PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                               September 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 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|


                                       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
               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                      6-7

              Notes to Consolidated Financial Statements                    8-13

Item 2      Management's Discussion and Analysis of Financial
              Condition and Results of Operations                          14-16

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                                  17

            Signatures                                                        18


                                       3
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEET (unaudited)
                               September 30, 2001

            ASSETS

CURRENT ASSETS:

   Cash                                            $     47,157
   Accounts receivable                                1,225,686
   Inventory                                            269,959
   Prepaid expenses and other current assets            146,908
                                                   ------------
         Total current assets                                      $   1,689,710

PROPERTY AND EQUIPMENT, net                                              887,895

OTHER ASSETS:
   Goodwill, net                                      2,503,561
   Security deposits and other                          230,875
                                                   ------------
                                                                       2,734,436
                                                                   -------------

                                                                   $   5,312,041
                                                                   =============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable                                $  1,444,129
   Advances from lender                                 227,696
   Accrued expenses                                   1,313,534
   Note payable                                         335,250
                                                   ------------
         Total current liabilities                                 $   3,320,609

COMMITMENTS                                                                   --

STOCKHOLDERS' EQUITY:
   Preferred stock, $.01 par value,
    authorized 5,000,000 shares, none issued                 --
   Common stock, $.01 par value,
    authorized 75,000,000 shares,
    issued and outstanding 11,127,984 shares            248,641
   Capital in excess of par value                    28,053,983
   Common Stock to be issued                             52,659
   Treasury Stock                                        (7,000)
   Note receivable, stockholder                         (44,082)
   Accumulated deficit                              (26,312,769)
                                                   ------------

        Total stockholders' equity                                     1,991,432
                                                                   -------------

                                                                   $   5,312,041
                                                                   =============

          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                                                           $ 1,444,784      $ 3,013,018      $  5,874,652      $  8,179,917
                                                                   -----------      -----------      ------------      ------------

OPERATING EXPENSES
  Cost of sales                                                      1,256,915        2,037,663         4,494,413         5,568,217
  Provision for goodwill impairment                                                          --                                  --
  Non-recurring costs associated with merger
     and operational restructuring                                                           --                                  --
  Marketing, selling, general and administrative                     1,663,151        2,160,591         5,180,047         5,979,302
                                                                   -----------      -----------      ------------      ------------
         Total operating expenses                                    2,920,066        4,198,254         9,674,460        11,547,519

LOSS FROM OPERATIONS                                                (1,475,282)      (1,185,236)       (3,799,808)       (3,367,602)

INTEREST EXPENSE (INCOME)                                              216,538          213,254           206,140           374,305

                                                                   -----------      -----------      ------------      ------------
LOSS FROM CONTINUING OPERATIONS                                     (1,691,820)      (1,398,490)       (4,005,948)       (3,741,907)

DISCONTINUED OPERATIONS                                              1,132,011         (140,105)       (7,471,285)         (630,227)
                                                                   -----------      -----------      ------------      ------------

NET LOSS                                                           $  (559,809)     $(1,538,595)     $(11,477,233)     $ (4,372,134)
                                                                   ===========      ===========      ============      ============
NET LOSS PER COMMON SHARE, BASIC AND DILUTED

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

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

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

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
USED IN COMPUTING BASIC AND DILUTED
LOSS PER COMMON SHARE                                                                 9,639,953                           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
                                                                               -------------------------------------
                                                                                 September 30,       September 30,
                                                                                     2001                2000
                                                                               -----------------   -----------------
<S>                                                                                          <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss from continuing operations                                                                $                   $
Discontinued operations
                                                                               -----------------   -----------------
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
   Depreciation and amortization
   Amortization of goodwill
   Provision for goodwill impairment
   Options/warrants issued for services in lieu of cash
   Provision for returns
   Common stock issued and warrants granted to outside
     directors, consultants, vendors and employees
Changes in operating Assets and Liabilities:
   Accounts receivable
   Inventory
   Prepaid expenses and other current assets
   Security deposits and other assets
   Accrued payroll and related expenses
   Accounts payable
   Accrued expenses
                                                                               -----------------   -----------------
NET CASH USED IN OPERATING ACTIVITIES
                                                                               -----------------   -----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Payment for property and equipment
   Acquisition costs, net of cash acquired
   Note receivable, officer
                                                                               -----------------   -----------------
NET CASH USED IN INVESTING ACTIVITIES
                                                                               -----------------   -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Advances from lender
   Note payable
   Proceeds from sale of common stock, net of expenses
   Proceeds from long term convertible debt, net of
     expenses
   Warrants issued with long term debt
                                                                               -----------------   -----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES
                                                                               -----------------   -----------------
NET INCREASE (DECREASE) IN CASH

CASH, beginning of period
                                                                               -----------------   -----------------

CASH, end of period                                                                            $                   $
                                                                               =================   =================
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       6
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                        Nine Months Ended
                                                                               -------------------------------------
                                                                                 September 30,       September 30,
                                                                                     2001                2000
                                                                               -----------------   -----------------
<S>                                                                            <C>                 <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION,
   Cash paid during the period for income taxes                                $                   $
                                                                               =================   =================

   Cash paid during the period for interest                                    $                   $
                                                                               =================   =================

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
  FINANCING ACTIVITIES:

  Conversion of liabilities into common stock                                  $                   $
                                                                               =================   =================
</TABLE>

          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 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 Film and Television 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 for 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 now. The first announcement of
            one of these agreements was made on November 8, 2001. Sufficient
            numbers of relationships are expected that a series of tours,
            concerts and festivals are planned for 2002. Some of these events
            are planned by the


                                       8
<PAGE>

            Company to result in Pay-per-View specials with a major television
            network, the agreement for which is currently being negotiated.
            These events, of course, will be dependent upon the Company
            completing its financing currently under way.

