**U.S.
        SECURITIES AND EXCHANGE COMMISSION**
 Washington,
        D.C. 20549
 
 **Form
          10-Q/A**
  (Mark
        One)
  x Quarterly Report under Section 13 or 15(d) of the Securities
 Exchange
        Act of 1934
  For
        the
        quarterly period ended June 30, 2008
   ̈ Transition Report under Section 13 or 15(d) of the Exchange Act For
        the
 Transition
        Period from ________ to ___________
  **Adrenalina**
 (Name
        of
        Small Business Issuer in its Charter)
 
 Nevada
              
              333-134568
              
              20-8837626(State or other jurisdiction
                of incorporation)
              
              (Commission
                File Number)
              
              (IRS Employer
                Identification No.)
 
 20855 NE 16 Ave., Suite #C-16
 Miami, Florida 33179
 (Address of principal executive offices)
 
 Phone: 305-770-4488 Fax:
        305-770-4489
 (Issuer's
        telephone numbers)
 
 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
        past 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  ̈ .
  Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer, a non-accelerated filer, or a smaller reporting
        company.  See definition of “accelerated filer”, “large accelerated
        filer”, “non-accelerated filer” and “smaller reporting company” in Rule 12b-2 of
        the Exchange Act.
 
 Large accelerated filer ̈
              Accelerated filer ̈
              Non-accelerated filer ̈
              Smaller reporting companyx
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2) of the Act. Yes  ̈ No x .
  State
        the
        number of shares outstanding of each of the issuer's classes of common equity,
        as of the latest practicable date:
  As
        of
        August 13, 2008 the registrant's outstanding common stock consisted of
        20,167,921 shares, $0.001 par value. Authorized - 50,000,000 common voting
        shares. No preferred shares issued, 5,000,000 authorized.
  
 
 **ADRENALINA**
 
 **TABLE
        OF CONTENTS**
 **Page****PART
                  I - FINANCIAL INFORMATION**Item
                  1. Financial Statements (Unaudited)Condensed
                  Consolidated Balance Sheets (unaudited)
              
              1Condensed
                  Consolidated Statements of Operations for the three months ended
                  June 30,
                  2008 and June 30, 2007 (unaudited)
              
              2Condensed
                  Consolidated Statement of Operations for the six months ended June
                  30,
                  2008 and June 30, 2007 (unaudited)
              
              3Condensed
                  Consolidated Statement of Equity (unaudited)
              
              4Condensed
                  Consolidated Statements of Cash Flows (unaudited)
              
              5Notes
                  to Condensed Consolidated Financial Statements (unaudited)
              
              7Item
                  2. Management’s Discussion and Analysis or Plan of
                  Operation
              
              18Item
                  3. Controls and Procedures
              
              25**PART
                  II - OTHER INFORMATION**Item
                  1. Legal Proceedings
              
              28Item
                  2. Unregistered Sales of Equity Securities and Use of
                  Proceeds
              
              28Item
                  3. Defaults Upon Senior Securities
              
              28Item
                  4. Submission of Matters to a Vote of Security Holders
              
              29Item
                  5. Other Information
              
              29Item
                  6. Exhibits
              
              29**SIGNATURES**
              
              30
  
 
 **PART
        I. FINANCIAL INFORMATION**
 **ADRENALINA**
 Condensed
        Consolidated Balance Sheets
 June
        30,
        2008 and December 31, 2007
  June 30, 2008
                  (Unaudited)
                
                December 31,
                  2007(as
                    restated)Current
                    Assets:Cash
                    and cash equivalents
                
                $
                329,248
                
                $
                444,843Investments
                    in securities available for sale
                
                
                12,957
                
                
                27,773Accounts
                    receivable, net
                
                
                120,128
                
                
                35,197Merchandise
                    inventories
                
                
                1,781,096
                
                
                1,678,937Film
                    costs, net
                
                
                63,900
                
                
                96,800Prepaid
                    expenses and other current assets
                
                
                74,635
                
                
                211,621Total
                    Current Assets
                
                
                2,381,964
                
                
                2,495,171Deferred
                    loan costs, net
                
                
                635,654
                
                
                643,027Property
                    and equipment, net
                
                
                7,513,873
                
                
                4,963,920Intangible
                    assets, net
                
                
                244,444
                
                
                248,444Total
                    Other Assets
                
                
                8,393,971
                
                
                5,855,391Total
                    Assets
                
                $
                10,775,935
                
                $
                8,350,562**Liabilities
                    and Shareholders’ Equity**Current
                    Liabilities:Accounts
                    payable and accrued liabilities
                
                $
                2,559,403
                
                $
                1,106,924Shareholder
                    advances
                
                
                725,000
                
                
                399,930Current
                    portion of convertible debentures, net of discount of $960,648 and
                    $0, respectively
                
                
                761,574
                
                
                ─Total
                    Current Liabilities
                
                
                4,045,977
                
                
                1,506,854Long-Term
                    Liabilities:Deferred
                    rent
                
                
                2,010,022
                
                
                582,114Related
                    party note
                
                
                3,294,267
                
                
                3,294,267Convertible
                    debentures, net of discount of $3,77,778 and $2,924,891,
                    respectively
                
                
                —
                
                
                75,109Total
                    Long-Term Liabilities
                
                
                5,304,289
                
                
                3,951,490Total Liabilities
                
                
                9,350,266
                
                
                5,458,344Commitments
                    and contingenciesShareholders’
                    Equity:Common
                    stock, $0.001 par value, 50,000,000 shares authorized, 19,853,000
                    and
                    19,453,000 issued and outstanding, respectively
                
                
                19,853
                
                
                19,453Additional
                    paid-in-capital
                
                
                15,113,703
                
                
                12,312,364Accumulated
                    deficit
                
                
                (13,707,887
                )
                
                (9,439,599
                )Total
                    Shareholders’ Equity
                
                
                1,425,669
                
                
                2,892,218Total
                    Liabilities and Shareholders’ Equity
                
                $
                10,775,935
                
                $
                8,350,562
 
 See
        accompanying notes to the condensed consolidated financial
        statements.
  1
  **ADRENALINA**
 Condensed
        Consolidated Statements of Operations
 For
        the
        Three Months Ended June 30, 2008 and 2007
 (Unaudited)
  2008
                
                2007Revenues:Merchandise
                    sales
                
                $
                1,124,609
                
                $
                519,780Entertainment -
                    other
                
                
                18,197
                
                
                112,300Publishing
                
                
                52,033
                
                
                45,411Total
                    Revenues
                
                
                1,194,839
                
                
                677,491Cost
                    of Revenues:Merchandise
                
                
                542,299
                
                
                238,361Entertainment
                    licensing fees
                
                
                8,706
                
                
                166,764Production
                
                
                87,710
                
                
                129,529Total
                    Cost of Revenues
                
                
                638,715
                
                
                534,654Gross
                    Profit
                
                
                556,124
                
                
                142,837Operating
                    Expenses:Payroll
                    and employee benefits
                
                
                684,069
                
                
                390,394Occupancy
                    expense
                
                
                769,709
                
                
                173,784Marketing
                    and advertising expense
                
                
                53,897
                
                
                125,925Professional
                    fees
                
                
                320,617
                
                
                43,394Other
                    selling, general and administrative
                
                
                91,691
                
                
                158,278Amortization
                
                
                18,450
                
                
                168,284Depreciation
                
                
                102,615
                
                
                76,239Total
                    Operating Expenses
                
                
                2,041,048
                
                
                1,136,298Other
                    (Income) and Expenses:Interest
                    income
                
                
                (274
                )
                
                ─Gain
                    on sale of available for sale securities
                
                
                (21,715
                )
                
                ─Interest
                    expense
                
                
                514,519
                
                
                8,653Total
                    Other (Income) and Expenses
                
                
                492,530
                
                
                8,653Net
                    Loss
                
                $
                (1,977,454
                )
                $
                (1,002,114
                )Net
                    loss per share
                
                $
                (0.10
                )
                $
                (0.05
                )Weighted
                    average common shares used in calculation of per share
                    data
                
                
                19,747,505
                
                
                19,100,000
  See
        accompanying notes to the condensed consolidated financial
        statements.
  2
 
 **ADRENALINA**
 Condensed
        Consolidated Statements of Operations
 For
        the
        Six Months Ended June 30, 2008 and 2007
 (Unaudited)
  2008
                
                2007Revenues:Merchandise
                    sales
                
                $
                2,189,820
                
                $
                971,721Entertainment -
                    related party
                
                
                ─
                
                
                282,219Entertainment -
                    other
                
                
                34,829
                
                
                194,200Publishing
                
                
                86,908
                
                
                91,612Total
                    Revenues
                
                
                2,311,557
                
                
                1,539,752Cost
                    of Revenues:Merchandise
                
                
                1,188,726
                
                
                491,462Entertainment
                    licensing fees
                
                
                19,613
                
                
                531,240Production
                
                
                141,405
                
                
                227,847Total
                    Cost of Revenues
                
                
                1,349,744
                
                
                1,250,549Gross
                    Profit
                
                
                961,813
                
                
                289,203Operating
                    Expenses:Payroll
                    and employee benefits
                
                
                1,130,625
                
                
                843,182Occupancy
                    expense
                
                
                1,739,407
                
                
                458,291Marketing
                    and advertising expense
                
                
                88,586
                
                
                239,097Professional
                    fees
                
                
                525,730
                
                
                99,478Other
                    selling, general and administrative
                
                
                296,002
                
                
                378,467Amortization
                
                
                36,900
                
                
                336,569Depreciation
                
                
                205,231
                
                
                150,627Total
                    Operating Expenses
                
                
                4,022,481
                
                
                2,505,711Other
                    (Income) and Expenses:Interest
                    income
                
                
                (296
                )
                
                (1,029
                )Loss
                    on sale of available for sale securities
                
                
                67,740
                
                
                ─Interest
                    expense
                
                
                1,140,176
                
                
                8,653Total
                    Other (Income) and Expenses
                
                
                1,207,620
                
                
                7,624Net
                    Loss
                
                $
                (4,268,288
                )
                $
                (2,224,132
                )Net
                    loss per share
                
                $
                (0.22
                )
                $
                (0.12
                )Weighted
                    average common shares used in calculation of per share
                    data
                
                
                19,600,253
                
                
                19,100,000
  See
        accompanying notes to the condensed consolidated financial
        statements.
  3
 
 **ADRENALINA**
 Condensed
        Consolidated Statements of Equity
 For
        the
        Six Months Ended June 30, 2008
 (Unaudited)
  Common
                  Shares
                
                Common
                  Stock
                
                Additional
                  Paid
                    In Capital
                
                (Accumulated
                  Deficit)
                
                Total
                  EquityBalance
                    at December 31, 2007 (as restated)
                
                
                19,453,000
                
                $
                19,453
                
                $
                12,312,364
                
                $
                (9,439,599
                )
                $
                2,892,218Issuance
                    of warrants with beneficially convertibledebt
                
                
                ─
                
                
                ─
                
                
                2,500,000
                
                
                ─
                
                
                2,500,000Issuance
                    of common stock
                
                
                400,000
                
                
                400
                
                
                299,600
                
                
                ─
                
                
                300,000Share-based
                    compensation
                
                
                ─
                
                
                ─
                
                
                1,739
                
                
                ─
                
                
                1,739Net
                    loss
                
                
                ─
                
                
                ─
                
                
                ─
                
                
                (4,268,288
                )
                
                (4,268,288
                )Balance
                    at June 30 , 2008 (Unaudited)
                
                
                19,853,000
                
                $
                19,853
                
                $
                15,113,703
                
                $
                (13,707,887
                )
                $
                1,425,669
 
 See
        accompanying notes to the condensed consolidated financial
        statements.
  4
 
