**SECURITIES
      AND EXCHANGE
      COMMISSION**


**Washington,
      D.C. 20549**





**F
      O R M 10-KSB**





**[x]  
      ANNUAL REPORT PURSUANT TO SECTION l3 OR l5 (d) OF**


**THE
      SECURITIES EXCHANGE ACT OF l934**





**For
      the fiscal year ended December 31, 2005**





**OR**


**[ 
      ]   TRANSITION REPORT PURSUANT TO SECTION 13**


**OR
      15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**





**Commission
      file number 1-12635**


----------------------





**PARADISE
      MUSIC & ENTERTAINMENT, INC.**


(Name
      of
      Small Business Issuer in its charter)





**Delaware**
            **13-3906452**(State
                or other jurisdiction of
            (I.R.S.
                Employer Identification No.)incorporation
                or organization)**122
                East 42****nd****Street, New York, New York**
            **10168**(Address
                of principal executive offices)
            (Zip
                Code)





**Issuer's
      telephone number, including area code: (888) 565-3259**





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





Title
                of each class
            Name
                of Each Exchange on Which Registered----------------------
            -------------------------------------------------------Common
                Stock, par value $0.01 per share
            Over-the-counter





**Securities
      registered pursuant to Section 12(g) of the Exchange Act:** None





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. [_]





Note—Checking
      the box above will not relieve any registration required to file reports
      pursuant to Section 13 or 15(d) of the Exchange Act from their obligations
      under
      those Sections.





Check
      whether the issuer (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
      |__|
      No |X_|





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant's knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. |
       |





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes
      |__|
      No |X_|





The
      issuer
      had $2,916,000 in revenues for the year ended December 31, 2005.





The
      aggregate market value of voting and non-voting common equity held by
      non-affiliates of the issuer on March 1, 2007 was approximately $328,000.
      On such date, the last sale price of issuer's common stock was $0.011. Solely
      for the purposes of this calculation, shares beneficially owned by directors,
      officers and beneficial owners of in excess of 10% of the registrant's common
      stock have been excluded, except shares with respect to which such persons
      disclaim beneficial ownership. Such exclusion should not be deemed a
      determination or admission by registrant that such persons are, in fact,
      affiliates of registrant. As of January 31, 2007 there were 58,496,358 shares
      of
      common stock outstanding.












**DOCUMENTS
      INCORPORATED BY REFERENCE:** None





Transitional
                  Small Business Disclosure Format (check one)
              Yes
                  |_|     No
                  |X|




















**PART
        I**
 
 The
        statements contained in this Annual Report that are not historical facts
        are
        forward-looking statements. Such forward-looking statements may be identified
        by, among other things, the use of forward-looking terminology such as
        "believes," "expects," "may," "will," "should" or "anticipates" or the negative
        thereof or other variations thereon or comparable terminology, or by discussions
        of strategy that involve risks and uncertainties. These forward-looking
        statements involve predictions. Our actual results, performance or achievements
        could differ materially from the results expressed in, or implied by, these
        forward-looking statements. Potential risks and uncertainties that could
        affect
        our future operating results include, but are not limited to, our need to
        raise
        additional capital, our history of losses, our change in focus with our business
        strategy, our ability to find, acquire, and integrate other businesses, and
        the
        high-risk nature of the music and entertainment business.
  ITEM
        1.
        DESCRIPTION OF BUSINESS
 
 GENERAL
 
 Paradise
        Music & Entertainment, Inc. ("Paradise" or the "Company"), a diversified
        holding company, is focused on adding to its 2005 acquisition, Environmental
        Testing Laboratories, Inc. (“ETL”). Now a wholly owned subsidiary, ETL operates
        profitably in the nationwide $1.8 billion a year environmental testing industry.
        Expanding ETL is a focal point for Paradise, and it is pursuing additional
        businesses. The Company, through its new expansion plans, along with its
        recently expanded management team, is working to attract and subsequently
        acquire companies operating successfully in other high growth industries.
        The
        goals of the expansion strategy include utilizing the Company’s existing Net
        Operating Loss (NOL) as well as aggregating these companies into successful
        subsidiaries. As of the date of this report, we are not in the process of
        negotiating any additional mergers or acquisitions. Paradise operates offices
        in
        New York and Colorado.
 
 In
        the
        past, we attempted to operate Paradise as a music and entertainment company
        focused on partnering with other companies to build their brands. In 2005,
        the
        Company launched the first step of the new strategy in order to maximize
        the
        opportunity for growing into a profitable operating company. That strategy
        is to
        acquire companies that are, or can be, operated profitably in the Services
        and
        Manufacturing sectors. Management has 35 years experience profitably operating
        manufacturing and service companies.
 
 Paradise
        is considering pursuing acquisitions in the following vertical industry
        segments:
 
 SERVICES
 Environmental
        Testing
 To
        that
        end, Paradise acquired Environmental Testing Laboratories, Inc. (ETL) of
        Farmingdale, NY in February 2005 as reported below.
 
 MANUFACTURING
 Product
        lines and companies that have a quantifiable market upside
        opportunity.
 
 In
        these
        potential scenarios, Paradise expects to improve the operational performance
        and
        the asset utilization of the acquired entities via both horizontal and vertical
        expansion. In each scenario, Paradise plans to increase its revenues while
        holding overhead and capitalization costs to a minimum by integrating back
        office, front office and field systems, routes and personnel. When it is
        appropriate, Paradise expects to spin these successful companies out to its
        shareholders as separate public entities.
 
 
 2005
        ACQUISITION OF ENVIRONMENTAL TESTING LABORATORIES, INC.
 
 On
        February 14, 2005, ETL Acquisition Corp. (“ETL”), a Delaware corporation and a
        wholly owned subsidiary of Paradise, completed the acquisition of all or
        substantially all of the assets and business of Environmental Testing
        Laboratories, Inc.  Environmental Testing Laboratories, Inc. is a privately
        held company based in Farmingdale, New York, and engaged in the business
        of
        environmental testing (as further described in the Current Report on form
        8-K
        filed with the United States Securities and Exchange Commission (the "SEC")
        on
        February 18, 2005 and the Asset Purchase Agreement filed as Exhibit 2.1 to
        that
  
   Current
        Report and incorporated herein by this reference). ETL acquired assets
        consisting primarily of accounts receivable, machinery and laboratory equipment
        of Environmental Testing Laboratories, Inc. valued at $1,915,463 at the time
        of
        the closing. At closing ETL paid for these assets by assuming liabilities
        of
        $761,820 from Environmental Testing Laboratories, Inc. and agreeing to assume
        additional liabilities of $1,153,643 from affiliated companies of Environmental
        Testing Laboratories, Inc. The $761,820 assumed directly from Environmental
        Testing Laboratories, Inc. consisted of approximately $530,000 of accounts
        payable, approximately $170,000 of tax obligations due to various taxing
        authorities, and approximately $63,000 in judgments entered against
        Environmental Testing Laboratories, Inc. The additional liabilities of
        $1,153,643 from affiliated companies of Environmental Testing Laboratories,
        Inc.
        which ETL agreed to assume would be determined by ETL in the future at its
        sole
        discretion; however, ETL agreed to pay a minimum of $250,000 of this $1,153,643
        within thirty days of the closing. On February 24, 2005 ETL made a payment
        of
        $250,000 in cash against the additional liabilities.
 
 On
        December 19, 2005 the parties agreed to amend the terms of the purchase as
        follows: In consideration for the purchased assets, the purchase price was
        reduced to $1,274,079, which ETL agreed to pay at closing by the assumption
        of
        accounts payable and accrued expenses in the amount of $546,441, the assumption
        of additional liabilities from affiliated companies of Environmental Testing
        Laboratories, Inc. in the amount of $671,638, and the issuance of preferred
        shares as noted below.
 
 As
        part of
        the consideration for the acquisition, Paradise agreed to issue 280,000 shares
        of its Series B Preferred Stock to Environmental Testing Laboratories, Inc.
        The
        parties agreed to amend the terms of the purchase, with effect from the date
        of
        the original agreement, to provide for the issuance by Paradise of 280,000
        shares of its Series A Preferred Stock, rather than its Series B Preferred
        Stock. Each share of Series A Preferred Stock is convertible, at the option
        of
        the holder or of the Company, into ten (10) shares of Paradise common stock.
        The
        holders of shares of Series A Preferred Stock are entitled to receive an
        annual
        dividend of five cents per share, but do not receive a liquidation preference
        with respect to the Series A Preferred shares. The Series A Preferred Shares
        issued to Environmental Testing Laboratories, Inc. were valued at $56,000,
        based
        on the value of the Company's underlying common stock on the purchase
        date.
 
 In
        conjunction with the transaction described above, ETL borrowed $500,000 from
        Capstone Business Credit LLC (“Capstone”) and executed a promissory note in that
        principal amount. The promissory note was secured by substantially all of
        the
        assets of ETL. The note bears interest at the rate of 24% per annum and is
        payable by ETL in 24 installments of $15,000 commencing on February 28, 2005
        until February 28, 2007, at which time the remaining unpaid principal and
        interest are due and payable (as further set forth in the Promissory Note
        filed
        as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February
        18, 2005 and incorporated herein by this reference). In addition, in connection
        with the asset acquisition, ETL entered into a Discount Factoring Agreement
        with
        Capstone whereby Capstone agreed to advance ETL an amount equal to seventy-five
        (75%) percent of certain of its accounts receivable. Capstone will remit
        payment
        to ETL upon its acceptance of the assignment of each account receivable (as
        further set forth in the Discount Factoring Agreement filed as Exhibit 10.2
        to
        the Company’s Current Report on Form 8-K filed on February 18, 2005 and
        incorporated herein by this reference). Paradise Music & Entertainment, Inc.
        and Kelly Hickel, personally, and as the President and CEO of Paradise Music
        & Entertainment at the time of the acquisition of Environmental Testing
        Laboratories, Inc., have jointly and severally guaranteed the faithful and
        timely performance and satisfaction by ETL of its obligations under both
        the
        promissory note and the Discount Factoring Agreement, including without
        limitation the payment of all amounts when due under such agreements (as
        further
        set forth in the Guarantee filed as Exhibit 10.3 to the Company’s Current Report
        on Form 8-K filed on February 18, 2005 and incorporated herein by this
        reference).
 
 ETL
        is
        committed to providing high quality data to its clients by adhering to approved
        methodologies and all mandated QA/QC protocols. Company analysts are seasoned
        professional with years of environmental experience. Using state-of-the-art
        instrumentation with powerful computer hardware and software, ETL provides
        the
        most current and competitive pricing and services to match the customers’ data
        quality objectives.
 
 
   ETL
        provides the following services:
 
 ·
            RCRA
                (Resource Conservation Recovery Act) and Hazardous Waste
                Characterization 
 ·
            TCLP
                (Toxic Characteristic Leaching Procedure)
                Analyses 
 ·
            Underground
                Storage Tank Analytical Assessment 
 ·
            Landfill/Ground
                Water Monitoring 
 ·
            Pesticide
                and Herbicide Testing in Soil and
                Groundwater 
 ·
            NPDES
                (National Pollution Discharge Elimination System) Effluent Characteristics
                Analysis 
 ·
            PCB
                (Polychlorinated biphenyls) and PCB Congener
                Analysis 
 ·
            HUD
                Lead Abatement Testing 
 ·
            Fingerprint
                Categorization 
 ·
            Petroleum
                Analyses 
 ·
            Client
                Specific Deliverables 
 ·
            Electronic
                Data Deliverables 
 As
        indicated by the acquisition of Environmental Testing Laboratories, Inc.,
        Paradise has launched a new strategy in order to maximize the opportunity
        for
        growing the Company into a profitable operating company. That strategy is
        to
        acquire companies that are, or can be, operated profitability in two vertical
        business areas: Services and Manufacturing. The Company’s management has
        operated manufacturing and service companies in a variety of fields for over
        35
        years.
 
 Based
        on
        our acquisition of Environmental Testing Laboratories, Inc., the Company
        is
        going to focus in the near term on acquiring additional businesses in the
        environmental testing industry. In these scenarios, the Company expects to
        improve the operational performance and the asset utilization of the acquired
        entities, if any are acquired, via both horizontal and vertical expansion.
        In
        each scenario, the Company plans to increase its revenues while holding overhead
        and capitalization costs to a minimum by integrating back office, front office
        and field systems, routes and personnel. We cannot guarantee, however, that
        we
        will be able to find entities or businesses in this field that fit within
        our
        strategy, or that, if we do find such businesses, we will be able to acquire
        them or, if they are acquired, to operate them successfully.
 
