PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                               September 30, 2001

                                  FORM 10-QSB/A

<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-QSB/A

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

For the quarterly period ended September 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 November 14, 2001, the Issuer had 23,821,610 shares of Common Stock, $.01 par
value, issued and outstanding.

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

The Company hereby amends its filing to include complete financial information
for PART I to its Form 10Q-SB filed on November 19, 2001.


                                       2
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                              INDEX TO FORM 10-QSB/A

PART I      FINANCIAL INFORMATION                                           PAGE
                                                                            ----

Item 1      Financial Statements (unaudited)

              Consolidated Balance Sheet as of
               September 30, 2001                                              4

              Consolidated Statements of Operations for the Three
               and Nine Months Ended September 30, 2001 and 2000               5

              Consolidated Statements of Cash Flows for the Nine
               Months Ended September 30, 2001 and 2000                        6

              Notes to Consolidated Financial Statements                    7-12

Item 2      Management's Discussion and Analysis of Financial
              Condition and Results of Operations                          13-15

PART II     OTHER INFORMATION

Item 1      Legal Proceedings                                                 16

Item 2      Changes in Securities and Use of Proceeds                         16

Item 3      Defaults Upon Senior Securities                                   16

Item 4      Submission of Matters to a Vote of Security Holders               16

Item 5      Other Information                                                 16

Item 6      Exhibits and Reports on Form 8-K                                  16

            Signatures                                                        17


                                       3
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEET (unaudited)
                               September 30, 2001

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

CURRENT ASSETS:
 Cash                                                 $      7,140
 Accounts receivable, net of allowances of $127,850        687,311
 Inventory                                                 269,959
 Prepaid expenses and other current assets                 169,978
                                                      ------------

      Total current assets                                            $ 1,134,388

PROPERTY AND EQUIPMENT, net                                               837,895

OTHER ASSETS:
 Goodwill and other intangibles, net                     2,517,001
 Security deposits and other                               202,480
                                                      ------------
                                                                        2,719,481
                                                                      -----------

                                                                      $ 4,691,764
                                                                      ===========

    LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
 Accounts payable                                     $  1,359,633
 Advances from lender                                      227,696
 Accrued expenses                                        1,113,538
 Notes payable                                             335,250
 Discontinued operations, net                            3,156,934
                                                      ------------

      Total current liabilities                                       $ 6,193,051
                                                                      -----------
COMMITMENTS & CONTINGENCIES

STOCKHOLDERS' DEFICIT:
 Preferred stock, $.01 par value,
  authorized 5,000,000 shares, none issued                      --
 Common stock, $.01 par value,
  authorized 75,000,000 shares,
  issued and outstanding 21,267,716 shares                 212,677
 Capital in excess of par value                         27,023,747
 Common stock to be issued                                  52,659
 Note receivable, stockholder                              (44,082)
 Accumulated deficit                                   (28,746,288)
                                                      ------------

     Stockholders' deficit                                             (1,501,287)
                                                                      -----------

                                                                      $ 4,691,764
                                                                      ===========
</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                  Nine Months Ended
                                                      -----------------------------      ------------------------------
                                                        Sept. 30         Sept. 30          Sept. 30          Sept. 30
                                                          2001             2000              2001              2000
                                                      ------------      -----------      ------------      ------------
<S>                                                   <C>               <C>              <C>               <C>
REVENUES                                              $  1,344,784      $ 3,013,018      $  5,774,652      $  8,179,917
                                                      ------------      -----------      ------------      ------------

OPERATING EXPENSES
   Cost of sales                                         1,256,915        2,037,663         4,494,413         5,568,217
   Non-recurring costs associated with merger
       and operational restructuring                            --               --           414,762                --
   Marketing, selling, general and administrative        1,663,151        2,160,591         4,765,285         5,979,302
                                                      ------------      -----------      ------------      ------------
       Total operating expenses                          2,920,066        4,198,254         9,674,460        11,547,519

LOSS FROM OPERATIONS                                    (1,575,282)      (1,185,236)       (3,899,808)       (3,367,602)

