UNITED STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-K





[x]
            ANNUAL
      REPORT PURSUANT TO SECTION l3 OR l5 (d) OF THE SECURITIESEXCHANGE
      ACT OF l934





For
the fiscal year ended December 31, 2008


OR





[
       ]
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
      EXCHANGE ACT OF 1934





Commission
file number 1-12635


________________________




PARADISE MUSIC & ENTERTAINMENT,
INC.


(Exact
name of registrant as specified in its charter)






Delaware
            13-3906452(State or other
      jurisdiction of incorporation or organization)
            (I.R.S.
      Employer Identification No.)1365 N.
      Courtenay Parkway, Suite A, Merritt Island, FL
            32953(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 RegisteredCommon
      Stock
              par value
      $0.01 per share
            
            Over-the-counter








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




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities
Act.           [  ]
Yes  [ X] No





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act.    [  ]
Yes  [ X] No





Indicate
by check mark 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  [ X] No





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained here, and will not 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-K or any amendment to this
Form 10-K.    [  ]





Indicate
by check mark whether the registrant is a large accelerated filer, a
non-accelerated filer, or a smaller reporting company.






Large accelerated
      filer  [  ]
            Accelerated
      filer  [  ]Non-accelerated
      filer  [  ]
            Smaller reporting
      company  [ X]




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
aggregate market value of the common stock held by non-affiliates as of June 30,
2008 was $462,045.





The
outstanding number of shares of common stock as of December 31, 2008 was
69,029,679





DOCUMENTS
INCORPORATED BY REFERENCE





None.





1








TABLE OF CONTENTS





PART IItem
      1.
            Business
            3Item
      1A
            Risk
      Factors ..
            3Item
      1B
            Unresolved
      Staff Comments .
            8Item
      2.
            Properties
            8Item
      3.
            Legal
      Proceedings
            8Item
      4.
            Submission
      of Matters to a Vote of Security Holders.
            8PART IIItem
      5.
            Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
            8Item
      6.
            Selected
      Financial Data.
            9Item
      7.
            Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
            10Item
      7A.
            Quantitative
      and Qualitative Disclosure about Market Risk
            12Item
      8
            Financial
      Statements and Supplementary Data.
            12Item
      9.
            Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
            12Item
      9A.
            Controls
      and Procedures.
            12Item
      9B.
            Other
      Information
            13PART
      IIIItem
      10
            Directors,
      Executive Officers and Corporate Governance .
            14Item
      11.
            Executive
      Compensation.
            15Item
      12.
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.
            16Item
      13.
            Certain
      Relationships and Related Transactions and Director
      Independence.
            17Item
      14.
            Principal
      Accountant Fees and Services.
            17PART
      IIIItem
      15.
            Exhibits,
      Financial Statement Schedules
            17








2












PART
I


ITEM
1.  BUSINESS





Forward-looking
Statements





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 our business.





GENERAL





Paradise
Music & Entertainment, Inc. was incorporated in the State of Delaware on
July 18, 1996.  Our principal executive offices are located at 1365 N.
Courtenay Parkway, Suite A, Merritt Island, FL 32953, and our telephone number
is 888-565-3259.





Paradise’s
principal operations are conducted through its wholly-owned
subsidiary  Environmental Testing Laboratories, Inc., which provides
environmental testing services in the northeast United States.  The
environmental testing industry is an approximately $1.8 billion business
annually in the United States.





ETL is
committed to providing high quality data to its clients by adhering to approved
methodologies and all mandated QA/QC protocols.  ETL analysts are
seasoned professionals with years of environmental experience.  Using
state-of-the-art instrumentation with powerful computer hardware and software,
ETL seeks to provide 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








3







*           PCB
(Polychlorinated biphenyls) and PCB Congener Analysis





*           HUD
Lead Abatement Testing





*           Fingerprint
Categorization





*           Petroleum
Analyses





*           Client
Specific Deliverables





*           Electronic
Data Deliverables





Starting
with our acquisition of ETL in 2005, the Company focus has been to acquire
additional businesses in the environmental services industry.  The
Company would endeavor to improve the operational performance and the asset
utilization of the acquired entities, if any are acquired, via both horizontal
and vertical expansion.  The Company would attempt 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.





In
October 2009 our Board of Directors approved a plan to re-establish our former
business of providing entertainment services, principally booking, sponsoring
and managing entertainers and venues.