 We
        were
        incorporated in the State of Delaware on July 18, 1996. Our principal executive
        offices are located at 122 East 42 nd Street,
        Suite 2900, New York, NY 10168, and our telephone number is 888-565-3259.
 
 COMPETITION
 
 We
        face
        intense competition both for business and for talent, executives and operating
        personnel. Regarding
        our recently acquired business and its competitive position in the industry,
        it
        should be noted that ETL operates one of approximately 7,639 testing
        laboratories in the United States, according to the listings from the
        Environmental Yellow Pages. These laboratories range from small dedicated
        local
        laboratories to large national labs that receive and deliver testing for
        materials on a national basis. The services provided include all those listed
        above as well as others not provided by ETL from mold detection and testing
        to a
        variety of water testing and other analytical services. ETL competes, primarily,
        in the regional northeastern US market sector. There are many labs in this
        regional marketplace. ETL succeeds because of its long relationships with
        customers. ETL was founded in 1988 and has been servicing many of its customers
        since that time. ETL’s customers include petroleum companies, contractors,
        environmental consulting firms and a variety of utilities and municipalities.
 
 
   ETL
        maintains the necessary permits and licenses with the local municipalities,
        a
        number of states where it does business and the regional and national
        environmental authorities as is necessary. The ETL business is relatively
        stable
        with only small fluctuations based on seasonality. ETL competes primarily
        on
        service, not price. Its reputation allows it to provide high quality, responsive
        service to a select group of customers, rather than the low-cost price-based
        commodity services provided by many of the national labs. While there is
        some
        overlap, ETL’s customers prefer to deal with someone they know and trust in this
        critically important piece of their own business activities.
 
 
 EMPLOYEES/INDEPENDENT
        CONTRACTORS
 
 During
        2005, we had two executive officer and no other employees. Mr. Hickel continued
        as Chairman of the Board and filled several executive positions until his
        resignation on June 15, 2006, as reported in the Company's Current Report
        on
        Form 8-K filed June 21, 2006 and incorporated herein by this reference. Mr.
        Richard Rifenburgh is the non-executive Vice Chairman, a member of the Board
        of
        Directors and the Chairman of the audit committee. Mr. Winston Willis serves
        as
        a member of the Board of Directors, Vice President of Paradise and President
        of
        All Access Entertainment Group, Inc., a subsidiary of the Company. These
        individuals serve under informal consulting agreements; however none of them
        are
        employed full time by the Company. Other services are provided on a consulting
        basis as needed. ETL, the Company’s operating subsidiary, is headed by Patty
        Werner-Els, president, who has been an employee of the laboratory for almost
        18
        years. The chief technical officer is Juan Cuba. All of the approximately
        35
        employees are engaged as at-will employees and are in the state of New York.
 
 
 ITEM
        2.
        DESCRIPTION OF PROPERTY
 
 We
        utilize
        space occupied by Total Communications Group, Inc. in New York City at 122
        E.
        42 nd Street.
        We use the space on a periodic basis, but we do not pay rent, having reached
        an
        agreement with Total Communications Group in 2002 to utilize space in exchange
        for 1.2 million shares of our common stock.
 
 Environmental
        Testing Laboratories, Inc., our recent acquisition, utilizes 11,750 square
        feet
        of rented facilities at 208 Route 109 in Farmingdale, New York. The landlord
        is
        Tyree Realty, Inc. and is not an affiliate of the Company.
  
  
 PART
        II
 
 ITEM
        5.
        MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
 Market
        Information:
 
 Our
        common
        stock traded on the Nasdaq Small Cap Market from January 22, 1997 through
        March
        29, 2002 under the symbol "PDSE". Beginning May 2002, the only bid and ask
        quotations for our common stock were those provided by market
        makers and other dealers who listed such quotations with the National Daily
        Quotation Service, commonly referred to as the interdealer "Pink
        Sheets." The high
        and low bid prices of our common stock (as reported by Nasdaq (and, after
        May
        2002, the pink sheets, as reported by the National Quotation Bureau)) were
        as
        follows. These quotations reflect inter-dealer prices, without retail mark-up,
        mark-down or commission and may not represent actual transactions.
 
 :
 
 Period
                High
                Low2005
                01/01/05
                    - 03/31/05
                $0.037
                $0.01404/01/05
                    - 06/30/05
                $0.025
                $0.01507/01/05
                    - 09/30/05
                $0.023
                $0.00610/01/05
                    - 12/31/05
                $0.023
                $0.0082004
                01/01/04
                    - 03/31/04
                $0.070
                $0.01904/01/04
                    - 06/30/04
                $0.080
                $0.03207/01/04
                    - 09/30/04
                $0.060
                $0.01010/01/04
                    - 12/31/04
                $0.052
                $0.0202003
                01/01/03
                    - 03/31/03
                $0.005
                $0.00103/31/03
                    - 06/30/03
                $0.020
                $0.00107/01/03
                    - 09/30/03
                $0.009
                $0.00210/01/03
                    - 12/31/03
                $0.017
                $0.002
  The
        approximate number of holders of record of our common stock was 94 as of
        December 31, 2005. We believe that there are in excess of 500 round lot
        beneficial owners of common stock whose shares are held in street
        name.
 
 We
        have
        never paid a dividend on our common stock. We anticipate that, except those
        dividends required to be paid on our Series A Preferred Stock, future earnings,
        if any, will be retained for use in our business or for other corporate purposes
        and we do not anticipate paying cash dividends on our common stock. The 280,000
        shares of Series A Preferred Stock issued in connection with the acquisition
        of
        Environmental Testing Laboratories, Inc. have a five cent per share per year
        cumulative dividend rate, accruable from their date of authorization for
        issuance. As of December 31, 2005, the Company has accrued dividends in the
        amount of $12,429 on the shares of Series A Preferred Stock.
 
 
 
  Equity
        Compensation Plan Information
 
 Plan
                  Category
              
              Number
                  of
                Securities
                  to be
                Issued
                  upon
                Exercise
                  of
                Outstanding
                  options
                Warrants
                  and rights
              
              Weighted-average
                Exercise
                  price of
                Outstanding
                  options
                Warrants
                  and rights
              
              Number
                  of securities
                Remaining
                  available
                for
                  future issuance
                under
                  equity
                compensation
                  plans
                (excluding
                  securities
                reflected
                  in column (a))(a)
              
              (b)
              
              (c)Equity
                  Compensation Plans
                Approved
                  by security holders
              
              -
                  0
                  -
              
              -
                  0
                  -
              
              -
                  0
                  -Equity
                  Compensation Plans
                Not
                  approved by security
                holders
              
              -
                  0
                  -
              
              -
                  0
                  -
              
              2,099,083Total
              
              -
                  0
                  -
              
              -
                  0
                  -
              
              2,099,083
  The
          Company filed a Form S-8 Registration Statement under the Securities Act of 1933 with
          respect to the
          Company’s 2001 Consultant Stock Option Plan on September 10, 2001. Five million
          shares were registered and awards were authorized to be made as Common
          Stock or
          options or warrants to purchase Common Stock under this Plan. The terms
          of the
          options and warrants are to be determined by the Board of Directors at
          its
          discretion. Such awards were authorized to be made only to Consultants
          who have
          provided bona fide services to the Company. The Board of Directors may
          suspend
          or terminate the
          plan at any
          time or from time to time, but no such action shall adversely affect the
          rights
          of a person granted an Award under this Plan prior to that date.
 
 The
          Company filed a Form S-8 Registration Statement under the Securities Act of 1933 with
          respect to the
          Company’s 2002 Employee Stock Compensation Plan on February 25, 2002. Five
          million shares were registered and awards were authorized as grants of
          Common
          Stock to Employees, Consultants and/or Directors. The effective date of
          this
          Plan is February 21, 2002. This plan shall expire on February 21, 2012,
          unless
          earlier terminated by the Board of Directors in accordance with provisions of the plan.
 The
        plans
        are combined for the purpose of the Equity Compensation Plan table
        above.
 
 **Recent
        Sales of Unregistered Securities**
 
 During
        the
        fiscal year ended December 31, 2005, we issued the following securities which
        were not registered under the Securities Act of 1933, as amended: 280,000
        shares
        of Series A Preferred Stock to Tyree Laboratories, Inc. as part of the
        acquisition described above. No warrants were issued during the fiscal year
        ending December 31, 2005.
 
 
 
  ITEM
        6.
        MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 
 Paradise
        Music & Entertainment, Inc. ("Paradise" or the "Company") is a diversified
        company which currently operates in the environmental testing and music and
        entertainment industries. The
        Company has established a PLAN OF OPERATION for 2006 and 2007 based on the
        continued effort in the entertainment sector and the successful acquisition
        of
        Environmental Testing Laboratories, Inc.
 
 In
        the
        entertainment space, Mr. Willis will continue to pursue specific projects
        that
        can, it is believed, generate profits and positive cash flow. It is very
        challenging since the Company is unwilling and/or unable to provide the
        financing for these projects. Projects that require investment will be based
        on
        the participation of outside investors. These investments may be designed
        as
        partnership on a participation basis, or other arrangements that are mutually
        satisfactory to both the Company, Mr. Willis and the investors. A number
        of
        these projects are currently under discussion and/or negotiations. It is
        not
        clear when or if these projects will come to completion.
 
 Regarding
        the environmental testing space, the PLAN OF OPERATION for 2006 is to a)
        to
        complete the required audits of ETL’s financial performance and to consolidate
        those with the Company’s financial reporting b) manage the cash flow c) increase
        the marketing activities of ETL d) identify additional acquisition targets
        and
        e) prepare to replace the high cost bridge financing used to make the
        acquisition. It is believed that the combined cash flow of the Company’s
        businesses will be adequate to support its operations for 2006. The only
        change
        in the number of employees is expected to be those needed by ETL to grow
        its
        business.
 
 In
        2007
        the PLAN OF OPERATION is to a) expand the ETL business by 10% or more through
        increased marketing; b) secure much more reasonable financing to replace
        the
        expensive bridge financing; c) begin servicing and/or reducing/settling the
        Company’s previously acquired debt that was unrelated directly to the ETL
        acquisition; d) make two additional acquisitions in the environmental testing
        laboratory sector; and e) identify at least one additional acquisition in
        other
        related market sectors. It is expected that acquisitions, if any, can be
        accomplished by a combination of asset-based borrowing, the issuance of notes
        and/or Preferred or Common Stock to the seller.
 
 There
        is
        no assurance any of the above contemplated plans can be accomplished.
 
 If
        management is successful in the above PLAN OF OPERATION, the Company’s cash flow
        in 2006 and 2007 will be adequate to support its existing business and loan
        repayment obligations, as restructured and agreed with its lenders. Any
        additional funds that may be needed should be for the purpose of acquisitions.
        Any expected purchase of plant and equipment will be one of two categories.
        ETL
        expects to make modest upgrades of equipment and vehicles necessary to support
        its business and its possible expansion. Any other purchases of plant and
        equipment are expected to be the result of acquisitions, if any.
 
 **Results
        of Operations**
 
 Year
        Ended
        December 31, 2005 Compared to Year Ended December 31, 2004
 
 There
        were
        $2.9 million in revenues from continuing operations for the year ended December
        31, 2005, compared to no revenues for the year ended December 31, 2004. The
        loss
        in 2005 was $124,000 compared to a loss $127,000 in 2004. The increase in
        revenue was due to the acquisition of Environmental Testing Laboratories,
        Inc.
        as described above.
 
 Paradise's
        marketing, selling, general and administrative expenses increased to $1.2
        million for the year ended December 31, 2005, from $48,000 for the year ended
        December 31, 2004, an increase of over $1.2 million. The increase was due
        to the
        acquisition of Environmental Testing Labs, Inc. as described above.
 
 Net
        interest expense was $391,000 for the year ended December 31, 2005, compared
        to
        $134,000 for the year ended December 31, 2004. The increase of $257,000 was
        due
        to the expense incurred from financing obligations taken on by the company
        at
        the time of the acquisition.
 
 
   **Liquidity
        and Capital Resources**
 
 Net
        cash
        used in operating activities for the year ended December 31, 2005, was $647,000.
 
