PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                                  June 30, 2001

                                   FORM 10-QSB

<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

|X|   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
      ACT OF 1934

For the quarterly period ended June 30, 2001
                               -------------------------------------------------

|_|   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from _____________ to _________________

Commission file number 1-12635
                       ---------------------------------------------------------

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

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

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

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

--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                 Yes |X|  No |_|

At August 6, 2001, the Issuer had 11,127,984 shares of Common Stock, $.01 par
value, issued and outstanding. This does not include 9,390,000 shares which are
in the process of being issued by the Issuer's transfer agent in connection with
the iball Media, Inc. merger as discussed in Part I, Note 12.

Transitional Small Business Disclosure Format    Yes |_|  No |X|


                                       2
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                              INDEX TO FORM 10-QSB

PART I  FINANCIAL INFORMATION                                               PAGE

Item 1  Financial Statements (unaudited)

           Consolidated Balance Sheet as of June 30, 2001                      4

           Consolidated Statements of Operations for the Three
            and Six Months Ended June 30, 2001 and 2000                        5

           Consolidated Statements of Cash Flows for the Six
            Months Ended June 30, 2001 and 2000                              6-7

           Notes to Consolidated Financial Statements                       8-12

Item 2  Management's Discussion and Analysis of Financial Condition and
          Results of Operations                                            13-16

PART II OTHER INFORMATION

Item 1  Legal Proceedings                                                     17

Item 2  Changes in Securities and Use of Proceeds                             17

Item 3  Defaults Upon Senior Securities                                       17

Item 4  Submission of Matters to a Vote of Security Holders                   17

Item 5  Other Information                                                     17

Item 6  Exhibits and Reports on Form 8-K                                      18

        Signatures                                                            18


                                       3
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEET (unaudited)
                                  June 30, 2001

                                      ASSETS

<TABLE>
<S>                                                                  <C>               <C>
CURRENT ASSETS:
  Cash                                                               $    777,512
  Accounts receivable                                                   3,632,037
  Inventory                                                               327,368
  Prepaid expenses and other current assets                               334,525
                                                                     ------------
       Total current assets                                                            $  5,071,442

PROPERTY AND EQUIPMENT, net                                                               1,625,854

OTHER ASSETS:
  Goodwill, net                                                           470,698
  Security deposits and other                                             249,680
                                                                     ------------
                                                                                            720,378
                                                                                       ------------

                                                                                       $  7,417,674
                                                                                       ============
</TABLE>

                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<S>                                                                  <C>               <C>
CURRENT LIABILITIES:
  Accounts payable                                                   $  3,683,578
  Advances from lender                                                    762,030
  Accrued expenses                                                      2,416,568
  Note payable                                                            211,658
                                                                     ------------
       Total current liabilities                                                       $  7,073,834

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Common stock, $.01 par value,
   authorized 75,000,000 shares,
   issued and outstanding 11,127,984 shares                               111,280
  Capital in excess of par value                                       24,956,969
  Note receivable, stockholder                                            (44,082)
  Accumulated deficit                                                 (24,680,327)
                                                                     ------------
      Total stockholders' equity                                                            343,840
                                                                                       ------------

                                                                                       $  7,417,674
                                                                                       ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       4
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                               Three Months Ended                  Six Months Ended
                                                        ------------------------------      --------------------------------
                                                          June 30,          June 30,          June 30,           June 30,
                                                            2001              2000              2001               2000
                                                        ------------      ------------      ------------      --------------
<S>                                                     <C>               <C>               <C>               <C>
REVENUES                                                $  7,765,268      $  6,164,769      $ 17,106,578      $   14,792,019
                                                        ------------      ------------      ------------      --------------
OPERATING EXPENSES
  Cost of sales                                            6,814,163         4,899,328        14,796,789          11,255,228
  Provision for goodwill impairment                        7,268,586                --         7,268,586                  --
  Non-recurring costs associated with merger
       and operational restructuring                         414,762                --           414,762                  --
  Marketing, selling, general and administrative           2,628,120         2,924,284         5,461,309           5,616,427
                                                        ------------      ------------      ------------      --------------
      Total operating expenses                            17,125,631         7,823,612        27,941,446          16,871,655
                                                        ------------      ------------      ------------      --------------
LOSS FROM OPERATIONS                                      (9,360,363)       (1,658,843)      (10,834,868)         (2,079,636)

INTEREST EXPENSE (INCOME)                                      3,937           151,104            (9,100)            190,416
                                                        ------------      ------------      ------------      --------------
LOSS FROM CONTINUING OPERATIONS                           (9,364,300)       (1,809,947)      (10,825,768)         (2,270,052)

DISCONTINUED OPERATIONS, NET                                 (11,945)         (237,711)          (91,652)           (563,486)
                                                        ------------      ------------      ------------      --------------
NET LOSS                                                $ (9,376,245)     $ (2,047,658)     $(10,917,420)     $   (2,833,538)
                                                        ============      ============      ============      ==============

NET LOSS PER COMMON SHARE, BASIC AND DILUTED

         FROM CONTINUING OPERATIONS                     $      (0.85)     $      (0.22)     $      (0.99)     $        (0.28)
                                                        ============      ============      ============      ==============

         FROM DISCONTINUED OPERATIONS                   $      (0.00)     $      (0.03)     $      (0.01)     $        (0.07)
                                                        ============      ============      ============      ==============