As part
of the renewed focus of the Company on the entertainment industry, the Company’s
Board of Directors approved the distribution of the shares of ETL to our
shareholders on a pro-rata basis.  ETL then will operate as a
stand-along company in the environmental testing market and will have no further
affiliation with the Company.  We expect to complete this distribution
in the first quarter of 2010.





COMPETITION





We face
intense competition both for business and for executives and operating
personnel.  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 those that ETL provides as well as others such as mold detection and
testing and 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





During
2008, Paradise had two executive officers and no other employees.  The
Board members and the two executives serve under informal agreements for the
Company. One officer is employed by ETL, which has approximately 35 at-will
employees.





SUBSEQUENT
EVENT





In
October 2009 our Board of Directors approved a plan to re-establish our former
business of providing entertainment services principally booking, sponsoring and
managing entertainers and venues.





As part
of the renewed focus of the Company on the entertainment industry, the Company’s
Board of Directors approved the distribution of the shares of ETL to our
shareholders on a pro-rata basis.  ETL then will operate as a
stand-along company in the environmental testing market and will have no further
affiliation with the Company.  We expect to complete this distribution
in the first quarter of 2010.








4





ITEM 1A.  RISK FACTORS.





Risks
Relating to Our Business




We
will need additional financing to execute our business plan and fund operations,
which additional financing may not be available.




We have
very limited funds and we may not be able to execute our current business plan
and fund business operations long enough to increase profitability. Our ultimate
success may depend upon our ability to raise additional capital. There can be no
assurance that additional funds will be available when needed from any source
or, if available, will be available on terms that are acceptable to
us.





We may be
required to pursue sources of additional capital through various means,
including joint venture projects and debt or equity financings. Additional
financings through equity investments are likely to continue to be dilutive to
existing stockholders. Also, the terms of securities we may issue in future
capital transactions may likewise be more favorable for our new investors. Newly
issued securities may include preferences, superior voting rights, the issuance
of warrants or other derivative securities, and the issuances of incentive
awards under equity employee incentive plans, which may have additional dilutive
effects. Further, we may incur substantial costs in pursuing future capital
and/or financing, including investment banking fees, legal fees, accounting
fees, printing and distribution expenses and other costs. We may also be
required to recognize non-cash expenses in connection with certain securities we
may issue, such as convertible notes and warrants, which will adversely impact
our financial condition.





Our
ability to obtain needed financing may be impaired by such factors as the
capital markets, both generally and specifically in the environmental industry,
and the fact that we are not profitable, which could impact the
availability and cost of future financings. If the amount of capital we are
able to raise from financing activities, together with our revenues from
operations, is not sufficient to satisfy our capital needs, even to the extent
that we reduce our operations accordingly, we may be required to cease
operations.





We
may be negatively affected by the changing economic conditions including the
current economic downturn.




A general
downturn in economic, business and financial conditions, including recession,
inflation and higher interest rates, could have an adverse effect on our
business.




To the
extent our financing involves high degrees of leverage; recessions, operating
problems and other general business and economic risks may have a more
pronounced effect on our profitability or survival. Also, increased interest
rates increase our interest expenses. In the event we cannot generate adequate
cash flow to meet debt service, we may suffer a partial or total loss of capital
invested in the Company.





We
are dependent upon key personnel whose loss may adversely impact our
business.




We rely
heavily on the expertise, experience and continued services of our senior
management and sales personnel. The loss, or any inability to attract or retain
key individuals, could materially adversely affect us. We seek to compensate and
motivate our executives, as well as other employees and independent contractors,
through competitive salaries, commissions and bonus plans, but there can be no
assurance that these programs will allow us to retain key employees and
contractors or hire or attract new key employees and contractors. As a result,
if key personnel were to leave or cease to be available or our ability to
utilize their skills, contacts and other resources impeded, we could face
substantial difficulty in finding qualified successors and could experience a
loss in productivity while any such successors obtain the necessary training and
experience.




The
environmental testing industry is extremely competitive.




We will
compete with a number of companies that are engaged in business similar to
ours.  Our competitors have been in business far longer than we have
and they may have significantly greater financial stability, access to capital
markets and name recognition. Unanticipated shortfalls in expected revenues due
to price competition or inadequate supply of raw materials would negatively
impact our financial results and harm our business. There is no assurance that
we will be able to successfully compete in this industry.