            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 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 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


                                       9
<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 approximately
            $___ million, an accumulated deficit in stockholder's equity of
            approximately $____ million, and has incurred losses since its
            inception. These conditions raise substantial doubt about the
            Company's ability to continue as a going concern.

            Paradise has been in negotiation with an investor to secure
            additional financing and anticipates completing a transaction in the
            immediate future. The investor has signed Term Sheets for a
            $2,750,000 financing as disclosed on October 18, 2001. This
            financing is deemed to be adequate to complete the restructuring and
            to launch the new strategy. If the Company is unsuccessful in
            completing this financing, it is likely that it will seek to
            formally reorganize.

            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 30, 2001 the outstanding note payable balance amounted
            to $211,658.

            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


                                       10
<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.

            On October 18, the Company announced the completion of arrangements
            for a Secured Convertible Debenture in the amount of $2,750,000.
            $750,000 is in the form of a Bridge Loan secured by all of the
            assets of the Company and its subsidiaries. The funds are expected
            shortly. There is, of course, no guarantee the Company will be able
            to complete either the Bridge Loan or the Permanent Financing.


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 was a subsidiaryn affiliate
            of the Company. In September 2001 the Board of Directors of Shelter
            Films, Inc., an affiliate 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., an affiliate 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 , including offsets of
            amounts due Straw Dogs, Inc. from the principals of 8330 W. Third
            Street, LLC and possible claims involving funds that were to have
            been paid either to Straw Dogs or the Company by the principals or
            the predecessor companiesThe 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 disclosed on September 20,
            2001., 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, 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.

            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 ______ shares of the Company's common stock. The stock was valued
            at approximately $______.

            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. 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 Film and 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


                                       11
<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 and
            digital production businesses. 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       $  877,732                                                                $  1,444,784

Net income (loss)      $ (240,484)      $ (135,714)        $  (148,402)       $ 1,132,011      $  (1,144,748)     $   (537,337)
</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)      $  270,571       $ (180,568)                           $  (140,105)     $  (1,488,493)     $ (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               $3,201,224       $2,673,428                                                                $  5,874,652

Net income (loss)      $  207,099       $ (731,541)        $  (148,402)       $(7,471,285)     $  (3,310,632)     $(11,454,761)
</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)      $  482,611       $ (421,860)                           $  (630,227)     $  (3,802,658)     $ (4,372,134)
</TABLE>


                                       12
<PAGE>

NOTE 11 -   RECENT AND SUBSEQUENT EVENTS:

            In October 2001, certain executives were awarded S-8 shares 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 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.


                                       13
<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 $1,4344,784 or 525% compared to revenues of $3,013,018 in the three-month
period ended September 30, 2000. The net loss from operations was
$5374,065,337968 for the three months ended September 30, 2001 compared to
$1,538,595 for the three months ended September 30, 2000, 34% of the prior
period's loss. Discontinued operations (net) amounted to a gain of
$12,132274,01148 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.


                                       14
<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 571.24% to $7842,732 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 $3445,742
or 4753% 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 businesses decided to discontinue
their businesses in the current three month period. Result Loss from of
discontinued operations amounted to $12,13274,01148 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
$1,64063,579151 for the three months ended September 30, 2001 from $2,160,591
for the three months ended September 30, 2000, a decrease of $520497,012440 or
234%. 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
$5,7874,652, or 552%, compared to $8,179,917 in the nine-month period ended
September 30, 2000. The net loss from operations was $114,454983,761392 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
$710,471877,444285 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 the same.

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. 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,


                                       15
<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 affiliate.

PDSE Music Group revenues decreased 3129.20% to $3,0166,224 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 00. 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

Net cash used in operating activities for the nine months ended September 30,
2001 was $ . The operating loss for the nine 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 nine months ended September 30,
2001 was $ , principally due to purchases of fixed assets offset by payments of
an officer's note receivable.

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

The Company had a working capital deficit of $ and stockholders' equity of $ at
September 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., an affiliate 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 Company is in the process
of determining potential counterclaims against the former executive and against
the principals of 8330 W. Third Street, LLC. The , including offsets of amounts
due Straw Dogs, Inc. from the principals of 8330 W. Third Street, LLC and
possible claims involving funds that were to have been paid either to Straw Dogs
or the Company by the principals or the predecessor companies.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. executive The
counterclaims potentially may include offsets of amounts due Straw Dogs, Inc.
from the executive and other principals, as well as 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.. 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.

Although management believ

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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.

      (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.


                                       17
<PAGE>

                      PARADISE MUSIC & ENTERTAINMENT, INC.
                                AND SUBSIDIARIES

                                   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 14, 2001


                                       18