 Net
        cash
        provided by financing activities for the year ended December 31, 2005, was
        $866,000, which is substantially represented by proceeds from financing
        arrangements related to the acquisition of Environmental Testing Laboratories,
        Inc. We had working capital of $137,000 and a stockholders' deficit of
        $7,570,805 at December 31, 2005.
 
 On
        April
        25, 2001, the Company entered into a commercial financing agreement with
        Porter
        Capital Corporation (PCC). The agreement provides that the Company sell,
        transfer, set over and assign certain invoices and accounts receivable to
        the
        lender, with recourse. The credit facility provided for maximum revolving
        borrowings up to $1,500,000. Borrowings under this facility are based on
        a
        funding formula and, in addition to the accounts receivable and invoices
        are
        collateralized by all of the Company's remaining assets. On April 12, 2004,
        PCC
        agreed to extend to Paradise a new line of credit in the amount of five million
        dollars upon its normal business terms for accounts receivable financing
        for the
        purposes of acquisitions by Paradise. As of December 31, 2005 approximately
        $300,000 was outstanding under the line. Advances from the lender bear interest
        at 18% per annum and were originally due on April 15, 2005. Paradise agreed
        to
        deposit 15,000,000 fully paid and non-assessable shares of its Common Stock
        in
        escrow (“Escrow Stock”) pursuant to an Escrow Agreement. On December 19, 2005,
        an agreement was reached with PCC waiving all current defaults and the Due
        Date
        of the Senior Loan Balance was revised to April 15, 2006. All obligations
        with
        respect to the Escrow Stock have been deleted in their entirety. The
        loan
        was further amended on October 20, 2006, as described in Subsequent
        Events.
 
 On
        February 14, 2005, Environmental Testing Laboratories, Inc. (ETL) signed
        a
        Discount Factoring Agreement with Capstone Business Credit, LLC. (Capstone).
        ETL
        agreed to appoint Capstone as its sole Factor with respect to all sales and
        offered to sell and assign, only to Capstone, all Accounts Receivable arising
        out of such sales. ETL agreed to pay Capstone a commission of 2% in the form
        of
        a discount on the face amount of the Account Receivable. This agreement was
        revised and modified on May 11, 2006, and again on December 14, 2006. The
        commission rate was dropped to 1.5% on December 14, 2006.
 
 On
        February 14, 2005, Environmental Testing Laboratories, Inc. (ETL) signed
        a
        Promissory Note for a $500,000 Equipment Loan with Capstone Business Credit,
        LLC. (Capstone). Interest on the outstanding balance shall be computed at
        the
        rate of 24% per annum. On May 11, 2006 the equipment loan was raised to
        $750,000, and on December 14, 2006 the interest rate was reduced to 18% per
        annum.
 
 **Risk
        Factors**
 
 We
        have a
        history of losses, we expect more losses in the future and we have substantial
        doubt regarding our ability to continue as a going concern. The report of
        our
        independent auditor contains a qualification that points out factors "raising
        substantial doubt about our ability to continue as a going concern." Since
        our
        inception, we have never been profitable before extraordinary items. We expect
        profitability in 2006, although there is no assurance that will happen. For
        the
        year ended December 31, 2005, we had a net loss of $124,000 compared to a
        net
        loss of $127,000 for the year ended December 31, 2004. We presently have
        limited
        credit facilities and we are in default on several loan instruments. These
        factors raise substantial doubt about our ability to continue as a going
        concern, though we may report positive net income in 2006.
 
 We
        believe
        we do have available funds sufficient to sustain our operations through the
        fourth quarter of 2006 as a result of our acquisition of Environmental Testing
        Laboratories, Inc. Our available funds generally consist of cash and the
        funding
        derived from our revenue sources: income related relating to music festivals,
        and in 2005, environmental testing. As of December 31, 2005, we had $137,000
        in
        available cash. Reducing operating expenses and capital expenditures alone
        will
        not be sufficient to solve our liquidity problems. Unless we are able to
        obtain
        sufficient funding through equity or debt offerings we will not be able to
        expand our business. Even if we are able to obtain additional financing it
        may
        not be sufficient to expand our current operations.
 
 
   For
        the
        year ended December 31, 2005 the Company had a net loss of $124,000 compared
        to
        a net loss of $127,000 for the year ended December 31, 2004 and has
        stockholders’ deficits of $7,570,805 at December 31, 2005. The Company's
        strategy is to maximize the opportunity for growing the Company into a
        profitable operating company. That strategy is to acquire companies that
        are, or
        can be, operated profitability in two vertical business areas: Services and
        Manufacturing. The Company’s management has operated manufacturing and service
        companies in a variety of fields for over 35 years. While there has been
        some
        progress made on the implementation of this relatively new strategy, the
        strategy is still in its infancy. The Company presently has limited credit
        facilities and is in default on several loan instruments. All of the above
        factors raise substantial doubt about our ability to continue as a going
        concern.
 
 The
        Company's status as a going concern is dependent on its ability to successfully
        implement a marketing plan and generate sufficient revenues to operate on
        a
        profitable basis, continued financial support by officers and major shareholders
        and raising of additional funds for working capital. The financial statements
        do
        not include any adjustments to reflect the possible future effects on the
        recoverability and classification of assets or the amounts and classification
        of
        liabilities that may result from the possible inability of the Company to
        continue as a going concern.
 
 The
        Company’s Directors and officers make all decisions regarding selection of
        management, budgeting, marketing, salaries and other matters affecting the
        Company. Shareholders have little, if any, ability to influence the management
        or the direction of the Company.
 
 Agreements
        and arrangements between the Company and the Directors are not the result
        of
        arm’s-length negotiations and may result in conflicts of interest. See
“MANAGEMENT- Compensation.”
 The
        Company intends to initiate additional acquisitions in the future and
        has only limited prior acquisition history. A shareholder in the Company
        must
        rely upon the ability of Management in identifying, structuring, and
        implementing acquisitions consistent with the Company's objectives and
        policies. There can
        be no assurance that there will be any additional acquisitions.
 The
        Company may involve high degrees of leverage. Accordingly, recessions, operating
        problems and other general business and economic risks may have a more
        pronounced effect on the profitability or survival of the company. Also,
        increased interest rates increase the company’s interest expenses. In the event
        the company cannot generate adequate cash flow to meet debt service, the
        Company
        may suffer a partial or total loss of capital invested in the company.
  Decisions
        with respect to the management of the Company will be made by Management
        of the
        Company or its parent. The loss of the services of one or more of the Principals
        of Management could have an adverse impact on the Company's ability to realize
        its business objectives.
 
 The
        principals of the Company anticipate devoting sufficient time as may be
        necessary to conduct the business affairs of the Company in an appropriate
        manner. However, two of the Principals of the Company and its parent are
        not
        full time employees and may participate in activities of other companies.
        There
        can be no assurance that the participation in such additional Companies will
        not
        give rise to conflicts of interest.
 
 ITEM
        7.
        FINANCIAL STATEMENTS
 
 See
        the
        index to our financial statements attached hereto.
 
 ITEM
        8.
        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
        DISCLOSURE
 
 Effective
        as of October 3, 2003, the Board of Directors approved the engagement of
        James
        E. Scheifley & Associates, P.C. to act as its certifying accountant. In
        April 2005, Mr. Scheifley formed a new company known as Tinter Scheifley
        Tang,
        LLC. On May 24, 2005 the Company signed an engagement letter with Tinter
        Scheifley Tang, LLP to act as its certifying accountants. Tinter Scheifley
        Tang,
        LLC’s report on the financial statements for December 31, 2005, contained no
        adverse opinion or disclaimer of opinion, nor was modified as to uncertainty,
        audit scope, or accounting principles, other than its “going concern”
paragraph.
 
 
 
  ITEM
        8A.
        CONTROLS AND PROCEDURES.
 
 (a)
        Disclosure controls and procedures. Based upon an evaluation, supervised
        by
        Kelly Hickel, our Chief Executive Officer and Principal Accounting Officer,
        of
        the effectiveness of the design and operation of our disclosure controls
        and
        procedures concluded that our disclosure controls and procedures were effective
        as of December 31, 2005.
 
 (b)
        Internal controls. During the year ended December 31, 2005, there were no
        significant changes in our internal accounting controls or in other factors
        that
        materially affected our internal controls over financial reporting.
 
 
 
 
  PART
        III
 
 ITEM
        9.
        DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH
        SECTION 16(a) OF THE EXCHANGE ACT
 
 Our
        directors, executive officers and key executives of our operating groups
        during
        fiscal year ended December 31, 2005 are as follows:
 
 
 **Name**
              **Age**
              **Position
                  with Company**
              **Held
                  Since**Kelly
                  T Hickel
              64
              Chairman
              February
                  2001*Richard
                  P. Rifenburgh
              74
              Vice-Chairman
              July
                  2001Winston
                  ‘Buzz’ Willis
              60
              Director
              November
                  2002*
 
 
 KELLY
        T.
        HICKEL was appointed as our Chairman in February 2001. From May 2000, until
        we
        merged with iball Media, Inc. in July 2001, he has served as the Chairman
        and
        Chief Executive Officer of iball Media, Inc. Mr. Hickel was also the turn-around
        President to Miniscribe Corp., a troubled Fortune 500 disk drive manufacturer,
        from 1989 to 1990. Mr. Hickel has been building products and services based
        on
        the Internet since 1981. He was the President of the Maxwell Technology
        Information Systems Group from 1993 until 1997. During his tenure, Maxwell
        was
        the 9th. best performing stock on NASDAQ in 1996. Mr. Hickel was the Chairman
        of
        Interstate Sweeping from 1997 until March, 1999. Mr. Hickel was the Chairman
        of
        EIS, a telecommunications company, from May 1999 until May 2000. Mr. Hickel
        is a
        graduate of Indiana University, with a Bachelors of Science.
 
 RICHARD
        P.
        RIFENBURGH has served as our Vice Chairman since July 2001. He has served
        as
        Chairman of the Board of Moval Management Corporation since 1968. Moval
        Management Corporation is a management consulting firm that specializes in
        restoring companies in financial distress. From February 1989 until May 1991
        Mr.
        Rifenburgh served as Chairman of the Board and Chief Executive Officer of
        Miniscribe Corporation, a publicly-held holding company and manufacturer
        of
        computer disc drives. From 1987 to 1990 he was a General Partner at Hambrecht
        and Quist Venture Partners, a venture capital organization. From 1988 to
        1990 he
        was Chairman of the Board and Chief Executive Officer of Ironstone Group,
        Inc.,
        and a publicly-held company. From 1996 to 2002 he served on the Board of
        Directors of Tristar Corporation, a publicly-held manufacturer of cosmetics
        and
        fragrances that filed for bankruptcy in 2001. From 1992 to 2001 Mr. Rifenburgh
        served as a director of Concurrent Computer Corporation, which is a publicly
        reporting company. Mr. Rifenburgh is also Chairman of the Board of Directors
        of
        St. George Crystal Ltd., a major manufacturer of fine quality crystal
        products.
 
 WINSTON
        “BUZZ” WILLIS, who serves as CEO of All Access Entertainment Management Group,
        Inc., a subsidiary of Paradise Music & Entertainment, Inc., is acknowledged
        as a true pioneer and marketing innovator in the music industry. After
        graduating from Case Weston University in Cleveland, OH, Buzz’s music industry
        career enjoyed significant growth from its humble beginning as a local promoter
        for MGM Records. From there, he joined the staff of RCA Records and signed
        several artists who went on to record gold and platinum records. He holds
        the
        distinction of being the youngest Vice President at RCA and was the founder
        of
        the Black Music Division of RCA Records where, under his guidance, the careers
        of Jose Feliciano and the Main Ingredient were nurtured. **** From
        the
        late 1970s to the early 1980s, he served as Senior V.P. of American operations
        of Phillips Electronics Corp. (parent of Polydor/Polygram Records). At Phillips,
        Buzz was instrumental in the acquisition of the Mercury and Verve labels.
        A true
        trailblazer, Buzz accepted the position of CEO of CTI Records. Here, he
        propelled the career of jazz greats such as George Benson and Esther Phillips,
        and was personally responsible for the industry’s first platinum jazz album,
“Mr. Magic” by Grover Washington, Jr. He introduced the concept of marketing
        black artists, such as Kool & The Gang, Sister Sledge and Alexander O’Neal,
        to mainstream audiences and treating them similarly to white
        artists. **** In 1996,
        Buzz launched One World Entertainment in partnership with The Sanctuary Group,
        which provided services such as artist management, tour direction, record
        production and concert tour promotion. Buzz is a member of the R&B Hall of
        Fame.
 