 **ADRENALINA**
 Condensed
        Consolidated Statements of Cash Flows
 For
        the
        Six Months Ended June 30, 2008 and 2007
 (Unaudited)
  2008
                
                2007Cash
                    from Operating Activities:Net
                    loss
                
                $
                (4,268,288
                )
                $
                (2,224,132
                )Adjustments
                    to reconcile net loss to net cash used in operating
                    activities:Depreciation
                    and amortization
                
                
                242,100
                
                
                487,197Amortization
                    of discount on convertible debenture
                
                
                686,465
                
                
                ─Deferred
                    loan amortization
                
                
                152,373
                
                
                ─Deferred
                    compensation expense
                
                
                1,739
                
                
                ─Deferred
                    Rent Expense
                
                
                1,427,908
                
                
                ─Loss
                    on sale of investments
                
                
                67,740
                
                
                ─Changes in assets and liabilities:Accounts
                    receivable
                
                
                (84,931
                )
                
                128,376Merchandise
                    inventories
                
                
                (102,159
                )
                
                (214,439
                )Prepaid
                    expenses and other assets
                
                
                136,986
                
                
                55,389Accounts
                    payable and accrued liabilities
                
                
                1,452,510
                
                
                332,288Total
                    Adjustments
                
                
                3,980,731
                
                
                788,811Net
                    Cash Used in Operating Activities
                
                
                (287,557
                )
                
                (1,435,321
                )Cash
                    Flows from Investing Activities:Incurred
                    film costs
                
                
                ─
                
                
                (625,190
                )Purchases
                    of investments in available for sale securities
                
                
                (3,501,189
                )
                
                ─Proceeds
                    from sales of investments in available for sale securities
                
                
                3,448,264
                
                
                ─Purchase
                    of property and equipment, net
                
                
                (2,755,183
                )
                
                (1,148,613
                )Net
                    Cash Used in Investing Activities
                
                
                (2,808,108
                )
                
                (1,773,803
                )Cash
                    Flows from Financing Activities:Repayments
                    of notes receivable - related parties
                
                
                ─
                
                
                (1,366,790
                )Proceeds
                    from related party notes
                
                
                325,070
                
                
                4,432,981Repayment
                    of affiliate note receivable
                
                
                ─
                
                
                (25,304
                )Proceeds
                    from sale of common stock
                
                
                300,000
                
                
                ─Deferred
                    loan costs
                
                
                (145,000
                )
                
                ─Proceeds
                    from convertible note payable
                
                
                2,500,000
                
                
                ─Net
                    Cash Provided by Financing Activities
                
                
                2,980,070
                
                
                3,040,887Net
                    Increase in Cash and Cash Equivalents
                
                
                (115,595
                )
                
                (168,237
                )Cash
                    and Cash Equivalents - Beginning of Period
                
                
                444,843
                
                
                297,801Cash
                    and Cash Equivalents - End of Period
                
                $
                329,248
                
                $
                129,564
 
 See
        accompanying notes to the condensed consolidated financial
        statements.
  5
  **ADRENALINA**
 Condensed
        Consolidated Statements of Cash Flows
 For
        the
        Six Months Ended June 30, 2008 and 2007
 (Unaudited)
  2008
                
                2007Supplemental
                    Disclosures of Cash Flow Information:Cash
                    paid for interest
                
                $
                60,540
                
                $
                ─Supplemental
                    Disclosure of Non-Cash Information:Issuance
                    of warrants with convertible debt
                
                $
                1,462,843
                
                $
                ─Effect
                    of beneficial conversion feature
                
                $
                1,037,157
                
                $
                ─
  See
        accompanying notes to the condensed consolidated financial
        statements.
  6
  **ADRENALINA**
 Unaudited
        Notes to Condensed Consolidated Financial Statements
 Six
        Months Ended June 30, 2008 and 2007
 
 **Note
        1 - Description of Business, Basis of Presentation and Summary of
        Significant Accounting Policies**
  **Description
        of Business and Basis of Consolidation**
  The
        accompanying condensed consolidated financial statements for the three and
        six
        months ended June 30, 2008 and June 30, 2007, are unaudited except for the
        balance sheet information at December 31, 2007, which is derived from the
        audited consolidated financial statements filed on April 15, 2008 in the
        Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007.
        These statements have been prepared in accordance with accounting principles
        generally accepted in the United States of America (“GAAP”) for interim
        financial information and with the instructions to Form 10-Q and Article
        10 of
        Regulation S-X. Accordingly, they do not include all of the information and
        footnotes required by GAAP for complete financial statements. In the opinion
        of
        management, all adjustments (consisting of normal recurring accruals) considered
        necessary for a fair presentation have been included. These financial statements
        should be read in conjunction with the consolidated financial statements
        included in the Company’s Annual Report on Form 10-KSB for the year ended
        December 31, 2007.
 
 Adrenalina
        (the “Company” or “Adrenalina”), f/k/a LQD Adrenalina, LLC, was formed as a
        privately-held Limited Liability Company headquartered in Miami, Florida
        on
        September 13, 2004.
  Basic
        Services, Inc. (“BSI”), a Nevada corporation, was organized March 28, 2007 (Date
        of Inception) and incorporated as a subsidiary of Eaton Laboratories, Inc.,
        ("Eaton"), also a Nevada corporation. On March 30, 2007, BSI's parent
        corporation, Eaton entered into an Acquisition Agreement and Plan of Merger
        ("Agreement") with Hydrogen Hybrid Technologies, Inc. ("HHT"), a privately-held
        Canadian corporation. Pursuant to the terms of the Agreement, HHT acquired
        Eaton, and Eaton agreed to spin off its wholly-owned subsidiary, Basic Services,
        Inc. On April 30, 2007, the record shareholders of Eaton received one
        unregistered, par value $0.001, share of Basic Services, Inc. common stock
        for
        every share of Eaton Laboratories common stock owned. The Basic Services,
        Inc.
        stock dividend was based on 10,873,750 shares of Eaton common stock that
        were
        issued and outstanding as of the record date. The spin off did not include
        any
        stock issued to the shareholders of Hydrogen Hybrid Technologies, Inc., who
        received Eaton shares pursuant to the Agreement with Eaton. Eaton retained
        no
        ownership in BSI following the spin off. Further, BSI was no longer a subsidiary
        of Eaton.
  On
        October 26, 2007, BSI and a newly formed subsidiary of BSI ("Merger Sub")
        and
        Adrenalina entered into an Acquisition Agreement and Plan of Merger
        ("Acquisition") pursuant to which BSI, through its wholly-owned subsidiary,
        Merger Sub, acquired 100% of the membership interests in Adrenalina in exchange
        for 18,000,000 shares of the BSI common stock which were issued to the owners
        of
        the membership interests in Adrenalina. Immediately after the Acquisition
        was
        consummated and further to the Acquisition Agreement, the four largest
        shareholders of BSI cancelled 9,773,750 shares of the BSI Common Stock held
        by
        them. The transaction contemplated by the Agreement was intended to be a
        "tax-free" reorganization pursuant to the provisions of Section 351 and
        368(a)(1)(A) of the Internal Revenue Code of 1986, as amended. Immediately
        prior
        to the Acquisition, BSI was a reporting corporation with limited
        activity.
  For
        accounting purposes, this transaction was accounted for as a reverse
        acquisition, since the stockholders of Adrenalina own a majority of the issued
        and outstanding shares of common stock of BSI and the directors and executive
        officers of Adrenalina became the directors and executive officers of BSI.
        As a
        consequence the historical financial information presented herein represents
        that of Adrenalina.
 
 On
        December 13, 2007, BSI changed its name to Adrenalina.
  7
  **ADRENALINA**
 Unaudited
        Notes to Condensed Consolidated Financial Statements
 Six
          Months Ended June 30, 2008 and 2007 - continued
 
 **Note
        1 - Description of Business, Basis of Presentation and Summary of
        Significant Accounting Policies**
 **(Continued)**
  The
        Company is a media, retail and entertainment company headquartered in South
        Florida. The Company operates in Latin America and throughout the United
        States.
        Adrenalina’s operations are concentrated in three lines of business:
 
 Merchandise
        Sales: extreme sports and adventure themed stores located in regional shopping
        malls, principally in Florida.
 Entertainment:
        theatrical and TV film and music production and distribution
 Publishing:
        extreme sports and music oriented periodical publishing and
        distribution.
  As
        of
        June 30, 2008 and December 31, 2007, the consolidated financial statements
        include the company and all wholly-owned subsidiaries. All intercompany accounts
        and transactions between consolidated companies have been eliminated in
        consolidation.
 
 **Restated
          Financial Statements**
 
 During
          the third quarter of 2008, the Company discovered errors in their previously
          issued financial statements as of December 31, 2007, March 31, 2008 and
          June 30,
          2008 related to the accounting for the Beneficial Conversion Features on
          our
          November and February convertible debt issues. These errors occurred because
          the
          Company incorrectly applied a marketability discount to the market value
          of
          their common stock based on a limited history and insufficient trading
          volume,
          which was then used to calculate the fair value of the embedded instruments.
          The
          correction these errors resulted in the reduction in the carrying amount
          of the
          debt due to an increase in the debt discount and an increase in the equity
          by
          approximately $1,698,000 and $1,455,000 from their November and February
          convertible debt issues, as well as an understatement of their non-cash
          interest
          expense and net loss by approximately $31,700 and $286,800 as of December
          31,
          2007 and June 30, 2008.
 
 **Use
        of Estimates**
  The
        preparation of consolidated financial statements in conformity with generally
        accepted accounting principles requires management to make estimates and
        assumptions that affect the amounts reported in the financial statements
        and
        footnotes thereto. Actual results could differ from those estimates. Significant
        estimates inherent in the preparation of the accompanying consolidated financial
        statements include accounting for depreciation and amortization, film costs,
        goodwill, barter transactions, business combinations, the beneficial conversion
        feature on the convertible debenture, warrants, deferred rent, loan costs
        and
        contingencies.
 
 **Recent
        Accounting Standards**
 
 In
        September 2006, the FASB issued SFAS No. 157, Fair Value Measurement (“SFAS
        157”). SFAS 157 defines fair value, establishes a framework for measuring fair
        value and expands disclosures about fair value measurements.  SFAS 157
        is effective for financial statements issued for fiscal years beginning after
        November 15, 2007 and interim periods within those fiscal years. In
        February 2008, the FASB issued FASB Staff Position No. 157-2, which
        deferred the effective date of SFAS 157 for all non-financial assets and
        non-financial liabilities, except those that are recognized or disclosed
        at fair
        value in the financial statements on a recurring basis (at least annually)
        until
        January 1, 2009. Accordingly, our adoption of this standard on January 1,
        2008 was limited to financial assets and liabilities. The adoption of SFAS
        157
        did not have a material effect on our financial condition or results of
        operations. The Company is still in the process of evaluating this standard
        with
        respect to its effect on non-financial assets and liabilities and therefore
        has
        not yet determined the impact that it will have on our financial statements
        upon
        full adoption in 2009. Non-financial assets and liabilities for which we
        have
        not applied the provisions of SFAS 157 include those measured at fair value
        in
        impairment testing.
 