INTEREST EXPENSE                                           216,538          213,254           206,140           374,305
                                                      ------------      -----------      ------------      ------------

LOSS FROM CONTINUING OPERATIONS                         (1,791,820)      (1,398,490)       (4,105,948)       (3,741,907)

DISCONTINUED OPERATIONS                                 (2,274,148)        (140,105)      (10,877,444)         (630,227)
                                                      ------------      -----------      ------------      ------------

NET LOSS                                              $ (4,065,968)     $(1,538,595)     $(14,983,392)     $ (4,372,134)
                                                      ============      ===========      ============      ============

NET LOSS PER COMMON SHARE, BASIC AND DILUTED

              FROM CONTINUING OPERATIONS              $      (0.11)     $     (0.15)     $      (0.32)     $      (0.44)
                                                      ============      ===========      ============      ============

              FROM DISCONTINUED OPERATIONS            $      (0.14)     $     (0.01)     $      (0.84)     $      (0.07)
                                                      ============      ===========      ============      ============

              NET LOSS                                $      (0.24)     $     (0.16)     $      (1.16)     $      (0.51)
                                                      ============      ===========      ============      ============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
USED IN COMPUTING BASIC AND DILUTED
LOSS PER COMMON SHARE                                   16,646,399        9,639,953        12,968,213         8,520,624
                                                      ============      ===========      ============      ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       5
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                          Nine Months Ended
                                                                                   -----------------------------
                                                                                     Sept. 30         Sept. 30
                                                                                       2001             2000
                                                                                   ------------      -----------
<S>                                                                                <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss from continuing operations                                                    $ (4,105,948)     $(3,741,907)
Discontinued operations                                                             (10,877,444)        (630,227)
                                                                                   ------------      -----------
Net loss                                                                            (14,983,392)      (4,372,134)

Adjustments to reconcile net loss to net cash
  used in operating activities:
   Depreciation and amortization                                                        306,903          326,127
   Amortization of goodwill                                                              34,654               --
   Discontinued Operations                                                           11,477,099         (804,615)
   Non-cash consulting expense in connection with warrants and options                   42,305           53,733
   Provision for returns                                                               (105,875)          37,244
   Non-cash interest expense                                                                 --          419,650
   Common stock issued to outside
    directors, consultants, vendors and employees                                       159,460           52,689
Changes in operating Assets and Liabilities:
   Accounts receivable                                                                1,012,925         (171,077)
   Inventory                                                                             61,032         (183,612)
   Prepaid expenses and other current assets                                             96,507         (194,937)
   Security deposits and other assets                                                    (2,000)         (19,972)
   Accrued payroll and related expenses                                                 104,697         (218,494)
   Accounts payable                                                                     441,029          478,598
   Accrued expenses                                                                      12,172          297,906
                                                                                   ------------      -----------
NET CASH (USED IN) OPERATING ACTIVITIES                                              (1,342,574)      (4,298,894)
                                                                                   ------------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Payment for property and equipment                                                   (49,943)        (224,256)
   Acquisition costs of subsequently discontinued operations                                 --          178,200
   Investment in Eruptor
   Note receivable, officer                                                              20,000               --
                                                                                   ------------      -----------
NET CASH (USED IN) INVESTING ACTIVITIES                                                 (29,943)         (46,056)
                                                                                   ------------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Advances from lender                                                                 227,696
   Proceeds from sale of common stock, net of expenses                                       --        1,567,022
   Proceeds from long term convertible debt, net of expenses                                 --        1,732,017
   Proceeds from warrants issued with long term debt                                         --          862,522
                                                                                   ------------      -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                               227,696        4,161,561
                                                                                   ------------      -----------

NET (DECREASE) IN CASH                                                               (1,144,821)        (183,389)

CASH, beginning of period                                                             1,151,961        1,454,404
                                                                                   ------------      -----------

CASH, end of period                                                                $      7,140      $ 1,271,015
                                                                                   ============      ===========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       6
<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") and have been reviewed in accordance
            with accounting principles generally accepted in the United States
            of America, 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 nine months
            ended September 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. Effective July 3, 2001, Paradise and iball Media Inc.
            ("iball") completed their plan of merger and effectively combined
            their business interests (See Financial Footnote 8 for further
            details).