 
  ***Subsequent
        Events**
  As
        reported in the Company's Current Report on Form 8-K filed June 21, 2006,
        Kelly
        Hickel resigned his positions as a director and as chairman, president, chief
        executive officer, treasurer, and secretary of the Company, effective at
        the
        close of business on June 15, and Mr. Winston "Buzz" Willis resigned his
        positions as a director and as a vice president of the Company, effective
        at the
        close of business on June 15, 2006. Mr. Willis also resigned his positions
        as
        chief executive officer and president of All Access Entertainment Management
        Group, Inc., a subsidiary of the Company.
 
 As
        reported in the Company's Current Report on form 8-K filed February 2, 2007
        (and
        amended in a Current Report filed on February 14, 2007), the Company elected
        Mr.
        Paul Lisak, M.S., R.E.H.S to fill the vacant Board seat previously held by
        Kelly
        T. Hickel. Mr. Lisak, age 62, retired in 2002 as Los Angeles (“LA”) County’s
        Hazardous Materials Control Manager, and from over 30 years service devoted
        to
        the administration and management of public health. Mr. Willis was also elected
        to fill the vacant Board seat that he previously held prior to his
        resignation in June 2006. In addition, Ms. Julia Belden was elected as Treasurer
        of the Company, a position she holds in addition to the position of Secretary,
        which she has held since June 2006. Ms. Patty Werner-Els was elected to the
        position of President of Environmental Testing Laboratories, Inc (ETL), the
        Company’s operating subsidiary. Ms. Werner-Els has been employed at ETL for 18
        years.
 
 **Compliance
        with Section 16(a) of the Exchange Act**
 
 Section
        16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
        requires our officers and directors and holders of more than 10% of our common
        stock (collectively "Reporting Person") to file reports of initial ownership,
        ownership and changes in ownership of the common stock with the SEC within
        certain time periods and to furnish us with copies of all such reports. **** These
        forms include (i) Form 3, which is the Initial Statement of Beneficial Ownership
        of Securities, (ii) Form 4, which is a Statement of Changes in Beneficial
        Ownership, and (iii) Form 5, which is an Annual Statement of Changes in
        Beneficial Ownership. Our Reporting Persons include Mr. Kelly T. Hickel,
        Mr.
        Richard P. Rifenburgh, and Mr. Winston "Buzz" Willis, all of whom are directors
        and/or executive officers of the Company, and the Hickel Living Trust, which
        holds more than 10% of our common stock, and its trustees.  Based on our
        review of our files and of filings made with the SEC, we believe that none
        of
        the Reporting Persons has filed any of the reports required under Section
        16(a).
        Mr. Hickel became a director and executive officer of the Company in February
        2001; Mr. Rifenburgh became a director in July 2001; and Mr. Willis became
        a
        director in November 2002. Based on our review of our files, in addition to
        the Initial Statement of Beneficial Ownership (Form 3) that Mr. Hickel did
        not
        file upon becoming a director, he did not file Statements of Changes in
        Beneficial Ownership (Forms 4) to report his acquisition of an aggregate
        of
        1,170,299 shares in connection with our acquisition of iBall Media, Inc.
        in July
        2001; his acquisition of 500,000 shares of common stock in March 2002 in
        lieu of
        consulting compensation; his acquisition of 850,000 shares of common stock
        in
        January 2003 in lieu of consulting compensation; and 9,150,000 shares of
        common
        stock in 2004 in lieu of consulting compensation. Of these shares, 7,700,000
        were issued to the Hickel Living Trust. Based on our review of our files,
        in
        addition to the Initial Statement of Beneficial Ownership (Form 3) that Mr.
        Rifenburgh did not file upon becoming a director, he did not file Statements
        of
        Changes in Beneficial Ownership (Forms 4) to report his acquisition of 128,718
        shares of common stock in September 2001 and 310,451 shares of common stock
        in
        October 2001 in connection with our acquisition of iBall Media, Inc. in July
        2001; and the acquisition of 1,000,000 shares of common stock in April 2004
        for outside director fees.   Based on our review of our files, in
        addition to the Initial Statement of Beneficial Ownership (Form 3) that Mr.
        Willis did not file upon becoming a director who owned 250,000 shares of
        common
        stock received in March 2002 in lieu of compensation; and he did not file
        Statements of Changes in Beneficial Ownership (Forms 4) upon his acquisition
        of
        3,000,000 shares of common stock in January 2003 in lieu of compensation.
        The
        Hickel Living Trust failed to file a Statement of Beneficial Ownership (Form
        3)
        upon becoming the beneficial owner of more than 10% of the shares of our
        common
        stock in April 2004. The Reporting Persons have indicated to the Company
        that
        they are in the process of filing forms 3, 4 and 5.
 
 
 
 
 **Audit
        Committee Financial Expert**
 
 The
        Securities Exchange Commission has adopted rules to implement certain
        requirements of the Sarbanes-Oxley Act of 2002 pertaining to public company
        audit committees. One of the rules adopted by the SEC requires a company
        to
        disclose whether it has an “audit committee financial expert” serving on its
        audit committee. As of July, 2005, our board of directors has established
        an
        audit committee consisting of Richard P. Rifenburgh. We have determined
        that Mr. Rifenburgh is an "audit committee financial expert," based on his
        experience described above in this Item 9. SEC rules also require us to
        determine whether Mr. Rifenburgh, as the sole member of our Audit Committee,
        is
        "independent," as defined by SEC rules adopted pursuant to the requirements
        of
        the Sarbanes-Oxley Act of 2002.  Although our stock is not listed for
        trading on the Nasdaq Stock Market at this time, we are required to determine
        the independence of Mr. Rifenburgh by reference to the rules of a national
        securities exchange or of a national securities association (such as the
        Nasdaq
        Stock Market). In accordance with these requirements, we have determined
        that
        Mr. Rifenburgh is an "independent director," as determined in accordance
        with
        Rule 4200(a) (15) of the Marketplace Rules of the Nasdaq Stock Market,
        Inc.
 
 
 **Code
        of Ethics**
 
 We
        have
        adopted a Code of Ethics within the meaning of Item 406(b) of Regulation
        S-K of
        the Exchange Act. This Code of Ethics applies to directors and senior officers,
        such as the principal executive officer, principal financial officer,
        controller, and persons performing similar functions, of ours. Our Code of
        Ethics is available as Exhibit 14. Any amendments or waivers to our Code
        of
        Ethics will be disclosed following the date of any such amendment or waiver.
 
 
 
 
  ITEM
        10.
        EXECUTIVE COMPENSATION
 
 The
        following table sets forth all compensation awarded to, earned by or paid
        by
        Paradise or its subsidiaries during each of the last two fiscal years to any
        of our
        officers and directors for all services rendered to Paradise and its
        consolidated subsidiaries, in all capacities for the fiscal years ended December
        31, 2005 and December 31, 2004 .
 
 SUMMARY
        COMPENSATION TABLE
 
 
 Name
                And
                Principal
                Position
              Year
              Salary
                  ($)
              Bonus
                  ($)
              Stock
                  Awards
                ($)
              Option
                  Awards
                ($)
              Non-Equity
                Incentive
                  Plan
                Compensation
                ($)
              Nonquali-fied
                  Deferred
                Compensation
                  Earnings
                ($)
              All
                  Other
                Compensation
                ($)
              Total
                ($)Kelly
                  T. Hickel,
                Chairman
                  (Principal Executive Officer)
              2005
              123,646
              20,000
              
              
              
              
              
              143,6462004
              123,140
              
              
              
              
              
              
              123,140
 
 
 Mr.
        Hickel's compensation for 2004 and 2005 was payment for consulting services
        accrued by the Company in prior years, with the exception of a $20,000 bonus
        paid upon the closing of the acquisition of Environmental Testing
        Laboratories, Inc. in early 2005.
 
 **Directors'
        Compensation**
 
 The
        following table provides summary information concerning compensation awarded
        to,
        earned by, or paid to any of our directors for all services rendered to the
        Company in all capacities for the fiscal year ended December 31,
        2005.
 
 DIRECTOR
        COMPENSATION
 
 Name
              Fees
                  Earned or Paid
                in
                  Cash
                ($)
              Stock
                  Awards
                ($)
              Option
                  Awards
                ($)
              Non-Equity
                  Incentive
                Plan
                  Compensation
                ($)
              Nonquali-fied
                  Deferred
                Compensation
                  Earnings
                ($)
              All
                  Other
                Compensation
                ($)
              Total
                ($)Richard
                  P. Rifenburgh
              18,000
              
              
              
              
              
              18,000Winston
                  Willis
              43,900
              
              
              
              
              
              43,900
 
 
 
  Pursuant
        to our Outside Directors Program, directors who are not employees ("Outside
        Directors") are entitled to receive non-qualified options to purchase 5,000
        shares for each year of service, payable in advance on July 1 of each year,
        at
        an exercise price equal to the closing bid price of the common stock on the
        first trading day of each fiscal year. Mr. Richard Rifenburgh was our sole
        Outside Director during 2005. No grants have been made under the Outside
        Directors Program since July 1, 2000. Mr.
        Rifenburgh agreed to suspend, effective January 2, 2002, the accrual of additional
        options until the Company reaches profitability.
 
 Outside
        Directors are entitled to receive compensation in the amount of $18,000 per
        annum, 100% payable in stock, as a fee for their services as directors. Such
        amounts are payable quarterly in arrears. On April 7, 2004 Mr. Rifenburgh,
        our
        sole Outside Director at the time of the award, received 1,000,000 shares
        of common stock pursuant to this plan. The value of the 1,000,000
        shares was $2,000 and was recorded as an expense for fiscal period ended
        December 31, 2004. With the exception of the 1,000,000 shares issued to Mr.
        Rifenburgh in 2004, the Company and Mr. Rifenburgh agreed to forego his
        right to receive all director shares, including all shares owed to him
        since he began his service as a director, and to reestablish his rights to
        receive Outside Director shares only if and when the Company reaches
        profitability.
 
 All
        directors are reimbursed for certain expenses in connection with attendance
        at
        Board of Directors and Committee meetings. Other than with respect to
        reimbursement of expenses, directors who are employees or officers or who
        are
        associated with us do not receive compensation for service as directors.
        We do
        not have any employment agreements with any of the Named Executive
        Officers.
 
 During
        the
        fiscal year ending December 31, 2005, Mr. Rifenburgh and Mr. Willis received
        consulting fees from the Company in the amounts of $18,000 and $43,900,
        respectively, as indicated in the table above.
 
 
 
  ITEM
        11.
        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
 The
        following table sets forth certain information as of December 31 **,** 2005
        regarding the share ownership of the company by (i) each person who is known
        to
        us to be the record or beneficial owner of more than five percent (5%) of
        our
        common stock; (ii) each director and each named executive officer; and (iii)
        all
        directors and executive officers as a group.
  Name
                  and Address of Beneficial Owner(1)
              Amount
                  and Nature of Beneficial Ownership(2)
              %
                  of Outstanding Shares Owned(3)*Named
                  Executive Officer and Directors:*Kelly
                  Hickel
              3,039,702(4)
              5.2%Richard
                  Rifenburgh
              1,370,062
                  (5)
              2.3%Winston
                  Willis
              3,250,000
              5.5%*All
                  Named Executive Officers and Directors as a group (3 persons)*
              7,659,764
              13%*Beneficial
                  Owners in Excess of 5% (other than Named Executive Officers and
                  Directors):*Porter
                  Capital Corporation
              7,125,000
                  (7)
              12.2%Julia
                  M. Belden
              4,500,000
                  (6)
              7.7%Hickel
                  Living Trust
              7,700,000
                  (8)
              16.0%
 
 (1)
        The
        address of each beneficial owner identified is c/o Paradise Music &
Entertainment, Inc., 122 East 42 nd Street,
        New York, NY 10168, except for (i) Porter Capital Corporation, which is 2112
        First Avenue North, Birmingham, AL 10168 and (ii) Julia M. Belden, which
        is P.O.
        Box 59, Denver, CO 80201.
 