5







Risks
Relating to Our Organization




We
are subject to the reporting requirements of the federal securities laws, which
can be expensive.




We are a
public reporting company and, accordingly, subject to the information and
reporting requirements of the Securities Exchange Act and other federal and
state securities laws, including compliance with the Sarbanes-Oxley Act of 2002.
We incur significant costs for preparing and filing annual and quarterly
reports, proxy statements and other information with the SEC and furnishing
audited reports to stockholders.





It is
time consuming, difficult and costly for us to develop and implement the
internal controls and reporting procedures required by the Sarbanes-Oxley Act.
We may need to hire additional financial reporting, internal controls and other
finance personnel in order to develop and implement appropriate internal
controls and reporting procedures. If we are unable to comply with the internal
controls requirements of the Sarbanes-Oxley Act, we may not be able to obtain
the independent accountant certifications required by that Act, if
applicable.





Failure
to achieve and maintain effective disclosure controls or internal controls could
have a material adverse effect on our ability to report our financial results
timely and accurately.





We have
identified material weaknesses in our disclosure controls and internal controls.
As a result of these deficiencies, we must perform additional analysis and other
post-closing procedures to insure that our financial statements are prepared in
accordance with US generally accepted accounting principles. As a result, we
will incur expenses and devote significant management resources to this review
process. Furthermore, effective internal controls and procedures are necessary
for us to continue to provide reliable financial reports. If we continue to have
material weaknesses in our internal controls and procedures, we may not be able
to provide reliable financial reports and our business and operating results
could be harmed.





Public company compliance
requirementsmay make it more difficult to attract
and retain officers and directors.





The
Sarbanes-Oxley Act and rules subsequently implemented by the SEC have required
changes in corporate governance practices of public companies. Compliance with
the new rules and regulations increases our operating costs and makes certain
activities more time consuming and costly than if we were not a public company.
As a public company, these new rules and regulations make it more difficult and
expensive for us to obtain director and officer liability insurance. As a
result, it may be more difficult for us to attract and retain qualified persons
to serve on our Board of Directors or as executive officers.





Our largest stockholders can exert
significant control over our business and affairs and have actual or potential
interests that may depart from those of our other
stockholders.





Our
largest stockholders, some of whom are key employees or consultants to us, own a
substantial number of shares of our common stock. Additionally, their holdings
may be supplemented in the event that they exercise any of the warrants they may
hold or in the future be granted, or exercise any conversion privilege under any
convertible debt securities held or if they otherwise acquire additional shares
of our common stock. The interests of such persons may differ from the interests
of other stockholders. As a result, in addition to their positions with us, such
persons will have significant influence over and control all corporate actions
requiring stockholder approval, irrespective of how our other stockholders may
vote, including the following actions:





·
            elect
      or defeat the election of our directors;·
            amend
      or prevent amendment of our Certificate of Incorporation or
      By-laws;·
            effect
      or prevent a merger, sale of assets or other corporate transaction;
      and·
            control
      the outcome of any other matter submitted to the shareholders for
      vote.





In
addition, such persons’ stock ownership may discourage a potential acquirer from
making a tender offer or otherwise attempting to obtain control of us, which in
turn could reduce our stock price or prevent our stockholders from realizing a
premium over our stock price.








6




Risks
Relating to our Common Stock





Our
stock price may be volatile.





The
market price of our common stock is likely to be highly volatile and could
fluctuate widely in price in response to various factors, many of which are
beyond our control, including the following:




·
            changes
      in our industry;·
            competitive
      pricing pressures;·
            our
      ability to obtain working capital financing;·
            additions
      or departures of key personnel;·
            limited
      “public float”, in the hands of a small number of persons whose sales or
      lack of sales, could result in positive or negative pricing pressure on
      the market price for our common stock;·
            our
      ability to execute our business plan;·
            operating
      results that fall below expectations;·
            loss
      of any strategic relationship;·
            regulatory
      developments;·
            economic
      and other external factors; and·
            period-to-period
      fluctuations in our financial
results.





In
addition, the securities markets have from time to time experienced significant
price and volume fluctuations that are unrelated to the operating performance of
particular companies. These market fluctuations may also materially and
adversely affect the market price of our common stock.





We
have not paid dividends in the past and do not expect to pay dividends in the
future. Any return on investment may be limited to the value of our common
stock.