 In
        February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
        Assets and Financial Liabilities—including an amendment of FASB Statement No.
        115 (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial
        instruments and certain other items at fair value. Entities that elect the
        fair
        value option will report unrealized gains and losses in earnings at each
        subsequent reporting date. The fair value option may be elected on an
        instrument-by-instrument basis, with few exceptions. SFAS 159 also establishes
        presentation and disclosure requirements to facilitate comparisons between
        companies that choose different measurement attributes for similar assets
        and
        liabilities. The adoption of SFAS 159 did not have an effect on our financial
        condition or results of operations as we did not elect this fair value option,
        nor is it expected to have a material impact on future periods as the election
        of this option for our financial instruments is expected to be
        limited.
  8
  **ADRENALINA**
 Unaudited
        Notes to Condensed Consolidated Financial Statements
 Six
          Months Ended June 30, 2008 and 2007 - continued
 
 **Note
        1 - Description of Business, Basis of Presentation and Summary of
        Significant Accounting Policies**
 **(Continued)**
  **Recent
        Accounting Standards - continued**
  In
        December 2007, the FASB issued SFAS No. 141(R), Business Combinations. SFAS
        No.
        141(R) will significantly change the financial accounting and reporting of
        business combination transactions. SFAS No. 141(R) establishes the criteria
        for
        how an acquiring entity in a business combination recognizes the assets acquired
        and liabilities assumed in the transaction; establishes the acquisition date
        fair value as the measurement objective for all assets acquired and liabilities
        assumed; and requires the acquirer to disclose to investors and other users
        all
        of the information they need to evaluate and understand the nature and financial
        effect of the business combination. Acquisition related costs including finder's
        fees, advisory, legal, accounting valuation and other professional and
        consulting fees are required to be expensed as incurred. SFAS No. 141(R)
        is
        effective for fiscal years beginning after December 15, 2008 and early
        implementation is not permitted. The Company has previously acquired ownership
        interest in several entities and may continue to do so in the future. The
        Company expects that the implementation of SFAS No. 141(R) will not have
        a
        material effect on its consolidated financial statements at the date of
        adoption.
  In
        December 2007, the FASB issued SFAS No. 160, Noncontrolling Interest in
        Consolidated Financial Statements - an amendment of ARB No. 51. SFAS No.
        160 requires the Company to establish accounting and reporting standards
        for the
        non-controlling interest in a subsidiary and for the deconsolidation of a
        subsidiary. SFAS No. 160 is effective for fiscal years, and interim periods
        within those fiscal years, beginning on or after December 15, 2008. Earlier
        adoption is prohibited. The Company does not expect the implementation of
        SFAS
        No. 160 to have a material impact on its consolidated financial
        statements.
  In
        March
        2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments
        and
        Hedging Activities - an amendment of FASB Statement No. 133. SFAS No. 161
        changes the disclosure requirements for derivative instruments and hedging
        activities. Entities are required to provide enhanced disclosures about how
        and
        why an entity uses derivative instruments; how derivative instruments and
        related hedged items are accounted for under Statement 133 and its related
        interpretations; and how derivative instruments and related hedged items
        affect
        an entity’s financial position, financial performance and cash flows. SFAS No.
        161 is effective for fiscal years and interim periods beginning after November
        15, 2008, with early application permitted. The Company does not expect the
        implementation of SFAS No. 161 to have a material impact on its consolidated
        financial statements.
 
 In
        April 2008, the FASB issued FSP FAS No. 142-3, which amends the
        factors that must be considered in developing renewal or extension assumptions
        used to determine the useful life over which to amortize the cost of a
        recognized intangible asset under FAS No. 142, “Goodwill and Other
        Intangible Assets.” The FSP requires an entity to consider its own assumptions
        about renewal or extension of the term of the arrangement, consistent with
        its
        expected use of the asset, and is an attempt to improve consistency between
        the
        useful life of a recognized intangible asset under FAS No. 142 and the
        period of expected cash flows used to measure the fair value of the asset
        under
        FAS No. 141, “Business Combinations.” The FSP is effective for fiscal years
        beginning after December 15, 2008, and the guidance for determining the
        useful life of a recognized intangible asset must be applied prospectively
        to
        intangible assets acquired after the effective date. The FSP is not expected
        to
        have a significant impact on the Company’s results of operations, financial
        condition or liquidity.
 
 In
        May
        2008 the FASB issued FASB Staff Position APB 14-1, “Accounting for Convertible
        Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial
        Cash Settlement).” APB 14-1 requires the issuer to separately account for the
        liability and equity components of convertible debt instruments in a manner
        that
        reflects the issuer’s nonconvertible debt borrowing rate. The guidance will
        result in companies recognizing higher interest expense in the statement
        of
        operations due to amortization of the discount that results from separating
        the
        liability and equity components. APB 14-1 will be effective for financial
        statements issued for fiscal years beginning after December 15, 2008, and
        interim periods within those fiscal years. The Company is currently evaluating
        the impact of adopting APB 14-1 on it consolidated financial
        statements.
  9
  **ADRENALINA**
 Unaudited
        Notes to Condensed Consolidated Financial Statements
 Six
          Months Ended June 30, 2008 and 2007 - continued
 
 **Note
        1 - Description of Business, Basis of Presentation and Summary of
        Significant Accounting Policies**
 **(Continued)**
 
 **Recent
        Accounting Standards - continued**
  In
        May 2008, the FASB issued Financial Accounting Standard
        (FAS) No. 162, “The Hierarchy of Generally Accepted Accounting
        Principles.” The statement is intended to improve financial reporting by
        identifying a consistent hierarchy for selecting accounting principles to
        be
        used in preparing financial statements that are prepared in conformance with
        generally accepted accounting principles. Unlike Statement on Auditing Standards
        (SAS) No. 69, “The Meaning of Present in Conformity With GAAP,” FAS
        No. 162 is directed to the entity rather than the auditor. The statement is
        effective 60 days following the SEC’s approval of the Public Company
        Accounting Oversight Board (PCAOB) amendments to AU Section 411, “The
        Meaning of Present Fairly in Conformity with GAAP,” and is not expected to have
        any impact on the Company’s results of operations, financial condition or
        liquidity.
 
 In
        June 2008, the Financial Accounting Standards Board (FASB) issued FASB
        Staff Position (FSP) Emerging Issues Task Force (EITF) No. 03-6-1,
“Determining Whether Instruments Granted in Share-Based Payment Transactions
        Are
        Participating Securities.” Under the FSP, unvested share-based payment awards
        that contain rights to receive nonforfeitable dividends (whether paid or
        unpaid)
        are participating securities, and should be included in the two-class method
        of
        computing EPS. The FSP is effective for fiscal years beginning after
        December 15, 2008, and interim periods within those years, and is not
        expected to have a significant impact on the Company’s results of operations,
        financial condition or liquidity.
 
 **Summary
        of Significant Accounting Policies**
  **Accounts
        Receivable**
  Accounts
        receivable, including credit card receivables, represent amounts currently
        due
        to the Company under contractual obligations or for services performed. When
        necessary, the Company evaluates and maintains an allowance for these accounts
        to reduce such balances to the amount deemed collectible. At June 30, 2008
        and
        December 31, 2007, the Company recorded an allowance for doubtful accounts
        of
        approximately $35,000 and $2,100, respectively.
 
 **Investments
        in Securities Available for Sale**
  The
        Company’s investments in marketable securities are classified as available for
        sale, reported at fair market value, and unrealized gains and losses (if
        any)
        would be reported as a component of other comprehensive income. Recognized
        gains
        and losses from sales of marketable securities or other than temporary declines
        in value, if any, are reported in other income and expense as incurred. As
        of
        June 30, 2008 and December 31, 2007, the cost of such investments, approximated
        fair value.
 
 **Revenue
        Recognition**
 
 *Retail*
 
 Revenue
        for sales of merchandise is recognized when merchandise is sold and delivered
        to
        the customer. The Company maintains a reserve for product returns and discounts.
        Retail revenue also includes income from its point-of-sale entertainment
        attraction, the Flow Rider ®. Revenue from the FlowRider ® is recorded at the
        time services are provided to the customer. Retail revenue is reported net
        of
        sales tax which amounted to approximately $60,500, $112,100, $32,700 and
        $63,800 for the three and six month periods ended June 30, 2008 and 2007,
        respectively.
  10
  **ADRENALINA**
 Unaudited
        Notes to Condensed Consolidated Financial Statements
 Six
          Months Ended June 30, 2008 and 2007 - continued
 
 **Note
        1 - Description of Business, Basis of Presentation and Summary of
        Significant Accounting Policies**
 **(Continued)**
 
 *Barter*
  In
        the
        normal course of operations, the Company enters into barter transactions
        whereby
        it exchanges programming product for advertising time that it can use or
        resell.
        The advertising time is provided by broadcasting companies in the United
        States
        and Central and South America. These transactions are valued at the fair
        value
        of the related programming products based on comparable arrangements in the
        broadcast areas. These transactions are accounted for at the time the
        programming is broadcast and the advertising is used.
  During
        the three and six month periods ended June 30, 2007, the total value of the
        recorded barter transactions was $82,900 and $166,000, respectively. (The
        Company did not have any such transactions for the three and six month periods
        ended June 30, 2008).
  **Gift
        Cards**  ******
  Cash
        received from the sale of gift cards is recorded as a liability, and revenue
        is
        recognized upon the redemption of the gift card or when it is determined
        that
        the likelihood of redemption is remote. At June 30, 2008 and December 31,
        2007
        the Company had recorded gift card liabilities of approximately $22,000 and
        $43,000, respectively.
  **Advertising
        Costs**
  The
        Company expenses advertising costs when incurred. Advertising expense incurred
        during the three and six month periods ended June 30, 2008 and 2007 was $53,900,
        $88,600, $125,900 and $239,100, respectively. Additionally, the Company included
        in advertising expense bartered transactions with broadcasters, in which
        the
        Company provides its film for broadcast and receives in return air time which
        is
        used to promote their products.
 
 **Income
        Taxes**  **
  Subsequent
        to October 26, 2007 the Company recognized deferred tax assets and liabilities
        for the future tax consequences attributed to differences between the financial
        statement carrying amounts of existing assets and liabilities and their
        respective tax basis. Deferred tax assets and liabilities are measured using
        enacted tax rates expected to apply to taxable income in the years in which
        those temporary differences are expected to be recovered or settled. Under
        SFAS
        109, the effect on deferred tax assets and liabilities of a change in tax
        rates
        is recognized in income in the period that includes the enactment date. If
        it is
        more likely than not that some portion of a deferred tax asset will not be
        realized, a valuation allowance is recognized.
 