         NET LOSS                                       $      (0.85)     $      (0.25)     $      (1.00)     $        (0.35)
                                                        ============      ============      ============      ==============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
 USED IN COMPUTING BASIC AND DILUTED
 LOSS PER COMMON SHARE                                    11,002,984         8,168,567        10,962,633           8,018,612
                                                        ============      ============      ============      ==============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       5
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                      Six Months Ended
                                                                                -----------------------------
                                                                                  June 30,         June 30,
                                                                                    2001             2000
                                                                                ------------      -----------
<S>                                                                             <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss from continuing operations                                                 $(10,825,768)     $(2,270,052)
Discontinued operations                                                              (91,652)        (563,486)
                                                                                ------------      -----------
Net loss                                                                         (10,917,420)      (2,833,538)
Adjustments to reconcile net loss to net cash used in operating activities:
   Depreciation and amortization                                                     337,813          320,574
   Amortization of goodwill                                                          286,016          204,484
   Provision for goodwill impairment                                               7,268,586
   Options/warrants issued for services in lieu of cash                               34,905           42,908
   Provision for returns                                                            (150,582)
   Common stock issued and warrants granted to outside
   directors, consultants, vendors and employees                                      11,824           39,189
Changes in operating Assets and Liabilities:
   Accounts receivable                                                             1,723,901          909,883
   Inventory                                                                           3,623               --
   Prepaid expenses and other current assets                                          50,951          137,423
   Security deposits and other assets                                                 38,234          303,001
   Accrued payroll and related expenses                                             (109,000)         (27,077)
   Accounts payable                                                                1,299,157       (1,361,619)
   Accrued expenses                                                               (1,204,507)         369,563
                                                                                ------------      -----------
NET CASH USED IN OPERATING ACTIVITIES                                             (1,326,499)      (1,895,209)
                                                                                ------------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Payment for property and equipment                                                (41,638)        (237,241)
   Acquisition costs, net of cash acquired                                                --       (1,178,922)
   Note receivable, officer                                                           20,000               --
                                                                                ------------      -----------
NET CASH USED IN INVESTING ACTIVITIES                                                (21,638)      (1,416,163)
                                                                                ------------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Advances from lender                                                              762,030
   Note payable                                                                      211,658
   Proceeds from sale of common stock, net of expenses                                              1,567,022
   Proceeds from long term convertible debt, net of expenses                              --        1,923,907
   Warrants issued with long term debt                                                    --          978,060
                                                                                ------------      -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                            973,688        4,468,989
                                                                                ------------      -----------

NET INCREASE (DECREASE) IN CASH                                                     (374,449)       1,157,617

CASH, beginning of period                                                          1,151,961        1,631,307
                                                                                ------------      -----------

CASH, end of period                                                             $    777,512      $ 2,788,924
                                                                                ============      ===========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       6
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                   (unaudited)

                                                          Six months ended
                                                     ---------------------------
                                                      June 30,        June 30,
                                                        2001            2000
                                                     ---------     -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION,
   Cash paid during the period for income taxes      $      --     $      22,653
                                                     =========     =============

   Cash paid during the period for interest          $   7,713     $      46,909
                                                     =========     =============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
  FINANCING ACTIVITIES:

  Conversion of liabilities into common stock        $      --     $       3,159
                                                     =========     =============

          See accompanying notes to consolidated financial statements.


                                       7
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

NOTE 1 -    BASIS OF PRESENTATION:

            The consolidated financial statements included herein have been
            prepared by Paradise Music & Entertainment, Inc. and subsidiaries
            (the "Company" or "Paradise") pursuant to the rules and regulations
            of the Securities and Exchange Commission (the "SEC") and reflect
            all adjustments, consisting of normal recurring adjustments, which
            are, in the opinion of management, necessary for a fair presentation
            of results of operations for interim periods. Certain information
            and footnote disclosures have been omitted pursuant to such rules
            and regulations. It is suggested that these financial statements be
            read in conjunction with the consolidated financial statements and
            the notes thereto included in the Company's Report for the period
            ended December 31, 2000 on Form 10-KSB.

            The consolidated results of operations for the three and six months
            ended June 30, 2001 are not necessarily indicative of the results to
            be expected for the full fiscal year.

NOTE 2 -    ORGANIZATION AND NATURE OF OPERATIONS:

            Paradise Music & Entertainment, Inc. ("Paradise") was formed in July
            1996. We are an entertainment company focused on supplying
            state-of-the art film, video, digital and music-related products,
            services and content to traditional and web-centric entertainment
            businesses. Our products, services and content are offered through
            three operating groups, which have been resegmented to reflect the
            Company's current strategic organization:

            PDSE Commercial Group includes our commercial production companies
            Straw Dogs, Inc. ("Straw Dogs") and Shelter Films, Inc. ("Shelter
            Films").

            PDSE Film and Television Group includes Picture Vision, Inc.
            ("Picture Vision"), our video, television and commercial production
            company and John Leffler Music, Inc. (which operates under the name
            of Rave Music and Entertainment) ("Rave"), a producer of music for
            commercials as well as original musical content for programs and
            movies, such as the theme music and underscore for the kids'
            television series Pokemon.