We have
never paid cash dividends on our common stock and do not anticipate doing so in
the foreseeable future. The payment of dividends on our common stock will depend
on earnings, financial condition and other business and economic factors
affecting us at such time as our board of directors may consider relevant. If we
do not pay dividends, our common stock may be less valuable because a return on
investment will only occur if our stock price appreciates.





There
is currently no liquid trading market for our common stock and we cannot ensure
that one will ever develop or be sustained.





To date
there has been no liquid trading market for our common stock. We cannot predict
how liquid the market for our common stock might become. Although we are not
presently eligible, we intend to apply for listing of our common stock on either
The Nasdaq Capital Market or other national securities exchanges if and when we
meet the requirements for listing. We cannot ensure that we will be able to
satisfy such listing standards or that our common stock will be accepted for
listing on any of these exchanges. Should our company fail to satisfy
the initial listing standards of the exchanges, or our common stock is
otherwise rejected for listing and remain listed on the OTC Bulletin Board or
suspended from the OTC Bulletin Board, the trading price of our common stock
could suffer and the trading market for our common stock may be less liquid and
our common stock price may be subject to increased volatility.





Our
common stock is deemed a “penny stock”, which may make it more difficult for our
investors to sell their shares.





Our
common stock is subject to the “penny stock” rules adopted under Section 15(g)
of the Securities Exchange Act of 1934. The penny stock rules apply to companies
whose common stock is not listed on a national securities exchange and trades at
less than $5.00 per share or that have tangible net worth of less than
$5,000,000 ($2,000,000 if the company has been operating for three or more
years). These rules require, among other things, that brokers who trade penny
stock to persons other than “established customers” complete certain
documentation, make suitability inquiries of investors and provide investors
with certain information concerning trading in the security, including a risk
disclosure document and quote information under certain circumstances. Many
brokers have decided not to trade penny stocks because of the requirements of
the penny stock rules and, as a result, the number of broker-dealers willing to
act as market makers in such securities is limited. If we remain subject to the
penny stock rules for any significant period, it could have an adverse effect on
the market, if any, for our securities. Insofar as many of our shares are
subject to the penny stock rules, investors will find it more difficult to
dispose of those shares.





Offers
or availability for sale of a substantial number of shares of our common stock
may cause the price of our common stock to decline.





If our
stockholders sell substantial amounts of our common stock in the public market,
or upon the expiration of any holding period under Rule 144, or expiration of
lock-up periods applicable to outstanding shares, or issued upon the exercise of
outstanding options or warrants or conversion of our convertible securities, it
could create a circumstance commonly referred to as an “overhang” and in
anticipation of which the market price of our common stock could fall. The
existence of an overhang, whether or not sales have occurred or are occurring,
also could make more difficult our ability to raise additional financing through
the sale of equity or equity-related securities in the future at a time and
price that we deem reasonable or appropriate. Recent revisions to Rule 144
shortened the holding period under Rule 144, as a result of which the overhang
period arises earlier than would previously have been the
case.








7




ITEM
1B.   UNRESOLVED STAFF COMMENTS.





None





ITEM
2. PROPERTIES





ETL
utilizes 11,750 square feet of rented office and laboratory facilities in
Farmingdale, New York at an annual rate of $186,000 plus
utilities.  The lease expired on December 31, 2008 and was renewed for
one year at base annual rate of $164,000 with options for two additional years
with 3 % increases in the base rent each year.





ITEM
3.  LEGAL PROCEEDINGS.





In 2008,
one of the Company’s lenders filed suit to recover debt of $12,500 in a state
court in New York. While the unpaid amount is included in notes payable as of
December 31, 2008, in the opinion of management, upon the advice of counsel,
since this debt was past due since 2002 the applicable statute of limitations to
collect on the debt has expired.





One of
the law firms representing the company from which we acquired the assets of ETL
has threatened to sue us for an amount of approximately $94,000 for legal fees
incurred by the selling company. The Company believes that this claim has no
standing and the outcome of such matter will not have a material impact on the
Company’s consolidated results of operations or its consolidated financial
condition.





A counsel
to the Company in prior years has asserted a claim against the Company in an
amount of approximately $62,500 for allegedly unpaid fees and expenses incurred.
The amount claimed is included in accounts payable in the financial statements.
The full amount of the claimed fees and other merger related costs were provided
for in connection with the merger with ETL and are included in the accompanying
balance sheet as an accrued liability.