 **Earnings
        per share**
  The
        Company computed basic and diluted loss per common share by dividing the
        losses
        applicable to   common stock by the weighted average number of basic and
        diluted common shares outstanding. The Company’s basic and diluted EPS
        calculation for the three and six month periods ended June 30, 2008 and 2007,
        respectively are the same since the number of shares that would be included
        in
        the dilutive calculation from assumed exercise of common stock equivalents
        would
        have been antidilutive due to the net loss in each of the periods reported.
        For the three and six month periods ended June 30, 2008 the Company excluded
        1,233,404 and 1,231,821 common shares from it’s earnings per share calculation.
        The Company did not have dilutive shares during the three and six month periods
        ended June 30, 2007.
  **Reclassifications**
 
 Certain
        amounts from prior consolidated financial statements and related notes have
        been
        reclassified to conform to current year presentation.
  11
  **ADRENALINA**
 Unaudited
        Notes to Condensed Consolidated Financial Statements
 Six
          Months Ended June 30, 2008 and 2007 - continued
  **Note
        2 — Going Concern**
  The
          accompanying financial statements have been prepared assuming the Company
          will
          continue as a going concern. The Company continued to incur significant
          operating losses through the six months ended June 30, 2008 which raise
          substantial doubt about the Company’s ability to continue as a going concern. As
          shown in the accompanying financial statements, the Company has incurred
          net
          losses of approximately $4,268,000 and $2,224,000 for the six months ended
          June
          30, 2008 and 2007, respectively. Additionally, the Company has used cash
          flows
          in operations of approximately $288,000 and $1,435,000 for the six months
          ended
          June 30, 2008 and 2007, respectively. The operations of the Company have
          been
          funded through related party borrowings, contributed capital and convertible
          debentures. Management’s plans to generate cash flow include expanding the
          Company’s operations through additional store openings and raising additional
          capital through debt or equity offerings in an effort to fund the Company’s
          anticipated expansion. There is no assurance additional capital or debt
          financing will be available to the Company on acceptable terms. The financial
          statements do not include any adjustments that might result from the outcome
          of
          this uncertainty. Six Months Ended June 30, 2008 and 2007
  **Note
        3 — Property and Equipment**
  Major
        categories of property and equipment at June 30, 2008 and December 31, 2007
        were
        as follows:
 
 June 30,
                2008
              
              December 31,
                2007Leasehold
                  improvements
              
              $
              2,227,698
              
              $
              2,162,295Furniture,
                  fixtures and equipment
              
              
              1,764,463
              
              
              1,747,462Software
              
              
              92,128
              
              
              90,978Vehicles
              
              
              15,000
              
              
              15,000Construction
                  in process
              
              
              1,534,895
              
              
              35,929Deposits
                  on FlowRider ® equipment purchase contracts
              
              
              2,509,163
              
              
              1,336,5008,143,347
              
              
              5,388,164Less:
                  accumulated depreciation and amortization
              
              
              (629,474
              )
              
              (424,244
              )Total
                  property and equipment
              
              $
              7,513,873
              
              $
              4,963,920
 
 Depreciation
        expense totaled approximately $102,600, $205,200, $76,200 and $150,600 for
        the
        three and six month periods ended June 30, 2008 and 2007,
        respectively.
  12
  **ADRENALINA**
 Unaudited
          Notes to Condensed Consolidated Financial Statements
 Six
          Months Ended June 30, 2008 and 2007 - continued
 
 **Note
        4 — Long-term Debt**
 
 *Related
        party note*
 
 On
        November 1, 2007 the Company issued a $3,294,267, 5% note payable to a
        shareholder, with monthly payments of $94,122 commencing on November 1, 2010
        and
        continuing monthly through October 2013, when the balance of unpaid principal
        and interest is due.
 
 *Convertible
        debentures*
 
 During
        December, 2007, the Company issued a $3,000,000 5% Senior Secured Convertible
        Debenture, with quarterly interest payments commencing in January 2008.
        Principal amounts under this debenture are payable in 18 equal monthly
        installments commencing the 12th month following the issuance date. The Company
        may also elect to make principal payments in shares of common stock if there
        exists an effective registration statement with respect to the shares issuable
        upon conversion of the Debenture. If the Company elects to make principal
        payments in common stock, the conversion rate will be the lesser of the then
        effective conversion price (see below) or 88% of the volume weighted average
        price for the ten consecutive trading days ending immediately prior to the
        applicable date a principal payment is due.
 
 During
        February 2008, the Company issued a $2,500,000 5% Senior Secured Convertible
        Debenture, with quarterly interest payments commencing in May 2008. Principal
        amounts under this debenture are payable in 18 equal monthly installments
        commencing the 12th month following the issuance date. The Company may also
        elect to make principal payments in shares of common stock if there exists
        an
        effective registration statement with respect to the shares issuable upon
        conversion of the Debenture. If the Company elects to make principal payments
        in
        common stock, the conversion rate will be the lesser of the then effective
        conversion price (see below) or 88% of the volume weighted average price
        for the
        ten consecutive trading days ending immediately prior to the applicable date
        a
        principal payment is due.
  At
        any
        time during the life of the loans the holder may convert the debenture into
        shares of the Company’s common stock at a fixed conversion price of $0.75,
        subject to adjustment in the event that the Company issues new common stock
        at a
        price below the conversion price. Following the effective date of the
        registration statement filed in connection with the shares, the Company may
        force conversion of the debentures if the market price of their common stock
        is
        at least $2.75 for any 20 out of 30 consecutive trading days. The Company
        may
        also prepay these debentures in cash at 115% of the then outstanding principal
        balance provided there is a registration statement in effect with respect
        to the
        shares issuable upon conversion of the debentures.
  These
        debentures rank senior to all of the Company’s current and future indebtedness
        and are secured by substantially all of the Company’s assets.
 
 *Beneficial
        Conversion Feature*
  In
                    connection with the December 2007 and February 2008 convertible
                    debentures, the Company determined that a beneficial conversion
                    feature
                    existed on the date the notes were issued. The beneficial conversion
                    feature related to these notes was valued as the difference between
                    the
                    effective conversion price (computed by dividing the relative
                    fair value
                    allocated to the convertible debt by the number of shares the
                    debt is
                    convertible into) and the fair value of the common stock multiplied
                    by the
                    number of shares into which the debt may be converted.
  In
          accordance with EITF 00-27 “ *Application
          of Issue No. 98-5 to*  *Certain
          Convertible Instruments* ,”
the
          intrinsic value of the beneficial conversion features were recorded as
          a debt
          discount with a corresponding amount to additional paid in capital. The
          debt
          discount is amortized to interest expense over the life of the instruments.
          The
          Company recorded beneficial conversion features related to the February
          2008
          financing of $1,037,157. The Company had a recorded beneficial conversion
          feature related to the December 2007 financing of approximately $1,506,546.
          Amortization of the beneficial conversion features, included in interest
          expense
          was $254,370 and $439,595 for the three and six months ended June 30, 2008,
          respectively.
  13
  **ADRENALINA**
 Unaudited
          Notes to Condensed Consolidated Financial Statements
 Six
          Months Ended June 30, 2008 and 2007 - continued
 
 **Note
          4 — Long-term Debt - continued**
 
 *Detachable
        Common Stock Warrants*
 
 In
        connection with the convertible debentures issued during December 2007 and
        February 2008, respectively, the Company issued five-year warrants to purchase
        4,000,000 and 3,333,333 shares of common stock, respectively, at $2.00 per
        share. The exercise price of these warrants is subject to full ratchet
        anti-dilution rights in the event that the Company issues securities at less
        than $1.38 per share. The warrants vested immediately and expire in five
        years.
 
 The
          aggregate fair value of these warrants was estimated at approximately $1,493,454
          and $1,462,843, respectively, based on the Black-Scholes option pricing
          model
          using the following assumptions: a risk free rate of 3.89% and 2.10%,
          respectively, an expected life of 5 years, a volatility factor of 69% and
          an
          expected dividend yield of 0%.
 
 The
          value
          of these warrants was recorded as a discount to the convertible debentures
          with
          an offset to additional paid-in capital and is being amortized as interest
          expense over the life of the debt.. Amortization of the warrants, included
          in
          interest expense was $147,816 and $246,870 for the three and six months
          ended
          June 30, 2008, respectively.
 
 *Interest
        Expense, net*
  Three months
                  ended June 30,
                
                Six months
                  ended June 30,2008
                
                2007
                
                2008
                
                2007Interest
                    expense related to debt
                
                $
                71,315
                
                $
                8,653
                
                $
                161,388
                
                $
                8,653Amortization
                    of deferred financing costs
                
                
                81,019
                
                
                —
                
                
                152,373
                
                
                —Amortization
                    of debt discount
                
                
                402,185
                
                
                —
                
                
                686,465
                
                
                —Liquidating
                    Damages on debt
                
                
                (40,000
                )
                
                —
                
                
                140,000
                
                
                —Total
                    interest expense
                
                $
                514,519
                
                $
                8,653
                
                $
                1,140,176
                
                $
                8,653
  Maturities
        of the Company’s long term debt for the next five years are as
        follows:
 
 2009
              
              $
              1,722,2222010
              
              
              3,500,0002011
              
              
              936,6312012
              
              
              1,129,4632013
              
              
              1,129,463Thereafter
              
              
              376,488Total
              
              $
              8,794,267
  As
          part
          of the December 2007 financing, the Company also entered into a registration
          rights agreement that requires it to register all of the shares issuable
          upon
          conversion of the debentures (calculated by dividing the principal debenture
          amount by the conversion price) and exercise of the warrants. Since the
          Company
          failed to cause the registration statement to be declared effective within
          180
          days after the closing dates, it became subject to liquidating damages.
          On
          August 12, 2008 the Company entered into an agreement with the holders
          pursuant
          to which the holders waived any (i) cash payments due as liquidated damages
          and
          (ii) default by the Company as a result of the non-effectiveness of the
          registration statement in consideration for the issuance to them of 148,254
          shares of restricted common stock. As such the Company has accrued approximately
          $140,000 of liquidating damages, based on the fair value of recent sales
          of
          restricted common stock, which is included in the accrued liabilities as
          of June
          30, 2008.
  14


**ADRENALINA**


Unaudited
      Notes to Condensed Consolidated Financial Statements


Six
        Months Ended June 30, 2008 and 2007 - continued





**Note
      5 — Commitments and Contingencies**





*Operating
      Leases*




The
      Company’s rent expense amounted to approximately $626,300, $1,492,700, $216,000
      and $432,100 for the three and six month periods ended June 30, 2008 and 2007,
      respectively. The Company has various long-term noncancelable lease commitments
      certain of which are guaranteed by officers and shareholders of the Company,
      for
      its offices, warehouse and stores which expire through 2019. The minimum rental
      commitments under noncancelable long-term operating leases during the next
      five
      years are as follows:





2009
            
            $
            2,886,9022010
            
            
            3,237,6702011
            
            
            3,309,2452012
            
            
            3,230,9332013
            
            
            3,240,089Thereafter
            
            
            16,494,107Total
            
            $
            32,398,946




*Capital
      Commitments*




*FlowRider* ®




Effective
      April 2007, the Company entered into an exclusive five year agreement to acquire
      thirty-six FlowRider®, water-themed entertainment units for placement in its
      future mall-based retail shops in an aggregate amount approximating $21,000,000.
      The agreement is subject to a performance schedule governing order timing and
      equipment deposits. Non-refundable deposits placed as of June 30, 2008 and
      December 31, 2007 were $2,509,200 and $1,336,500, respectively.





*Retail
      Locations*





At
      June
      30, 2008, the Company had signed leases and construction agreements to develop
      five new retail locations. Capital commitments under these agreements were
      approximately $4.5 million.




*Litigation*





The
      Company is involved in various claims and legal proceedings in the ordinary
      course of its business activities. The Company believes that any potential
      liability associated with the ultimate outcome of these matters will not have
      a
      material adverse effect on its financial position or results of
      operations.




**Note
      6 - Related Party Transactions**




*Advertising
      Revenue*




During
      2007, the Company sold advertising to Parlux, Inc, a company whose Chairman
      and
      CEO was also a 67.7% shareholder of Adrenalina. These advertising revenues
      amounted to approximately $0 and $282,200 for the three and six month periods
      ended June 30, 2007. (None for the three or six month periods ended June 30,
      2008).




*Related
      Party Note Payable*





On
      November 1, 2007, the Company issued a 5%, $3,294,267 note to a shareholder.
      (see note 4)


15


**ADRENALINA**


Unaudited
      Notes to Condensed Consolidated Financial Statements


Six
        Months Ended June 30, 2008 and 2007 - continued





**Note
      7 - Concentration of Risk**




*Vendor
      Concentration*




During
      the three and six month periods ended June 30, 2008 and 2007, retail inventories
      supplied by one vendor constituted approximately 29.0%, 32.6%, 4.0% and 1.6%,
      respectively of total purchases and 25.4% and 35.0% of total inventory as of
      June 30, 2008 and December 31, 2007, respectively.




*FlowRider* ®




Sales
      related to the FlowRider® entertainment product, amounted to approximately
      $182,400, $364,200, $108,000 and $207,000 for the three and six month periods
      ended June 30, 2008 and 2007, respectively. These sales represented 16.2%,
      16.6%, 20.8% and 21.3% of retail revenues and 15.3%, 15.8% 15.9% and 13.5%
      of
      total revenues for the three and six month periods ended June 30, 2008 and
      2007,
      respectively.