            Paradise is a music and entertainment company now focused on
            partnering with other companies to build their brands by utilizing
            music and events to marry marketing, technology and entertainment to
            connect customers with consumers. This strategy is to deliver the
            branding message for global and Fortune 1000 companies through
            unique music and music events geared to targeted demographics. Our
            products, services and content are offered through three operating
            groups, which have been resegmented to reflect the Company's current
            strategic organization:

            (1) PDSE Television ("TV") Group includes Picture Vision, Inc.
            ("Picture Vision"), a 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. Subsequent to the balance sheet date,
            Paradise entered in to an agreement with Jon Small regarding
            PictureVision as more fully described in Financial Footnote 11.

            (2) 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) and Trippin' N' Rhythm (adult
                  urban contemporary and smooth jazz).

            (3) PDSE Festival & Events Group markets sponsor-targeted
            entertainment projects, including the development and production of
            proprietary festivals, events and branding campaigns for corporate
            clients. This Group and the new strategy were launched on July 3,
            2001 as a result of the merger with iball. On October 11, 2001, the
            Group signed a marketing agreement with Action Marketing Group for
            marketing a number of the Company's sponsorship contracts over the
            next year. As a result of the joint efforts, the group is currently
            in negotiations for a number of festivals and music events for the
            2002 season, with contracts with a number of Global Brand companies
            currently being negotiated.


                                       7
<PAGE>

            These events, of course, are dependent upon the Company completing
            its financing currently under way and described more fully in
            Financial Footnote 4.

            As of the quarter ended September 30, 2001, the Company has
            discontinued the operations of the PDSE Digital, Inc., All Access
            Entertainment Management Group, Inc., Straw Dogs, Inc. ("Straw
            Dogs"), and Shelter Films, Inc. ("Shelter Films") as more fully
            explained in Management's Discussion and Analysis as well as in
            Financial Footnote 6.

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.

            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. The Company
            continually evaluates the carrying value of goodwill and other
            intangible assets. Any impairment 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 nine months
            ended September 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 impairment applying a


                                       8
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

            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 position 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 September 30,
            2001, the Company had a working capital deficit of $5,058,663, an
            accumulated deficit of $1,501,287, and has incurred losses since its
            inception. These conditions raise substantial doubt about the
            Company's ability to continue as a going concern.

            The Company has executed a term sheet with an investor which would
            provide up to $2,750,000 in financing to the Company. Of this amount
            $750,000 would initially be provided on a bridge financing basis
            with the permanent financing to be provided within a reasonable time
            thereafter. The financing would be secured by all of the assets of
            the Company and would be convertible into common stock at the price
            of the common stock on the date of the financing. Additional
            warrants would be issued in connection with the financing. There can
            be no assurance that either the bridge financing or the permanent
            financing will be completed. If the financing is completed the
            Company will move forward with its corporate strategy. If the
            financing is not completed it is likely that the Company will have
            to seek a reorganization in order to remain in business.

            Management's plans include further expense reductions, debt and
            equity financings, along with strategic acquisitions of
            complementary businesses, further evaluation of its current
            operating segments and development of new revenue sources.
            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 -    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 September 30, 2001 approximately $227,700 was the outstanding
            advance balance. 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 future royalties to
            be earned under an affiliation agreement with a music publisher. As
            of September 12, 2001 the outstanding note payable obligation was
            assumed by the same lender that provides the factoring facility
            (noted above).

            On August 15, 2001, Company entered into a loan agreement in the
            amount of $250,000 at a fixed interest rate of 15% with the same
            lender that provides the factoring facility (noted above).
            Subsequently on September 5, 2001 Company entered into a financing
            agreement with the same lender. The agreement provided for the sale
            of future royalties relating to certain Rave compositions, for
            $1,200,000 as well as the cancellation of the note under the August
            15 loan agreement. In connection with this transaction, the Company
            issued warrants to the lender providing for the purchase of 200,000
            restricted common shares of Paradise at $0.25 per share which vested
            and were exercisable immediately. Such warrants were valued at
            $7,400 utilizing the Black Scholes method for calculating such
            instruments. The proceeds of the sale were used to provide working
            capital and to cross-collateralize the factoring agreement. On
            October 2, 2001


                                        9
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

            Paradise and its lender agreed to terminate the lending arrangements
            under the terms of the agreement, effective October 31, 2001.

