audience for new artists is to properly coordinate
      all these promotional activities to maximize awareness and exposure. The
      Company has and will continue to, where possible, use its in-house
      expertise to direct or assist with the promotional activities with respect
      to its artists. By coordinating or providing assistance with these
      activities, to the extent practicable, in-house costs will be further kept
      under control.

      Relationship with Artists

      The Company's plan is to sign and develop new or emerging music artists
      and, to the extent practicable, sign established artists. The Company will
      continue to recruit new and emerging artists and to enter into exclusive,
      long-term recording contracts (expected to cover an initial album, with
      options to record three to five additional albums, at the Company's
      discretion). The Company will concentrate its resources on a small number
      of artists, developing a tailored marketing and promotion plan for each.
      There can be no assurance that the Company will be able to attract new and
      emerging music talent or established artists, or, if the Company is able
      to attract such talent, that the Company will be able to develop that
      talent successfully or in such manner so as to produce significant sales.

      If the Company develops commercially successful music artists, there can
      be no assurance that the Company will be able to maintain its
      relationships with such artists even if it has entered into exclusive
      recording contracts with them. Furthermore, performing artists
      occasionally request releases from their exclusive recording agreements.
      Among the reasons that may cause an artist to engage in so-called "label
      jumping" are expectations of greater income and advances or promotional
      support by a competing label. There can be no assurance that any given
      artist developed by the Company will not determine to request a release
      from his or her agreement with the Company. Because of the highly personal
      and creative nature of the artist's contractual obligations to the
      Company, it is not feasible to force an unwilling artist to perform the
      terms of his or her contract with the Company. If the Company does release
      a "label jumping" artist from his or her contract, it may be able to
      obtain an "override royalty" as consideration for the release. Override
      royalties are customarily paid by the released artist's new recording
      company and are based on a percentage of the suggested retail selling
      price or wholesale price (depending on the particular label in question),
      subject to certain deductions. Such royalties are payable with respect to
      a negotiated number of the artist's albums after release from his or her
      existing contract.


                                      -6-
<PAGE>

      The Company will seek to contract with its artists on an exclusive basis
      for the marketing of their recordings in return for a percentage royalty
      on the retail selling price of the recording. The Company will generally
      seek to obtain rights on a worldwide basis. A typical contract for an
      artist may provide for a number of albums to be delivered, with advances
      against royalties being paid upon delivery of each album, although
      advances are often made prior to recording. The Company will generally
      have an option to take each album that the artist is contracted to
      deliver, exercisable within an agreed period of time, usually a few months
      following delivery of the previous album. Normally, if an option is not
      exercised, the artist has no obligation to deliver additional albums.
      Provisions in contracts with established artists vary considerably and
      may, for example, require the Company to release a fixed number of albums
      and/or contain an option exercisable by the Company covering more than one
      album. The Company will seek to obtain rights to commercially exploit
      product delivered by the artists for the life of the product's copyright.
      Under the contracts, advances are normally recoupable against royalties
      payable to the artist. The Company will seek to recoup a portion of
      certain marketing and tour support costs, if any, against artist
      royalties.

      Contracts either provide for the artists to deliver completed recordings
      or for the Company to undertake the recording with the artist. If the
      recording costs are advanced by the Company, they are added to the
      advances paid to the artist and recouped against royalties payable to the
      artist. The Company's staff is involved in selecting producers, recording
      studios, any additional musicians needed and songs to be recorded, as well
      as supervising the output of recording sessions, although for experienced
      artists, such involvement may be less. The Company will produce music
      videos of single songs for promotional purposes (clips) and longer music
      programs (for example, concert programs). Income from music videos is
      derived from the sale of video cassettes and from the publishing of music
      included in such videos.

      Acquisition Program

      The music and entertainment industry includes six major companies in the
      area of recorded music and thousands of smaller independent music entities
      in the area of recorded music and the broader music business. The Company
      believes that many owners of independent music entities do not enjoy
      certain benefits which the Company intends to offer. These benefits
      include the ability to provide a broader range of services to their
      clients and greater liquidity and potential for capital enhancement
      through ownership of a publicly traded entity. Other benefits that the
      Company believes it can provide acquired entities are management expertise
      and a broad range of industry contacts.

      The Company's acquisition program will concentrate on small complementary
      music driven businesses in the music and entertainment industry. The
      Company has, to date, consummated only one transaction which could be
      deemed an acquisition. In October, 1997, the Company hired the sole
      proprietor of Paul Hoffman music to open a Los Angeles, California office
      and studio facility for RAVE, the Company's commercial music subsidiary.
      Known as "RAVE West," the Company spent approximately $60,000 and Mr.
      Hoffman personally invested approximately $50,000 in the build out and
      equipping of a state-of-the-art digital recording and editing facility. No
      cash or securities were paid to Mr. Hoffman in exchange for the
      "acquisition" of the going concern value of Paul Hoffman music, but Mr.
      Hoffman's employment agreement called for him to earn options to purchase
      shares of the Company's common stock based upon the earnings of RAVE West
      in accordance with a formula established under the agreement. No options
      have been earned by Mr. Hoffman as RAVE West has been operational for less
      than four full quarters and has not yet achieved the earnings thresholds
      established under the agreement for the vesting of any options.


                                      -7-
<PAGE>

      In June of 1998, Mr. Hoffman developed a business plan for commercializing
      this new business as a stand-alone division of the Company (as opposed to
      an operating division of RAVE). The business plan called for Mr. Hoffman
      to invest his own funds to: (1) support the new division's infrastructure
      and operations, (ii) hire and train a sales and marketing staff to grow
      the revenues of the division, and (iii) "brand" the division by changing
      its name from "RAVE West" to "Blue Music and Sound Design".

      Unless and until the Company's financial condition is improved through the
      infusion of capital from the sale of equity securities, debt financing or
      a combination of the two, it is unlikely that the Company will be able to
      consummate any new acquisitions for the foreseeable future. There can be
      no assurance that any such financing can be obtained. There can be no
      assurance that even if such financing is obtained, that any acquisitions
      can be successfully consummated or, if consummated, that such acquisitions
      will positively contribute to the cash flow and/or profits of the Company.

Copyrights

      The Company's record business, like that of other companies involved in
      recorded music, will primarily rest on ownership or control and
      exploitation of musical works and sound recordings. The Company's music
      products, including its commercial music, are and will be protected under
      applicable domestic and international copyright laws.

      Although circumstances vary from case to case, rights and royalties
      relating to a particular recording typically operate as follows: When a
      recording is made, copyright in that recording vests either in the
      recording artist (and is licensed to the recording company) or in the
      record company itself, depending on the terms of the agreement between
      them. Similarly, when a musical composition is written, copyright in the
      composition vests either in the writer (and is licensed to a music
      publishing company) or in a publishing company. A public performance of a
      musical composition will result in money being paid to the writer and
      publisher. The rights to reproduce songs on soundcarriers are obtained by
      record companies or publishers from the writer. The manufacture and sale
      of a soundcarrier results in mechanical royalties being payable by the
      record company to the performer at industry agreed or statutory rates for
      the use of the composition and by the record company to the recording
      artists for the use of the recording. The Company operates in an industry
      in which revenues are adversely affected by the unauthorized reproduction
      of recordings for commercial sale, commonly referred to as "piracy", and
      by home taping for personal use.

      Potential publishing revenues may be derived from the Company's ownership
      interest in musical compositions, written in whole or in part by artists.
      Management anticipates securing a partial ownership position in the
      copyright to any compositions written by its recording artists, where such
      rights are available and have not been previously sold or assigned.
      Generally, revenues from publishing are generated in the form of: (1)
      mechanical royalties, paid by the record company to the publisher for the
      mechanical duplication of the copyright to a particular composition (as
      distinct from the copying of the artist's performance of that
      composition); (2) performance royalties collected and paid by performing
      rights entities such as ASCAP and BMI for the actual public performance of
      the composition as represented by radio airplay, Musak, or as a theme or
      single broadcast in synchronization with a visual image via television;
      (3) sub-publishing revenues derived from copyright earnings in foreign
      territories, and publishers in those territories acting as designated
      collection agents for the Company; and (4) licensing fees derived from
      printed sheet music, uses in synchronization with images as a video or
      film scores, computer games and other software applications, and any other
      use involving the composition.


                                      -8-
<PAGE>

      The Company may be engaged, with respect to its recorded music business,
      in licensing activities involving both the acquisition of rights to
      certain master recordings and compositions for its own projects and the
      granting of rights to third parties in the master recordings and
      compositions it owns. There can be no assurance that the Company will be
      able to obtain licenses from third parties on terms satisfactory to the
      Company or at all.

Competition

      The Company currently competes 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 music artist management. 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 including Crushing Enterprises, Elias Associates, JSM Music,
      Inc. and Tomandandy, with respect to commercial music, The End,
      Propaganda, DNA, Automatic Films and High Five with respect to video
      production and Gold Mountain Entertainment, Left Bank Management and H.K.
      Management, with respect to artist management, have greater financial
      resources, and in many instances longer operating histories, than the
      Company.

      Push, the Company's record label, faces intense competition for
      discretionary consumer spending from numerous other record companies and
      other forms of entertainment offered by film companies, video companies
      and others. Push competes directly with other recorded music companies,
      including the six 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 the Company. The Company's ability to compete
      successfully in the recorded music business will be largely dependent upon
      obtaining additional capital, signing and retaining successful artists and
      introducing music products which are accepted by consumers.

      The Company does not believe that there are currently any independent
      music companies, that are comparable in size to the Company, which offer
      the range of services which are provided by the Company.

Organization

      The Company was incorporated in the State of Delaware on July 18, 1996 and
      is located at 53 West 23rd Street, New York, New York, 10010 and its
      telephone number is 212-590-2100.

Employees/Independent Contractors

      As of September 10, 1998, the Company had 35 employees, 26 of whom were
      located at the Company's New York office, 6 of whom were located in
      Nashville, Tennessee, and 3 of whom were located in Los Angeles. None of
      the Company's employees is represented by a labor union. The Company has
      not experienced any work stoppage and considers relations with its
      employees to be good.

      As is customary in the music business, the Company also utilizes 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.


                                      -9-
<PAGE>

ITEM 2.                       DESCRIPTION OF PROPERTY

The Company leases office space at three locations. Its headquarters and
commercial music recording studios are located at 53 West 23rd Street in New
York City where it leases approximately 20,000 square feet, pursuant to a lease
that expires in July 2007. The Company's 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. The Company's commercial music
business also leases 3,400 square feet of office space at 7237 Santa Monica
Boulevard in Los Angeles, which lease expires in September 2002. Rent expense
for leased facilities amounted to approximately $322,000 for the year end June
30, 1998.