**Note
      8 - Income Taxes**




The
      Company has fully reserved its U.S. net deferred tax assets as of June 30,
      2008
      due to the uncertainty of future taxable income. The Company has U.S. net
      operating loss carry-forwards of approximately $3,102,000 which will expire
      through 2028 and state net operating loss carry-forwards of approximately
      $3,407,000 which will expire through 2028.





**Note
      9 - Warrants**





The
      following is a summary of the status of all of the Company’s stock warrants for
      the year ended December 31, 2007 and the six months period ended June 30,
      2008:




Number of
              Shares
            
            Weighted-Average
              Exercise PriceOutstanding
                at January 1, 2007
            
            
            —
            
            $
            —Granted
            
            
            4,000,000
            
            
            2.00Exercised
            
            
            —
            
            
            —Cancelled
            
            
            —
            
            
            —Outstanding
                at December 31, 2007
            
            
            4,000,000
            
            
            2.00Granted
            
            
            3,333,333
            
            
            2.00Exercised
            
            
            —
            
            
            —Cancelled
            
            
            —
            
            
            —Outstanding
                at June 30, 2008
            
            
            7,333,333
            
            
            2.00Warrants
                exercisable at December 31, 2007
            
            
            4,000,000
            
            
            2.00Warrants
                exercisable at June 30, 2008
            
            
            7,333,333
            
            $
            2.00





The
      following tables summarize information about stock warrants outstanding and
      exercisable at June 30, 2008:





Stock Warrants OutstandingExercise Prices
            
            Number of Shares
              Outstanding
            
            Weighted-Average
              Remaining
              Contractual Life in
              Years
            
            Weighted-Average
              Exercise Price$
            2.00
            
            
            7,333,333
            
            
            4.5
            
            $
            2.007,333,333
            
            
            4.5
            
            $
            2.00


16


**ADRENALINA**


Unaudited
      Notes to Condensed Consolidated Financial Statements


Six
        Months Ended June 30, 2008 and 2007 - continued





**Note
      9 - Warrants - continued**





Stock Warrants ExercisableExercise Prices
            
            Number of Shares
              Exercisable
            
            Weighted-Average
              Exercise Price$
            2.00
            
            
            7,333,333
            
            $
            2.007,333,333
            
            $
            2.00





**Note
      10 - Share-Based Compensation**




On
      February 28, 2008, the Company granted 20,000 options to certain non-employee
      directors, to acquire common stock during a five-year period at $1.50 per share.
      The directors’ options vested over a five-year period at the annual rate of
      4,000 shares per year. The fair value of the options at the grant
      date was determined to be $11,300.  The directors’ options are
      being expensed as share-based compensation over the applicable vesting
      periods.




The
      fair
      value of these options at the date of grant was estimated using a Black-Scholes
      option pricing model with the following weighted average assumptions.




Expected
                life (years)
            
            
            5.0Expected
                volatility
            
            
            69.0
            %Risk-free
                interest rate
            
            
            2.10
            %Dividend
                yield
            
            
            0.0
            %




The
      expected life of options represented the estimated period of time until exercise
      based on expectations of future behavior. The expected volatility was estimated
      using the historical volatility of the Company's stock which management believes
      is the best indicator at this time. The risk-free interest rate was based on
      the
      implied yield available on U.S. Treasury zero coupon issues with an equivalent
      term. The Company has not paid dividends in the past and does not intend to
      in
      the foreseeable future.




Included
      in compensation expense for the three and six months ended June 30, 2008, are
      $1,315 and $1,739 of share-based compensation relating to the options issued
      in
      February 2008. The Company did not have any share-based compensation during
      the
      three and six months ended June 30, 2007.





**Note
      11 - Common Stock**





During
      April 2008 the Company sold 400,000 shares of its common stock, in a Securities
      Purchase Agreement to an accredited investor, at $0.75 per share.





**Note
      12 - Subsequent Events**




In
        July
        2008, the Company entered into a Securities Purchase Agreement to sell certain
        accredited investors 166,667 shares of common stock and 83,334 warrants to
        purchase shares of common stock at $1.50 per share, for the sum of $250,000.
        Professional fees paid in connection with a finder’s fee and related legal
        expenses were $32,000.


17


**Item
      2. Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations.**




**Cautionary
      Note about Forward-Looking Statements**




**Forward-Looking
      Statements**





We
        caution that any forward-looking statements (as such term is defined in the
        Private Securities Litigation Reform Act of 1995) contained in this Quarterly
        Report on Form 10-Q/A or made by our management involve risks and uncertainties
        and are subject to change based on various important factors, many of which
        may
        be beyond our control. Accordingly, our future performance and financial
        results
        may differ materially from those expressed or implied in any such
        forward-looking statements. Accordingly, investors should not place undue
        reliance on forward-looking statements as a prediction of actual results.
        You
        can identify these statements as those that may predict, forecast, indicate
        or
        imply future results, performance or advancements and by forward-looking
        words
        such as *“believe,”
        “anticipate,” “expect,” “estimate,” “predict,” “intend,” “plan,” “project,”
“will,” “will be,” “will continue,” “will result,” “could,” “may,”
“might”* or any
        variations of such words or other words with similar meanings. Forward-looking
        statements address, among other things, our expectations, our growth strategies,
        including our plans to open new stores, our efforts to increase our gross
        margins and create a return on invested capital, plans to grow our private
        label
        business, projections of our future profitability, results of operations,
        capital expenditures or our financial condition or other “forward-looking”
information and includes statements about revenues, earnings, spending, margins,
        liquidity, store openings and operations, inventory, private label products,
        our
        actions, plans or strategies. We are including this cautionary statement
        in this
        report to make applicable and take advantage of the safe harbor provisions
        of
        the Private Securities Litigation Reform Act of 1995 for any forward-looking
        statements made by, or on behalf, of us.





The
        following factors, among others, in some cases have affected and in the future
        could affect our financial performance and actual results and could cause
        actual
        results for fiscal 2008 and beyond to differ materially from those expressed
        or
        implied in any forward-looking statements included in this report or otherwise
        made by our management: the intense competition in the sporting goods industry
        and actions by our competitors; our inability to manage our growth, open
        new
        stores on a timely basis and expand successfully in new and existing markets;
        the availability of retail store sites on terms acceptable to us; the cost
        of
        real estate and other items related to our stores; our ability to access
        adequate capital; changes in consumer demand; risks relating to product
        liability claims and the availability of sufficient insurance coverage relating
        to those claims; our relationships with our suppliers, distributors or
        manufacturers and their ability to provide us with sufficient quantities
        of
        products; any serious disruption at our distribution or return facilities;
        the
        seasonality of our business; the potential impact of natural disasters or
        national and international security concerns on us or the retail environment;
        risks related to the economic impact or the effect on the U.S. retail
        environment relating to instability and conflict in the Middle East or
        elsewhere; risks relating to the regulation of the products we sell, risks
        associated with relying on foreign sources of production; risks relating
        to
        implementation of new management information systems; factors associated
        with
        our pursuit of strategic acquisitions; risks and uncertainties associated
        with
        assimilating acquired companies; risks associated with our exclusive brand
        offerings; the loss of our key executives, our ability to meet our labor
        needs;
        changes in general economic and business conditions and in the specialty
        retail
        or sporting goods industry in particular; our ability to repay or make the
        cash
        payments under our senior convertible notes; changes in our business strategies;
        any factor described under Part II-Item 1A Risk Factors in our Form 10-Q/A
        filings and other factors discussed in other reports or filings filed by
        us with
        the Securities and Exchange Commission.





In
      addition, we operate in a highly competitive and rapidly changing environment;
      therefore, new risk factors can arise, and it is not possible for management
      to
      predict all such risk factors, nor to assess the impact of all such risk factors
      on our business or the extent to which any individual risk factor, or
      combination of factors, may cause results to differ materially from those
      contained in any forward-looking statement. We do not assume any obligation
      and
      do not intend to update any forward-looking statements except as may be required
      by securities laws.


18


**Overview**





Adrenalina
      is a retail, entertainment, media and publishing company that is focused on
      the
      nature and lifestyle surrounding extreme sports and outdoor adventures. We
      are
      also the nation's first and only retailer that has enhanced the retail shopping
      experience, with our particular mix of shopping and entertainment that includes
      the FlowRider®. Currently we have two stores open and are in the process of
      opening 5 additional stores during 2008 and the first quarter of
      2009.





Historically
      we were considered a media company which produced the show “Adrenalina”
primarily in Latin America. However over the last twelve months we have moved
      away from our original focus and placed a greater emphasis on our retail stores,
      with current plans of expanding into new markets throughout the United States.
      During 2008 we will continue our transformation to a retail focused operation.
      Although we will continue to produce our television show we will no longer
      receive any material revenues related to its production. Instead our focus
      will
      be on getting the show as much air time as possible in an effort to increase
      our
      brand awareness and to put us in front of our targeted audience.





We
      expect
      the next 12 months to be our most challenging as we transform our operations
      and
      expand into new markets. We are also going to face extreme financial pressure
      as
      we continue the construction of our Tampa, Atlanta and Houston stores and start
      building out our stores in Dallas and Denver. Each of these endeavors will
      take
      significant cash to open and currently we do not have sufficient financial
      capacity to fund their openings.





Also,
      through the rest of 2008 we anticipate that our current trend of losses will
      continue and may exceed our losses incurred during 2007; these continued losses
      are a direct result of greater pressures put on our existing employees which
      may
      in turn lead to greater turnover, coupled with the fact that we may not be
      able
      to find suitable additional employees or replacements for key
      personnel for our growth strategy. We may also face additional delays in opening
      our new stores, and if they are not completed on time then we may miss our
      fourth quarter retail sales opportunities. We may additionally face economic
      pressures if our sales in our new markets do not meet up to our anticipated
      results, because of the continued pressure placed on our buying capacity because
      of a declining currency or our customers ability to purchase our products
      because of a decline in their disposable income.





We
      are
      however, developing additional channels to make our products available
      throughout the rest of the world with our wholesale and internet operations.
      During 2007 our total wholesale and internet operation were not material to
      our
      financial results. We believe that these segments will turn during the third
      quarter of 2008 and expect to see our sales in these areas increase, which
      in
      turn will help provide us with some of the cash flows that will be necessary
      to
      support our operations.





While
      many of our competitors are slowing their expansion because of recent declines
      in the national retail sales, we believe that now is the time to push into
      new
      markets and will be key for future success. While recent trends have softened
      the real estate market we believe that incentives offered by malls will
      help to off-set most of our cost to develop during the rest of 2008 and
      2009.