            As more fully described in Financial Footnote 4, the Company has an
            executed term sheet covering a financing of an aggregate of
            $2,750,000. Without this, or other, financing there is question as
            to the ability of the Company to continue its operations.

NOTE 6 -    DISCONTINUED OPERATIONS:

            In May 2001, the Company discontinued its artist management and
            digital production businesses.

            In August 2001, The Board of Directors of Straw Dogs, Inc. decided
            to terminate its operations. Straw Dogs is a subsidiary of the
            Company. In September 2001 the Board of Directors of Shelter Films,
            Inc., a subsidiary of the Company, elected to cease operations. As a
            result of these actions, the Company has decided to discontinue its
            commercial production segment.

            Results of operations including estimated costs associated with the
            disposal of this segment has been determined and are included in the
            statement of operations as discontinued operations. However, certain
            contingencies may exist with regard to the final disposition of the
            commercial production group and are explained more fully in
            Financial Footnote 7.

NOTE 7 -    COMMITMENTS AND CONTINGENCIES:

            On August 13, 2001, 8330 W. Third Street, LLC filed a complaint
            against Straw Dogs, Inc., a subsidiary of the Company, 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.

            On September 17, 2001, Craig Rodgers, the former President of Straw
            Dogs, made a demand for arbitration alleging breach of various
            obligations under his employment agreement, which was guaranteed by
            the Company. He is seeking damages in an amount not less than
            $1,000,000. The Company is in the process of determining potential
            counterclaims against the former executive and against the
            principals of 8330 W. Third Street, LLC.. The parties are currently
            in negotiations to settle the matter, however there can be no
            assurance that a resolution will be reached.

            Additional claims have been raised by former management regarding
            breach of contract (employment), as well as third parties for
            damages incurred pertaining to the shutdown of both the Straw Dogs
            and Shelter Films businesses by their respective Boards of
            Directors. The third party claims made by vendors, former employees
            and unions are against the respective former subsidiaries and in
            some cases, name the Company as well. In each matter, the Company is
            currently investigating potential counterclaims.

            Although management believes that the Company will be able to settle
            these disputes favorably, there can be no assurance of such outcome.
            Further, resolution may be predicated on Company's ability to secure
            capital funding, details of which are more fully explained in
            Financial Footnote 4. Unfavorable resolution of these claims would
            have a material adverse impact on the financial condition of the
            Company.

NOTE 8 -    STOCKHOLDERS' EQUITY

            The Company entered into consulting agreements with various
            consultants throughout 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 500,029 shares of the Company's common stock. The stock was
            valued at approximately $72,205.

            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
            at $.22 per share, which represented approximately 45% of the total
            Paradise common stock outstanding as of the completion of the
            transaction. The total purchase price of $2,065,800 was allocated
            among other assets ($471,260), current liabilities ($484,700) and
            goodwill ($2,079,240). Further, 2,000,000 shares were placed in
            escrow for future grants of options to present and future employees
            of the Company. Such options were valued at a conversion price of
            $0.22 per common share, which represented the closing market price
            on the date of the iball merger.

NOTE 9 -    ECONOMIC DEPENDENCY:

            Approximately $507,000 and $782,000 of PDSE TV Group revenues for
            the nine months ended September 30, 2001 and 2000, respectively,
            were derived from one customer. As of September 30, 2001, no amounts
            were receivable from this customer.

NOTE 10 -   INFORMATION CONCERNING BUSINESS SEGMENTS


                                       10
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

            Segment information listed below reflects the three re-segmented
            principal business units of the Company for the three and nine
            months ended September 30, 2001 and 2000. Discontinued operations
            include the net losses realized for the artist management, digital
            productions as well as the commerical production segment which
            included Straw Dogs and Shelter Films. Each segment is managed
            according to the products or services provided to the respective
            customers.