 (2)
        Unless
        otherwise indicated, we believe that all persons named in the table have
        sole
        voting and investment power with respect to all shares of common stock
        beneficially owned by them. A person is deemed to be the beneficial owner
        of
        securities that can be acquired by such person within 60 days of December
        31,
        2005 upon the exercise of options, warrants or convertible
        securities.
 
 (3)
        Each
        beneficial owner's percentage ownership is determined by assuming (i) that
        options, warrants or convertible securities that are held by such person
        (but
        not those held by any other person) and that are exercisable within 60 days
        of
        December 31, 2005 have been exercised and converted, and (ii) 58,496,358
        shares
        of common stock were outstanding, before any consideration is given to such
        options, warrants or convertible securities.
 
 (4)
        Includes 1,450,000 shares issued in 2004. These shares were approved for
        issuance on April 9, 2002 and are part of the ten million shares issued to
        Kelly
        Hickel, or his designee(s), as payment of compensation due.
 
 (5)
        Includes 1,000,000 shares issued in 2004. These shares were approved for
        issuance on October 4, 2003.
 
 (6)
        Includes 1,000,000 shares issued in 2004. These shares were approved for
        issuance on October 4, 2003.
 
 (7)
        Includes securities held by Porter Capital Corporation (PCC) as follows:
        (i)
        common stock, (ii) warrants to purchase 275,000 shares of common stock at
        a
        price of $.05 per share, (iii) warrants to purchase 500,000 shares of common
        stock at a price of $.02 per share, and (iv) warrants to purchase 500,000
        shares
        of common stock at a price of $0.002 per share. This amount also includes
        4,000,000 shares which PCC had the right to acquire in 2002 but which were
        not
        issued until 2004.
 
 (8)
        Includes 7.7 million shares which were approved for issuance on April 9,
        2002
        and are part of the ten million shares issued to Kelly Hickel, or his
        designee(s), as payment of compensation due.
  
   Information
        contained herein with regard to stock ownership was obtained from our
        stockholders' list, filings with governmental authorities, or from the named
        individual nominees, directors and officers. The persons identified in the
        foregoing table disclaim beneficial ownership of shares owned or held in
        trust
        for the benefit of members of their families or entities with which they
        may be
        associated.
 
 
 ITEM
        13.
        EXHIBITS
 
 (a)
        Exhibits
 ExhibitNumber
                
                Description3.1
                
                Certificate
                    of Incorporation of the Registrant (1)3.2
                
                Amended
                    and Restated By-Laws of the Registrant (1)4.1
                
                Specimen
                    of Registrant's Common Stock Certificate (1)4.2
                
                Specimen
                    of Registrant's Warrant Certificate (1)4.3
                
                Form
                    of Representative's Warrant Agreement including form of Warrant
                    (1)4.4
                
                Form
                    of Warrant Agreement between Registrant and Continental Stock
                    Transfer and
                    Trust Company (1)10.7
                
                Form
                    of The Registrant's 1996 Stock Option Plan (corrected version)
                    (1)14
                
                Code
                    of Ethics21.1
                
                Subsidiaries
                    of Registrant (2)31
                
                Certification
                    of Richard P. Rifenburgh under Rule 13a-14(a)32
                
                Certification
                    of Richard P. Rifenburgh(1)
                    Incorporated by reference to the Company's Registration Statement
                    on Form
                    SB-2 (Reg. No. 333-13941) which was declared effective by the
                    Securities
                    and Exchange Commission on January 22, 1997.(2)
                    Incorporated by reference to the Company's Current Report on
                    Form 8-K
                    filed on February 15, 2001.
 
 
 
  **ITEM
        14. Principal Accountant Fees and Services**
  (a)Audit
        Fees
 
 During
        our
        fiscal year ended December 31, 2005, our principal accountant, James E.
        Scheifley of Tinter Scheifley Tang, LLC, billed us approximately $22,750
        for
        professional services that were provided for the audit of our annual financial
        statements, review of the financial statements included in our reports on
        10-QSB, and other services typically provided by an accountant in connection
        with statutory and regulatory filings or engagements for that fiscal year,
        as
        set forth in the table below.
 
 During
        our
        fiscal year ended December 31, 2004, our principal accountant, James E.
        Scheifley & Associates, billed us aggregate fees of approximately $11,500,
        as set forth in the table below. These amounts were billed for professional
        services that the accountants provided for the audit of our annual financial
        statements, review of the financial statements included in our reports on
        10-QSB, and other services typically provided by an accountant in connection
        with statutory and regulatory filings or engagements for that fiscal
        year.
 
 Type
                  of Fee
              Paid
                  to
              Fiscal
                  Year ending 2005
              Fiscal
                  Year Ending 2004Audit
              Tinter
                  Scheifley Tang, LLC
              $22,750
              $11,500
  (b) Audit-Related
        Fees
  Tinter
        Scheifley Tang, LLC did not bill us for any audit-related fees for the fiscal
        year ended December 31, 2005 or the fiscal year ended December 31,
        2004.
  (c) Tax
        Fees
  Tinter
        Scheifley Tang, LLC did not bill us for any tax services for the fiscal year
        ended December 31, 2005 or the fiscal year ended December 31, 2004.
  (d) All
        Other
        Fees
  Tinter
        Scheifley Tang, LLC did not bill us for any services other than those disclosed
        above under the caption "Audit Services" for the fiscal year ended December
        31,
        2005 or the fiscal year ended December 31, 2004.
  (e) Audit
        Committee's Pre-Approval Practice
  Section 10A(i) of
        the Securities Exchange Act of 1934 prohibits our auditors from performing
        audit
        services for us as well as any services not considered to be "audit services"
        unless such services are pre-approved by the audit committee of the Board
        of
        Directors, or unless the services meet certain *de
        minimis* standards. As our principal certifying accountants have not provided services
        other than audit services for the fiscal year ended December 31, 2005 and
        the
        fiscal year ended December 31, 2004, it has not been necessary for our Audit
        Committee to approve the performance of any such services for such fiscal
        years.
 
 According
        to information provided by our principal certifying accountants, all services
        were performed by persons who were their full time employees.
 
 
 
  SIGNATURES
 
 In
        accordance with the requirements of the Securities Exchange Act of 1934,
        as
        amended, the registrant caused this report to be signed on its behalf by
        the
        undersigned thereunto duly authorized, in the City of New York, State of
        New
        York on April 17, 2007.
 
 PARADISE
                  MUSIC & ENTERTAINMENT, INC.By:
                /s/
                  Richard P. RifenburghRichard
                  P. Rifenburgh, Chairman
 In
        accordance with the Exchange Act of 1934, as amended, this report has been
        signed below by the following persons on behalf of the registrant and in
        the
        capacities and on the dates below.
 Signature
                Title
                Date/s/
                    RICHARD P. RIFENBURGH
                Chairman
                    of the Board
                April
                    19, 2007Richard
                    P. Rifenburgh/s/
                    PAUL LISAK
                Director
                April
                    19, 2007Richard
                    P. Rifenburgh/S/
                    WINSTON WILLIS
                Director
                April
                    19, 2007Winston
                    Willis
 
 
 PARADISE
        MUSIC & ENTERTAINMENT, INC.
 CONSOLIDATED
        FINANCIAL STATEMENTS
 
 
 
 CONTENTS
 
 INDEPENDENT
                    AUDITOR’S REPORT
                F-2CONSOLIDATED
                    FINANCIAL STATEMENTSCONSOLIDATED
                    BALANCE SHEET
                F-3CONSOLIDATED
                    STATEMENTS OF
                    OPERATIONS
                F-4CONSOLIDATED
                    STATEMENTS OF STOCKHOLDERS’
                    EQUITY
                F-5CONSOLIDATED
                    STATEMENTS OF CASH
                    FLOWS
                F-6NOTES
                    TO CONSOLIDATED FINANCIAL
                    STATEMENTS
                F-7
                    to
                    F-14


REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
        FIRM
 
 Stockholders
        and Board of Directors
 Paradise
        Music and Entertainment, Inc.
 
 We
        have
        audited the accompanying consolidated balance sheet of Paradise Music and
        Entertainment, Inc. as of December 31, 2005, and the related consolidated
        statements of operations, stockholders’ (deficit) and cash flows for the years
        ended December 31, 2005 and 2004. These financial statements are the
        responsibility of the Company's management. Our responsibility is to express
        an
        opinion on these financial statements based on our audits.
 
 We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. The Company is not required
        to
        have, nor were we engaged to perform, an audit of its internal control over
        financial reporting. Our audit includes consideration of internal control
        over
        financial reporting as a basis for designing audit procedures that are
        appropriate in the circumstances, but not for the purpose of expressing an
        opinion on the effectiveness of the Company’s internal control over financial
        reporting. Accordingly, we express no such opinion. An audit also includes
        examining, on a test basis, evidence supporting the amounts and disclosures
        in
        the financial statements, assessing the accounting principles used and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. We believe that our audits provide a
        reasonable basis for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the financial position of Paradise Music and Entertainment,
        Inc. as of December 31, 2005, and results of its operations and its cash
        flows
        for the years ended December 31, 2005 and 2004, in conformity with accounting
        principles generally accepted in the United States of America.
 
 The
        accompanying consolidated financial statements have been prepared assuming
        that
        the Company will continue as a going concern. As discussed in Note 2 to the
        financial statements, the Company has suffered a loss from operations and
        has
        working capital and stockholders’ deficits. These factors raise substantial
        doubt about the Company’s ability to continue as a going concern. Management’s
        plans in regard to this matter are also discussed in Note 2. The financial
        statements do not include any adjustments that might result from the outcome
        of
        this uncertainty.
 
 
 Tinter
        Scheifley Tang, LLP
 
 
 Denver,
        Colorado
 February
        25, 2007
 
 
 
 
 Paradise
                  Music & Entertainment,
                  Inc.Consolidated
                  Balance SheetDecember
                  31, 2005AssetsCurrent
                  assets:Cash
              
              $
              137,409Accounts
                    receivable, net of allowance fordoubtful
                    accounts of $66,834
              
              
              698,071Prepaid
                  expenses
              
              
              7,292Total
                  current assets
              
              
              842,772Property
                    and equipment, at cost, net of accumulateddepreciation
                    of $99,349
              
              
              903,297$
              1,746,069Liabilities
                  and stockholders' (deficit)Current
                  liabilities:Line
                  of credit - financial institution
              
              $
              778,683Current
                  portion of long-term debt
              
              
              88,073Other
                  notes payable
              
              
              649,750Accounts
                  payable
              
              
              5,743,560Dividends
                  Payable
              
              
              12,429Accrued
                  interest
              
              
              390,101Accrued
                  wages
              
              
              510,291Accrued
                  expenses - other
              
              
              791,886Total
                  current liabilities
              
              
              8,964,773Long-term
                  debt
              
              
              352,101Stockholders'
                  (deficit):Preferred
                  stock, $.01 par value, 5,000,000 shares authorized
                280,000
                  shares issued and outstanding
              
              
              56,000Common
                    stock, $.01 par value, 75,000,000 authorized
                  58,496,358
                    shares issued and outstanding
              
              
              584,964Additional
                  paid-in capital
              
              
              27,065,022Accumulated
                  (deficit)
              
              
              (35,276,791
              )(7,570,805
              )$
              1,746,069See
                  accompanying notes to the consolidated financial statements.
 
 
 
 
 Paradise
                  Music & Entertainment,
                  Inc.Statement
                  of OperationsYears
                  Ended December 31, 2005 and 20042005
              
              2004Sales
              
              $
              2,915,698
              
              $
              -Cost
                  of sales
              
              
              1,305,273
              
              
              -Gross
                  margin
              
              
              1,610,425
              
              
              -Other
                  costs and expenses:Selling,
                  general and administrative
              
              
              1,371,167
              
              
              48,467Income
                  (loss) from operations
              
              
              239,258
              
              
              (48,467
              )Other
                  (income) and expense:Interest
                  expense
              
              
              391,131
              
              
              133,541Other
                  income
              
              
              (27,462
              )
              
              (55,205
              )363,669
              
              
              78,336Net
                  (Loss)
              
              
              (124,411
              )
              
              (126,803
              )Preferred
                  Stock Dividends
              
              
              (12,429
              )
              
              -Net
                  (Loss) attributable to Common Shares
              
              $
              (136,840
              )
              $
              (126,803
              )Basic
                  and diluted (loss) per share
              
              $
              -
              
              $
              -Weighted
                  average shares outstanding
              
              
              58,496,358
              
              
              53,656,906See
                  accompanying notes to the consolidated financial statements.
 