            PDSE Music Group includes the following operating divisions:

            o     PDSE Records, Inc. produces and releases jazz music for sale
                  to the public through its Label M division and African music
                  through its IndigeDisc division formed in October 2000. The
                  majority of PDSE Records' releases are distributed in the U.S.
                  through its agreement with Ryko Distribution and worldwide
                  through distributors on a territory by territory basis.
            o     Push Records, Inc. ("Push") produces records for sale to the
                  public and has a distribution agreement with V2 Records for
                  U.S. distribution currently through BMG.
            o     PDSE Records and Push also maintain licensing, marketing and
                  distribution and joint venture agreements with Kinetic Records
                  (electronic and dance music), Trippin' N' Rhythm (adult urban
                  contemporary and smooth jazz), and Mesa Records (jazz,
                  pop/rock).
            o     Newly formed Events division is involved with event marketing
                  and production.

            As of the quarter ended June 30, 2001, the Company has discontinued
            the operations of the PDSE Digital Group and of its All Access
            Entertainment Management Group, Inc. subsidiary as more fully
            explained in Management's Discussion and Analysis as well as in
            Financial Footnote 7.

NOTE 3 -    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

            Principles of Consolidation - The consolidated financial statements
            include the accounts of Paradise and its wholly owned subsidiaries.
            All significant intercompany accounts and transactions have been
            eliminated in consolidation.


                                       8
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

            Revenue Recognition - Commercial music production revenues and
            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, and when
            received if it cannot be reasonably estimated. For projects that 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 that recognizes income as work on
            the project progresses. Record label revenues are recognized in
            accordance with the provisions of the distribution agreements.
            Certain record costs are capitalized as recoverable from future
            revenues and amortized over the expected life of the records, to the
            extent there is reasonable assurance that these costs will be
            recoverable from future sales. The Company is accounting for these
            costs in accordance with Statement of Financial Accounting Standards
            ("SFAS") No. 50 "Financial Reporting in the Record and Music
            Industry."

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

            Goodwill - The excess of the cost over the fair value of net assets
            of purchased businesses is recorded as goodwill and is amortized on
            a straight-line basis over a period of 15 years. The Company
            continually evaluates the carrying value of goodwill and other
            intangible assets. Any impairments would be recognized when the
            expected future operating cash flows derived from such intangible
            assets is less than their carrying value.

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

            Loss Per Common Share - Basic earnings per share excludes dilution
            and is computed by dividing net loss by the weighted average number
            of common shares outstanding for the period. Diluted earnings per
            share reflects the potential dilution that could occur if securities
            or other contracts to issue common stock were exercised or converted
            into common stock or resulted in the issuance of common stock that
            then shared in the earnings of the entity. Diluted loss per common
            share is the same as basic loss per common share for the six months
            ended June 30, 2001 and 2000. Unexercised stock options and
            outstanding stock warrants were not included in the computations of
            diluted earnings per common share because their effect would have
            been antidilutive as a result of the Company's losses.

            Use of Estimates - The preparation of consolidated financial
            statements in conformity with accounting principles generally
            accepted in the United States of America 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.

            New accounting pronouncements - In July 2001, the Financial
            Accounting Standard Board issued Statement of Financial Accounting
            Standards ("SFAS") Nos. 141 and 142, "Business Combinations" and
            "Goodwill and Other Intangibles". SFAS 141 requires all business
            combinations initiated after June 30, 2001 to be accounted for using
            the purchase method. Under SFAS 142, goodwill is no longer subject
            to amortization over its estimated useful life. Rather, goodwill is
            subject to at least an annual assessment for the impairment applying
            a fair-value based test. Additionally, an acquired intangible asset
            should be separately recognized if the benefit of the intangible
            asset is obtained through contractual or other legal rights, or if
            the intangible asset can be sold, transferred, licensed, rented, or
            exchanged, regardless of the acquirer's intent to do so. The Company
            is in the process of determining the impact of these pronouncements
            on its financial postion and results of operations.

NOTE 4 -    GOING CONCERN CONSIDERATION:

            The consolidated financial statements have been prepared assuming
            the Company will continue as a going concern. As of June 30, 2001,
            the Company had a working capital deficit of approximately $2.0
            million, an accumulated deficit in stockholder's equity of
            approximately $24.7 million, and has incurred losses since its
            inception. These conditions raise substantial doubt about the
            Company's ability to continue as a going concern. Management's plans
            include further staff and expense reductions under a more aggressive
            restructuring plan, debt and equity financings, along with strategic
            acquisitions of complementary businesses, further evaluation of its
            current operating segments and development of new revenue sources.
            There can be


                                       9
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

            no assurance that the Company will be able to obtain sufficient debt
            or equity financing on favorable terms, if at all. Continuation of
            the Company as a going concern is dependent upon its ability to
            resolve its liquidity problem, its ability to continue to defer
            payment of certain obligations, and ultimately, to attain future
            profitable operations. The financial statements do not include any
            adjustment that might result from this uncertainty.

NOTE 5 -    PROVISION FOR GOODWILL IMPAIRMENT

            The Company is presently analyzing alternatives regarding its Straw
            Dogs affiliate acquired in December 1999. Despite revenue increases
            in the current six month period, the unit incurred a significant net
            loss due to declining operating margins, had negative cash flows
            from operations and is not expected to have a material improvement
            in the near term. In light of these circumstances and in accordance
            with Statement of Financial Accounting Standards ("SFAS") No. 121
            Accounting For Impairment of Long Lived Assets, the Company has
            recorded an impairment provision equal to net book value of the
            goodwill associated with the acquisition of Straw Dogs of $7,268,586
            as of June 30, 2001.