**Critical
      Accounting Policies and Estimates**





We
      have
      prepared our financial statements in conformity with U.S. generally accepted
      accounting principles, and these financial statements necessarily include some
      amounts that are based on our informed judgments and estimates. Our senior
      management has discussed the development and selection of these critical
      accounting estimates, and the disclosure in this section of this report
      regarding them, with the Board of Directors. Our significant accounting policies
      are discussed in Note 1 of Notes to Consolidated Financial Statements. Our
      critical accounting policies represent those policies that are subject to
      judgments and uncertainties. As discussed below, our financial position and
      results of operations may be materially different when reported under different
      conditions or when using different assumptions in the application of these
      policies. In the event estimates or assumptions prove to be different from
      actual amounts, adjustments are made in subsequent periods to reflect more
      current information. Our critical accounting policies include:





*Merchandise
      Inventories* —Merchandise
      inventories are valued at the lower of cost or market, with cost determined
      using a weighted average method. Included in our cost basis are costs incurred
      in making inventories available for sale in our stores, such as freight and
      other distribution costs. We utilize perpetual inventory records to value
      inventory in our stores. Physical inventory counts are performed during each
      fiscal quarter and we adjust our perpetual records based on the results of
      the
      physical counts. Cost is calculated based upon the purchase order cost of an
      item at the time it is received by us, reconciled to actual vendor invoices,
      and
      also includes the cost of warehousing, handling, purchasing, and transporting
      the inventory to the stores. The cost of warehousing, handling, purchasing,
      and
      transporting, as well as vendor allowances, are recognized through cost of
      sales
      when the inventory is sold.  Due to systems limitations, it is
      impracticable for us to assign specific costs and allowances to individual
      units
      of inventory. As such, to properly match net costs against the related revenues,
      we must use all available information to appropriately estimate the costs and
      allowances to be deferred and recognized each period. Our estimate of when
      inventory is sold affects the deferral, and subsequent income statement
      recognition, of costs incurred in preparing inventory for sale and represents
      the most significant estimate in that calculation; any changes in this estimate
      could have a material impact on the financial statements.  Vendor
      allowances, which primarily represent volume rebates and cooperative advertising
      funds, are recorded as a reduction of the cost of the merchandise inventories.
      We earn vendor allowances as a consistent percentage of certain merchandise
      purchases with no minimum purchase requirements. We did not have any vendor
      allowance programs in fiscal 2008 and 2007 that were based on purchase volume
      milestones.


19


We
      maintain a provision for estimated shrinkage based on the actual historical
      results of our physical inventories. We compare our estimates to the actual
      results of the physical inventory counts as they are taken and adjust the
      shrinkage estimates accordingly. We also record adjustments to the value of
      inventory equal to the difference between the carrying value and the estimated
      market value, based on assumptions about future demand.





*Film
      Costs* —
We
      account for our film costs and related revenues (“film accounting”), in
      accordance with the guidance in SOP 00-2, which requires the exercise of
      judgment related to the film’s ultimate revenues. Our current film costs consist
      of the costs of completed television episodes, completed and unreleased episodes
      and in process production costs, all reflected at the lower of cost, less
      accumulated amortization, or fair value. Prior to release, we estimate our
      ultimate revenues for each film on factors such as our historical performance
      of
      similar films. On an annual basis we evaluate and update our estimates based
      on
      information available on the progress of the film’s production and, upon
      release, the actual results of each film. Changes in our estimate of the
      ultimate revenues from period to period affect the amount of film costs
      amortized in a given period and, therefore, could have an impact on the
      financial results for that period.





*Intangible
      Assets* —
We
      perform annual impairment tests of our intangible assets by comparing the book
      values of our reporting units to their estimated fair values. The estimated
      fair
      values of our reporting units are computed using estimates that include a
      discount factor in valuing future cash flows. There are assumptions and
      estimates underlying the determination of fair value and any resulting
      impairment loss. Another estimate using different, but still reasonable,
      assumptions could produce different results.




*Revenue
      Recognition*





*Retail
      Items* —
Revenue
      from sales of our merchandise is recognized at the time of the merchandise
      sale,
      Revenue is presented net of sales taxes collected. We allow for merchandise
      to
      be returned under most circumstances and provide for a reserve of estimated
      returns. Additionally, retail revenue includes income from our point-of-sale
      attraction, Flow Rider ® revenue, which is recorded at the time services are
      provided to the end user.





*Gift
      cards—* We
      record a gift card liability on the date we issue the gift card to the customer.
      We record revenue and reduce the gift card liability as the customer redeems
      the
      gift card. Gift card breakage is recorded as revenue based on an estimated
      amount of gift cards that are expected to go unused that are not subject to
      escheatment. For the periods ended June 30, 2008 and December 31,
      2007, we did not record an estimate for breakage due to our limited history
      and
      the overall estimated materiality for gift cards expected to remain
      unused.





*Film—* Revenue
      from our entertainment series are recognized when we have persuasive evidence
      of
      a sale or licensing arrangement; the film is complete and has been delivered
      or
      is available for immediate and unconditional delivery and the license period
      of
      the arrangement has begun.





*Publishing* —
We
      record magazine advertising revenues and subscriptions at the magazine cover
      date. Our magazine sales revenues are primarily generated from bulk orders
      from
      retail outlets such as newsstands, supermarkets and convenience stores. Revenues
      from bulk sales are recorded when the magazines are placed with the vendor,
      less
      an allowance for returns, based on our historical performance of the closed
      sales of our magazines.





*Internet
      Sales* — ** Revenue
      from internet sales are recognized upon estimated receipt by the
      customer.




*Barter—* From
      time to time and in the normal course of operations we enter into various barter
      transactions whereby, we exchange programming product for advertising time
      that
      we can use or resell. Generally, this advertising time is provided to us by
      broadcasting companies in the United States and Central and South America.
      For
      all recorded barter transactions we record the fair value of the related
      programming products based on comparable arrangements in the broadcast areas
      or
      from our existing contracts. These transactions are accounted for at the time
      the programming is broadcast and the advertising is used.





*Beneficial
        Conversion and Warrant Valuation* —We
        account for our convertible debentures with beneficial conversion features,
        in
        accordance with EITF No. 98-5 *,
        Accounting for Convertible Securities with Beneficial Conversion Features
        or
        Contingently Adjustable Conversion Ratios* and EITF
        No. 00-27, *Application
        of Issue No. 98-5 to Certain Convertible Instruments* . We
        record a beneficial conversion feature (“BCF”) related to the issuance of
        convertible debt instruments that have conversion features at fixed rates
        that
        are in the money when issued and the fair value of warrants issued in connection
        with those instruments as a discount to the debt. The discounts recorded
        in
        connection with the BCF and warrant valuation are recognized as non-cash
        interest expense over the term of the instruments.





The
        valuation of the warrants and conversion feature require us to make certain
        estimates about their fair value. If actual results differ from estimated
        results and these notes and warrants convert to common stock, then the
        differences on the date of conversion could be material to our financial
        position.


20


*Income
      Taxes* —We
      record income tax expense using the liability method for taxes and are subject
      to federal, state, and local jurisdictions. As necessary, our current tax
      liability or asset is recognized for the estimated taxes payable or refundable
      on the tax returns for the current year and a deferred tax liability or asset
      is
      recognized for the estimated future tax effects attributable to temporary
      differences and carryforwards. Deferred tax assets and liabilities are measured
      using enacted income tax rates expected to apply to taxable income in the years
      in which those temporary differences are expected to be recovered or settled.
      The effect of a change in tax rates is recognized as income or expense in the
      period that includes the enactment date. Also a valuation allowance is recorded
      to reduce the carrying amounts of deferred tax assets unless it is more likely
      than not that such assets will be realized. If different assumptions had been
      used, our tax expense, assets, and liabilities could have varied from recorded
      amounts. If actual results differ from estimated results or if we adjust these
      assumptions in the future, we may need to adjust our deferred tax assets or
      liabilities, which could impact our effective tax rate.





**General**





**Restatement**





During
        the third quarter of 2008, we discovered errors in their previously issued
        financial statements as of December 31, 2007, March 31, 2008 and June 30,
        2008
        related to the accounting for the Beneficial Conversion Features on our November
        and February convertible debt issues. These errors occurred because we
        incorrectly applied a marketability discount to the market value of their
        common
        stock based on a limited history and insufficient trading volume, which was
        then
        used to calculate the fair value of the embedded instruments. The correction
        these errors resulted in the reduction in the carrying amount of the debt
        due to
        an increase in the debt discount and an increase in the equity by approximately
        $1,698,000 and $1,455,000 from their November and February convertible debt
        issues, as well as an understatement of our non-cash interest expense and
        net
        loss by approximately $31,700 and $286,800 as of December 31, 2007 and June
        30,
        2008.





These
        errors were accounted for as a prior period adjustments in accordance with
        Statement of Financial Accounting Standard (SFAS) No. 154 “Accounting for
        Changes and Error Corrections.” As a result, we have restated our year-end
        December 31, 2007 and interim periods March 31 and June 30, 2008 consolidated
        statements of operations cash flows and equity.




**Results
      of Reporting Lines**





We
      classify our business interests in three reportable lines:





Retail
      sales from our stores which focus on extreme sports and adventure themed
      clothing and merchandise; Entertainment which is comprised of theatrical and
      TV
      films as well as musical productions and distribution; and Publishing which
      is
      made up of publications centered around the life styles of extreme sports
      enthusiast and alternative music trends.


21


The
      following table sets forth the percentage relationship net sales to costs of
      sales for each of our reporting lines in our condensed consolidated statements
      of operations. This table should be read in conjunction with the following
      discussion and with our consolidated financial statements, including the related
      notes.




**For the six months ended****June 30,**
              
              **June 30,**(Amounts in thousands of dollars)
              
              **2008**
              
              **2007****Retail
                  Sales**
              
              $
              2,190
              
              
              972Cost
                  of sales
              
              $
              1,189
              
              
              492**Gross
                  profit**
              
              
              45.7
              %
              
              49.4
              %**Entertainment**
              
              $
              35
              
              
              476Cost
                  of sales
              
              $
              20
              
              
              531**Gross
                  profit**
              
              
              42.9
              %
              
              (11.6
              )%**Publishing**
              
              $
              87
              
              
              92Cost
                  of sales
              
              $
              141
              
              
              228**Gross
                  profit**
              
              
              (62.7
              )%
              
              (147.8
              )%**Total
                  Sales**
              
              $
              2,312
              
              
              1,540Cost
                  of sales
              
              $
              1,350
              
              
              1,251**Gross
                  profit**
              
              
              41.6
              %
              
              18.8
              %





**Results
      of Operations**





**Three
      Months Ended June 30, 2008 compared to June 30, 2007**





*Net
      Revenues.* Net
      revenues for the three months ended June 30, 2008 increased $517,300 or 76.4%
      as
      compared to the three months ended June 30, 2007, primarily due to increased
      volume in retail operations as we had an additional store which opened in
      December 2007. Revenues from our retail stores amounted to $1,124,600 for the
      three months ended June 30, 2008 as compared to $519,800 for the three months
      ended June 30, 2007 resulting in an increase of $604,800 or 116.4%. Revenues
      from entertainment and publishing were $18,200 and $52,000 for the three months
      ended June 30, 2008 as compared to $112,300 and $45,400 for the three months
      ended June 30, 2007; resulting in a total decrease of $87,500 in entertainment
      and publishing revenue from the same period in 2007. This decrease is
      attributable to a shift in corporate strategy from a film based entertainment
      company to one focused on expanding its revenue base primarily through
      merchandise sales and entertainment via retail operations
      nationwide.




*Gross
      Margin.* Our
      Gross Margin for the three months ended June 30, 2008 increased $413,300 to
      $556,100 from $142,800 for the three months ended June 30, 2007. This increase
      of 289.3% is principally due to a greater volume of retail sales as media
      entertainment activity decreased.




*Payroll
      and Employee Benefits.* Payroll
      and employee benefits increased to $684,100 for three months ended June 30,
      2008
      from $390,400 for the three months ended June 30, 2007, an increase of $293,700
      or 75.2%. This increase is primarily attributable to additional employees to
      support the retail operations and an increase in support personnel in
      anticipation of increased operations.




*Occupancy
        Expense.* Occupancy expense includes rent, utilities, insurance and other costs necessary
        for the occupancy of the stores and main office. During the three months
        ended
        June 30, 2008 this cost increased to $769,700 from $173,800 or 342.9% from
        the
        three months ended June 30, 2007. This increase is primarily due an increase
        in
        rent expense related to the additional leases signed by us during the fourth
        quarter of 2007 and our second store which opened during December 2007, as
        well
        as an increase in our rent expense of $620,600 during the three months ended
        June 30, 2008.