 
 
 
 Paradise
        Music & Entertainment,
        Inc.
 Consolidated
        Statements of Stockholders’ Equity
 Years
        Ended December 31, 2005 and 2004
 
 Additional
              
              CommonPreferred
              
              Stock
              
              Common
              
              Stock
              
              Paid-in
              
              Stock
              
              AccumulatedACTIVITY
              
              Shares
              
              Amount
              
              Shares
              
              Amount
              
              Capital
              
              Subscriptions
              
              Deficit
              
              TotalBalance,
                  January 1, 2004
              
              
              
              
              $
              -
              
              
              40,096,358
              
              $
              400,964
              
              $
              26,915,401
              
              $
              200,000
              
              $
              (35,013,148
              )
              $
              (7,496,784
              )Issuance
                  of stock for services
              
              
              
              
              
              
              
              
              3,750,000
              
              
              37,500
              
              
              (29,000
              )
              
              
              
              
              
              
              
              8,500Issuance
                  of stock for services previously expensed
              
              
              
              
              
              
              
              
              10,650,000
              
              
              106,500
              
              
              (57,750
              )
              
              
              
              
              
              
              
              48,750Issuance
                  of previously authorized common stock subscriptions
              
              
              
              
              
              
              
              
              4,000,000
              
              
              40,000
              
              
              160,000
              
              
              (200,000
              )
              
              
              
              
              -Compensation
                  value of warrants issued for financing
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              37,703
              
              
              
              
              
              
              
              
              37,703Net
                  (loss) for the year
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (126,803
              )
              
              (126,803
              )Balance,
                  December 31, 2004
              
              
              -
              
              
              -
              
              
              58,496,358
              
              
              584,964
              
              
              27,026,354
              
              
              -
              
              
              (35,139,951
              )
              
              (7,528,632
              )Issuance
                  of preferred stock for acquisition
              
              
              280,000
              
              
              56,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              56,000Compensation
                  value of warrants issued for financing
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              38,667
              
              
              
              
              
              
              
              
              38,667Accrued
                  Dividends on Series A Preferred Stock
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (12,429
              )
              
              (12,429
              )Net
                  (loss) for the year
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (124,411
              )
              
              (124,411
              )Balance,
                  December 31, 2005
              
              
              280,000
              
              $
              56,000
              
              
              58,496,358
              
              $
              584,964
              
              $
              27,065,021
              
              $
              -
              
              $
              (35,276,791
              )
              $
              (7,570,805
              )See
                  accompanying notes to financial statements.
 
 
 
 
 Paradise
                  Music &Entertainment,
                  Inc.Statements
                  of Cash FlowsYears
                  Ended December 31, 2005 and 20042005
              
              2004Net
                  income (loss)
              
              $
              (124,411
              )
              $
              (126,803
              )Adjustments
                  to reconcile net income (loss) to net cash provided (used in) by
                  operating
                  activities:Depreciation
                  expense
              
              
              99,349
              
              
              -Common
                  stock issued for services
              
              
              
              
              
              8,500Compensation
                  value of warrants issued for financing
              
              
              38,667
              
              
              37,703Changes
                  in assets and liabilities:(Increase)
                  decrease in:Accounts
                  receivable
              
              
              (344,257
              )
              
              -Prepaid
                  expenses and other assets
              
              
              (7,292
              )
              
              -Increase
                  (decrease) in:Accounts
                  payable
              
              
              (518,411
              )
              
              (113,353
              )Accrued
                  expenses
              
              
              209,674
              
              
              71,968Total
                  adjustments
              
              
              (522,270
              )
              
              4,818Net
                  cash (used in) operating activities
              
              
              (646,681
              )
              
              (121,985
              )Cash
                  flows from investing activities:Acquisition
                  of property and equipment
              
              
              (82,381
              )
              
              -Net
                  cash provided by investing activities
              
              
              (82,381
              )
              
              -Cash
                  flows from financing activities:Proceeds
                  from bank borrowings
              
              
              857,843
              
              
              40,000Repayment
                  of bank borrowings
              
              
              (58,986
              )Proceeds
                  from loans
              
              
              67,500
              
              
              77,000Net
                  cash provided by financing activities
              
              
              866,357
              
              
              117,000Increase
                  (decrease) in cash
              
              
              137,295
              
              
              (4,985
              )Cash
                  and cash equivalents, beginning of period
              
              
              114
              
              
              5,099Cash
                  and cash equivalents, end of period
              
              $
              137,409
              
              $
              114Supplemental
                  cash flow information:Cash
                  paid for interest
              
              $
              262,119
              
              $
              -Cash
                  paid for income taxes
              
              $
              -
              
              $
              -Non-cash
                  financing activities:Options,
                  warrants and stock granted for services
              
              $
              -
              
              $
              8,500Net
                  assets acquired for preferred stock
              
              $
              56,000
              
              $
              -Accrued
                  Dividends on Series A Preferred Stock
              
              $
              12,429
              
              $
              -See
                  accompanying notes to the consolidated financial
                  statements.
 
 
 
  NOTES
        TO CONSOLIDATED FINANCIAL
        STATEMENTS
 
 
 1.
        ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 -------------------------------------
 Paradise
        Music & Entertainment, Inc. ("Paradise" or the "Company"), a diversified
        holding company, is focused on adding to its 2005 acquisition, Environmental
        Testing Laboratories, Inc. (“ETL”). Now a wholly owned subsidiary, ETL operates
        profitably in the nationwide $1.8 billion a year environmental testing industry.
        Paradise operates offices in New York and Colorado, and was incorporated
        in the
        State of Delaware in July 1996.
 
 In
        the
        past Paradise operated as a music and entertainment company focused on
        partnering with other companies in the entertainment industry.
 
 Paradise
        is pursuing acquisitions in the following vertical industry
        segments:
 
 SERVICES
 Environmental
        Testing
 To
        that
        end, Paradise acquired Environmental Testing Laboratories, Inc. (ETL) of
        Farmingdale, NY in February 2005 as reported below.
 
 MANUFACTURING
 Product
        lines and companies that have a quantifiable market upside
        opportunity.
 
 The
        Company, to date, has not begun acquisition proceedings with any additional
        merger candidates.
 
 Principles
        of Consolidation - The consolidated financial statements include the accounts
        of
        Paradise and its wholly-owned inactive subsidiaries, iball Media, PDSE Events,
        All Access, PDSE Records, Push Records, PDSE Digital, Rave, Picture Vision,
        Straw Dogs, Shelter Films and the newly acquired Environmental Testing
        Laboratories, Inc. (collectively the "Company"). All significant intercompany
        accounts and transactions have been eliminated in consolidation. In 2001,
        the
        Company discontinued operations in all the subsidiaries except for All Access
        Entertainment Management Group, Inc, which is currently inactive.
 
 Reclassifications
        - Certain items presented in the previous year’s financial statements have been
        reclassified to conform to current year presentation.
 
 Revenue
        Recognition - The Company’s current revenue from the provision of environmental
        testing services is recorded when the service has been performed.
 
 Cash
        and
        Cash Equivalents -The Company considers all highly liquid investments with
        maturities of three months or less when purchased to be cash equivalents.
        The
        Company maintains its cash in bank deposit accounts that, at times, may exceed
        federally insured limits. The Company has not incurred any losses in such
        accounts and believes it is not exposed to any significant credit risk on
        cash.
 
 Impairment
        of Long Lived Assets - Impairment losses on long-lived assets (including
        goodwill) is recognized when events and circumstances indicate that the
        undiscounted cash flows estimated to be generated by these assets are less
        than
        the carrying amounts of those assets.
 
 Stock
        Warrants - Stock warrants issued for goods and services are accounted for
        in
        accordance with Emerging Issues Task Force (EITF) 96-18, Accounting for Warrants
        that are Issued to other than Employees for Acquisition, or in Conjunction
        with
        Selling Goods and Services. Accordingly warrants subject to vesting based
        on
        performance, will be valued each reporting period until vested. The portion
        of
        the value related to the completed term of the related agreement is expensed,
        and the remaining non-cash deferred consulting expense is amortized over
        the
        remaining term of the agreement. The value of such related warrants was subject
        to adjustment until such time that the warrant was nonforfeitable, fully
        vested
        and exercisable. All warrants issued as consideration for goods or services,
        either were fully vested or cancelled as of December 31, 2005.
 
 Income
        Taxes - Deferred income tax assets and liabilities are computed for differences
        between the financial statement and tax bases of assets and liabilities that
        will result in taxable or deductible amounts in the future, based on enacted
        tax
        laws and rates applicable to the periods in which the differences are expected
        to affect taxable income. Valuation allowances are established, when necessary,
        to reduce the deferred income tax assets to the amount expected to be
        realized.
 
 
   Loss
        Per
        Common Share - Basic earnings per share excludes dilution and is computed
        by
        dividing loss applicable to common stockholders by the weighted average number
        of common shares outstanding for the period. Diluted earnings per share reflects
        the potential dilution that could occur if securities or other contracts
        to
        issue common stock were exercised or converted into common stock or resulted
        in
        the issuance of common stock that then shared in the earnings of the entity.
        Diluted loss per common share is the same as basic loss per common share
        for all
        periods presented. Unexercised stock options and warrants to purchase 4,439,465
        shares at December 31, 2005 and 6,598,879 shares at December 31, 2004 of
        the
        Company's common stock were not included in the computations of diluted earnings
        per common share because their effect would have been anti-dilutive as a
        result
        of the Company's losses. In February, 2005, as part of the Asset Purchase
        of
        Environmental Testing Laboratories, Inc., the Company agreed to issue 280,000
        shares of Series A Preferred Stock to the sellers. This transaction will
        significantly affect earnings per share in future periods.
 
 Fair
        Value
        of Financial Instruments - The fair value of the Company's assets and
        liabilities which qualify as financial instruments under SFAS No. 107
        "Disclosures about fair value of financial instruments," approximate the
        carrying amounts presented in the consolidated balance sheet due to the short
        term nature of the instruments...
 
 Use
        of
        Estimates in Financial Statements - The preparation of financial statements
        in
        conformity with accounting principles generally accepted in the United States
        of
        America requires management to make estimates and assumptions that affect
        the
        amounts reported in the financial statements and accompanying notes. Actual
        results could differ from those estimates.
 
 Advertising
        Costs - Advertising costs are charged to expense as incurred. Advertising
        costs
        are included in selling, general and administrative expenses were $ 2,403
        and
        $0.00 during 2005 and 2004, respectively.
 
 Segment
        Information - The Company follows SFAS 131, “Disclosures about Segments of an
        Enterprise and Related Information”. Certain information is disclosed, per SFAS
        131, based on the way management organizes financial information for making
        operating decisions and assessing performance. The Company currently operates
        in
        a single segment and will evaluate additional segment disclosure requirements
        as
        it expands its operations.
 
 Stock-Based
        Compensation - The Company accounts for equity instruments issued to employees
        for services based on the fair value of the equity instruments issued and
        accounts for equity instruments issued to other than employees based on the
        fair
        value of the consideration received or the fair value of the equity instruments,
        whichever is more reliably measurable.
 
 The
        Company accounts for stock based compensation in accordance with SFAS 123,
        "Accounting for Stock-Based Compensation." The provisions of SFAS 123 allow
        companies to either expense the estimated fair value of stock options or
        to
        continue to follow the intrinsic value method set forth in APB Opinion 25,
        "Accounting for Stock Issued to Employees" (“APB 25”) but disclose the pro forma
        effects on net income (loss) had the fair value of the options been expensed.
        The Company has elected to continue to apply APB 25 in accounting for its
        stock
        option incentive plans.
 
 
 New
        Accounting Pronouncements
 
 In
        November 2004, the FASB issued SFAS 151, “Inventory Costs.” SFAS 151 amends the
        accounting for abnormal amounts of idle facility expense, freight, handling
        costs, and wasted material (spoilage) under the guidance in ARB 43, Chapter
        4,
“Inventory Pricing.” Paragraph 5 of ARB 43, Chapter 4, previously stated that
“...under some circumstances, items such as idle facility expense, excessive
        spoilage, double freight, and rehandling costs may be so abnormal as to require
        treatment as current period charges....” This Statement requires that those items
        be recognized as current-period charges regardless of whether they meet the
        criterion of “so abnormal.” In addition, this Statement requires that allocation
        of fixed production overheads to the costs of conversion be based on the
        normal
        capacity of the production facilities. This statement is effective for inventory
        costs incurred during fiscal years beginning after June 15, 2005. Management
        does not expect adoption of SFAS 151 to have a material impact on the Company’s
        financial statements.
 