NOTE 6 -    FINANCING ARRANGEMENTS:

            On April 25, 2001, the Company entered into a commercial factoring
            agreement with a lender. The agreement provides that the Company
            sell, transfer, set over and assign certain invoices and accounts
            receivable to the lender, with recourse. The credit facility
            provides for maximum revolving borrowings up to $1,500,000.
            Borrowings under this facility are based on a funding formula and,
            in addition to the factored accounts receivable and invoices, are
            collateralized by all of the Company's remaining assets.

            As of June 30, 2001 $762,030 was the outstanding advance balance,
            leaving remaining availability of $737,970 under this facility.
            Advances from the lender bear interest at the higher of 10.5% per
            annum or the prime rate plus 2.50%. A factoring fee of 3.25% per
            invoice is assessed, with available rebates up to 2.25% depending on
            speed of collection of invoices.

            In connection with this transaction, the Company issued warrants to
            the lender providing for the purchase of 75,000 restricted common
            shares of Paradise at $0.25 per share which vested and were
            exercisable immediately. Such warrants were valued at $18,750
            utilizing the Black Scholes method for calculating such instruments.

            On May 21, 2001 the Company entered into a loan agreement in the
            amount of $450,000 with another lender. In connection with this
            loan, the Company issued a note payable which bears interest at the
            rate of 2.5% per month and is collateralized by royalties earned
            under an affiliation agreement with a music publisher. As of June
            30, 2001 the outstanding note payable balance amounted to $211,658.

NOTE 7 -    DISCONTINUED OPERATIONS:

            In May 2001, the Company decided to discontinue its artist
            management and digital production businesses in connection with the
            implementation of its new strategy. Results of operations including
            all costs associated with the disposal of these segments have been
            determined and included in results of operations.

NOTE 8 -    COMMITMENTS AND CONTINGENCIES:

            The Company has employment agreements with seven of its principal
            executives, which provide for various compensation and bonus
            arrangements. However, no bonus expense has been recorded for the
            three and six months ended June 30, 2001.

NOTE 9 -    STOCKHOLDERS' EQUITY

            The Company entered into consulting agreements with various
            consultants in the first quarter of 2001 for ongoing professional
            and financial services. The consultants were compensated for their
            services (either partially or in full) through the issuance of an
            aggregate of 27,027 shares of the Company's common stock. The stock
            was issued in March, 2001 at a price of $.44 per share. The stock
            was valued at approximately $12,000.


                                       10
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

NOTE 10 -   ECONOMIC DEPENDENCY:

            Approximately $351,000 and $562,000 of PDSE Film and TV Group
            revenues for the six months ended June 30, 2001 and 2000,
            respectively, were derived from one customer. As of June 30, 2001,
            approximately $37,000 was receivable from this customer.

NOTE 11 -   INFORMATION CONCERNING BUSINESS SEGMENTS

            Segment information listed below reflects the three resegmented
            principal business units of the Company for the three and six months
            ended June 30, 2001 and 2000. Discontinued operations include the
            net losses realized for the artist management and digital production
            businesses. Each segment is managed according to the products or
            services provided to the respective customers.

            For the three months ended June 30, 2001 (unaudited):

<TABLE>
<CAPTION>
                             PDSE            PDSE          PDSE     Discontinued
                       Commercial              TV         Music       Operations        Corporate     Consolidated
                      -----------      ----------     ---------     ------------      -----------     ------------
<S>                   <C>              <C>            <C>            <C>              <C>              <C>
Revenues              $ 5,591,439      $1,766,114     $ 407,715                       $        --      $ 7,765,268
Net income (loss)     $(8,271,952)     $  438,795     $(417,834)     $   (11,945)     $(1,113,309)     $(9,376,245)
</TABLE>

            For the three months ended June 30, 2000 (unaudited):

<TABLE>
<CAPTION>
                             PDSE            PDSE          PDSE     Discontinued
                       Commercial              TV         Music       Operations        Corporate     Consolidated
                      -----------      ----------     ---------     ------------      -----------     ------------
<S>                   <C>              <C>            <C>            <C>              <C>              <C>
Revenues              $ 3,464,044      $1,783,148     $ 917,577      $        --      $        --      $ 6,164,769
Net income (loss)     $  (471,252)     $   88,589     $(200,380)     $  (237,711)     $(1,226,904)     $(2,047,658)
</TABLE>

            For the six months ended June 30, 2001 (unaudited):

<TABLE>
<CAPTION>
                              PDSE            PDSE            PDSE    Discontinued
                        Commercial              TV           Music      Operations        Corporate      Consolidated
                      ------------      ----------     -----------    ------------      -----------      ------------
<S>                   <C>               <C>            <C>            <C>               <C>              <C>
Revenues              $ 12,676,711      $3,332,027     $ 1,097,840    $         --      $        --      $ 17,106,578
Net income (loss)     $ (8,511,643)     $  447,583     $  (595,823)   $    (91,652)     $(2,165,885)     $(10,917,420)
</TABLE>

            For the six months ended June 30, 2000 (unaudited):

<TABLE>
<CAPTION>
                            PDSE           PDSE            PDSE     Discontinued
                      Commercial             TV           Music       Operations        Corporate      Consolidated
                      ----------     ----------     -----------       --------        -----------      ------------
<S>                   <C>            <C>            <C>               <C>             <C>              <C>
Revenues              $9,625,119     $4,032,710     $ 1,134,190       $       --      $        --      $ 14,792,019
Net income (loss)     $   73,360     $  221,040     $  (241,293)      $ (563,486)     $(2,323,159)     $ (2,833,538)
</TABLE>


                                       11
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

NOTE 12 -   RECENT AND SUBSEQUENT EVENTS:

            Effective July 3, 2001, Paradise and iball Media, Inc. ("iball")
            completed their Plan of Merger and effectively combined their
            business interests. In connection with this transaction, iball
            shareholders were issued 9,390,000 shares of Paradise common stock,
            which represented approximately 45% of the total Paradise common
            stock outstanding as of the completion of the transaction.