ITEM 3.                          LEGAL PROCEEDINGS

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

ITEM 4.                MATTERS SUBMITTED TO SHAREHOLDER VOTE

The Company did not submit any matters to the vote of security holders during
the fourth quarter of the fiscal year ended June 30, 1998.


                                      -10-
<PAGE>

PART II

ITEM 5.      MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

The Company's Common Stock commenced trading on the Nasdaq SmallCap Market and
the Boston Stock Exchange on January 22, 1997. The high and low bid prices of
the Company's Common Stock (as reported by Nasdaq and the Boston Stock Exchange)
for each quarter since its initial public offering were as follows:

Nasdaq SmallCap Market

            Start          End
            Date           Date             High             Low
            ----           ----             ----             ---

            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
            01/01/98       03/31/98         $4               $2-13/16
            04/01/98       06/30/98         $3-3/4           $2

Boston Stock Exchange

            Start          End
            Date           Date             High             Low
            ----           ----             ----             ---

            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
            01/01/98       03/31/98         $4               $2-13/16
            04/01/98       06/30/98         $3-5/8           $2

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 the 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 the common stock was 32 as of
September 10, 1998. The Company believes that there are in excess of 300 round
lot beneficial owners of common stock whose shares are held in street name.

The Company has never paid a dividend on its common stock. The Company
anticipates that future earnings, if any, will be retained for use in its
business or for other corporate purposes, and it is not anticipated that cash
dividends in respect of the common stock will be paid.


                                      -11-
<PAGE>

Recent Sales of Unregistered Securities

On October 6, 1998, the Company entered into the Pines Investment Agreement with
Pines pursuant to which, among other things, Pines agreed to purchase 500,000
shares of the Company's Common Stock in consideration for payment to the Company
of $775,000 in tranches of $345,000 and $430,000, respectively. Under the terms
of this agreement the Company will receive the first payment of $345,000 no
later than October 14, 1998. In addition, the Company has agreed to grant
warrants to Pines for the purchase of 350,000 shares of the Company's Common
Stock at prices ranging from $1.55 to $2.50 per share. The warrants became
exercisable on October 6, 1998 and expire at various dates trough December 31,
1999. In accordance with the Pines Investment Agreement, Pines is required to
pay to the Company $430,000 within one week of filing a Registration Statement
on Form S-3. On or about September 24, 1998, the Company entered into a
non-exclusive financial advisory relationship with CCF Capital pursuant to
which, among other things, CCF Capital would receive, upon the closing of the
Pines Investment Agreement, 100,000 shares of the Company's Common Stock in
connection with the rendering of its financial advisory services and an
aggregate of $75,000. In addition, CCF Capital will receive a monthly fee of
$6,500 for a minimum of 8 months and a maximum of 35 months.

In late July of 1998, all six members of the Company's Board of Directors sold
in the aggregate approximately 105,000 shares of the Company's Common Stock in
one or more open market transactions at a price per share of $2.875. The
Company's two outside directors lent the proceeds of such open market sales (an
aggregate of approximately $48,000) to the Company pursuant to convertible
promissory notes that would allow the holders of such notes to convert the
outstanding principal and interest accrued thereunder into shares of the
Company's Common Stock at a price per share equal to $2.875. Three of the
Company's Board members took the proceeds of their open market sales
(approximately $190,000) and reinvested them into the Company in exchange for
restricted shares of Common Stock at a purchase price per share of $2.875. One
of the Company's Board members, Mr. Loeffler, used the proceeds of his open
market sales to repay approximately $58,000 of a loan that had been advanced to
him by the Company. In all, the Company received approximately $302,000 in gross
proceeds from such transactions. The securities were issued to the foregoing
persons in reliance on the exception from registration set forth in Section 4(2)
of the Securities Act of 1933, as amended.


                                      -12-
<PAGE>

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

Forward Looking Statements

Except for the historical information contained herein, this Annual Report on
Form 10-KSB may contain forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Investors are cautioned that forward-looking
statements are inherently uncertain. Actual performance and results of
operations may differ materially from those projected or suggested in the
forward-looking statements due to certain risks and uncertainties, including,
without limitation, the ability of the Company to obtain adequate financing to
continue its current operations, risks associated with the ability to produce
additional albums which are commercially successful, the Company's history of
operating losses, dependence on senior management, risks inherent in the
recorded music industry, the Company's ability to contract with recording
artists, the Company's ability to manage growth and the success of the Company's
acquisition program. The forward-looking statements contained herein represent
the Company's judgment as of the date of filing this Annual Report hereof, and
the Company cautions readers not to place undue reliance on such statements.

General

The Company currently derives most of its revenues from: the production of
original music scores and advertising themes for television, radio, and film;
the production of music videos used to promote music artists and music specials
and programs for television networks and other video broadcasters; the
management of music artists and the recorded music business.

The Company believes the results of operations of its operating subsidiaries
will be subject to seasonal variations, which variations may initially offset
each other. As such, the Company's operating results could be materially
adversely affected. The timing of new record releases, for example, could
materially impact the Company's operating results. Additionally, due to the
success of particular artists, artists touring schedules and the timing of music
television specials, it is possible that the Company could also experience
material fluctuations in revenue from year to year.

As discussed in "Liquidity and Capital Resources", as well as in Item 1 of this
Annual Report and elsewhere, the Company is experiencing severe liquidity
problems which have had and will continue to have a material adverse effect on
operations of the Company.

Results of Operations

Commercial music production revenues increased to $1,497,173 for the fiscal year
ended June 30, 1998 from $894,362 for the fiscal year ended June 30, 1997, an
increase of $602,811 or 67.4% while commercial music production cost of sales
increased to $644,552 for the fiscal year ended June 30, 1998 from $365,434 for
the fiscal year ended June 30, 1997, an increase of $279,118 or 76.4%. The
increase in revenues was primarily due to an increase in advertising agency
billings and royalty income relating to musical compositions for three
television series.


                                      -13-
<PAGE>

Gross profit as a percentage of commercial music production revenues decreased
to 56.9% for the fiscal year ended June 30, 1998 from 59.1% for the fiscal year
ended June 30, 1997. The decrease was attributable to a decrease in residual
income which has no cost of sales associated with it, the utilizing of outside
studios as new studios were being built and higher than expected costs on a few
jobs. The level of residual and royalty income varies from year to year based
upon the number of compositions airing at any one time, the medium on which such
compositions are aired and the frequency of such airings.

Video production revenues increased to $8,997,169 for the fiscal year ended June
30, 1998 from $3,839,472 for the fiscal year ended June 30, 1997, an increase of
$5,157,697 or 134.3%. The increase in production revenues was due to the
completion of the production of three television music specials compared with
one special in 1997.

Cost of sales for video productions increased to $7,508,866 for the fiscal year
ended June 30, 1998 from $2,976,949 for the fiscal year ended June 30, 1997, an
increase of $4,531,917 or 152.2%. The increase was attributable to an increase
in the number of music special productions.

Gross profit as a percentage of video production revenues decreased to 16.5% for
the fiscal year ended June 30, 1998 from 22.5% for the fiscal year ended June
30, 1997. The decrease was primarily attributable to the Company earning a lower
gross profit on the music specials described above.

The current year's gross profit includes three television special productions
which generated significant revenues and profits; however, the gross profit
percentage on these projects was lower than the Company's gross profit
percentage on its smaller projects.

Music artist management revenues increased to $891,401 for the fiscal year ended
June 30, 1998 from $834,452 for the fiscal year ended June 30, 1997, an increase
of $56,949 or 6.8%. The increase was primarily attributable to a higher level of
touring activity of one artist and signing of a significant production contract
offset in part by managing fewer artists than in 1997.

Record label revenues for the year ended June 30, 1998 were $2,207,683 and
resulted primarily from shipments of the Daryl Hall and John Oates album
"Marigold Sky". There were no record label sales for the year ended June 30,
1997. Gross profit amounted to $599,593 for the year ended June 30, 1998
compared with a loss of $104,622 for the year ended June 30, 1997. The gross
profit in 1998 relates to the "Marigold Sky" album. The loss in 1997 resulted
from the production of a Luxx album which was fully expensed in such year but
which had no related revenues in 1997.

The Company's marketing, selling, general and administrative expenses increased
to $6,828,087 for the fiscal year ended June 30, 1998 from $3,199,901 for the
fiscal year ended June 30, 1997, an increase of $3,628,186 or 113.4%. The
increase is primarily attributable to (i) the operations of Push, (ii) costs
associated with building an infrastructure to operate and manage a public
company, and (iii) executive compensation.

Interest income increased to $139,040 for the fiscal year ended June 30, 1998
from $94,100 for the fiscal year ended June 30, 1997, an increase of $44,940 or
47.8%. The increase resulted from the investment of proceeds from the Company's
initial public offering for a full year in fiscal 1998 compared with six months
in fiscal 1997 offset by lower cash amounts invested in the current fiscal year.
The cash was utilized to fund the Company's operations.


                                      -14-
<PAGE>

The Company's loss before income taxes increased to $2,857,129 for the fiscal
year ended June 30, 1998 from $984,520 for the fiscal year ended June 30, 1997,
an increase of $1,872,609 or 190.2%. The increase was primarily due to the
increase in marketing, selling, general and administrative expenses described
above offset in part by the increase in profit at the Company's video production
subsidiary.

Liquidity and Capital Resources

The Company has a history of operating losses having incurred losses of
approximately $2.9 million and 1.0 million for the years ended June 30, 1998 and
1997, respectively. These losses have had a negative impact on the liquidity of
the Company. The Company currently requires additional working capital to
continue funding the operations of its businesses and is currently exploring
various alternatives to obtain such financing. There can be no assurance that
such financing will be available or, if available, on terms that are acceptable
or favorable to the Company. Failure to obtain such financing will have a
material adverse effect on the Company and its continuing operations.
Continuation of the Company as a going concern is dependent on its ability to
resolve its liquidity problem and attain future profitable operations.

On October 6, 1998, the Company entered into the Pines Investment Agreement with
Pines pursuant to which, among other things, Pines agreed to purchase 500,000
shares of the Company's Common Stock in consideration for payment to the Company
of $775,000 in tranches of $345,000 and $430.000, respectively. Under the terms
of this agreement the Company will receive the first payment of $345,000 no
later than October 14, 1998. In addition, the Company has agreed to grant
warrants to Pines for the purchase of 350,000 shares of the Company's Common
Stock at prices ranging from $1.55 to $2.50 per share. The warrants became
exercisable on October 6,1998 and expire at various dates through December 31,
1999. In accordance with the Pines Investment Agreement, Pines is required to
pay to the Company $430,000 within one week of filing a Registration Statement
on Form S-3. If Pines defaults on such obligation, the Company will experience
immediate and serious liquidity problems.