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





None.





PART
II





ITEM
5.   MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.





Market
Information





Our common stock traded on the Nasdaq
OTC Bulletin Board from January 22, 1997 through March 15, 2008 under the symbol
"PDSE" and thereafter quotations for our common stock have been 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 were as
follows.  (The Pink Sheet quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent actual
transactions.)




Period
              
              High
              
              
              Low2008
              01/01/08
      - 03/31/08
              
              $
              0.030
              
              
              $
              0.00404/01/08
      - 06/30/08
              
              
              0.030
              
              
              
              0.00707/01/08
      - 09/30/08
              
              
              0.009
              
              
              
              0.00610/01/08
      - 12/31/08
              
              
              0.015
              
              
              
              0.0022007
              01/01/07
      - 03/31/07
              
              $
              0.050
              
              
              $
              0.00704/01/07
      - 06/30/07
              
              
              0.100
              
              
              
              0.00807/01/07
      - 09/30/07
              
              
              0.035
              
              
              
              0.00810/01/07
      - 12/31/07
              
              
              0.024
              
              
              
              0.008





The
number of holders of record of our common stock was 103 as of December 31,
2008.





We have
never paid a dividend on our common stock. We anticipate that, except for 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 Series A Preferred Stock have a five cent per share per
year cumulative dividend rate. As of December 31, 2008, the Company has accrued
dividends in the amount of $44,249 on the shares of Series A Preferred
Stock.




8









Recent
Sales of Unregistered Securities





During
the three months ended December 31, 2008, we issued 135,000 shares of Series C
Preferred Stock to officers, directors and consultants and as compensation for
services rendered.





ITEM
6.  SELECTED FINANCIAL DATA.





The
following table summarizes certain selected consolidated financial data, which
should be read in conjunction with our audited consolidated financial statements
and the notes thereto and with management’s discussion and analysis of financial
condition and results of operations included elsewhere in this
report.





Consolidated
      Statement of Operations Data:Year Ended December 31,2008
            
            
            2007Sales
            
            $
            2,208,801
            
            
            $
            2,721,032Cost
      of sales
            
            
            996,085
            
            
            
            1,061,189Gross
      Margin
            
            
            1,212,716
            
            
            
            1,659,843Selling,
      general and administrative
            
            
            2,260,373
            
            
            
            2,103,647Income
      from operations
            
            
            (1,047,657
            )
            
            
            (443,804
            )Other
      (income) and expenseInterest
      expense
            
            
            562,540
            
            
            
            393,733Other
      income
            
            
            (1,774,388
            )
            
            
            (5,318,445
            )(1,211,848
            )
            
            
            (4,924,712
            )Net
      income
            
            
            164,191
            
            
            
            4,480,909Preferred
      stock dividend
            
            
            (14,000
            )
            
            
            (14,000
            )Net
      income attributable to common shares
            
            $
            150,191
            
            
            $
            4,466,909Earnings
      per shareBasic
            
            $
            0.00
            
            
            $
            0.07Diluted
            
            $
            0.00
            
            
            $
            0.06Weighted
      average shares outstandingBasic
            
            
            63,475,129
            
            
            
            60,549,434Diluted
            
            
            164,158,792
            
            
            
            78,015,383





Consolidated
      Balance Sheet Data:December 31,Cash
            
            $
            66,670
            
            
            $
            8,657Working
      capital deficiency
            
            
            (2,181,357
            )
            
            
            (2,982,415
            )Total
      assets
            
            
            847,221
            
            
            
            1,025,495Non-current
      liabilites
            
            
            395,822
            
            
            
            347,691Stockholders'
      deficiency
            
            
            (2,249,517
            )
            
            
            (2,789,740
            )











9





ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION





OVERVIEW





You
should read the following discussion and analysis of our financial condition and
results of operations together with ‘‘Selected Consolidated Financial Data’’ and
our consolidated financial statements and related notes appearing elsewhere in
this annual report on Form 10-K. This discussion and analysis contains
forward-looking statements that involve risks, uncertainties and assumptions.
The actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including, but not
limited to, those set forth under ‘Risk Factors’ and elsewhere in this annual
report on Form 10-K.








Critical
Accounting Policies





Our
discussion and analysis of operations is based upon our consolidated financial
statements, which have been prepared in accordance with generally accepted
accounting principles in the United States. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results could differ materially from
these estimates under different assumptions or conditions.