22


*All
        Other Selling, General and Administrative Expenses.* Other
        Selling, general and administrative expenses are primarily made up of marketing
        and advertising expenses, professional fees, bad debt expense , amortization
        expense, depreciation expense and costs related to maintaining our patents
        and
        trademarks. For the three months ended June 30, 2008 these costs increased
        by
        $15,200, a increase of 2.6% from the three months ended June 30, 2007. This
        change was mainly comprised of additional professional fees of $277,200,
        related
        to our annual audit, residual merger related expenses and registration statement
        expenses, offset by a decrease in amortization expense on our film products
        of
        $149,800 and a decrease in marketing and advertising of $72,000 from the
        three
        months ended June 30, 2007.





*Net
        Loss.* The net
        loss for the three months ended June 30, 2008 increased to $1,977,500 from
        $1,002,100 for the three months ended June 30, 2007, an increase of $975,400
        or
        97.3%. This increase is primarily due to increased interest expense of $505,900
        from our convertible debentures from amortization of the debt discount and
        an
        increase in our rent expense of $620,600 related to the leases we signed
        during
        the fourth quarter of 2007.





**Six
      Months Ended June 30, 2008 compared to June 30, 2007**





*Net
        Revenues.* Net
        revenues for the six months ended June 30, 2008 increased $771,800 or 50.1%
        as
        compared to the six months ended June 30, 2007, primarily due to increased
        volume in retail operations as we had an additional store opened in December
        2007. Revenues from our retail stores amounted to $2,189,800 for the six
        months
        ended June 30, 2008 as compared to $971,700 for the six months ended June
        30,
        2007 resulting in a increase of $1,218,100 or 125.4%. Revenues from
        entertainment and publishing amounted to $34,800 and $86,900 for the six
        months
        ended June 30, 2008 as compared to $476,400 and $91,600 for the six months
        ended
        June 30, 2007; resulting in a decrease of $446,300 in entertainment and
        publishing revenue from the same period in 2007. This decrease is attributable
        to a shift in corporate strategy from a film based entertainment company
        to one
        focused on expanding its revenue base primarily through merchandise
        sales.




*Gross
      Margin.* Gross
      Margin for the six months ended June 30, 2008 increased $672,600 to $961,800
      from $289,200, for the six months ended June 30, 2007. This increase of 232.6%
      from the six months ended June 30, 2008 is principally due to a greater volume
      of retail sales as media entertainment activity decreased.




*Payroll
      and Employee Benefits.* Payroll
      and employee benefits increased to $1,130,600 for six months ended June 30,
      2008
      from $843,200 for the six months ended June 30, 2007, an increase of $287,400
      or
      34.1%. This increase is primarily related to our expansion into new
      stores.




*Occupancy
        Expense.* Occupancy expense includes rent, utilities, insurance and other costs necessary
        for the occupancy of the stores and main office. During the six months ended
        June 30, 2008 this cost increased to $1,739,400 from $458,300 for the six
        months
        ended June 30, 2007. This increase is primarily attributable to the increase
        in
        rent expense related to the additional leases signed. Rent expense for the
        six
        months ended June 30, 2008 was $1,428,000. For the six months ended June
        30,
        2008 occupancy expense increased $1,281,000 or 279.5%.





*All
        Other Selling, General and Administrative Expenses.* Other
        Selling, general and administrative expenses are primarily made up of marketing
        and advertising expenses, professional fees, bad debt expense, amortization
        expense, depreciation expense and cost related to maintaining our patents
        and
        trademarks. For the six months ended June 30, 2008 these costs decreased
        by
        $51,800, or 4.3% verse the six months ended June 30, 2007. This decrease
        was
        primarily comprised of a decrease in our marketing expense of $150,500 and
        a
        decrease in our film amortization of $299,700, which was offset by an increase
        in our professional fees of $426,300 which was related to our annual audit,
        residual merger related expenses and registration statement expenses versus
        the
        six months ended June 30, 2007.





*Net
        Loss.* The net
        loss for six months ended June 30, 2008 increased to $4,268,300 from $2,224,100
        for the six months ended June 30, 2007, an increase of $2,044,200 or 91.9%.
        This
        increase is primarily due to an increase interest expense of $1,132,000 on
        our
        convertible debentures, an increase in our rent expense of $1,428,000 offset
        by
        an increase in our gross margin of $673,000. This overall increase is primarily
        attributable to a change in our focus on retail stores as we expand our
        operations.


23


**Plan
      of Operation**





Currently
      we do not believe that the Company will be able to generate any significant
      cash
      flow during the coming year to fund our planned expansion or to fund our current
      operations. However, under our current model of funding operations through
      capital contributions and debt we believe that we can sustain ourselves for
      the
      next twelve months. Currently we are seeking additional outside funding to
      keep
      the business operational beyond 2008; however there is no assurance additional
      debt or capital will be available to us on acceptable terms.




**Liquidity
      and Capital Resources**





As
        of
        June 30, 2008, the Company's current liabilities exceeded its current assets
        by
        $1,664,000. This is mainly due to retail operations under construction where
        the
        current liability is incurred during the purchase of a long term asset. At
        June
        30, 2008, there were $998,500 in current liabilities for properties under
        construction.




As
      of
      June 30, 2008, the Company has cash and cash equivalents of $329,200 and net
      accounts receivable of $120,100, which provided available capital for operations
      primarily from the proceeds of the debt incurred by the Company during February
      2008. The lack of available cash from the operations of the Company has an
      adverse impact on the Company's liquidity, activities and operations. Without
      realization of additional capital, it would be unlikely for the Company to
      execute its business plan. Management is seeking additional working capital
      through additional debt or equity private placements, additional notes payable
      to banks or related parties, or from other available funding sources at market
      rates of interest, or a combination of these. The ability to raise necessary
      financing will depend on many factors, including the economic and market
      conditions prevailing at the time financing is sought. No assurances can be
      given that any necessary financing can be obtained on terms favorable to the
      Company, if at all.





During
        February 2008, we issued to three accredited investors our 5% Senior Secured
        Convertible Debentures in the principal amount of $2,500,000. The proceeds
        of
        that offering have already been used in connection with new store openings
        and
        equipment purchases. In addition, as of June 30, 2008, we had signed commitments
        to purchase equipment, build out our new store locations and committed under
        our
        lease agreements in excess of $45.4 million. Without additional funding,
        and the
        rapid generation of significant cash flow from operations, we will likely
        be
        unable to meet these commitments and we may have to curtail our operations.
        We
        are looking for additional funding which may or may not become available
        to us
        on acceptable terms. Any such funding may be in the form of equity and/or
        debt
        financing and will likely dilute the ownership interest of our current
        shareholders.





Net
        cash
        flows used in operating activities for the six months ended June 30, 2008
        were
        $287,600 as compared to net cash used in operating activities of $1,435,300
        for
        the six months ended June 30, 2007. For the six months ended June 30, 2008,
        our
        net loss amounted to $4,268,300, which included a non-cash adjustment due
        to
        depreciation and amortization of $1,080,900. Changes in current assets and
        liabilities provided $1,402,400 in cash. For the six months ended June 30,
        2007
        our net loss amounted to $2,224,100, which included a non-cash adjustment
        due to
        depreciation and amortization of $487,200. Changes in current assets and
        liabilities provided $301,600 in cash.





Net
      cash
      flows used in investing activities for the six months ended June 30, 2008 was
      $2,808,100 as compared to $1,773,800 for the six months ended June 30, 2007.
      For
      the six months ended June 30, 2008 and 2007 our net cash used in investing
      activities was primarily attributable to the purchase of property and equipment
      for our retail operations. Additionally during the six months ended June 30,
      2008 we purchased and sold available for sale securities. Our securities held
      at
      the end of the quarter were approximately $13,000.





Net
        cash
        flows provided by financing activities for the six months ended June 30,
        2008
        were $2,980,100 as compared to $3,040,900 for the six months ended June 30,
        2007. This cash provided by financing activities in the six months ended
        June
        30, 2008 was primarily attributable to proceeds of $2,500,000 related to
        the
        issuance of convertible debentures. The cash provided by financing activities
        in
        the six months ended June 30, 2007 was primarily attributable to proceeds
        of
        $4,433,000 in cash from related parties.




**Dividends**




Holders
      of common stock are entitled to receive such dividends as the board of directors
      may from time to time declare out of funds legally available for the payment
      of
      dividends. No cash dividends have been paid on our common stock, and we do
      not
      anticipate paying any cash dividends on our common stock in the foreseeable
      future.




On
      August
      13, 2007, we formed and spun-off our wholly-owned subsidiary, Generic Marketing
      Services, Inc. a Nevada corporation to its shareholders of record, in a
      one-for-one special stock dividend. Following the spin-off, we did not retain
      any ownership in Generic Marketing Services, Inc.





24




**Item
      4T. Controls and Procedures**





**Disclosure
      Controls and Procedures**





As
      required by SEC Rule 13a-15 or Rule 15d-15, our Chief Executive and Chief
      Financial Officer carried out an evaluation under the supervision and with
      the
      participation of our management, of the effectiveness of the design and
      operation of our disclosure controls and procedures as of the end of the period
      covered by this report. Based on the foregoing evaluation, we have concluded
      that our disclosure controls and procedures are not effective as of June 30,
      2008, and that they do not allow for information required to be disclosed by
      the
      company in the reports that it files or submits under the Exchange Act to be
      recorded, processed, summarized and reported, within the time periods specified
      in the SEC's rules and forms. Based on the foregoing, our Chief Executive and
      Chief Financial Officer concluded that our disclosure controls and procedures
      were not effective. Specifically, the Company identified several material
      weaknesses in our internal control over financial reporting as described in
      Item
      8A and 8A(T) in our annual report on Form 10-KSB filed with the SEC on April
      15,
      2008, which had not been corrected as of June 30, 2008. Disclosure controls
      and
      procedures include, without limitation, controls and procedures designed to
      ensure that information required to be disclosed by the company in the reports
      that it files or submits under the Exchange Act is accumulated and communicated
      to the Company’s management, including its Chief Executive and Chief Financial
      Officer as appropriate to allow timely decisions regarding required
      disclosure.





Our
      management does not expect that our disclosure controls and procedures or our
      internal control over financial reporting will necessarily prevent all fraud
      and
      material error. Our disclosure controls and procedures are designed to provide
      reasonable assurance of achieving our objectives and our Chief Executive and
      Chief Financial Officer concluded that our disclosure controls and procedures
      are effective at that reasonable assurance level. Further, the design of a
      control system must reflect the fact that there are resource constraints, and
      the benefits of controls must be considered relative to their costs. Because
      of
      the inherent limitations in all control systems, no evaluation of controls
      can
      provide absolute assurance that all control issues and instances of fraud,
      if
      any, within the Company have been detected. These inherent limitations include
      the realities that judgments in decision-making can be faulty, and that
      breakdowns can occur because of simple error or mistake. Additionally, controls
      can be circumvented by the individual acts of some persons, by collusion of
      two
      or more people, or by management override of the internal control. The design
      of
      any system of controls also is based in part upon certain assumptions about
      the
      likelihood of future events; and, there can be no assurance that any design
      will
      succeed in achieving its stated goals under all potential future conditions.
      Over time, controls may become inadequate because of changes in conditions,
      or
      the degree of compliance with the policies or procedures may
      deteriorate.




**Internal
      Control over Financial Reporting**




Pursuant
      to Rule 13a-15(d) or Rule 15d-15(d) of the Exchange Act, our management, with
      participation with the Company’s Chief Executive and Chief
      Financial Officer, are responsible for evaluating any change in the
      Company's internal control over financial reporting (as defined in Rule
      13a-15(f) or Rule 15d-15(f) under the Exchange Act), that occurred during each
      of our fiscal quarters that has materially affected, or is reasonably likely
      to
      materially affect, the Company's internal control over financial
      reporting.