In addition to the Pines Investment Agreement, the Company is pursuing debt
and/or equity financing to provide for its immediate, short-term and long-term
cash requirements. In the event that the Company cannot procure adequate
financing, the Company may be required to, among other things, reduce its
operating costs, reduce its payroll, curtail its on-going investment activities,
especially in Push Records, and curtail, restrict or even eliminate certain of
the Company's businesses or operating subsidiaries. Even if the Company is
successful in obtaining financing for its immediate cash needs, there can be no
assurance that the actions outlined above will ensure the Company's survival as
a going concern and if the Company does continue, implementation of the cash
containment measures outlined above could materially adversely affect the
long-term profitability or potential future value of the Company's business and
operating subsidiaries.

The Company's tangible net asset value as of June 30, 1998 was below the
threshold required by NASDAQ for continued listing of the Company's securities.
The Company believes that the financing provided pursuant to the Pines
Investment Agreement will result in an increase of the Company's tangible net
asset value above the threshold established for continued NASDAQ listing.
However, there can be no assurance that failure to consummate the Pines
Investment Agreement or continuing losses will not result in a net tangible
asset value in the future which again falls below the requirement for continued
NASDAQ listing. If the Company's securities are delisted, the value of the
Company's securities would be materially adversely affected and the Company
would, in all likelihood, find it more difficult to consummate any financing
transactions.

During the year ended June 30, 1998, the Company had cash used by operating
activities in the amount of $2,497,659 as compared to $443,419 of cash used for
the year ended June 30, 1997. The operating cash usage was primarily
attributable to the net loss and an increase in accounts receivable offset by
depreciation, amortization and provision for returns and increases in accrued
expenses and other current liabilities.

During the year ended June 30, 1998, the Company used cash for investing
activities in the amount of $1,722,932 as compared to cash used for investing
activities of $112,144 for the year ended June 30, 1997. The cash was used for
the construction of the Company's newly leased facility, the purchase of
property and equipment and cash which collateralizes a letter of credit in
connection with a leased facility and an officer loan.


                                      -15-
<PAGE>

During the year ended June 30, 1998, the Company had net cash used in financing
activities of $1,667 compared to net cash provided by financing activities of
$5,558,868 for the year ended June 30, 1997. In the 1997 period the Company
received net proceeds of approximately $5,588,000 from the issuance of 1,224,333
shares of common stock, 1,146,000 of which were included in the Company's
underwritten initial public offering and related over allotment option exercise,
78,333 of which were included in a private placement, and $100,000 from a bank
loan by Republic National Bank to one of the Company's subsidiaries.

The Company has completed construction of its newly leased facility at a net
cost of approximately $1.1 million.

In late July of 1998, all six members of the Company's Board of Directors sold
in the aggregate approximately 105,000 shares of the Company's Common Stock in
one or more open market transactions at a price per share of $2.875. The
Company's two outside directors lent the proceeds of such open market sales (an
aggregate of approximately $48,000) to the Company pursuant to convertible
promissory notes that would allow the holders of such notes to convert the
outstanding principal and interest accrued thereunder into shares of the
Company's Common Stock at a price per share equal to $2.875. Three of the
Company's Board members took the proceeds of their open market sales
(approximately $190,000) and reinvested them into the Company in exchange for an
aggregate of 66,249 restricted shares of Common Stock at a purchase price per
share of $2.875. One of the Company's Board members, Mr. Loeffler, used the
proceeds of his open market sales to repay approximately $58,000 of a loan that
had been advanced to him by the Company. In all, the Company received
approximately $302,000 in gross proceeds from such transactions.

Inflation

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

Year 2000

The Company has conducted a review of its computer systems to identify any
systems that could be affected by the "Year 2000" issue. The year 2000 problem
is the result of computer programs being written using two digits rather than
four to define the applicable year. Any programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a major systems failure or miscalculations. The
Company believes that its computer systems and software products are fully year
2000 compatible. However, it is possible that certain computer systems or
software products of the Company's suppliers or customers may not accept input
of, store, manipulate and output dates in the year 2000 or thereafter without
error or interruption. The Company has retained a consultant to evaluate the
implications of year 2000 issues on the Company and its suppliers and customers.
There can be no assurance that the Company will not be required to make
significant expenditures to identify, address or remedy any potential year 2000
problems, or to satisfy liabilities to which the Company may become subject as a
result of such problem.


                                      -16-
<PAGE>

ITEM 7.                        FINANCIAL STATEMENTS

See index to the Company's financial statements attached hereto.

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

None


                                      -17-
<PAGE>

PART III

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

The Company's directors and executive officers are as follows:

      Name                   Age                Position with the Company
      ----                   ---                -------------------------

      John Loeffler          47       President, Chief Executive Officer and
                                       Chairman of the Board
      Jon Small              51       Executive Vice President and Director
      Brian Doyle            42       Executive Vice President and Director
      Richard Flynn          41       Executive Vice President, Treasurer,
                                       Secretary and Director
      Paul Thomas Cohen      46       Director
      Thomas J. Edelman      47       Director
      Philip G. Nappo, III   39       Chief Operating Officer
      Joseph A. Gallo        46       Senior Vice President and Chief Financial
                                       Officer

Mr. John Loeffler has been President, Chief Executive Officer and Chairman of
the Board of the Company since its inception in 1996. From 1986 to September
1996, Mr. Loeffler was the Chief Executive Officer and sole stockholder of Rave.
From 1986 to 1995, Mr. Loeffler was the President of Rave. Rave's roster of
staff composers and producers regularly produced four to five commercial
soundtracks per week. Rave's clients include: Downy Fabric Softner, Hertz and
Coca Cola. Mr. Loeffler was awarded by ASCAP as one of television's "Most
Performed" composers in 1988 and 1989 for his title themes of the television
shows "Kate & Allie", "Another World", and NBC's "Friday Nite Videos". He also
composed the theme for New York City's Channel 4 NBC Evening News, and recently
completed the themes for the new syndicated TV show, "WMAC Masters", ESPN's
"Survival of the Fittest", Robin Leach's "Home Videos of the Stars", the New
York Marathon and ESPN's "US Open", as well as two NBC Summer Olympic '96
Specials. Prior to 1986, Mr. Loeffler was a composer and producer at Sherman and
Cahan, a commercial music production company in New York City. Since 1979, he
has also been a consulting music director to Grey Advertising. Mr. Loeffler
graduated from Williams College, cum laude, in 1973.

Mr. Jon Small has been an Executive Vice President and a director of the Company
since its inception in 1996. Since September 1996, Mr. Small has been the Chief
Executive Officer of Picture Vision. From 1984 to September 1996, Mr. Small had
been President and the sole stockholder of Picture Vision. Picture Vision has
produced, executively-produced and or directed over 300 video musical
productions of such performers as Garth Brooks, Whitney Houston, Madonna, Anita
Baker, Ray Charles, Van Morrison, Rod Stewart, Reba McEntire, Billy Joel and
Sting. Previously, as a musician/performer, Mr. Small toured, or recorded with
The Kinks, The Doobie Brothers, and Billy Joel. While at Picture Vision, Mr.
Small produced and or directed specials for Disney and HBO and has received
several Grammy nominations. While at Picture Vision, Mr. Small also produced and
directed specials and long form programs including NBC's 1994 Thanksgiving
Special "Reba! Live in concert", the Disney special Billy Joel's "Live from Long
Island", Anita Baker's "One Night of Rapture", Hall & Oates' "Live from the
Apollo Theater", Donald Fagen's "New York Rock and Soul Revue", Garth Brooks'
"Live from Central Park", and several shows for the ABC Network's series "Live
in Concert". While at Picture Vision, Mr. Small has won ACE and Monitor awards
for Best Television Music Specials and has received two Grammy nominations for
his work with Billy Joel. He received Country Music awards for Best Video of the
Year, awards for Cable Excellence (ACE), and Monitor Awards. He has been awarded
gold Medals by the International Film & TV Festival. In addition, the Academy of
Country Music set a precedent by choosing two of Mr. Small's videos out of the
final five in the "Videos of the Year" category.


                                      -18-
<PAGE>

In July of 1998, programs produced and/or executive produced by Mr. Small were
nominated for seven (7) Emmy Awards and in August 1998, a music video produced
and directed by Mr. Small was nominated for Video of the Year by the Country
Music Association.

Mr. Brian Doyle has been an Executive Vice President and a director of the
Company since its inception in 1996. Since 1996, Mr. Doyle has been the Chief
Executive Officer of All Access and, since February 1997, has been the Chief
Executive Officer of Push Records. He founded All Access in 1994 and has been
the President and co-owner of All Access since its inception. He currently
manages Daryl Hall and John Oates, and others. From 1991 to 1994, Mr. Doyle
served as CEO/President of Horizon Entertainment and Management Group, Inc.
("Horizon"). Horizon's clients included Mariah Carey, John Mellencamp, and Daryl
Hall and John Oates. His responsibilities included managing the overall
achievement of the Company's strategic objectives, development and control of
the client roster, coordinating worldwide marketing efforts for clients, serving
as artists liaison to MTV, VH-1 and other media outlets, and interfacing on
behalf of clients with record companies and professional services consultants.
In addition, he provided specialized personal management services for clients
including career planning and development, music development, and song
acquisition. Mr. Doyle has also produced HBO and Lifetime television specials.

Mr. Richard Flynn has been an Executive Vice President and Secretary of the
Company since its inception, has been a director since October 9, 1996 and has
been Treasurer since December 1996. Since September 1996, Mr. Flynn has been
Vice President and General Manager of All Access. From September 1994 to
September 1996, Mr. Flynn has been the Managing co-owner of All Access. From
March 1990 until September 1994. Mr. Flynn served as General Counsel to Horizon.
He provided legal services to Horizon and its clients Mariah Carey, John
Mellencamp, Daryl Hall & John Oates, and other artists. In addition, Mr. Flynn
assisted in all aspects of artist management for Horizon's clients. Since 1983,
Mr. Flynn has been a practicing attorney in New York State specializing in
entertainment, corporate and public sector law. Since 1989, he has provided
legal representation, financial management, and consulting services to artists
and entertainers, including negotiating recording, publishing, production,
performance and endorsement contracts.

Mr. Paul Thomas Cohen has been a director of the Company since October 9, 1996.
Since 1987, Mr. Cohen has been an investment banker and a consultant to the
media and entertainment industries. As an advisor to such clients as Time-Life,
Time Inc., The New York Times, NBC, and Rolling Stone Magazine, he has been
involved in licensing, alliances and other strategic initiatives involving new
media activities in both the on-line services and CD-ROM arenas. From 1984 to
1987, Mr. Cohen served as Co-Executive Officer of Herzfeld & Stern, a mid-size
brokerage firm. Mr. Cohen graduated from Williams College in 1974 and received
an MBA from Columbia University in 1976.