Business
Plan





Paradise
currently operates in the environmental testing industry through its ETL
subsidiary.  The Company’s plans for 2009 include continued effort in
the environmental testing sector and the expansion of that business in the
environmental services industry. The specific objectives include:





a) manage
the cash flow;


b)
increase the marketing activities of ETL;


c)
identify additional acquisition targets; and


e)
prepare to replace the high cost bridge financing used to make the acquisition
of ETL in 2005.





We have
very limited funds and we may not be able to execute our current business plan
and fund business operations long enough to increase profitability. Our ultimate
success may depend upon our ability to raise additional capital. There can be no
assurance that additional funds will be available when needed from any source
or, if available, will be available on terms that are acceptable to
us.





We may be
required to pursue sources of additional capital through various means,
including joint venture projects and debt or equity financings. Additional
financings through equity investments are likely to continue to be dilutive to
existing stockholders. Also, the terms of securities we may issue in future
capital transactions may likewise be more favorable for our new investors. Newly
issued securities may again include preferences, superior voting rights, the
issuance of warrants or other derivative securities, and the issuances of
incentive awards under equity employee incentive plans, which may have
additional dilutive effects. Further, we may incur substantial costs in pursuing
future capital and/or financing, including investment banking fees, legal fees,
accounting fees, printing and distribution expenses and other costs. We may also
be required to recognize non-cash expenses in connection with certain securities
we may issue, such as convertible notes and warrants, which will adversely
impact our financial condition.





Our
ability to obtain needed financing may be impaired by such factors as the
capital markets, both generally and specifically in our industry, and the fact
that we are not operationally profitable, which could impact the
availability and cost of future financings. If the amount of capital we are
able to raise from financing activities, together with our revenues from
operations, is not sufficient to satisfy our capital needs, even to the extent
that we reduce our operations accordingly, we may be required to cease
operations.






10







SUBSEQUENT
EVENT





In
October 2009 our Board of Directors approved a plan to re-establish our former
business of providing entertainment services principally booking, sponsoring and
managing entertainers and venues.





As part
of the renewed focus of the Company on the entertainment industry, the Company’s
Board of Directors approved the distribution of the shares of ETL to our
shareholders on a pro-rata basis.  ETL then will operate as a
stand-along company in the environmental testing market and will have no further
affiliation with the Company.  We expect to complete this distribution
in the first quarter of 2010.





Results
of Operations





Year Ended December 31, 2008 Compared
to Year Ended December 31, 2007





There
were $2.2 million in revenues from continuing operations for the year ended
December 31, 2008, compared to $2.7 million in revenues for the year ended
December 31, 2007.  There was a loss from operations in the amount of
$(1.0 million) for the year ended December 31, 2008 compared to an operating
loss of $(444,000) for the year ended December 31, 2007. The increase in the
operating loss is principally attributable to the decline in revenues associated
with the general decline in the economy and increased marketing costs over the
prior period.  Selling general and administrative expenses for 2008
and 2007 includes noncash compensation to officers and directors of
approximately $350,000 in each period.  There was an overall net
profit for the year ended December 31, 2008 in the amount of $164,000 compared
to a net profit of $4.5 million in 2007.  The gains in each year were
attributable to the income from the write off of various obligations which
originated in prior years which offset the operating losses in each
year.





Net
interest expense was $563,000 for the year ended December 31, 2008, compared to
$394,000 for the year ended December 31, 2007.  The increase of
$169,000 was due to the increase in the Company’s indebtedness and amortization
of the premium related to the convertible debentures issued in 2008 amounting to
$76,000.





Liquidity
and Capital Resources





We
generated net income of $164,000 and $4,481,000 in 2008 and 2007,
respectively.  However we incurred losses from operations of $1.1
million and $444,000 in 2008 and 2007, respectively.  Historically, we
have funded our operating losses principally through financing through a factor;
bank loans; equity sales; and loans from officers, directors and other related
parties.