 
   In
        December 2004, the FASB issued SFAS 153, “Exchanges of Nonmonetary Assets,” an
        amendment to Opinion No. 29, “Accounting for Nonmonetary Transactions.”
Statement 153 eliminates certain differences in the guidance in Opinion No.
        29
        as compared to the guidance contained in standards issued by the International
        Accounting Standards Board. The amendment to Opinion No. 29 eliminates the
        fair
        value exception for nonmonetary exchanges of similar productive assets and
        replaces it with a general exception for exchanges of nonmonetary assets
        that do
        not have commercial substance. Such an exchange has commercial substance
        if the
        future cash flows of the entity are expected to change significantly as a
        result
        of the exchange. SFAS 153 is effective for nonmonetary asset exchanges occurring
        in periods beginning after June 15, 2005. Earlier application is permitted
        for
        nonmonetary asset exchanges occurring in periods beginning after December
        16,
        2004. Management does not expect adoption of SFAS 153 to have a material
        impact
        on the Company’s financial statements.
 
 In
        December 2004, the FASB issued SFAS 123(R), “Share-Based Payment.” SFAS 123(R)
        amends SFAS 123, “Accounting for Stock-Based Compensation,” and APB Opinion 25,
“Accounting for Stock Issued to Employees.” SFAS 123(R) requires that the cost
        of share-based payment transactions (including those with employees and
        non-employees) be recognized in the financial statements. SFAS 123(R) applies
        to
        all share-based payment transactions in which an entity acquires goods or
        services by issuing (or offering to issue) its shares, share options, or
        other
        equity instruments (except for those held by an ESOP) or by incurring
        liabilities (1) in amounts based (even in part) on the price of the entity’s
        shares or other equity instruments, or (2) that require (or may require)
        settlement by the issuance of an entity’s shares or other equity instruments.
        This statement is effective (1) for public companies qualifying as SEC small
        business issuers, as of the first fiscal year beginning after December 15,
        2005,
        or (2) for all other public companies, as of the first fiscal year or interim
        period beginning after June 15, 2005, or (3) for all nonpublic entities,
        as of
        the first fiscal year beginning after December 15, 2005. Management is currently
        assessing the effect of SFAS No. 123(R) on the Company’s financial
        statements.
 
 In
        May
        2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections”
(“SFAS 154”), which replaces Accounting Principles Board Opinions No. 20,
“Accounting Changes” and SFAS No. 3, “Reporting Accounting changes in Interim
        Financial Statements—An Amendment of APB Opinion No. 28”. SFAS 154 provides
        guidance on the accounting for and reporting of accounting changes. It
        establishes retrospective application, or the latest practicable date, as
        the
        required method for reporting a change in accounting principle and the reporting
        of a correction of an error. SFAS 154 is effective for accounting changes
        and
        corrections of errors made in fiscal years beginning after December 15, 2005.
        The adoption of this statement did not have a material effect on the Company’s
        financial position or results of operations.
 
 In
        September 2005, the FASB’s Emerging Issues Task Force (“EITF”) reached a final
        consensus on Issue 04-13, “Accounting for Purchases and Sales of Inventory with
        the Same Counterparty” (“EITF 04-13”). EITF 04-13 requires that two or more
        legally separate exchange transactions with the same counterparty be combined
        and considered a single arrangement for purposes of applying APB Opinion
        No. 29,
“Accounting for Nonmonetary Transactions”, when the transactions are entered
        into in contemplation of one another. EITF 04-13 is effective for new
        arrangements entered into, or modifications or renewals of existing
        arrangements, in interim or annual periods beginning after March 15, 2006.
        The
        Company does not anticipate that the adoption of this statement will have
        a
        material effect on the Group’s financial position or results of
        operations.
 
 
 2.
        CONTINUED OPERATIONS:
 --------------------
 For
        the
        year ended December 31, 2005 the Company had a net loss of $124,000 compared
        to
        a net loss of $127,000 for the year ended December 31, 2004 and has
        stockholders’ deficits of $7,570,805 at December 31, 2005. The Company's
        strategy is to maximize the opportunity for growing the Company into a
        profitable operating company. That strategy is to acquire companies that
        are, or
        can be, operated profitability in two vertical business areas: Services and
        Manufacturing. The Company’s management has operated manufacturing and service
        companies in a variety of fields for over 35 years. While there has been
        some
        progress made on the implementation of this relatively new strategy, the
        strategy is still in its infancy. The Company presently has limited credit
        facilities and is in default on several loan instruments. All of the above
        factors raise substantial doubt about our ability to continue as a going
        concern.
 
 The
        Company's status as a going concern is dependent on its ability to successfully
        implement a marketing plan and generate sufficient revenues to operate on
        a
        profitable basis, continued financial support by officers and major shareholders
        and raising of additional funds for working capital. The financial statements
        do
        not include any adjustments to reflect the possible future effects on the
        recoverability and classification of assets or the amounts and classification
        of
        liabilities that may result from the possible inability of the Company to
        continue as a going concern.
 
 
 3.
        ASSET
        ACQUISITION AGREEMENT
 ---------------------
 On
        February 14, 2005, ETL Acquisition Corp. (“ETL”), a Delaware corporation and a
        wholly owned subsidiary of Paradise Music & Entertainment, Inc., completed
        the acquisition of all or substantially all of the assets and business of
        Environmental Testing Laboratories, Inc.  Environmental Testing
        Laboratories, Inc. is a privately held company based in Farmingdale, New
        York,
        and engaged in the business of environmental testing. ETL acquired assets
        consisting primarily of accounts receivables, machinery and laboratory equipment
        of Environmental Testing Laboratories, Inc. valued at $1,915,463 at the time
        of
        the closing. At closing ETL paid for these assets by assuming liabilities
        of
        $761,820 from Environmental Testing Laboratories, Inc. and agreeing to assume
        additional liabilities of $1,153,643 from affiliate companies of Environmental
        Testing Laboratories, Inc. The $761,820 assumed directly from Environmental
        Testing Laboratories, Inc. consisted of approximately $530,000 of accounts
        payable, approximately $170,000 of tax obligations due to various taxing
        authorities, and approximately $63,000 in judgments entered against
        Environmental Testing Laboratories, Inc. The additional liabilities of
        $1,153,643 from affiliate companies of Environmental Testing Laboratories,
        Inc.
        which ETL agreed to assume would be determined by ETL in the future at its
        sole
        discretion; however, ETL agreed to pay a minimum of $250,000 of this $1,153,643
        within thirty days of the closing. On February 24, 2005 ETL made a payment
        of
        $250,000 in cash against the additional liabilities.
 
 On
        December 19, 2005 the parties agreed to amend the terms of the purchase as
        follows: In consideration for the purchased assets, the purchase price was
        reduced to $1,274,079, which ETL agreed to pay at closing by the assumption
        of
        accounts payable and accrued expenses in the amount of $546,441, the assumption
        of additional liabilities of $671,638 from affiliate companies of Environmental
        Testing Laboratories, Inc., and the issuance of preferred shares as noted
        below.
 
 
   As
        part of
        the consideration for the acquisition, Paradise agreed to issue 280,000 shares
        of its Series B Preferred Stock to Environmental Testing Laboratories, Inc.
        The
        parties agreed to amend the terms of the purchase, with effect from the date
        of
        the original agreement, to provide for the issuance by Paradise of 280,000
        shares of its Series A Preferred Stock, rather than its Series B Preferred
        Stock. The Series A Preferred Stock is convertible, at the option of the
        holder
        or of the Company, into ten (10) shares of Paradise common stock. The holders
        of
        shares of Series A Preferred Stock are entitled to receive an annual dividend
        of
        five cents per share, but do not receive a liquidation preference with respect
        to the Series A Preferred shares. The fair value of the Series A Preferred
        Stock
        at the purchase date was $56,000, based of the trading price of the underlying
        common stock.
 
 The
        asset
        purchase was consummated in connection with the Company’s efforts to expand its
        intended business focus. The Company launched a new strategy in order to
        maximize the opportunity for growing the Company into a profitable operating
        company. That strategy is to acquire companies that are, or can be, operated
        profitability in two vertical business areas: Services and Manufacturing.
 
 At
        the
        purchase date, the net assets of Environmental Testing Laboratories, Inc.
        consisted of:
 
 Accounts
                  Receivable
              $
                  353,814Property
                  & Equipment
              920,265Accounts
                  Payable and Accrued Expenses
              (546,441)Additional
                  Liabilities
              (671,638)$
                  56,000
 
 
 Had
        the
        acquisition been completed at January 1, 2005, the Company’s results of
        operations would be as follows:
 
 Sales
              3,261,380Net
                  (loss)
              (198,014)Basic
                  and diluted (loss) per share
              0.00
 
 
 4.
        PROPERTY AND EQUIPMENT
 
 Property
        and equipment at December 31, 2005 consisted of the following:
 Furniture
                    and office equipment
                
                $
                36,462Laboratory
                    equipment
                
                
                966,184Accumulated
                    depreciation
                
                
                99,349$
                903,297
 
 Depreciation
        expense for the years ended December 31, 2005 and 2004 was $99,349 and $0.00
        -
        respectively.
 
 
 5.
        DEBT:
 --------------------
 Financing
        Agreement - On April 25, 2001, the Company entered into a commercial financing
        agreement with Porter Capital Corporation (PCC). The agreement provides that
        the
        Company sell, transfer, set over and assign certain invoices and accounts
        receivable to the lender, with recourse. The credit facility provided for
        maximum revolving borrowings up to $1,500,000. Borrowings under this facility
        are based on a funding formula and, in addition to the accounts receivable
        and
        invoices are collateralized by all of the Company's remaining assets. On
        April
        12, 2004, PCC agreed to extend to Paradise a new line of credit in the amount
        of
        five million dollars upon its normal business terms for accounts receivable
        financing for the purposes of acquisitions by Paradise. As of December 31,
        2005
        approximately $300,000 was outstanding under the line. Advances from the
        lender
        bear interest at 18% per annum and were originally due on April 15, 2005.
        Paradise agreed to deposit 15,000,000 fully paid and non-assessable shares
        of
        its Common Stock in escrow (“Escrow Stock”) pursuant to an Escrow Agreement. On
        December 19, 2005, an agreement was reached with PCC waiving all current
        defaults and the Due Date of the Senior Loan Balance was revised to April
        15,
        2006. All obligations with respect to the Escrow Stock have been deleted
        in
        their entirety. The loan was further amended on October 20, 2006, as described
        in Subsequent Events.
 
 
   Notes
        payable totaling $649,750 are past due and in default. The notes currently
        bear
        a default interest rate of 24%.
 
 On
        February 14, 2005, Environmental Testing Laboratories, Inc. (ETL) signed
        a
        Discount Factoring Agreement with Capstone Business Credit, LLC. (Capstone).
        ETL
        agreed to appoint Capstone as its sole Factor with respect to all sales and
        hereby offered to sell and assign, only to Capstone, all Accounts Receivable
        arising out of such sales. ETL agreed to pay Capstone a commission of 2%
        in the
        form of a discount on the face amount of the Account Receivable. This agreement
        was revised and modified on May 11, 2006, and again on December 14, 2006.
        The
        commission rate was dropped to 1.5% on December 14, 2006.
 
 On
        February 14, 2005, Environmental Testing Laboratories, Inc. (ETL) signed
        a
        Promissory Note for a $500,000 Equipment Loan with Capstone Business Credit,
        LLC. (Capstone). Interest on the outstanding balance shall be computed at
        the
        rate of 24% per annum. On May 11, 2006 the equipment loan was raised to
        $750,000, and on December 14, 2006 the interest rate was reduced to 18% per
        annum.
 
 5.
        ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
 -------------------------------------
 At
        December 31, 2005, accounts payable and accrued expenses include an aggregate
        of
        $4,595,115 of past due liabilities of certain of the Company’s inactive
        subsidiaries.
 