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

<TABLE>
<CAPTION>
For the three months ended Sept. 30, 2001 (unaudited)

                           PDSE            PDSE             PDSE         Discontinued
                            TV             Music       Festival/Events    Operations      Corporate      Consolidated
                      -------------    -------------   ---------------   ------------    ------------    ------------
<S>                   <C>              <C>               <C>              <C>            <C>             <C>
Revenues              $     567,052    $     742,732     $  35,000                                       $ 1,344,784

Net income (loss)     $    (240,484)   $    (235,714)    $(148,402)       $(2,274,148)   $ (1,167,220)   $(4,065,968)
</TABLE>

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

<TABLE>
<CAPTION>
For the three months ended Sept. 30, 2000 (unaudited)

                           PDSE             PDSE              PDSE          Discontinued
                            TV             Music         Festival/Events     Operations         Corporate          Consolidated
                      --------------  -----------------  ----------------  ---------------  ------------------  -------------------
<S>                    <C>              <C>                <C>                <C>              <C>                <C>

Revenues               $1,278,163       $1,734,855         $        --        $        --      $          --      $  3,013,018

Net income (loss)      $  192,620       $ (180,568)        $        --        $  (140,105)     $  (1,410,542)     $ (1,538,595)
</TABLE>

            For the nine months ended September 30, 2001 (unaudited):

<TABLE>
<CAPTION>
For the nine months ended Sept. 30, 2001 (unaudited)

                           PDSE             PDSE              PDSE          Discontinued
                            TV             Music         Festival/Events     Operations         Corporate          Consolidated
                      --------------  -----------------  ----------------  ---------------  ------------------  -------------------
<S>                    <C>              <C>                <C>               <C>               <C>                <C>
Revenues               $2,673,428       $3,066,224         $    35,000                                            $  5,774,652

Net income (loss)      $  207,099       $ (831,541)        $  (148,402)      $(10,877,444)     $  (3,333,104)     $(14,983,392)
</TABLE>

            For the nine months ended September 30, 2000 (unaudited):

<TABLE>
<CAPTION>
For the nine months ended Sept. 30, 2000 (unaudited)

                           PDSE             PDSE              PDSE          Discontinued
                            TV             Music         Festival/Events     Operations         Corporate          Consolidated
                      --------------  -----------------  ----------------  ---------------  ------------------  -------------------
<S>                    <C>              <C>                <C>                <C>              <C>                <C>
Revenues               $3,721,669       $4,458,248         $         --                                           $  8,179,917

Net income (loss)      $  404,660       $ (421,860)        $         --       $  (630,227)     $  (3,724,707)     $ (4,372,134)
</TABLE>


                                       11
<PAGE>

NOTE 11 -   RECENT AND SUBSEQUENT EVENTS:

            In October 2001, certain executives were awarded shares of Common
            Stock under the 2001 Consultant Stock Compensation Plan, registered
            on Form S-8, for their effort in connection with Management's
            restructuring of the Company.

            As of October 14, 2001, Company has defaulted on certain iball
            Notes. The Note holders have demanded a cure of the defaults.
            Resolution of the matter is predicated on Company's ability to
            secure capital funding, details of which are more fully explained in
            Financial Footnote 4.

            On October 5, 2001, Paradise received a notice of Voluntary
            Termination by Jon Small. As a result of negotiations, the Company
            entered in an agreement with Mr. Small where, certain assets of its
            Picture Vision subsidiary were transferred to Mr. Small, its
            President and founder, for $157,000. The agreement provides for,
            among other things, future royalties payments to Paradise (which
            relate to future revenues from customers obtained during the period
            of Paradise ownership), transfer of the office lease, and right to
            the "Picture Vision" name to Jon Small. Additionally, the parties
            agreed to an ongoing strategic relationship whereby Jon Small would
            provide technical services for Paradise future projects.