Our
      internal controls over financial reporting are designed to provide
      reasonable assurance regarding the reliability of financial reporting and the
      preparation of financial statements for external purposes in accordance with
      generally accepted accounting principles and includes those policies and
      procedures that: (i) Pertain to the maintenance of records that in reasonable
      detail accurately and fairly reflect the transactions and dispositions of the
      assets of the company; (ii) Provide reasonable assurance that transactions
      are
      recorded as necessary to permit preparation of financial statements in
      accordance with generally accepted accounting principles, and that receipts
      and
      expenditures of the company are being made only in accordance with
      authorizations of management and directors of the company; and (iii) Provide
      reasonable assurance regarding prevention or timely detection of unauthorized
      acquisition, use or disposition of the company’s assets that could have a
      material effect on the financial statements. Our internal controls framework
      is
      based on the criteria set forth in the Internal Control - Integrated Framework
      issued by the Committee of Sponsoring Organizations of the Treadway Commission
      (COSO).




Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions or that the degree of compliance
      with the policies or procedures may deteriorate.




Based
      on
      the foregoing evaluation, the Company has concluded that there was no change
      in
      our internal control over financial reporting that occurred during the six
      months ended June 30, 2008, that has materially affected, or is reasonably
      likely to materially affect, our internal control over financial
      reporting.


25


We
      continue to have the following material weaknesses in our internal control
      over
      financial reporting, as described in Item 8A and 8A(T) in our annual report
      on
      Form 10-KSB filed with the SEC on April 15, 2008..





1.
            *Lack
                of sufficient resources in our accounting and finance
                organization*.
                The Company did not maintain a sufficient complement of personnel
                to
                maintain an appropriate accounting and financial reporting structure
                to
                support the activities of the Company. As of December 31, 2007, the
                Company had an insufficient number of personnel with clearly delineated
                and documented responsibilities in order to timely prepare and file
                its
                year-end financial statements and Annual Report on Form 10-KSB. Due
                to the Company’s limited resources, it has had to rely on an outside
                consultant to perform period closings and key reconciliations of
                the
                Company’s transactions and accounts, and a second outside accountant to
                prepare its annual financial statements in anticipation of the audit
                by
                the independent certified public accountants. In addition, the Company’s
                Chief Financial Officer is responsible for preparing or compiling
                certain
                critical portions of the annual financial information and is often
                responsible for performing the final review of this information.
                These
                represent a material weakness in design of internal controls over
                financial reporting. Due to the potential pervasive effect on the
                financial statements and disclosures and the absence of other mitigating
                controls there is a more than remote likelihood that a material
                misstatement of the annual financial statements could occur and not
                be
                prevented or detected. This material weakness has also contributed
                to the
                material weaknesses in Nos. 2 and 3
                below





2.
            *Lack
                of sufficient resources to provide for suitable segregation of
                duties*.
                Specifically, in connection with the lack of sufficient accounting
                and
                finance resources described in material weakness No. 1 above, certain
                financial and accounting personnel had incompatible duties that permitted
                creation, review, processing and potential management override of
                certain
                financial data with limited independent review and authorization
                affecting
                cash, inventory, accounts payable and accounts receivable. The increase
                in
                the Company’s administrative staffing has not been commensurate with the
                rapid growth in the volume of business transactions. These represent
                a
                material weakness in design of internal controls over financial reporting.
                Due to the potential pervasive effect on the financial statements
                and
                disclosures and the absence of other mitigating controls there is
                a more
                than remote likelihood that a material misstatement of the annual
                financial statements could occur and not be prevented or
                detected.





3.
            *Inadequate
                access controls with regard to computer master file
                information*.
                Specifically, certain of the Company’s personnel in accounts payable,
                accounts receivable and inventory had access and could make changes
                to
                master files without approval. The internal controls were not adequately
                designed. Due to the potential pervasive effect on the financial
                statements and disclosures and the absence of other mitigating controls
                there is a more than remote likelihood that a material misstatement
                of the
                interim and annual financial statements could occur and not be prevented
                or detected.





4.
            *Inadequate
                controls over the processing of certain expenses.*Costs relating to the Company’s products and services are a significant
                cost of operations. The internal controls were not adequately designed
                or
                operating in a manner to establish specific controls to ensure that
                all
                expenses were approved and processed on a timely basis. This material
                weakness is the result of aggregate deficiencies in internal control
                activities and could result in a material misstatement of financial
                statements that would not be prevented or
                detected.




5.
            *Inadequate
                controls over the processing of adjustments to accrued
                expense*.
                The internal controls over accrued expenses, period accruals and
                adjustments, were not adequately designed or operating in a manner
                to
                effectively support the expenditure cycle. Certain adjustments were
                processed without proper approval, or the Company’s procedures did not
                specifically document the approvals that would be required. This
                material
                weakness is the result of aggregate deficiencies in internal control
                activities and could result in a material misstatement of the accrued
                expenses and operating expenditures that would not be prevented or
                detected.





6.
            *Inadequate
                controls over the measurement and adjustments to Capitalized Film
                Costs.*The Company did not have in place adequate processes and procedures
                for
                measuring and evaluating capitalized film costs under the ultimate
                revenues method of accounting. This material weakness resulted in
                a
                restatement of our 2006 consolidated financial
                statements




7.
            *Inadequate
                Safeguards of Personnel Files and Customer Information.*The Company did not have in place adequate physical safeguards to
                prevent
                an employee from gaining access to sensitive customer information
                and
                employee records.





8.
            *Audit
                Committee and Financial Expert*.
                The Company does not have a formal audit committee with a financial
                expert, and thus the Company lacks the board oversight role within
                the
                financial reporting process.


26





9.
            *Fraud
                Prevention and Detection*.
                In conjunction with the lack of segregation of duties, the company
                did not
                institute specific anti-fraud
                controls.





10.
            *Whistle
                Blower Policy*.
                The company did not institute, as of December 31, 2007, a
                whistle-blower policy and procedure as required by Section 301 of the
                Sarbanes-Oxley Act.





11.
            *Written
                Policies and Procedures*.
                The Company did not have any written policies or procedures that
                cover the
                Board of Director, Management or its Employees. Currently the Company
                lacks any written policy regarding the
                following:





a)
            Code
                of Ethicsb)
            Management
                and Board over-sitec)
            Employee
                responsibilitiesd)
            Program
                application and other IT applicationse)
            Data
                security and Customer Informationf)
            Fraud
                prevention and detection





*Remediation
      of Material Weaknesses*





As
      of
      December 31, 2007, and June 30, 2008, there were control deficiencies which
      constituted material weaknesses in our internal control over financial
      reporting. To the extent reasonably possible in our current financial condition,
      we will continue to seek the advice of outside consultants and internal
      resources to implement additional internal controls.




In
      addition, we are taking steps to hire additional personnel, implement new
      policies and procedures within the financial reporting process with adequate
      review and approval procedures. During the three months ended June 30, 2008,
      the
      company hired a Director of IT and new Chief Financial Officer. These 2
      additions to the Company’s senior management have begun to improve the internal
      control over financial reporting which may help to mitigate the material
      weaknesses in the future.




Through
      these steps, we believe we are addressing the deficiencies that affected our
      internal control over financial reporting as of December 31, 2007, and June
      30, 2008. Because the remedial actions additionally require hiring of personnel,
      upgrading certain of our information technology systems, and relying extensively
      on manual review and approval, the successful operation of these controls for
      at
      least several quarters may be required before management may be able to conclude
      that the material weaknesses have been remediated. We intend to continue to
      evaluate and strengthen our ICFR systems. These efforts require significant
      time
      and resources. If we are unable to establish adequate ICFR systems, we may
      encounter difficulties, which in turn may have a material adverse effect on
      our
      ability to prepare financial statements in accordance with GAAP and to comply
      with our SEC reporting obligations.


27


**PART
      II OTHER INFORMATION**





**Item
      1. Legal Proceedings**




The
      Company is not a party to any legal proceedings.





**Item
      1A. Risk Factors**





In
      addition to the other information set forth in this report, you should carefully
      consider the factors discussed in Part I, “Item 1A. Risk Factors” in
      our Annual Report on Form 10-KSB for the year ended December 31, 2007, as filed
      with the Securities and Exchange Commission on April 15, 2008, which could
      materially affect our business, financial condition, financial results or future
      performance. Reference is made to “Item 2. Management’s Discussion and
      Analysis of Financial Condition and Results of Operations — Forward-Looking
      Statements” of this report which is incorporated herein by
      reference.





**Unauthorized
      disclosure of sensitive or confidential customer information could harm the
      Company’s business and standing with our customers.**





The
      protection of our customer, employee and Company data is critical to us. The
      Company relies on commercially available systems, software, tools and monitoring
      to provide security for processing, transmission and storage of confidential
      customer information, such as payment card and personal information. Despite
      the
      security measures the Company has in place, its facilities and systems, and
      those of its third party service provider, may be vulnerable to security
      breaches, acts of vandalism, computer viruses, misplaced or lost data,
      programming and/or human errors, or other similar events. Any security breach
      involving the misappropriation, loss or other unauthorized disclosure of
      confidential information, whether by the Company or its vendors, could damage
      our reputation, expose us to risk of litigation and liability, disrupt our
      operations and harm our business.





**We
      may be subject to claims and our insurance may not be sufficient to cover
      damages related to those claims.**





We
      may be
      subject to lawsuits resulting from injuries associated with the use of sporting
      goods equipment that we sell. In addition, we may also be subject to lawsuits
      relating to the design, manufacture or distribution of our private label
      products. Additionally, we may incur losses relating to these claims or the
      defense of these claims and there is a risk that claims or liabilities will
      exceed our insurance coverage and we may be unable to retain adequate liability
      insurance in the future. Although we have entered into product liability
      indemnity agreements with many of our vendors, we cannot assure you that we
      will
      be able to collect payments sufficient to offset product liability losses or
      in
      the case of our private label products, collect anything at all.





**Item
      2. Changes in Securities and Use of Proceeds**




On
      April
      25, 2008, the company sold 400,000 shares of unregistered common shares to
      an
      accredited investor at $0.75 per common shares, for sum of $300,000.





**Item
      3. Defaults upon Senior Securities**




As
      of
      June 30, 2008 the Company’s registration statement with the SEC had not been
      declared effective and as such the Company was in default of its’ $3,000,000
      senior convertible debentures. As of August 12, 2008 the holders of these
      debentures notified the Company that they had waived the escalation of the
      debentures under the default provisions.


28




**Item
      4. Submission of Matters to a Vote of Security Holders**




None.





**Item
      5. Other Information**




See
      Part
      II. Item 2 above.




**Item
      6. Exhibits**


**Index
      to Exhibits**





31.1 Certifications of the President pursuant to Section 302 of the
                Sarbanes- Oxley Act of 2002.31.2 Certifications of the Treasurer pursuant to Section 302 of the
                Sarbanes- Oxley Act of 2002.32.1 Certifications of President pursuant to 18 U.S.C. Section 1350
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                200232.2 Certifications of Treasurer pursuant to 18 U.S.C. Section 1350
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.


29


**SIGNATURES**





Pursuant
        to the requirements of Section 13 or 15(d) of the Securities Exchange Act
        of 1934, the Registrant has duly caused this report to be signed on October
        17,
        2008 on its behalf by the undersigned, thereunto duly
        authorized.




**Adrenalina**By:
            /s/
                Ilia LekachIlia
                LekachChief
                Executive OfficerBy:
            /s/
                Michael LabinskiMichael
                LabinskiChief
                Financial Officer


30