            The following unaudited pro forma consolidated financial information
            for the three and six month periods ended June 30, 2001 is presented
            to reflect the results of Paradise as if the iball merger had
            occurred at the beginning of the fiscal periods being reported
            herein. No comparative prior year pro forma data is reflected since
            iball had no operating results for the six month period ended June
            30, 2000.

                                        Three months ended      Six months ended
                                        June 30, 2001           June 30, 2001
                                        ------------------      ----------------
            Net Revenues                 $ 7,816,268            $ 17,289,813

            Net loss                     $(9,544,540)           $(11,171,762)

            Loss per common Share        $      (.47)           $       (.55)

            On August 13, 2001, 8330 W. Third Street, LLC filed a complaint
            against Straw Dogs, Inc. in the Superior Court of California, County
            of Los Angeles, alleging that Straw Dogs breached various
            obligations under its lease dated August 1, 1998. The suit seeks
            damages, including, but not limited to, past due rent in the amount
            of $59,083.21, attorneys fees, and certain other fees and taxes. The
            parties are currently in negotiations to settle the claim, however
            there can be no assurance that a resolution will be reached. In the
            opinion of management, the ultimate outcome of this action should
            not have a material impact on the liquidity, results of operations
            or financial condition of the Company as a whole, although it may
            further impair the viability of the Straw Dogs division. However, an
            unfavorable settlement of this complaint could result in a possible
            write down of fixed assets and leasehold improvements relating to
            the Straw Dogs business.

            On August 15, 2001, the Company entered into a loan agreement with
            the same lender that provided funding through a commercial factoring
            agreement (such factoring agreement is more fully discussed at Note
            6). The additional loan in the amount of $250,000 is secured by and
            cross-collateralized against the commercial factoring agreement and
            by a security agreement. The loan bears interest at the rate of 15%
            per annum and matures on August 15, 2002.


                                       12
<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

Forward-Looking Statements

Except for the historical information contained herein, this quarterly report on
Form 10-QSB may contain forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. All statements other than statements of historical facts included in
this document, including without limitation, statements that use terminology
such as "anticipate", "believe", "continue", "estimate", "expect", "intend",
"may", "plan", "predict", "will", and similar expressions, are forward-looking
statements. These statements relate to, among other things, the Company's
business strategy and expectations concerning the Company's future operations,
margins, profitability, liquidity and capital resources, expenditures for
capital resources and cost reduction efforts. These statements are only
predictions and may differ from actual future events or results. We disclaim any
intention or obligation to revise any forward-looking statements whether as a
result of new information, future developments or otherwise. All phases of the
operations of the Company involve risks and uncertainties that could cause the
actual results to differ from those contained in the forward-looking statements,
including but not limited to risks associated with our ability to obtain more
capital and maintain cash flow, actions of our competitors, the extent to which
we are able to develop new services and markets for our services, the time and
expense involved in such development activities, the level of demand and market
acceptance of our services and changes in business strategies.

General

Paradise Music & Entertainment, Inc. ("Paradise" or the "Company") is an
entertainment company focused on supplying state-of-the-art film, video, digital
and music-related products, services and content to traditional and web-centric
entertainment businesses. Paradise intends to grow its existing businesses and
plans to extend into the broadcast, on-site and online spaces. In order to
facilitate this growth, Paradise recently reorganized its operating groups in
fiscal 2001. The Music Group consists of the record labels and our newly formed
events division. The Film and TV Group consists of Picture Vision and Rave.
Straw Dogs and Shelter Films are part of the newly formed Commercial Group. As a
result of the rapid shift in digital entertainment markets and the Company's
desire to minimize its risk and contain costs, the Digital Group and the
operations of PDSE Digital Inc. and Paradise Digital Productions were
discontinued and its services will be assimilated into the other remaining
operating divisions. Additionally, the Company's All Access Entertainment
Management Group, Inc. subsidiary has been discontinued as it no longer fits the
Company's long term strategy.

Paradise has launched a new strategic direction that empowers the business and
creative talent already encompassed within the company. This strategy is to
deliver the branding message for Global and Fortune 1000 companies with unique,
cross-platform multiple media solutions.

Paradise's music events and marketing capabilities are designed to offer these
premier brands and their advertising agencies events and projects that are
cost-effective, geared to brands' targeted demographics, offer offline and
online pre-event, event and post-event exposure, promotions, and data gathering.
In addition to effectively targeting demographics, our vertical integration in
the entertainment industry allows us to offer bundled packages to our customers,
allowing for seamless, dependable, coordinated campaigns across multiple media
platforms. Paradise is entering a new chapter as a leaner, more aggressive firm
with a core vision of creating sponsor-targeted entertainment and an ethnically
and racially diverse management team and ownership committed to making Paradise
the world's premier creative studio.