 6.
        INCOME
        TAXES:
 ------------
 The
        Company accounts for income taxes under SFAS 109, which requires the use
        of the
        liability method. SFAS 109 provides that deferred tax assets and liabilities
        are
        recorded based on the differences between the tax bases of assets and
        liabilities and their carrying amounts for financial reporting purposes,
        referred to as temporary differences. Deferred tax assets and liabilities
        at the
        end of each period are determined using the currently enacted tax rates applied
        to taxable income in the periods in which the deferred tax assets and
        liabilities are expected to be settled or realized.
 
 The
        provision for income taxes differs from the amount computed by applying the
        statutory federal income tax rate to income before provision for income taxes.
        The sources and tax effects of the differences are as follows:
 Income
                    tax provision at the federal statutory rate
                34%Effect
                    of operating losses
                (34%)-
 As
        of
        December 31, 2005, the Company has a net operating loss carry forward of
        approximately $21,312,000. This loss will be available to offset future taxable
        income. If not used, this carry forward will expire through 2023. The deferred
        tax asset of approximately $7,246,000 relating to the operating loss carry
        forward has been fully reserved at December 31, 2005. The reserve increased
        by
        approximately $29,000 during fiscal year ending December 31, 2005.
 
 7.
        COMMITMENTS AND CONTINGENCIES:
 -----------------------------
 The
        Company has agreed to pay each of its outside directors $18,000 per year,
        payable quarterly in the Company's common stock valued on the last day of
        the
        applicable quarter. As the only outside director, Mr. Rifenburgh signed an
        agreement on January 2, 2002 to suspend the accrual of compensation until
        the
        Company begins significant operations. The Company has agreed to pay the
        Chairman $240,000 per year. The Company was not able to make these payments,
        nor
        have they accrued the expense for fiscal year ended December 31, 2005. The
        Chairman, Mr. Hickel, agreed on January 2, 2004 to suspend the accrual of
        compensation until the Company begins significant operations.
 
 
 
 8.
        STOCKHOLDERS' EQUITY:
 --------------------
 During
        2005, the Company issued 280,000 shares of Series A Preferred Stock to the
        seller of Environmental Testing Laboratories, Inc., the Company’s 2005
        acquisition described above. These shares were authorized and the related
        expense was accounted for in fiscal year 2005.
  The
        holder
        of each share of Series A Preferred are entitled to receive distributions
        in
        cash at the rate of $0.05 per share per calendar year during which such share
        shall have been authorized to be issued, such distributions to be pro rated
        for
        any fraction of a year (based on the number of days in such year) during
        which
        such share shall have been so authorized to be issued. Such dividend shall
        be
        paid on or before the 30 th day after
        the end of each calendar year. Dividends in the amount of $12,249 were accrued
        for fiscal year ending December 31, 2005.
 
 9.
        STOCK
        OPTIONS:
 ----------------------
 On
        October
        8, 1996, the Board of Directors adopted and the stockholders approved the
        Option
        Plan. The Option Plan provides for the granting of incentive stock options
        ("ISOs") within the meaning of Section 422 of the Internal Revenue Code of
        1986,
        as amended (the "Code"), non-qualified stock options ("NQSOs") and/or Stock
        Appreciation Rights (SARs) to certain directors, agents and employees of,
        and
        consultants to the Company. The purpose of the Option Plan is to attract
        and
        retain exemplary employees, agents, consultants and directors. Options and
        SARs
        granted under the Option Plan may not be exercisable for terms in excess
        of 10
        years from the date of grant. In addition, no options or SARs may be granted
        under the Option Plan later than 10 years after the Option Plan's effective
        date. The total number of shares of Common Stock with respect to which options
        and SARs will be granted under the Option Plan is 3,000,000. The shares subject
        to and available under the Option Plan may consist, in whole or in part,
        of
        authorized but unissued stock or treasury stock not reserved for any other
        purpose. Any shares subject to an option or SAR that terminates, expires
        or
        lapses for any reason, and any shares purchased pursuant to an option and
        subsequently repurchased by the Company pursuant to the terms of the option,
        shall again be available for grant under the Option Plan. As part of the
        Option
        Plan, the Board of Directors set aside for Outside Directors an aggregate
        of
        100,000 stock options to eligible directors of the Company. Each eligible
        director receives 5,000 stock options per annum, subject to adjustment, for
        his
        services on the Board on each July 1. The options are exercisable at the
        fair
        market value of the common stock on the last date preceding the date of grant.
        The maximum term of the stock options is 5 years and the stock options may
        be
        exercised at any time for a period of 5 years after the date of grant. As
        the
        only outside director, Mr. Rifenburgh signed an agreement on January 2, 2002
        to
        suspend the accrual of compensation until the Company begins significant
        operations.
 The
                    activity in the Option Plan is as follows:
                
                
                Exercise
                    PriceNumber
                    of Options
                
                
                Per
                    share rangeBalances
                    outstanding January 1, 2004
                
                
                1,344,000
                
                
                1.00
                    - 5.00Granted
                
                
                -
                    0 -
                
                
                n/aCancelled
                
                
                -
                    0 -
                
                
                n/aBalances
                    outstanding Dec 31, 2004
                
                
                1,344,000
                
                
                1.00
                    - 5.00Granted
                
                
                -
                    0 -
                
                
                n/aCancelled
                
                
                812,333
                
                
                1.50
                    - 5.00Balances
                    outstanding December 31, 2005
                
                
                531,667
                
                
                1.00
                    - 3.00
  The
        Company has adopted the disclosure requirements of SFAS No. 123, "Accounting
        for
        Stock-Based Compensation". The Company applies Accounting Principles Board
        Opinion No. 25 and related interpretations in accounting for its Option Plan
        and
        Program. Had compensation for the Company's stock options been determined
        based
        on the fair value at the grant dates, consistent with the provisions of SFAS
        No.
        123, the Company's consolidated net loss and loss per common share would
        not
        have been adjusted as no options were granted for the periods
        presented.
 
 
 
 10.
        STOCK
        WARRANTS :
 --------------
 The
        following table summarizes common stock warrant activity:
 Shares
                
                Exercise
                    PricesWarrants
                    outstanding as of January 1, 2004
                
                
                3,384,026
                
                
                0.002
                    - 2.61Granted
                
                
                2,907,798
                
                
                0.002
                    - 0.01Cancelled
                
                
                -
                    0 -
                
                
                n/aWarrants
                    outstanding as of December 31, 2004
                
                
                6,254,879
                
                
                0.002
                    - 2.61Granted
                
                
                -
                    0 -
                
                
                n/aCancelled
                
                
                2,347,081
                
                
                0.04
                    - 2.61Warrants
                    outstanding as of December 31, 2005
                
                
                3,907,798
                
                
                0.002
                    - 0.05
  The
        fair
        value of each option grant is estimated on the grant date using the
        Black-Scholes option pricing model with the following assumptions for
        grants:
  For the
                    YearsEnded
                    December 31,2005
                
                2004Volatility
                
                
                --
                
                
                49.03Interest
                    rate
                
                
                --
                
                
                12
                %Dividends
                
                
                --
                
                
                n/aExpected
                    term
                
                
                --
                
                
                24
 
 The
        expense for warrants granted in 2004 was $38,667 for 2005 and $37,703 for
        2004
        and is discussed further in Note 4 and is related primarily to additional
        cost
        of debt issuance.
 
 
 11.
        SUBSEQUENT EVENTS:
 -----------------
 
 On
        May 11,
        2006, Capstone Business Credit increased the equipment loan from $500,000
        to
        $750,000 and signed an Amended and Restated Discount Factoring Agreement
        with
        the Company. On December 14, 2006, Capstone Business Credit reduced the rate
        of
        the equipment loan to18% per annum from the previous 24%, and signed a Second
        Amended and Restated Discount Factoring Agreement with the Company which
        decreased the commission from 2% to 1.5%.
 
 On
        June
        15, 2006, Mr. Kelly Hickel resigned his positions as a director and as chairman,
        president, chief executive officer, treasurer, and secretary of Paradise
        Music
& Entertainment, Inc. (the "Company"), effective at the close of business on
        June 15, and Mr. Winston "Buzz" Willis resigned his positions as a director
        and
        as a vice president of the Company, effective at the close of business on
        June
        15, 2006. Mr. Willis also resigned his positions as chief executive officer
        and
        president of All Access Entertainment Management Group, Inc., a subsidiary
        of
        the Company. Mr. Hickel and Mr. Willis each plan to devote his attention
        to
        other business interests. The Company's sole remaining director, Mr. Richard
        Rifenburgh, has taken over all responsibilities of Mr. Hickel.
 
 As
        of
        October 20, 2006, Porter Capital Corporation (“PCC”) agreed to further amend all
        of the obligations due to it from Paradise. In exchange for the waiver by
        PCC of
        all prior defaults under prior agreements, Paradise Music & Entertainment,
        Inc. executed and delivered to PCC its Promissory Note in the principal amount
        of $150,000 bearing interest at the rate of 13% per annum. Interest on the
        Note
        is payable monthly in arrears commencing December 1, 2006 through November
        1,
        2008, when the principal of the Note is due and payable. This amended agreement
        provides that the new Note replaces all other Notes prior to it. This
        results in $237,351 of debt forgiveness income in the fiscal year 2006.
 
 On
        February 2, 2007, the board of Directors (the “Board”) of Paradise Music &
Entertainment, Inc. (the “Company”) elected Mr. Paul Lisak, M.S., R.E.H.S to
        fill the vacant Board seat previously held by Kelly T. Hickel. Mr. Lisak,
        age
        62, retired in 2002 as Los Angeles (“LA”) County’s Hazardous Materials Control
        Manager, and from over 30 years service devoted to the administration and
        management of public health.
 
 
   Mr.
        Winston "Buzz" Willis was also elected to fill the vacant Board seat that
        he
        previously held by him prior to his resignation in June 2006. Mr. Willis
        was the
        youngest Vice President at RCA and was the founder of the Black Music Division
        of RCA Records. From the late 1970s to the early 1980s, he served as Senior
        V.P.
        of American operations of Phillips Electronics Corp. (parent of Polydor/Polygram
        Records).
 
 Ms.
        Julia
        Belden was elected as Treasurer of the Company in addition to the position
        of
        Secretary which she has held since June 15, 2006. Ms. Patty Werner-Els was
        elected to the position of President of Environmental Testing Laboratories,
        Inc.
        (ETL), the Company’s subsidiary. Ms. Werner-Els has been employed at ETL for 17
        years.
 
 Mr.
        Richard P. Rifenburgh maintains his position as Chairman of the Board and
        the
        other officer positions he has held since June 2006 and the position of Vice
        Chairman which he has held since 2001. He also serves on the Board’s Audit
        Committee, Compensation Committee and Nominating and Governance Committee;
        as
        well as Chairman of the Audit Committee.
 
 In
        consideration for his service on the Board, Mr. Lisak has been granted stock
        options to purchase 10,000 shares of the Company’s newly-authorized Series C
        Preferred stock. In consideration for his service on the Board, Mr. Willis
        was
        also granted stock options to purchase 10,000 shares of the Company’s Series C
        Preferred stock. Mr. Rifenburgh, in consideration of his long service and
        additional responsibilities was granted stock options to purchase 50,000
        shares
        of the Company’s Series C Preferred stock. In consideration for her service as
        an Officer was granted options to purchase 7,500 shares of the Company’s Series
        C Preferred stock. Ms. Werner-Els, in consideration for her service as the
        President of the Company’s operating subsidiary was granted options to purchase
        7,500 shares of the Company’s Series C Preferred stock. All options granted to
        Mr. Lisak, Mr. Rifenburgh, Mr. Willis, Ms. Belden, and Ms. Werner-Els are
        exercisable for a period of five years from the date of grant at an exercise
        price of $1.10 per share of Series C Preferred Stock. Each share of Series
        C
        Preferred Stock is convertible into 100 shares of the Company's Common Stock,
        subject to adjustment, if, as, and when the Company has authorized a sufficient
        number of shares of Common Stock for issuance upon such conversion. The Company
        has agreed to register under the Securities Act of 1933, as amended, and
        to
        register or qualify under the applicable securities laws of other jurisdictions,
        at its expense, the shares of Common Stock into which the shares of Series
        C
        Preferred stock are convertible. Upon the effectiveness of such registrations
        and qualifications, the shares of Series C Preferred Stock will automatically
        be
        converted into shares of Common Stock as described above.