            On November 6, LoMo Holdings Inc. d/b/a Trippin' N' Rhythm notified
            Push Records of a breach of their agreement dated July 2, 2001
            relating to certain restructuring actions taken by the Company and
            Push Records.

            Subsequent to the balance sheet date, additional claims have been
            raised by third parties for damages incurred pertaining to the
            discontinuing of both the Straw Dogs and Shelter Films businesses.
            The third party claims made by vendors, former employees and unions
            are against the respective subsidiaries and in some cases the
            Company as well. In each matter, the Company is currently
            investigating potential counterclaims as described above.

            On November 14, 2001, A to Z Music Services, Inc. ("A to Z") filed a
            complaint against PDSE Records and Company in the Supreme Court of
            the State of New York, County of New York, alleging that PDSE
            Records has failed to make payment for goods and services rendered
            by A to Z. The suit seeks damages in the amount of $41,381.81.


                                       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 a music
and entertainment company focused on partnering with other companies to build
their brands by utilizing music and events to marry marketing, technology and
entertainment to connect customers with consumers. To accomplish this objective,
Paradise has been reorganizing operations throughout 2001 and currently supports
the business with three operating groups as described more fully in Financial
Footnote 2.

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
music and events geared to targeted demographics - a strategy focused on
creating Sponsor Targeted Entertainment.

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
a premier a 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 complete
it's planned financing and maintain cash flow to support its business units and
intended acquisitions. There can be no assurance that such financing will be
obtained.

Results of Operations
Three Months Ended September 30, 2001 Compared to
Three Months Ended September 30, 2000.

In aggregate, revenues for the three months ended September 30, 2001 decreased
to $1,344,784 or 55% compared to revenues of $3,013,018 in the three-month
period ended September 30, 2000. The net loss from operations was $4,065,968 for
the three months ended September 30, 2001 compared to $1,538,595 for the three
months ended September 30, 2000. Discontinued operations (net) amounted to a
$2,274,148 loss versus a loss of $140,105 in the respective periods. The current
year's results include a one time charge relating to the write down of related
assets to net realizable value and estimated costs associated with the
disposition.


                                       13
<PAGE>

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

PDSE TV Group revenues were $567,052 and $1,278,163 for the three months ended
September 30, 2001 and 2000, respectively, a decrease of $711,111, or 55.6%,
reflecting the impact of the overall poor domestic economy and weak
entertainment market.

PDSE TV Group cost of sales decreased to $829,925 for three months ended
September 30, 2001 from $916,204 for the three months ended September 30, 2000,
a decrease of $86,279 or 9.4%. Gross profit as a percentage of PDSE TV revenues
decreased to a negative 46% for the three months ended September 30, 2001,
compared to 28% for the three months ended September 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 57.2% to $742,732 for the three months ended
September 30, 2001, from $1,734,855 for the three months ended September 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 $396,990 for the three months ended
September 30, 2001 from $1,121,459 for the three months ended September 30,
2000, a decrease of $694,469 or 64.6%. Gross profit for the group was $345,742
or 47% for the three months ended September 30, 2001, compared to $613,396 or
35% for the three months ended September 30, 2000. The improvement is due to the
reduced costs associated with the elimination of certain label affiliations.

PDSE Festival & Events Group revenue was $35,000 and the cost of sales was
$30,000 for the three months ended September 30, 2001. There were no revenues or
Cost of Goods for the prior period.

The Company's Straw Dogs and Shelter Films subsidiaries decided to discontinue
their businesses in the current three month period. Loss from discontinued
operations amounted to $2,274,148 associated with the write down of the related
assets and liabilities to their net realizable value.

Paradise's marketing, selling, general and administrative expenses decreased to
$1,663,151 for the three months ended September 30, 2001 from $2,160,591 for the
three months ended September 30, 2000, a decrease of $497,440. The decrease in
overhead reflects the effect of personnel and overhead cost reductions.

Net interest expense was $216,538 for the three months ended September 30, 2001,
essentially flat compared to net interest expense of $213,254 for the three
months ended September 30, 2000.