All of the foregoing discussion of anticipated changes is subject to
negotiations and completion and there can be no assurance that any one or more
of these changes will take place. Paradise will need, in any event, to raise
additional financing and maintain cash flow to support its business units and
intended acquisitions. There can be no assurance that such financing can be
obtained on terms acceptable to the Company.

Results of Operations

Three Months Ended June 30, 2001 Compared to
Three Months Ended June 30, 2000.

In aggregate, revenues for the three months ended June 30, 2001 increased to
$7,765,268 or 26% compared to revenues of $6,164,769 in the three-month period
ended June 30, 2000. The net loss was $9,376,245 for the three months ended June
30, 2001 compared to $2,047,658 for the three months ended June 30, 2000. The
loss for the three months ended June 30, 2001 included a provision for goodwill
impairment of $7,268,586. Notwithstanding the goodwill impairment provision, the
PDSE


                                       13
<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

Commercial group incurred a loss in the period of $1,003,366 almost entirely in
the Straw Dogs affiliate, reflective of the severe downturn in the advertising
industry. Additionally, the Company incurred $414,762 of non-recurring costs
relating to the iball merger and business restructuring.

Exclusive of the provision for goodwill impairment, the non-recurring costs
relating to the iball merger and business restructuring and the significant loss
incurred in the PDSE Commercial segment (mainly Straw Dogs), the Paradise
adjusted net loss for the current three month period would be $689,531 compared
with a net loss of $1,576,406 (adjusted for the PDSE Commercial segments loss in
the prior period).

PDSE Commercial Group revenues increased to $5,591,439 for the three months
ended June 30, 2001, from $3,464,044 for the three months ended June 30, 2000,
an increase of $2,127,395 or 61%. The increase in revenues is primarily due to
the negative impact of the SAG strike on last year's activity.

PDSE Commercial Group cost of sales increased to $5,295,437 for the three months
ended June 30, 2001 from $3,082,356 for the three months ended June 30, 2000, an
increase of $2,213,081 or 72%. Gross profit, as a percentage of commercial group
revenues, was 5% for the three months ended June 30, 2001, compared to 11% for
the three months ended June 30, 2000. The change in cost of sales and gross
profit margin is primarily due to the fact that three of the Company's in-house
directors were involved in producing films external to the Company and were not
available to direct commercials. The commercial revenue in the three months
ended June 30, 2001 for Straw Dogs was contributed primarily by a director whose
agreement with the Company provides for a lower Gross Profit Margin.

PDSE Film and TV Group revenues were $1,766,114 and $1,783,148 for the three
months ended June 30, 2001 and 2000, respectively, essentially flat.

PDSE Film and TV Group cost of sales decreased to $909,820 for three months
ended June 30, 2001 from $1,137,950 for the three months ended June 30, 2000, a
decrease of $228,130 or 20%. Gross profit as a percentage of PDSE Film revenues
increased to 48% for the three months ended June 30, 2001, compared to 36% for
the three months ended June 30, 2000. The change in cost of sales and gross
profit margin is primarily due to the higher contribution of royalties, which
carry little or no cost of sales, to total income in the current year.

PDSE Music Group revenues decreased 56% to $407,715 for the three months ended
June 30, 2001, from $917,577 for the three months ended June 30, 2000. The
decrease in revenues is primarily due to the elimination of certain label
affiliations that contributed to revenues in the previous periods.

PDSE Music Group cost of sales decreased to $608,906 for the three months ended
June 30, 2001 from $679,022 for the three months ended June 30, 2000, a decrease
of $70,116 or 10%. Gross loss for the group was $201,191 for the three months
ended June 30, 2001, compared to a gross profit of $238,555 for the three months
ended June 30, 2000. The decreased profit is due to the costs associated with
the elimination of certain label affiliations. In addition, the decrease also
reflects the low margins indicative of start up recording labels.

In accordance with SFAS No. 121 Accounting For Impairment of Long Lived Assets,
management has reviewed the carrying value of Goodwill and determined that as of
June 30, 2001 the recoverablility of that portion of Goodwill relating to the
Straw Dogs, Inc. affiliate is impaired. As such, the Company has recorded a
provision for the net carrying value of the Goodwill related to Straw Dogs
amounting to $7,268,586.

The Company has decided to discontinue the operations of its artist management
and digital production businesses. The net loss associated with the disposal of
these segments for the three months ended June 30, 2001 amounted to $11,845 as
compared to a net loss of $237,711 for the three months ended June 30, 2000.

Paradise's marketing, selling, general and administrative expenses decreased to
$2,628,120 for the three months ended June 30, 2001 from $2,924,284 for the
three months ended June 30, 2000, a decrease of $296,164 or 10%. The decrease in
overhead reflects the effect of personnel and overhead cost reductions initiated
by the Company toward the end of the second quarter of 2000. In addition,
non-recurring costs associated with the iball merger and business restructuring
amounted to $414,762 in the current period.

Net interest expense was $3,937 for the three months ended June 30, 2001,
compared to net interest expense of $151,104 for the three months ended June 30,
2000. The decrease is the result of interest expense related to $3 million
convertible debt


                                       14
<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

financing completed in March 2000 with BayStar Capital and BayStar International
that was extinguished in December 2000.