Mr. Thomas J. Edelman has been a director of the Company since October 1996. Mr.
Edelman has served as Chairman and Chief Executive Officer of Patina Oil & Gas
Corporation since its formation in 1996. He co-founded Snyder Oil Corporation
and was its President and a director from 1981 through February 1997. Prior to
1981, he was a Vice President of The First Boston Corporation. From 1975 through
1980, Mr. Edelman was with Lehman Brothers Kuhn Loeb Incorporated. Mr. Edelman
received his Bachelor of Arts Degree from Princeton University and his Masters
Degree in Finance from Harvard University's Graduate School of Business
Administration. Mr. Edelman also serves as Chairman of Range Resources
Corporation, and is a director of Petroleum Heat & Power Co. and Star Gas
Corporation. Mr. Edelman is also a Trustee of The Hotchkiss School.


                                      -19-
<PAGE>

Mr. Philip G. Nappo III joined the Company as its Chief Operating Officer In May
1998. In addition to his responsibilities with the Company, Mr. Nappo is a
partner in the corporate and securities law firm of Nappo/Every, Attorneys at
Law, LLP with offices in New York, New York. The firm is a successor in interest
to a private practice founded by Mr. Nappo in 1988. In addition, Mr. Nappo has,
since 1990, been the managing director of Ronin Partners, LLC, which firm is
engaged in investment banking, strategic block investing, and public company
restructuring activities. Ronin Partners, LLC has offices in New York City and
Putnam County, New York, and in Greenwich, Connecticut. Mr. Nappo graduated from
Princeton University in 1981 with a degree in English Literature and Creative
Writing and NYU Law School in 1984.

Mr. Joseph A. Gallo, has been Senior Vice President and Chief Financial Officer
of the Company since October 1997. Mr. Gallo was a consultant to the Company
from March 1997 to September 1997. From 1988 to 1996, Mr. Gallo was Treasurer of
JWP Inc., a contracting and computer reseller. From 1991 to 1993, Mr. Gallo was
also a Vice President and from 1993 to 1996, a Senior Vice President of JWP Inc.
From 1983 to 1988, Mr. Gallo served as a Assistant Treasurer and as Director of
Auditing of the Allen Group Inc., an automotive company. From 1974 to 1983, Mr.
Gallo was an auditor with Coopers & Lybrand. Mr. Gallo received a degree in
accounting from Seton Hall University in 1974. Mr. Gallo is a certified public
accountant.

All directors of the Company are elected by the stockholders, or in the case of
a vacancy, by the directors then in office, to hold office until the next annual
meeting of stockholders and until their successors are elected and qualified or
until their earlier resignation or removal.

All officers of the Company serve at the discretion of the Board of Directors.


                                      -20-
<PAGE>

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 officers and directors of the Company and holders of more than
10% of the Common Stock (collectively "Reporting Persons") to file reports of
intial ownership, ownership and changes in ownership of the Common Stock with
the Securities and Exchange Commission within certain time periods and to
furnish the Company with copies of all such reports. Based solely on its review
of copies of such reports furnished to the Company by such Reporting Persons or
on the written representations of such Reporting Persons that no reports on Form
5 were required, the Company believes that during the fiscal year ended June 30,
1998, all of the Reporting Persons complied with their Section 16(a) filing
requirements.

ITEM 10.                      EXECUTIVE COMPENSATION

The following summary compensation table sets forth the aggregate compensation
paid or accrued by the Company or its subsidiaries for the fiscal years ended
June 30, 1998, 1997 and 1996 to John Loeffler, the Company's Chief Executive
Officer and to Jon Small, Brian Doyle and Richard Flynn, each an Executive Vice
President of the Company (collectively the "Named Executive Officers"). No other
executive officer received annual compensation in excess of $100,000 for the
fiscal years ended June 30, 1998, 1997 and 1996.

      Summary Compensation Table

<TABLE>
<CAPTION>
                                                                                      Long-term
                                                                                    Compensation
                                               Annual Compensation (1)                 Awards
                                       -------------------------------------------  -------------
                                                                                     Securities
                                                                   All Other         Underlying
Name and Principal Position    Year     Salary          Bonus     Compensation (2)    Options
--------------------------- ---------  --------- --------------  -----------------  -------------
<S>                            <C>     <C>          <C>             <C>                  <C>  
John Loeffler                  1998    $ 310,000    $       -       $  33,805                -
 Chief Executive Officer       1997      150,000      191,000          34,000            5,000
                               1996      218,000                       71,000
Jon Small                      1998    $ 310,000    $ 150,000       $  60,365                -
 Executive Vice President      1997      150,000      189,000          36,000            5,000
                               1996       88,000                       89,000
Brian Doyle                    1998    $ 300,000    $       -       $  27,613                -
 Executive Vice President      1997      150,000      162,500           7,000
                               1996      101,000                       48,000
Richard Flynn                  1998    $ 300,000    $       -       $  15,306                -
 Executive Vice President      1997      150,000      162,500
                               1996      101,000                       48,000
</TABLE>

(1)   The Company was incorporated in July 1996. Compensation for the fiscal
      year ended June 30, 1996 represents amounts paid by Rave, Picture Vision
      and All Access. Compensation for the fiscal years ended June 30, 1998 and
      1997 represents amounts paid by Rave, Picture Vision, All Access and Push.

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


                                      -21-
<PAGE>

      Option Grants in Last Fiscal Year

      There were no options or stock appreciation rights granted to any of the
      Named Executive Officers during fiscal 1998.

      Aggregated Option/SAR Exercises During Fiscal 1998 and Year End Option/SAR
      Values

      The following table provides information related to options exercised by
      the Named Executive Officers during fiscal 1998 and the number and value
      of options and stock appreciation rights held at fiscal year end which are
      currently exercisable. No options or stock appreciation rights were
      exercised during fiscal 1998.

<TABLE>
<CAPTION>
                                    Number of Securities         Value of Unexercised
                                   Underlying Unexercised       in the Money Options/
                                   Options/SARs at FY-End           SARs at FY-End
           Shares
         Acquired on     Value
   Name   Exercise (#)  Realized  Exercisable  Unexercisable  Exercisable  Unexercisable
<S>           <C>          <C>       <C>           <C>           <C>           <C>
J. Loeffler   0            0         5,000         0             $ 0           $ 0
J. Small      0            0         5,000         0               0             0
R. Flynn      0            0           0           0               0             0
B. Doyle      0            0           0           0               0             0
</TABLE>

      Directors' Compensation

      Directors who are not employees of the Company ("Outside Directors") are
      entitled to receive compensation in the amount of $18,000 per annum, 50%
      of which is payable in cash and 50% in stock. Such amounts are payable
      quarterly in arrears.

      For the year ended June 30, 1998, Outside Directors each received
      compensation in the amount of $18,000; $6,750 was paid in cash and the
      remainder with 4,030 common shares of the Company's stock. For the fourth
      quarter of fiscal 1998, 100% of their compensation was paid in stock. In
      addition, 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 of the Company or who are associated with the Company do not
      receive compensation for service as a director.

      Outside Directors are entitled to receive non-qualified options to
      purchase 5,000 shares of common stock for each year of service, payable in
      advance on July 1 of each year. The initial options are exercisable at the
      initial public offering price of $6.00. Thereafter, the option exercise
      price will be the closing bid price of the common stock on the first
      trading day of each fiscal year, commencing July 1, 1997. Accordingly,
      5,000 options were granted at $4.00 on July 1, 1997 and at $2.0625 on July
      1, 1998 to each Outside Director.


                                      -22-
<PAGE>

      Employment Agreements

      On October 1, 1997, the Company entered into an employment agreement (the
      "Employment Agreement") with an individual who manages the Company's Los
      Angeles commercial music division. The Agreement provides for the
      individual to receive as compensation an amount equal to 75% of the first
      $350,000 of the division's gross margin and 15% of the division's gross
      margin above $350,000. In addition, this individual has been granted
      options to purchase 100,000 shares of the Company's common stock at $4.75
      per share which vest at various times during the term of the Employment
      Agreement.

      In October 1996, the Company entered into employment agreements, as
      amended (the "Executive Agreements"), with each of Messrs. Loeffler,
      Doyle, Flynn and Small (the "Executives"). Each of the Executive
      Agreements was for a period of three years, and provided for annual base
      salaries of $150,000 plus bonuses.

      Effective July 1, 1997, these Executive Agreements were replaced by New
      Agreements (the "New Agreements"). Each of the New Agreements is for a
      period of two years and provides for annual salaries between $300,000 and
      $325,000. If an Executive's subsidiary reports a pretax loss, such related
      Executive's salary will be reduced, but not below $150,000 per annum, to
      reflect a pretax breakeven and such reduction will be recorded as an
      advance with interest payable at prime plus 1% and will be payable over
      three years. In addition, such Executive's salary will be reduced for the
      subsequent year by the amount of such reduction but not below $150,000.
      Based on the performance of one of the Company's subsidiaries
      approximately $150,000 of compensation should have been recorded as
      advances pursuant to the Executive Agreements but remained as compensation
      following approval by the Compensation Committee. Pursuant to these New
      Agreements, two bonus plans have been established for the benefit of the
      Executives based upon attainment of certain financial results.

      For the years ended June 30, 1998 and 1997, approximately $1,480,000 and
      $973,000 have been expensed under the bonus plans and Employment,
      Executive and New Agreements and are included in marketing, selling,
      general and administrative expenses.

      On or about September 28, 1998, Messrs. Loeffler, Small, Doyle and Flynn
      entered into a letter agreement (the "Employment Modification Agreement")
      with the Company which amended certain provisions of the New Employment
      Agreements. In the case of Messrs. Doyle and Flynn, the Employment
      Modification Agreement is subject to approval by the Compensation
      Committee of the Board of Directors of a definitive budget for fiscal year
      1999 for Push. The Employment Modification Agreement provides for, among
      other things a reduction in the base salaries of each of Messrs, Loeffler,
      Flynn and Doyle (starting October 1, 1998) by $100,000 per annum, and
      establishes a new bonus program for such executives pursuant to which such
      executives receive 50% of the Net Profits (as defined therein) of the
      subsidiaries they manage until they have recouped the $100,000 in salary
      reductions described above. Thereafter, Net Profits are allocated 85% to
      the Company and 15% to the executives. In recognition of his performance
      for fiscal year 1998, Mr. Small's base compensation will remain at the
      fiscal year 1998 level (i.e., $320,000) for so long as Picture Vision
      generates at least $320,000 in Net Profits. In the event that Net Profits
      from Picture Vision for any fiscal year fall below $320,000, Mr. Small's
      base salary will also be reduced by the amount of such shortfall but not
      below $200,000 per annum. Mr. Small's bonus plan provides that Mr. Small
      shall be allocated (i) 100% of Picture Vision's Net Profits until he has
      received a total of $320,000 in compensation, (ii) then the next $200,000
      shall be allocated to the Company, and (iii) then any remaining Net
      Profits shall be allocated 75% to the Company and 25% to Mr. Small.