Results of Operations
Nine Months Ended September 30, 2001 Compared to
Nine Months Ended September 30, 2000.

In aggregate, revenues for the nine months ended September 30, 2001 decreased to
$5,774,652, or 55%, compared to $8,179,917 in the nine-month period ended
September 30, 2000. The net loss from operations was $14,983,392 for the nine
months ended September 30, 2001, including $414,762 of non-recurring costs
relating to the iball merger and business restructuring compared to $4,372,134
for the nine months ended September 30, 2000.

Current year's results include a loss from discontinued operations (net) of
$10,877,444 for the nine month period ended September 30, 2001, including the
costs associated with the write down of related assets and liabilities related
to the Straw Dogs, Shelter Films, All Access Management, and PDSE Digital; the
comparable amount was $630,227 for fiscal year 2000. Loss from continuing
operations amounted to $3,677,336 and $3,367,602 in the respective periods, an
increase of $409,734. When taking into account non-recurring charges as noted
above, the loss was essentially flat, year over year.

On September 17, 2001, Craig Rodgers, the former President of Straw Dogs, made a
demand for arbitration alleging breach of various obligations under his
employment agreement, which was guaranteed by the Company. He is seeking damages
in an amount not less than $1,000,000. The Company is in the process of
determining potential counterclaims against the principals of 8330 W. Third
Street, LLC and the former executive.

PDSE TV Group revenues decreased to $2,673,428 for the nine months ended
September 30, 2001 from $3,721,669 for the comparable period in fiscal 2000, a
decrease of $1,048,241 or 28.2%. 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 TV Group cost of sales decreased to $2,426,757 for nine months ended
September 30, 2001 from $2,790,901 for the comparable period in fiscal 2000, a
decrease of $364,144 or 13%. Gross profit as a percentage of PDSE TV revenues
decreased to 9% for the nine months ended September 30, 2001, compared to 25%
for the nine months ended September 30,


                                       14
<PAGE>

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

2000. The change in cost of sales and gross profit margin is primarily due to
the higher costs realized in the music video subsidiary.

PDSE Music Group revenues decreased 31% to $3,066,224 for the nine months
ended September 30, 2001, from $4,458,248 for the nine months ended September
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 decreased to $2,037,656 for the nine months ended
September 30, 2001 from $2,777,316 for the nine months ended September 30, 2000,
a decrease of $739,660 or 26.6%. Gross profit as a percentage of PDSE Music
Group revenues decreased to 36% for the nine months ended September 30, 2001,
compared to 38% for the nine months ended September 30, 2000.

PDSE Festival & Events Group revenue was $35,000 and the cost of sales was
$30,000 for the three months ended September 30, 2001. There were no revenues or
Cost of Goods for the prior period.

Paradise's marketing, selling, general and administrative expenses decreased to
$5,157,575 for the nine months ended September 30, 2001 from $5,979,302 for the
nine months ended September 30, 2000, a decrease of $821,727 or 13.7%. The
decrease in overhead reflects the effect of personnel and overhead cost
reductions initiated by the management. In addition, non-recurring costs
associated with the iball merger and business restructuring amounted to $414,762
in the current year.

Interest expense (net) was $206,140 for the nine months ended September 30,
2001, compared to $374,305 for the nine months ended September 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

At September 30, 2001, our balance sheet reflected cash of $7,140, and negative
working capital of $5,058,663.

We believe that our current reserves of cash and cash flows from operations are
insufficient to finance our operating requirements. We are actively seeking
additional capital.

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 a term
sheet covering certain proposed financing arrangements has been executed in the
current period (as discussed more fully in Financial Footnote 5), there is no
certainty that such financing will be completed. Discussions are under way with
other prospective investors, as well, 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
Financial Footnote 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.

Net cash provided by operating activities was $1,342,574. Of the net loss of
$14,983,392, $11,477,099 related to the now discontinued operations. The
remaining loss was partially offset by non-cash charges of depreciation and
amortization coupled with increases in accounts payable, advances from lender
and a decrease in accounts receivable.

Net cash used in investing activities was mainly for property and equipment.