Results of Operations

Six Months Ended June 30, 2001 Compared to
Six Months Ended June 30, 2000.

In aggregate, revenues for the six months ended June 30, 2001 increased to
$17,106,578 or 16% compared to $14,792,019 in the six-month period ended June
30, 2000. The net loss was $10,917,420 for the six months ended June 30, 2001
compared to $2,833,538 for the six months ended June 30, 2000. The loss for the
six months ended June 30, 2001 included a provision for goodwill impairment of
$7,268,586. Notwithstanding the goodwill impairment provision, the PDSE
Commercial group incurred a loss in the period of $1,243,057 almost entirely in
the Straw Dogs affiliate, reflective of the severe downturn in the advertising
industry. Additionally, the Company incurred $414,762 of non-recurring costs
relating to the iball merger and business restructuring.

Exclusive of the provision for goodwill impairment, the non-recurring costs
relating to the iball merger and business restructuring and the significant loss
incurred in the PDSE Commercial segment (mainly Straw Dogs), the Paradise
adjusted net loss for the current six month period would be $1,991,015 compared
with a net loss of $2,906,898 (adjusted for the PDSE Commercial segments profit
in the prior period).

PDSE Commercial Group revenues were $12,676,711 for the six months ended June
30, 2001, an increase of 32% from $9,625,119 for the six months ended June 30,
2000. The increase is primarily due to the negative impact of the SAG strike on
last year's activity.

PDSE Commercial Group cost of sales increased to $11,559,291 for the six months
ended June 30, 2001 from $7,724,674 for the six months ended June 30, 2000, an
increase of $3,834,617 or 50%. Gross profit, as a percentage of commercial group
revenues, was 9% for the six months ended June 30, 2001, compared to 20% for the
six months ended June 30, 2000. The change in cost of sales and gross profit
margin is primarily due to the fact that three of the Company's in-house
directors were involved in producing films external to the Company and were not
available to direct commercials. The commercial revenue realized in the six
months ended June 30, 2001 for Straw Dogs was primarily the result of the
projects of a director whose agreement with the Company provides for a lower
Gross Profit Margin.

PDSE Film and TV Group revenues decreased to $3,332,027 for the six months ended
June 30, 2001 from $4,032,709 for the comparable period in fiscal 2000, a
decrease of $700,683 or 17%. The decrease in revenues is primarily due to the
additional revenues generated last year from movie scores in addition to soft
market conditions for the music video industry in the current fiscal period.

PDSE Film and TV Group cost of sales decreased to $2,010,954 for six months
ended June 30, 2001 from $2,705,557 for the comparable period in fiscal 2000, a
decrease of $694,602 or 26%. Gross profit as a percentage of PDSE Film revenues
increased to 40% for the six months ended June 30, 2001, compared to 33% for the
six months ended June 30, 2000. The change in cost of sales and gross profit
margin is primarily due to the higher contribution of royalties, which carry
little or no cost of sales, to total income in the current year.

PDSE Music Group revenues decreased 3% to $1,097,840 for the six months ended
June 30, 2001, from $1,134,190 for the six months ended June 30, 2000. The
decrease in revenues is primarily due to the elimination of certain label
affiliations that contributed to revenues in the comparable period in fiscal
2000.

PDSE Music Group cost of sales increased to $1,226,554 for the six months ended
June 30, 2001 from $824,998 for the six months ended June 30, 2000, an increase
of $401,546 or 49%. Gross loss for the group was $128,704 for the six months
ended June 30, 2001, compared to a gross profit of $309,192 for the six months
ended June 30, 2000. The decreased profit is due to the costs associated with
the elimination of certain label affiliations coupled with the lower gross
margins normally experienced in the start up of recording labels.

In accordance with SFAS No. 121 Accounting For Impairment of Long Lived Assets,
management has reviewed the carrying value of Goodwill and determined that as of
June 30, 2001 the recoverablility of that portion of Goodwill relating to the
Straw Dogs, Inc. affiliate is impaired. As such, the Company has recorded a
provision for the net carrying value of the Goodwill related to Straw Dogs
amounting to $7,268,586.


                                       15
<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

The Company has decided to discontinue the operations of it's artist management
and digital production businesses. The net loss associated with the disposal of
these segments for the six months ended June 30, 2001 amounted to $91,652 as
compared to a net loss of $563,486 for the six months ended June 30, 2000.

Paradise's marketing, selling, general and administrative expenses decreased to
$5,461,309 for the six months ended June 30, 2001 from $5,616,427 for the six
months ended June 30, 2000, a decrease of $155,118 or 3%. The decrease in
overhead reflects the effect of personnel and overhead cost reductions initiated
by the Company toward the end of the second quarter of 2000. In addition,
non-recurring costs associated with the iball merger and business restructuring
amounted to $414,762 in the current year.

Interest income was $9,100 for the six months ended June 30, 2001, compared to
interest expense of $190,416 for the six months ended June 30, 2000. The
decrease is the result of interest expense related to $3 million convertible
debt financing completed in March 2000 with BayStar Capital and BayStar
International that was subsequently extinguished in December 2000.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities for the six months ended June 30, 2001 was
$1,326,449. The operating loss for the six months was partially offset by
non-cash expenses such as depreciation and amortization and provision for
goodwill impairment.

Net cash used in investing activities for the six months ended June 30, 2001
was $21,638, principally due to purchases of fixed assets offset by payments of
an officer's note receivable.