                                      -23-
<PAGE>

      The Employment Modification Agreement also imposes stronger restrictions
      on executives who leave the employ of the Company either voluntarily or
      for cause. In contrast to the New Employment Agreements, the Employment
      Modification Agreement provides that an executive who leaves the employ of
      the Company voluntarily or for cause, will have to forfeit up to 291,000
      shares of the Company's common stock received by such executive pursuant
      to the Exchange Agreement (as hereafter defined). Also, in contrast to the
      New Employment Agreements, the Employment Modification Agreement requires
      the executive to pay the Company an override of 25% of the gross margin
      earned by any firm or entity that employs the executive following his
      departure from the Company (again, either voluntarily or for cause) on
      work performed for any client or artist that the executive first worked
      with while employed by the Company.

      In consideration of the reduced base salaries, other compensation
      concessions and more stringent non-compete terms reflected in the
      Employment Modification Agreement (and, in the case of Mr. Doyle,
      conditioned upon approval of the Push budget for fiscal year 1999), the
      compensation committee of the Board of Directors treated all monies paid
      to the executives in fiscal year 1998 as compensation, as opposed to
      treating any portion thereof as "advances" subject to recoupment. In
      recognition of Picture Vision's profitability for fiscal year 1998 and the
      other achievements of Mr. Small, the Compensation Committee also awarded
      Mr. Small a bonus of $150,000 for fiscal year 1998, which bonus was paid
      in July 1998.

      Effective October 1, 1997, the Company entered into a one-year employment
      agreement with Mr. Joseph A. Gallo, subject to renewal. The agreement
      provides for annual compensation of $125,000 and the executive may be
      entitled to bonuses. The agreement further provides for the grant of
      options to acquire 25,000 shares of the Company's common stock at $3.125
      per share and for the grant of options to acquire an additional 25,000
      shares of the Company's common stock at $4.125 per share. These options
      vest equally over a three year period and expire in five years.

      In May 1998, the Company entered into an agreement with Mr. Philip G.
      Nappo to function as interim Chief Operating Officer. The agreement
      provides for cash payments of $20,000 per month and equipment rental
      charges of $1,000 per month for the term of the agreement which cannot
      exceed nine months and the issuance of stock valued at approximately
      $45,000 during the term. As of June 30, 1998, the Company charged to
      operations cash payments of $52,500 and issued 5,000 shares of its common
      stock pursuant to such agreement, which shares were valued at a price of
      $2 per share.


                                      -24-
<PAGE>

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Principal Stockholders

The following table sets forth certain information as of September 10, 1998,
with respect to each beneficial owner of five percent (5%) or more of the
outstanding shares of Common Stock of the Company, each Named Executive Officer,
each director of the Company and all officers and directors as a group. The
table does not include options or SARs that have not yet vested or are not
exercisable within 60 days of the date hereof.

                                                Amount and
                                                Nature of             Percent
                                                Beneficial              of
Name and Address of Beneficial Owner            Ownership (1)          Class
------------------------------------         ----------------          -----

John Loeffler                                 322,367 (2)(6)           14.2%
  c/o Paradise Music & Entertainment, Inc.
  53 West 23rd Street
  New York, New York  10010
Paul Thomas Cohen                             29,863 (8)(10)(11)        1.3%
  c/o Paradise Music & Entertainment, Inc.
  53 West 23rd Street
  New York, New York  10010
Brian Doyle                                   145,500                   6.5%
  c/o Paradise Music & Entertainment, Inc.
  53 West 23rd Street
  New York, New York  10010
Thomas J. Edelman                             76,918 (3)(4)(8)(12)      3.3%
  c/o Patina Oil & Gas Corporation
  667 Madison Avenue
  New York, New York  10021
Richard Flynn                                 145,500                   6.5%
  c/o Paradise Music & Entertainment, Inc.
  53 West 23rd Street
  New York, New York  10010
Jon Small                                     299,000 (2)              13.2%
  c/o Paradise Music & Entertainment, Inc.
  53 West 23rd Street
  New York, New York  10010
All executive  officers and directors
 as a group (8 persons)                       1,059,103 (5)(6)(7)(9)   44.5%


                                      -25-
<PAGE>

      (1)   All shares are beneficially owned and sole voting and investment
            power is held by the persons named, except as otherwise noted.
      (2)   Includes options to purchase 5,000 shares of common stock.
      (3)   Includes options to purchase 30,000 shares of common stock.
      (4)   Includes 4,500 shares of common stock earned.
      (5)   Includes options to purchase 71,667 shares of common stock.
      (6)   Includes 3,600 and 3,800 shares of common stock purchased by Mr.
            Loeffler's Pension and his wife's Keogh Plans, respectively.
      (7)   Includes 23,538 shares of common stock earned by the Outside
            Directors and officers.
      (8)   Includes debentures which are convertible into 8,334 shares of
            common stock.
      (9)   Includes debentures which are convertible into 47,973 shares of
            common stock.
      (10)  Includes 3,750 shares of common stock earned.
      (11)  Include options to purchase 15,000 shares of common stock.
      (12)  Includes debentures which are convertible into 31,305 shares of
            common stock.

ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On October 9, 1996, the Company entered into an Exchange Agreement (the
"Exchange Agreement") with each of John Loeffler, Jon Small, Brian Doyle and
Richard Flynn, each of whom was an executive officer and a director of the
Company. Pursuant to the Exchange Agreement, John Loeffler and Jon Small were
each issued 291,000 shares of common stock and Brian Doyle and Richard Flynn
were each issued 145,500 shares of common stock in exchange for all of the
outstanding stock of each of Rave, Picture Vision and All Access. The Company
believes that this transaction was fair from a financial point of view. This
belief is based on the fact that the Exchange Agreement, and the transactions
consummated thereby, were analyzed and approved by the Company's Board of
Directors and by all of its then existing stockholders.

John Loeffler, the President, Chief Executive Officer and a director of the
Company, is also a consultant to Grey Advertising, which is a major client of
the Company's commercial music production division. For such consulting
services, Mr. Loeffler is paid approximately $45,000 per year by Grey
Advertising. The Company derived approximately $303,000 and $361,000 of
commercial music production revenues (approximately 24% and 40% of commercial
music production revenues) from Grey Advertising for the years ended June 30,
1998 and 1997, respectively.

In January 1997, the Company entered into an eighteen month consulting agreement
with Thomas J. Edelman, an Outside Board member for $90,000. On or about July 1,
1998, the full amount of such consulting fee was unpaid and converted into a one
year convertible promissory note bearing interest at the rate of one percent
(1%) per month. In addition, Outside Board members have also received consulting
fees of $55,500 in cash and 4,750 shares in common stock for the year ended June
30, 1998.


                                      -26-
<PAGE>

In January 1997, the Company entered into a one year consulting agreement with
Mr. Cohen, a director, for $60,000.

The Company has a promissory note receivable with Mr. Loeffler providing for
borrowings up to $150,000, 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 June 30, 1998, $129,000 is outstanding under this promissory note. On or
about August 6, 1998, Mr. Loeffler repaid approximately $58,000 of such loan.


                                      -27-
<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)
    10.1     Exchange Agreement dated as of October 9, 1996 among the
             Registrant, Brian Doyle,
             Richard Flynn, John Loeffler and Jon Small (1)
    10.2     Employment Agreement dated as of October 9, 1996 between the 
             Registrant and Brian Doyle (1)
    10.3     Employment Agreement dated as of October 9, 1996 between the 
             Registrant and Richard Flynn (1)
    10.4     Employment Agreement dated as of October 9, 1996 between the 
             Registrant and John Loeffler (1)
    10.5     Employment Agreement dated as of October 9, 1996 between the 
             Registrant and Jon Small (1)
    10.6     Expense Allocation Agreement dated as of October 9, 1996 among the
             Registrant, Rave, Picture Vision, All Access and Robert Klein (1)
    10.7     Form of The Registrant's 1996 Stock Option Plan (corrected version)
    10.8     Lease Agreement dated June 24, 1992 between Not Just Jingles, Inc.
             and Newmark & Company Real Estate, Inc. (1)
    10.9     Lease Agreement dated October 28, 1994 between the Registrant and
             Silk & Halpern Realty Associates, Inc. (1)
    10.10    Lease Agreement dated April 4, 1995 between the Registrant and
             Cummins Station L.L.C. (1)
    10.11    Sublease Agreement dated September 29, 1996 between the Registrant
             and Not Just Jingles, Inc. (1)
    10.12    Financial Consulting Agreement (1)
    10.13    Form of Consulting Agreement dated as of January 1, 1997 between
             the Company and Thomas J. Edelman (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)
    10.15    Form of Amended and Restated Employment Agreement dated as of
             January 17, 1997 between the Registrant and Brian Doyle (1)
    10.16    Form of Amended and Restated Employment Agreement dated as of
             January 17, 1997 between the Registrant and Richard Flynn (1)
    10.17    Form of Amended and Restated Employment Agreement dated as of
             January 17, 1997 between the Registrant and John Loeffler (1)
    10.18    Form of Amended and Restated Employment Agreement dated as of
             January 17, 1997 between the Registrant and Jon Small (1)
    10.19    Distribution Agreement with BMG Music d/b/a BMG Entertainment and
             Push Records, Inc. (3)


                                      -28-
<PAGE>

    10.20    Lease Agreement dated July 10, 1997 between the Registrant and
             Twenty-third Street Joint Venture (3)
    10.21    Consulting Agreement dated August 15, 1997 between the Registrant
             and Consulting for Strategic Growth, Ltd. (3)
    10.22    Personal Services Agreement dated August 13, 1997 between Push 
             Records and Luxx (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 and
             Paul Hoffman (4)
    10.25    Employment Agreement dated as of July 1, 1997 among the Registrant,
             Rave and John Loeffler (4)
    10.26    Employment Agreement dated as of July 1, 1997 among the Registrant,
             All Access and Richard Flynn (4)
    10.27    Employment Agreement dated as of July 1, 1997 among the Registrant,
             Push Records and Brian Doyle (4)
    10.28    Employment Agreement dated as of July 1, 1997 among the Registrant,
             Picture Vision and Jon Small (4)
    10.29    Employment Agreement Amended dated as of July 1, 1997 among the
             Registrant, Rave and John Loeffler (5)
    10.30    Employment Agreement Amended dated as of July 1, 1997 among the
             Registrant, All Access and Richard Flynn (5)
    10.31    Employment Agreement Amended dated as of July 1, 1997 among the
             Registrant, Push Records and Brian Doyle (5)
    10.32    Employment Agreement Amended dated as of July 1, 1997 among the
             Registrant, Picture Vision and Jon Small (5)
    10.33    Employment Agreement dated as of December 1, 1997 between
             Registrant and Joseph Gallo (5)
    10.34    Consulting Agreement dated as of January 15, 1998 between
             Registrant and Thomas J. Edelman (5)
    10.35    Consulting Agreement dated as of January 15, 1998 between
             Registrant and Thomas Cohen (5)
    10.36    Outside Director Compensation Agreement dated January 15, 1998
             between Registrant and Thomas J. Edelman (5)
    10.37    Outside Director Compensation Agreement dated January 15, 1998
             between Registrant and Thomas Cohen (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)
    10.41    Interim Chief Operating Officer Consulting Agreement dated May 5,
             1998 between the Registrant and Philip G. Nappo III.
    10.42    Personal Services Agreement dated June 18, 1998 between Push
             Records and Legend Entertainment Corporation.
    10.43    Promissory Note in the amount of $23,960 dated as of August 7, 1998
             between Registrant and Thomas Edelman.
    10.44    Promissory Note in the amount of $90,000 dated as of July 1, 1998
             between Registrant and Thomas Edelman.