Net cash used in financing activities consisted of advances from lender.


                                       15
<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., a subsidiary of the Company, 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 matter, 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.

On September 17, 2001, Craig Rodgers, the former President of Straw Dogs, made a
demand for arbitration alleging breach of various obligations under his
employment agreement, which agreement was guaranteed by the Company. He is
seeking damages in an amount not less than $1,000,000.

The Company is in the process of determining potential counterclaims against the
former executive and against the principals of 8330 W. Third Street, LLC.

On October 1, 2001, the Directors Guild of America ("DGA") made 2 demands for
arbitration for alleged failure to pay individuals who are alleged members of
the DGA.

In connection with the discontinued operations of the Company, additional third
party claims have been made by vendors, former employees and unions against the
respective former subsidiaries and in some cases, name the Company as well. In
each matter, the Company is currently investigating potential counterclaims.
With respect to the discontinued operations of Straw Dogs, there are numerous
actions, which, although under dispute, aggregate $180,158.88.

Additional third party claims have been made by vendors, former employees and
unions against the respective former subsidiaries and in some cases, allege, the
Company as well. In each matter, the Company is currently investigating
potential counterclaims. In the Straw Dogs matter, the counterclaims potentially
may include offsets of amounts due Straw Dogs, Inc. from the principals, LLC and
possible claims involving funds that were to have been paid either to Straw Dogs
or the Company by the principals, the predecessor companies, or clients.

On November 6, LoMo Holdings Inc. d/b/a Trippin' N' Rhythm notified Push Records
of a breach of their agreement dated July 2, 2001 relating to certain
restructuring actions taken by the Company and Push Records.

On November 14, 2001, A to Z Music Services, Inc. ("A to Z") filed a complaint
against PDSE Records and Company in the Supreme Court of the State of New York,
County of New York, alleging that PDSE Records has failed to make payment for
goods and services rendered by A to Z. The suit seeks damages in the amount of
$41,381.81.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

The following table sets forth certain information with respect to our issuance
of certain securities during the quarter ended September 30, 2001, without
registration of such securities under the Securities Act:

<TABLE>
<CAPTION>
                                                                                          Exemption
Securities Sold       Date Sold       Purchasers               Consideration               Claimed     Use of Proceeds
---------------       ---------       ----------               -------------               -------     ---------------
<S>                   <C>             <C>                      <C>                       <C>           <C>
9,390,000             July 3, 2001    The stockholders         The shares were issued    Section 4(2)  We did not receive cash
shares of                             of iball Media, Inc.     in connection with the                  proceeds for these
common stock                                                   Agreement and Plan of                   shares
                                                               Merger by and among
                                                               Paradise Music &
                                                               Entertainment, Inc.,
                                                               ib Acquisition Corp.,
                                                               iball Media, Inc. and
                                                               the stockholders of
                                                               iball Media, Inc.
</TABLE>

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

During the three and nine months ended September 30, 2001, we incurred net
losses of $4,065,968 and $14,983,392, respectively.

In October 2001, we were notified by the holders of certain iball Notes (the
"Notes") that we were in default under the Notes and demanded a cure of the
defaults. We are currently unable to meet our payment obligations under the
Notes and will be unable to achieve compliance with the terms of the Notes
absent additional equity or debt financing, restructuring of the terms of the
Notes or a combination of such financing and restructuring.

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

None.

ITEM 5. OTHER INFORMATION

On 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.

On September 12, 2001, Jesse Dylan resigned from his position on the Company's
Board of Directors.

On September 12, 2001, Jeffrey Rosen resigned from his position on the Company's
Board of Directors.

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.*

            *     Incorporated by reference to the Company's Current Report on
                  Form 8-K, filed June 22, 2001.

      (b)   Reports on Form 8-K

            o     On August 29, 2001, we filed an amended Form 8-K relating to
                  the merger with iball Media, Inc.


                                       16
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

            On September 20, 2001, we filed a Form 8-K announcing the
            discontinuation of operations of our subsidiary, Straw Dogs, 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: November 20, 2001


                                       17