Net cash provided by financing activities for the six months ended June 30, 2001
was $973,688, which is substantially represented by the net proceeds of various
short-term financing arrangements.

The Company had a working capital deficit of $2,002,392 and stockholders' equity
of $343,840 at June 30, 2001. The Company is reviewing the profit and/or loss
projections and cash needs of its businesses. The future cash requirements of
the Company will be dependent upon the outcome of this review and the changes
put into effect. Although certain financing arrangements have been secured in
the current period (as discussed more fully in Note 6), additional capital is
required to support the business. Discussions are under way with various
prospective investors to provide additional capital, but there can be no
assurance that such discussions will result in the arrangement of such capital
on terms acceptable to the Company if at all. As more fully discussed in Note 4,
continuation of the Company as a going concern is dependent upon its ability to
resolve its liquidity problem and attain future profitable operations. Pending
the outcome of the Company's efforts to raise additional capital, the Company
has deferred payment of certain outstanding obligations. Failure to pay such
obligations on a current basis could result in such creditors initiating adverse
actions against the Company.


                                       16
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On August 13, 2001, 8330 W. Third Street, LLC filed a complaint against Straw
Dogs, Inc. in the Superior Court of California, County of Los Angeles, alleging
that Straw Dogs breached various obligations under its lease dated August 1,
1998. The suit seeks damages, including, but not limited to, past due rent in
the amount of $59,083.21, attorneys fees, and certain other fees and taxes. The
parties are currently in negotiations to settle the claim, however there can be
no assurance that a resolution will be reached. In the opinion of management,
the ultimate outcome of this action should not have a material impact on the
liquidity, results of operations or financial condition of the Company as a
whole, although it may further impair the viability of the Straw Dogs division.
However, an unfavorable settlement of this complaint could result in a possible
write down of fixed assets and leasehold improvements relating to the Straw Dogs
business.

ITEM 2. CHANGES IN SECURITIES

On March 30, 2001, the Company was notified by Nasdaq's listing qualifications
department that it failed to comply with the minimum bid price requirement for
continued listing on Nasdaq SmallCap Market as set forth in Marketplace Rule
4310(c). The Company requested an appeal of the staff determination which stayed
the delisting. The Nasdaq Listing Qualifications Panel subsequently delisted the
Company's securities from the Nasdaq Stock Market effective June 7, 2001, based
upon the bid price deficiency. The Company's securities now trade on the OTC
Bulletin Board.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

On June 15, 2001, the Company and iball Media, Inc. ("iball") signed the
Agreement and Plan of Merger whereby iball would merge with and into a wholly
owned, direct subsidiary of Paradise. The completion of the merger was
contingent on certain closing conditions that were subsequently satisfied. On
July 3, 2001, the parties completed the transaction and, accordingly, the iball
shareholders will receive 9,390,000 restricted shares of Paradise common stock.

On August 15, 2001, the Company entered into a loan agreement with the same
lender that provided funding through a commercial factoring agreement (such
factoring agreement is more fully discussed at Part I, Note 6). The additional
loan in the amount of $250,000 is secured by and cross-collateralized against
the commercial factoring agreement and by a security agreement. The loan bears
interest at the rate of 15% per annum and matures on August 15, 2002.

As of July 1, 2001, the Company and Trippin' `N Rhythm Records ("LoMo") have
amicably resolved all outstanding issues arising out of the distribution
agreement between the parties and have signed a new agreement setting forth the
terms of their ongoing relationship.

The Company and Brian Doyle entered into a separation agreement and general
release effective May 31, 2001, whereby Mr. Doyle resigned from his positions as
Chief Executive Officer of All Access Entertainment Management Group, Inc. and
of Push Records, Inc., and from all positions held as an officer or director of
the Company and its subsidiaries.

The Company and Richard Flynn entered into a separation agreement and general
release effective May 16, 2001, whereby Mr. Flynn resigned from all positions he
held as an officer and director of the Company and its subsidiaries.

On July 12, 2001, the Company named Mr. Philip J. Ablove to its Board of
Directors. Mr. Ablove is Executive Vice President, Chief Financial Officer and a
director of Pioneer Companies, Inc., a public company that manufactures
chlorine, caustic soda and related products.

On May 31, 2001, the Company named Mr. Richard Rifenburgh to its Board of
Directors to serve as Vice Chairman. Mr. Rifenburgh also presently serves on the
Board of Directors of Verance Corporation, Current Computer Corporation, Tristar
Corporation and St. George Crystal, Ltd. Until recently, Mr. Rifenburgh served
on the Board of iball Media, Inc.


                                       17
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

      (a)   Exhibits

      Please refer to the following document filed as an Exhibit to Form 8-K
      filed with the SEC on June 21, 2001:

            o     Agreement and Plan of Merger dated June 15, 2001, by and
                  between the Company, ib Acquisition Corp., and iball Media,
                  Inc.

      (b)   Reports on Form 8-K

            o     Report on Form 8-K filed with the SEC on June 21, 2001
                  announcing the signing of the merger with iball Media, Inc.

                                   SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized

                                PARADISE MUSIC & ENTERTAINMENT, INC.


                                By: /s/ Kelly Hickel
                                    ------------------------------------------
                                Kelly Hickel, President


                                By: /s/ John Gansley
                                    ------------------------------------------
                                John Gansley, Interim Chief Financial Officer

Date: August 20, 2001


                                       18