                                      -29-
<PAGE>

    10.45    Promissory Note in the amount of $23,960 dated as of August 7, 1998
             between Registrant and Paul Thomas Cohen.
    10.46    Employment Modification Letter Agreement dated as of September 24,
             1998 among Registrant and Messrs, Doyle, Flynn, Loeffler and Small.
    10.47    Financial Advisory Agreement dated as of September 24, 1998 between
             Registrant and CCF Capital Group, Inc.
    10.48    Investment Agreement dated as of October 6, 1998 between Registrant
             and Pines International Resorts, Inc.
    21.1     Subsidiaries of Registrant (1)
    27.1     Financial Data Schedule.

                  (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, 1998.
                  (6)   Filed with the Securities and Exchange Commission on May
                        15, 1998.

      (b) Reports on Form 8-K

            None


                                      -30-
<PAGE>

                                   SIGNATURES

      In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized

Date: October 8, 1998

                                    PARADISE MUSIC & ENTERTAINMENT, INC.

                                    By: /s/ John Loeffler
                                        ----------------------------------------
                                        John Loeffler, Chairman of the Board,
                                        Chief Executive Officer and President

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 indicated:


By: /s/ John Loeffler
    ----------------------------------------------------------------------------
    John Loeffler, Chairman of the Board, Chief Executive Officer, President
    (Principal Executive Officer)

Date: October 8, 1998


By: /s/ Jon Small
    ----------------------------------------------------------------------------
    Jon Small, Executive Vice President and Director

Date: October 8, 1998


By: /s/ Brian Doyle
    ----------------------------------------------------------------------------
    Brian Doyle, Executive Vice President and Director

Date: October 8, 1998


By: /s/ Richard Flynn
    ----------------------------------------------------------------------------
    Richard Flynn, Executive Vice President, Treasurer, Secretary and Director

Date: October 8, 1998


By: /s/ Paul Thomas Cohen
    ----------------------------------------------------------------------------
    Paul Thomas Cohen, Director

Date: October 8, 1998


By: /s/ Thomas J. Edelman
    ----------------------------------------------------------------------------
    Thomas J. Edelman, Director

Date: October 8, 1998


By: /s/ Joseph A. Gallo
    ----------------------------------------------------------------------------
    Joseph A. Gallo, Senior Vice President and Chief Financial Officer
    (Principal Financial and Accounting Officer)

Date: October 8, 1998


                                      -31-
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                                    CONTENTS

INDEPENDENT AUDITORS' REPORT                                                 F-2

CONSOLIDATED FINANCIAL STATEMENTS

  CONSOLIDATED BALANCE SHEET                                                 F-3
                                                     
  CONSOLIDATED STATEMENTS OF OPERATIONS                                      F-4
                                                     
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                            F-5
                                                     
  CONSOLIDATED STATEMENTS OF CASH FLOWS                                  F-6-F-7
                                                     
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            F-8-F-18
                                                    

                                       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 June 30, 1998, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended June 30, 1998 and 1997. 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 financial position of Paradise Music &
Entertainment, Inc. and Subsidiaries as of June 30, 1998, and the results of
their operations and their cash flows for the years ended June 30, 1998 and
1997, in conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Notes 3 and
13 to the consolidated financial statements, the Company's significant operating
losses and need for working capital to continue to fund its operations raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Notes 3 an 13. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

                                             /s/ ROTHSTEIN, KASS & COMPANY, P.C.

Roseland, New Jersey
July 28, 1998, except for Note 6 as
to which the date is August 6, 1998
and Note 13 as to which the date is
October 6, 1998


                                      F-2
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET
                                 JUNE 30, 1998

                                     ASSETS

CURRENT ASSETS:
   Cash and cash equivalents                          $   863,860
   Restricted cash                                        464,603
   Accounts receivable, less reserve for returns
    of $271,188                                           806,586
   Prepaid production costs                                52,882
   Prepaid record master costs                             93,750
   Other current assets                                   129,985
                                                      -----------
     Total current assets                                            $ 2,411,666

PROPERTY AND EQUIPMENT, net                                            1,262,465

OTHER ASSETS:
   Note receivable, officer                                70,878
   Restricted cash                                        350,000
   Other                                                   26,826
                                                      -----------
                                                                         447,704
                                                                     -----------
                                                                     $ 4,121,835
                                                                     ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Deferred revenues                                  $   266,636
   Accrued payroll and related expenses                   152,599
   Accrued expenses and other current liabilities       1,754,733
                                                      -----------
     Total current liabilities                                       $ 2,173,968

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
   Preferred stock, $.01 par value,
    authorized 5,000,000 shares, none issued
   Common stock, $.01 par value,
    authorized 20,000,000 shares,
    issued and outstanding 2,245,143 shares                22,451
   Capital in excess of par value                       5,861,499
   Accumulated deficit                                 (3,936,083)
                                                      -----------
     Total stockholders' equity                                        1,947,867
                                                                     -----------
                                                                     $ 4,121,835
                                                                     ===========

          See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                           Years Ended
                                                             June 30,
                                                    ---------------------------
                                                        1998            1997
                                                    ------------   ------------
REVENUES                                            $ 13,593,426   $  5,568,286
                                                    ------------   ------------
OPERATING EXPENSES:
   Cost of sales                                       9,761,508      3,447,005
   Marketing, selling, general and administrative      6,828,087      3,199,901
                                                    ------------   ------------
     Total operating expenses                         16,589,595      6,646,906
                                                    ------------   ------------

LOSS FROM OPERATIONS                                  (2,996,169)    (1,078,620)

INTEREST INCOME                                          139,040         94,100
                                                    ------------   ------------

LOSS BEFORE INCOME TAXES                              (2,857,129)      (984,520)

INCOME TAXES                                              12,000          9,432
                                                    ------------   ------------

NET LOSS                                            $ (2,869,129)  $   (993,952)
                                                    ============   ============

BASIC AND DILUTED LOSS PER COMMON SHARE             $      (1.29)  $       (.65)
                                                    ============   ============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
USED IN COMPUTING BASIC AND DILUTED
LOSS PER COMMON SHARE                                  2,230,042      1,529,736
                                                    ============   ============

          See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                            Retained       Common
                                          Common Stock       Capital in     Earnings        Stock
                                     ----------------------  Excess of   (Accumulated   Subscription
                                       Shares       Amount   Par Value      Deficit)     Receivable
                                     ----------   ---------  ----------   ------------   -----------
<S>                                  <C>          <C>        <C>          <C>            <C>        
BALANCES, June 30, 1996                 998,000   $   9,980  $   12,090   $   119,160    $   (1,250)

RECLASSIFICATION OF PRIOR
 "S" CORPORATION RETAINED
 EARNINGS                                                       192,162      (192,162)

SALE OF COMMON STOCK, net
 of expenses                             78,333         783     209,804

COMMON STOCK, issued for
 services relating to the initial
 public offering                          4,000          40      11,960

SALES OF COMMON STOCK,
 net of expenses                      1,146,000      11,460   5,318,571

COMMON STOCK, issued to
 outside directors                        2,000          20       7,730

PAYMENT OF COMMON STOCK
 SUBSCRIPTION RECEIVABLE                                                                      1,250

NET LOSS                                                                     (993,952)
                                     ----------   ---------  ----------   -----------    ----------
BALANCES, June 30, 1997               2,228,333      22,283   5,752,317    (1,066,954)         --

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

WARRANTS GRANTED FOR
 SERVICES                                                        71,017

INITIAL PUBLIC OFFERING
 EXPENSES                                                        (1,667)

NET LOSS                                                                   (2,869,129)
                                     ----------   ---------  ----------   -----------    ----------
BALANCES, June 30, 1998               2,245,143   $  22,451  $5,861,499   $(3,936,083)   $     --
                                     ==========   =========  ==========   ===========    ==========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                 Years Ended June 30,
                                                             ----------------------------
                                                                  1998          1997
                                                             -------------   ------------
<S>                                                          <C>             <C>        
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                   $(2,869,129)    $ (993,952)
  Adjustments to reconcile net loss to                                       
   net cash used in operating activities:                                    
    Depreciation and amortization                                753,015         46,544
    Expenses recorded in connection with warrants granted         71,017     
    Provision for returns                                        588,500     
    Common stock issued to outside directors and executive                   
     officer                                                      40,000          7,750
    Increase (decrease) in cash attributable                                 
     to changes in assets and liabilities:                                   
      Accrued interest receivable                                               (23,162)
      Restricted cash                                           (464,603)    
      Accounts receivable                                     (1,342,846)        77,475
      Prepaid production costs                                   182,763       (218,390)
      Prepaid record master costs                               (215,054)      (350,160)
      Other current assets                                      (168,569)       (46,216)
      Deferred revenues                                         (234,437)       451,461
      Accrued payroll and related expenses                      (221,991)       374,590
      Accrued expenses and other current liabilities           1,383,675        230,641
                                                              -----------     ----------

NET CASH USED IN OPERATING ACTIVITIES                         (2,497,659)      (443,419)
                                                             -----------     ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Payments for property and equipment                         (1,243,932)      (112,144)
  Restricted cash                                               (350,000)    
  Note receivable, officer                                      (129,000)    
                                                             -----------     ----------

NET CASH USED IN INVESTING ACTIVITIES                         (1,722,932)      (112,144)
                                                             -----------     ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from note payable, bank                                              100,000
  Payment on note payable, bank                                                (100,000)
  Proceeds from sales of common stock, net of expenses            (1,667)     5,557,618
  Payment of common stock subscription receivable                                 1,250
                                                             -----------     ----------

NET CASH PROVIDED BY (USED IN)                                               
 FINANCING ACTIVITIES                                             (1,667)     5,558,868
                                                             -----------     ----------

NET INCREASE (DECREASE) IN CASH AND
 CASH EQUIVALENTS                                             (4,222,258)     5,003,305
                                                                             
CASH and CASH EQUIVALENTS, beginning of year                   5,086,118         82,813
                                                             -----------     ----------
CASH and CASH EQUIVALENTS, end of year                       $   863,860     $5,086,118
                                                             ===========     ==========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-6
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                                                         Years Ended June 30,
                                                       -----------------------
                                                          1998        1997
                                                       ----------   ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
 Cash paid during the year for interest                $       --   $    5,322
                                                       ==========   ==========

 Cash paid during the year for income taxes            $    7,092   $   58,660
                                                       ==========   ==========

          See accompanying notes to consolidated financial statements.


                                      F-7
<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 on July 18,
      1996 and in July 1996 issued 125,000 shares of common stock at $.01 par
      value (see Note 10). In October 1996, Paradise entered into an exchange
      agreement (the "Agreement") (see Note 10). Paradise exchanged 873,000
      shares of common stock in exchange for the outstanding stock of its three
      original subsidiaries in a transaction accounted for as a pooling of
      interests, whereby the financial statements for all periods prior to the
      combination were restated to reflect the combined operations of its
      original subsidiaries: All Access Entertainment Management Group, Inc.
      ("All Access"), a musical artist management company incorporated in New
      York, Picture Vision, Inc. ("Picture Vision") a video production company
      incorporated in Tennessee, and John Leffler 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, which was
      incorporated in New York. In February 1997, the Company incorporated its
      record label in Delaware, Push Records, Inc. ("Push"). In October 1997,
      Rave established its Los Angeles operations (Rave West).

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

      Principles of Consolidation - The consolidated financial statements give
      effect to the execution of the Agreement (see Note 10) and include the
      accounts of Paradise and its wholly-owned subsidiaries, Rave, Picture
      Vision, All Access and Push collectively (the "Company"). All significant
      intercompany transactions and balances 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 and purchase orders 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
      when records are shipped and costs which are directly related to
      production, manufacture and sale of records 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 - Cash and cash equivalents consist of cash on
      hand and a highly liquid investment account with maturity of less than
      three months from the purchase date, and at times exceeds the Federal
      Deposit Insurance Corporation Coverage of $100,000 per institution.
      Management regularly monitors the financial condition of the financial
      institutions in order to keep the potential risk to a minimum.


                                      F-8
<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

      Impairment of Long-Lived Assets - The Company periodically assesses the
      recoverability of the carrying amount of long-lived assets, including
      intangible assets. A loss is recognized when expected future cash flows
      (undiscounted and without interest) are less than the carrying amount of
      the asset. The impairment loss is determined as the difference by which
      the carrying amount of the asset exceeds its fair value.

      Income Taxes - Rave and All Access were "S" corporations prior to the
      execution of the exchange agreement and, as a result, earnings and losses
      have been included in the personal income tax returns of the respective
      stockholders. As a result of the Agreement the "S" elections were
      terminated. Accordingly, the financial statements reflect a
      reclassification of $192,162 from retained earnings to capital in excess
      of par value for the year ended June 30, 1997.

      The Company complies with SFAS No. 109, "Accounting for Income Taxes",
      which requires an asset and liability approach to financial reporting for
      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 - Effective December 31, 1997, the Company adopted
      SFAS No. 128, "Earnings Per Share". SFAS No. 128 requires dual
      presentation of basic and diluted earnings per share for all periods
      presented. Basic earnings per share excludes dilution and is computed by
      dividing income (loss) available to common shareholders 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. Prior period loss
      information has been restated as required by SFAS No. 128. The restatement
      had no effect on previously reported loss per share.

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


                                      F-9
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

      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.

NOTE 3 - LIQUIDITY:

      The Company's consolidated financial statements have been prepared on the
      basis that it is a going concern, which contemplates the realization of
      assets and the satisfaction of liabilities in the normal course of
      business. The Company has incurred net losses of approximately $2,869,000
      and $994,000 for the years ended June 30, 1998 and 1997, respectively, and
      will require working capital to continue to fund its operations. The
      Company is in the process of seeking additional equity or debt financing.
      Continuation of the Company as a going concern is dependent on its ability
      to resolve its liquidity problem and attain future profitable operations.
      The financial statements do not include any adjustments that might result
      from this uncertainty (see Note 13).

NOTE 4 - RESTRICTED CASH:

      The Company holds approximately $465,000 of cash in foreign banks on
      behalf of a third party. The Company has a corresponding liability to the
      third party and is not exposed to currency risk.

      The Company has a letter of credit for $350,000 collateralized with cash
      for security on a lease.

NOTE 5 - PROPERTY AND EQUIPMENT:

      Property and equipment consists of the following:

      Furniture, fixtures and equipment                              $  671,944
      Leasehold improvements                                            913,952
                                                                     ----------
                                                                      1,585,896
      Less accumulated depreciation and amortization                    323,431
                                                                     ----------
                                                                     $1,262,465
                                                                     ==========


                                      F-10
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - NOTE RECEIVABLE, OFFICER:

      The Company has a promissory note receivable with an executive providing
      for borrowings up to $150,000, 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 repayments as
      defined in the note. On or about August 6, 1998, approximately $58,000 of
      such loan was repaid.

NOTE 7 - INCOME TAXES:

      The provision for income taxes consists of the following:

                                                           Years Ended June 30,
                                                          ---------------------
                                                             1998        1997
                                                          ---------   ---------
       Current:
         Federal                                          $     --    $     --
         State and city                                      12,000       9,432
                                                          ---------   ---------

         Total                                            $  12,000   $   9,432
                                                          =========   =========

      At June 30, 1998, the Company recorded deferred federal, state and city
      income tax assets aggregating approximately $1,745,000, arising from net
      operating loss carryforwards. A valuation allowance in the same amount has
      been recorded, since management has no assurance that the tax benefit will
      be realized.

      At June 30, 1998, the Company has federal and New York State and City net
      operating loss carryforwards of approximately $3,585,000 and $4,400,000
      respectively, which expire beginning in 2012.

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

                                                           Years Ended June 30,
                                                          ---------------------
                                                             1998        1997
                                                          ---------   ---------
      Tax benefit computed
       at federal statutory rate                            (34.00)%    (34.00)%
      State and city provision                                 .42        1.00
      Valuation allowance                                    34.00       34.00
                                                          --------    --------
                                                                      
                                                               .42%       1.00%
                                                          ========    ========


                                      F-11
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - COMMITMENTS

      In May 1998, the Company entered into an agreement with an executive to
      function as interim Chief Operating Officer. The Agreement provides for
      cash payments of $20,000 per month and equipment rental charges of $1,000
      per month through the term of the agreement which cannot exceed nine
      months, and the issuance of stock valued at approximately $45,000 during
      the term. As of June 30, 1998, the Company charged to operations cash
      payments of $52,500 and issued 5,000 shares of its common stock valued at
      $2 per share.

      Effective October 1, 1997, the Company entered into a one-year employment
      agreement with an executive subject to renewal. The agreement provides for
      annual compensation of $125,000 and the executive may be entitled to
      bonuses. The agreement further provides for the grant of options to
      acquire 25,000 shares of the Company's common stock at $3.125 per share
      and for the grant of options to acquire an additional 25,000 shares of the
      Company's common stock at $4.125 per share. These options vest equally
      over a three-year period and expire in five years.

      On August 15, 1997 Push entered into a three-year distribution and
      manufacturing agreement, ("the BMG Agreement"), with BMG Music d/b/a BMG
      Entertainment ("BMG"). Such BMG Agreement, which expires on August 15,
      2000, contains an option to extend for one additional year, and provides
      that BMG will provide distribution and manufacturing services within the
      United States, its territories and possessions and Puerto Rico for all
      sound recordings derived from record masters owned or controlled by Push,
      excluding products geared primarily toward non-audio personal computer
      use. As part of the BMG Agreement, BMG will retain a distribution and a
      manufacturing fee based on the cumulative net sales before any adjustments
      for special terms as defined in the BMG Agreement.

      Effective August 1, 1997, the Company entered into a 10-year lease. The
      lease requires the Company to pay for certain operating expenses. The
      Company's Corporate, Rave, All Access and Push employees utilize this
      space. Picture Vision rents office space under a lease which expires in
      2001 and Rave's Los Angeles operation rents space under a lease which
      expires in 2003. Rent expense for the years ended June 30, 1998 and 1997
      was approximately $322,000 and $122,000, respectively.

      The aggregate future minimum annual rental payments are approximately as
      follows:

      Years ending June 30,
             1999                                                     $  233,000
             2000                                                        336,000
             2001                                                        324,000
             2002                                                        324,000
             2003                                                        321,000
             Thereafter                                                1,265,000
                                                                      ----------

                                                                      $2,803,000
                                                                      ==========


                                      F-12
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED):

      In October 1996, the Company entered into employment agreements, as
      amended (the "Executive Agreements"), with four of its executives (the
      "Executives"). Each of the Executive Agreements was for a period of three
      years, and provided for annual base salaries of $150,000 plus bonuses.
      (See Note 13)

      Effective July 1, 1997, these Executive Agreements were replaced by New
      Agreements (the "New Agreements"). Each of the New Agreements is for a
      period of two years and provides for annual salaries between $300,000 and
      $325,000. If an Executive's subsidiary reports a pretax loss, such
      Executive's salary will be reduced, but not below $150,000 per annum, to
      reflect a pretax breakeven and such reduction will be recorded as an
      advance with interest payable at prime plus 1% and will be payable over
      three years. In addition, such Executive's salary will be reduced for the
      subsequent year by the amount of such reduction but not below $150,000.
      Based on the performance of one of the Company's subsidiaries
      approximately $150,000 of compensation should have been recorded as
      advances pursuant to the Executive Agreements but remained as compensation
      upon approval by the Compensation Committee. Pursuant to these New
      Agreements, two bonus plans have been established for the benefit of the
      Executives based upon attainment of certain financial results. (See Note
      13)

      On October 1, 1997, the Company entered into an employment agreement (the
      "Employment Agreement") with an individual who manages Rave's Los Angeles
      commercial music division. The Employment Agreement provides for the
      individual to receive as compensation an amount equal to 75% of the first
      $350,000 of the division's gross margin and 15% of the division's gross
      margin above $350,000. In addition, this individual has been granted
      options (outside the option plan (see Note 11)) to purchase 100,000 shares
      of the Company's common stock at $4.75 per share which vest at various
      times during the term of the Employment Agreement.

      For the years ended June 30, 1998 and 1997, approximately $1,480,000 and
      $973,000 has been expensed under the bonus plans and Employment, Executive
      and New Agreements and are included in marketing, selling, general and
      administrative expenses. (See Note 13)

      The Company has agreed to pay its outside directors an aggregate of
      $36,000 per fiscal year payable quarterly in cash and the Company's common
      stock valued on the last day of the applicable quarter. For the years
      ended June 30, 1998 and 1997, the Outside Directors earned in the
      aggregate $13,500 and $12,000 in cash respectively, and 8,060 and 2,000
      shares of common stock, respectively.

      The Company has entered into various consulting agreements with its
      outside Board members. These agreements provide for monthly consulting
      fees ranging between $1,000 and $5,000 through January 2000. An aggregate
      of $55,500 was paid in cash, $90,000 was accrued and 3,750 shares of the
      Company's common stock were issued at $2 per share and charged to
      operations. As of June 30, 1998, the consulting agreements provide for an
      aggregate consulting fee to the Board members of $2,500 per month through
      January 2000 payable in the Company's common stock.


                                      F-13
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - ECONOMIC DEPENDENCY:

      Approximately $303,000 and $361,000 of commercial production revenues for
      the years ended June 30, 1998 and 1997, respectively, were derived from
      one advertising agency. Approximately $750,000 and $675,000 of musical
      talent management revenues for the years ended June 30, 1998 and 1997,
      respectively, were derived from two musical artists, respectively. For the
      years ended June 30, 1998 and 1997, approximately $7,402,000 and
      $1,867,000, respectively, of video production revenues were derived from
      two artists and one artist, respectively. For the year ended June 30,
      1998, approximately $2,056,000 of record label revenues were derived from
      one customer. At June 30, 1998, approximately $96,000 was owed in the
      aggregate by the Company to these artists and customers.

NOTE 10 - STOCKHOLDERS' EQUITY

      The Company has reserved for issuance 80,500 shares of its common stock
      relating to common stock purchase warrants outstanding as of June 30, 1998
      with exercise prices of $4.03 and $5.00. At June 30, 1998, 38,500 common
      stock purchase warrants are exercisable.

      In September 1997, Push reached a worldwide exclusive recording agreement
      ("the Agreement"), with an artist. Such Agreement provides for Push to
      have the exclusive right to distribute one album and, in addition, the
      agreement provides for two consecutive options for two additional albums
      only if performance plateaus are met by the preceding album as defined in
      the Agreement. Additionally, under the Agreement warrants to purchase
      30,000 shares of the Company's common stock were granted and vested
      immediately.

      In January 1997, the Company completed its initial public offering.
      Through the offering the Company sold 1,000,000 units consisting of
      1,000,000 shares of common stock and 1,000,000 warrants at $6.00 per unit.
      For each two warrants owned, the holder is entitled to purchase one share
      of common stock through January 21, 2001 at $7.20. In February 1997, an
      additional 146,000 units were sold upon the exercise of the underwriter's
      over allotment option. The aggregate net proceeds were approximately
      $5,330,000, after underwriters' commissions and offering expenses of
      approximately $1,546,000.

      On October 9, 1996, the Company issued 4,000 shares of its common stock in
      consideration for legal services to the Company relating to the initial
      public offering.

      On October 9, 1996, the Company completed a private placement to sell
      78,333 shares of common stock for approximately $235,000 ($3.00 per share)
      prior to deducting fees and expenses of approximately $25,000.

      On October 9, 1996, Paradise issued 873,000 shares of its common stock in
      exchange for the outstanding stock of Rave, Picture Vision and All Access
      in a transaction accounted for as a pooling of interests (see Notes 1 and
      2).


                                      F-14
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - STOCKHOLDERS' EQUITY (CONTINUED)

      On July 18, 1996, a new Delaware corporation was formed, Paradise Music &
      Entertainment, Inc. which on July 22, 1996 issued 125,000 shares of common
      stock at $.01 par value (see Notes 1 and 2).

NOTE 11 - STOCK OPTIONS:

      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 185,000. 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 June 30, 1998, options under the Option
      Plan to purchase 109,000 shares of common stock are outstanding, none of
      which have been exercised.

      In addition, the Board of Directors approved the adoption of the Outside
      Directors Stock Option Program (the "Program"). The Program provides for
      the granting of an aggregate of 100,000 stock options to eligible
      directors of the Company (as defined in the Program). Each eligible
      director shall receive 5,000 stock options per annum, subject to
      adjustment, for their services on the Board on each July 1, that they are
      serving as an eligible director. The options are exercisable at the fair
      market value of common stock on the last date preceding the date of grant.
      The Program further provides that the maximum term of stock options may
      not exceed 5 years and the stock options may be exercised at any time for
      a period of 5 years after the date of grant. At June 30, 1998, options to
      purchase 35,000 shares 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 11 - 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                                    109,000             3.31 - 6.00
                                             -----------            ------------

      Balance outstanding,                                    
       June 30, 1998                             144,000            $3.31 - 6.00
                                             ===========            ============

      Exercisable,                                            
       June 30, 1998                              45,000            $4.00 - 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 stock 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:

                                                       Years Ended June 30,
                                                   ---------------------------
                                                      1998             1997
                                                   -----------     -----------
      Net loss:
         As reported                               $(2,869,129)    $  (993,952)
         Pro forma                                  (2,975,323)     (1,081,102)

      Basic and diluted loss per common share:                    
         As reported                               $     (1.29)    $      (.65)
         Pro forma                                       (1.33)           (.71)

      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 year ended June 30, 1998: risk-free interest rate 6.0%, no
      dividend yield, expected life of 5 years and expected volatility of 44
      percent.


                                      F-16
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - 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 year ended June 30,
      1998, profit sharing expense was $38,000.

      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 1998 and $9,500 in 1997. The
      Plan does not provide for a Company match.

NOTE 13 - SUBSEQUENT EVENTS:

      In September 1998, Messrs. Loeffler, Small, Doyle and Flynn
      entered into a letter agreement (the "Employment Modification Agreement")
      with the Company which amended certain provisions of the New Employment
      Agreements. In the case of Messrs. Doyle and Flynn, the Employment
      Modification Agreement is subject to approval by the Compensation
      Committee of the Board of Directors of a definitive budget for fiscal year
      1999 for Push. In consideration of the reduced base salaries, other
      compensation concessions and more stringent non-compete terms reflected in
      the Employment Modification Agreement (and, in the case of Mr. Doyle,
      conditioned upon approval of the Push budget for year 1999), the
      Compensation Committee of the Board of Directors treated all monies paid
      to the executives in fiscal year 1998 as compensation, as opposed to
      treating any portion thereof as "advances" subject to recoupment. In
      recognition of Picture Vision's profitability for fiscal year 1998 and the
      other achievements of Mr. Small, the Compensation Committee also awarded
      Mr. Small a bonus of $150,000 for fiscal year 1998, which bonus was paid
      in July of 1998.

      On October 6, 1998, the Company entered into an investment agreement (the
      "Pines Investment Agreement") with Pines International Resorts, Inc.
      ("Pines") pursuant to which, among other things, Pines agreed to purchase
      500,000 shares of the Company's common stock in consideration for payment
      to the Company of $775,000 in tranches of $345,000 and $430,000,
      respectively. Under the terms of this agreement the Company will receive
      the first payment of $345,000 no later than October 14, 1998. In addition,
      the Company has agreed to grant warrants to Pines for the purchase of
      350,000 shares of the Company's common stock at prices ranging from $1.55
      to $2.50 per share. The warrants became exercisable on October 6,1998 and
      expire at various dates through December 31, 1999. In accordance with the
      Pines Investment Agreement, Pines is required to pay to the Company
      $430,000 within one week of filing a Registration Statement on Form S-3.
      If the Company fails to have an effective Registration Statement covering
      the shares issued to Pines within 90 days following the payment by Pines
      of $345,000, a monthly penalty, at the option of Pines, of $50,000 or the
      issuance of 100,000 shares of the Company's common stock shall be imposed
      until the Registration Statement becomes effective.

      In September 1998, the Company entered into a non-exclusive financial
      advisory relationship with CCF Capital Group, Inc. ("CCF Capital")
      pursuant to which, among other things, CCF Capital would receive a monthly
      retainer of $6,500 per month and certain success fees and bonuses for
      assisting the Company in raising monies through the sale of debt, equity
      or a combination of the two. Upon closing of the Pines Investment
      Agreement, CCF Capital will receive 100,000 shares of the Company's common
      stock in connection with the rendering of its financial advisory services
      and will earn a success fee of $75,000.

      On a proforma basis, assuming the aforementioned equity financing occurred
      on June 30, 1998, stockholders' equity at June 30, 1998 would have been
      approximately $2,648,000. If the aforementioned equity financing occurred
      on July 1, 1997, proforma loss per common share would have been $1.01.

      The Company is pursuing debt and/or equity financing to provide for its
      immediate, short-term and long-term cash requirements. In the event that
      the Company cannot procure adequate financing, the Company may be required
      to, among other things, reduce its operating costs, reduce its payroll,
      curtail its on-going investment activities, especially in Push Records,
      and curtail, restrict or even eliminate certain of the Company's
      businesses or operating subsidiaries. Even if the Company is successful in
      obtaining financing for its immediate cash needs, there can be no
      assurance that the actions outlined above will ensure the Company's
      survival as a going concern and if the Company does continue,
      implementation of the cash containment measures outlined above could
      materially adversely affect the long-term profitability or potential
      future value of the Company's business and operating subsidiaries.

      The Company's tangible net asset value as of June 30, 1998 was below the
      threshold required by NASDAQ for continued listing of the Company's
      securities. The Company believes that the financing activities described
      above especially the financing provided pursuant to the Pines Investment
      Agreement will result in an increase of the Company's tangible net asset
      value above the threshold established for continued NASDAQ listing.
      However, there can be no assurance that failure to consummate the Pines
      Investment Agreement or continuing losses will not result in a net
      tangible asset value in the future which again falls below the requirement
      for continued NASDAQ listing. If the Company's securities are delisted,
      the value of the Company's


                                      F-17
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - SUBSEQUENT EVENTS (CONTINUED):

      securities would be materially adversely affected and the Company would,
      in all likelihood, find it more difficult to consummate any financing
      transactions.

      In late July of 1998, all six members of the Company's Board of Directors
      sold in the aggregate approximately 105,000 shares of the Company's Common
      Stock in one or more open market transactions at a price per share of
      $2.875. The Company's two outside directors lent the proceeds of such open
      market sales (an aggregate of approximately $48,000) to the Company
      pursuant to convertible promissory notes that would allow the holders of
      such notes to convert the outstanding principal and interest accrued
      thereunder into shares of the Company's Common Stock at a price per share
      equal to $2.875. Three of the Company's Board members took the proceeds of
      their open market sales (approximately $190,000) and reinvested them into
      the Company in exchange for restricted shares of Common Stock at a
      purchase price per share of $2.875. One of the Company's Board members,
      Mr. Loeffler, used the proceeds of his open market sales to repay
      approximately $58,000 of a loan that had been advanced to him by the
      Company. In all, the Company received approximately $302,000 in gross
      proceeds from such transactions.


                                      F-18