The
Company’s available funds generally consist of cash and the funding derived from
its environmental testing operations. As of December 31, 2008, the Company had
$67,000 in available cash.  While the Company believes that it will
have available funds sufficient to sustain operations through at least the end
of 2009, reducing operating expenses and capital expenditures alone will not be
sufficient to solve the Company’s liquidity problems. The Company is pursuing
both equity and debt financing for its operations while seeking to expand its
operations. Failure to secure such financing may result in the Company depleting
its available funds and not being able pay its
obligations.  Additional funding is currently under discussion
although there is no assurance that it will be accomplished. Unless the Company
is able to obtain additional funding through equity or debt offerings it will
not be able to maintain its business.  Even if the Company is able to
obtain additional financing, the terms may not be acceptable or may not be
sufficient to maintain the Company’s current operations.




11







Cash
Flows





The
Company cash on hand at December 31, 2008 and 2007 was $67,000 and $9,000,
respectively.  The Company’s working capital deficiency at those dates
was $2.2 million and $3.0 million, respectively.





Operating cash
flows:Our principal operating source of cash came fromthesales of environmental
testing services.  Our principal operating uses of cash are payroll
and other costs incurred to perform testing services and general and
administrative expenses.





Net cash
used in operating activities for the year ended December 31, 2008 was $61,000 as
compared to $83,000 in the prior year. Cash was used to fund the loss from
operations each year. The decrease in cash used was principally the result of
improved cash collections on receivables and extension of credit from
vendors.





Investing cash
flows:The Company used cash of $43,000 to acquire property
and equipment in 2007 and had no similar expenditures in 2008.





Financing cash
flows:Net cash generated from financing in 2008 of $119,000
consists of net proceeds from issuance of convertible debentures of $332,000,
advances from factor – net of $303,000 and loans from related parties of $43,000
less net repayments of borrowings of $560,000.  Net cash used in
financing activities for the prior year was $58,000 which represents repayments
of borrowings of $232,000 net of new borrowings of $136,000 and loans from
related parties of $38,000.





ITEM
7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.





We are
subject to financial market risks; including changes in interest rates. As our
outstanding indebtedness has fixed interest rates we are subject to opportunity
losses when interest rates go down. We may hedge against interest rate
fluctuations by using standard hedging instruments such as futures, options and
forward contracts subject to the requirements of the 1940 Act. While hedging
activities may insulate us against adverse changes in interest rates, they may
also subject us to risks associated with the credit worthiness of the counter
party, etc. During the twelve months ended December 31, 2008 we did not engage
in any hedging activities.





ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





The
financial statements required by Item 8 are submitted in a separate section of
this report, beginning on Page F-1.





ITEM
9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.





None.





ITEM
9A.  CONTROLS AND PROCEDURES.





Disclosure
Controls and Procedures





Our Chief
Executive Officer and Acting Chief Financial Officer has concluded that our
disclosure controls and procedures as of December 31, 2008 were not effective,
as described below under the heading "Internal Control Over Financial
Reporting", based on an evaluation of these controls and procedures pursuant to
Rule 13a-15(b) of the Exchange Act.





The
Company’s management performed additional accounting and financial analyses and
other post-closing procedures including detailed validation work with regard to
all the balance sheet account balances, additional analysis on income statement
amounts and managerial review of all significant account balances and
disclosures in the Annual Report on Form 10-K, to ensure that the Company’s
Annual Report and the financial statements forming part thereof are in
accordance with accounting principles generally accepted in the United States of
America. Accordingly, management believes that the financial statements included
in this Annual Report fairly present, in all material respects, the Company’s
financial condition, results of operations, and cash flows for the periods
presented.






12





Internal
Control over Financial Reporting





The
Company’s management is responsible for establishing and maintaining adequate
internal control over financial reporting. The Company's internal control over
financial reporting is a process designed under the supervision of the Company's
Principal Executive Officer and Principal Financial Officer to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of the Company's financial statements for external purposes in
accordance with U.S. generally accepted accounting principles.





As of
December 31, 2008, management assessed the effectiveness of the Company's
internal control over financial reporting based on the criteria for effective
internal control over financial reporting established in Internal Control’
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission ("COSO") and SEC guidance on conducting such
assessments.  Based on that evaluation, they concluded that, during
the period covered by this report, such internal controls and procedures were
not effective to detect the inappropriate application of US GAAP rules as more
fully described below. This was due to deficiencies that existed in the design
or operation of our internal control over financial reporting that adversely
affected our internal controls and that may be considered to be material
weaknesses.





The
matters involving internal controls and procedures that the Company's management
considered to be material weaknesses under COSO and SEC rules were: (1)lack of a
functioning audit committee, resulting in ineffective oversight in the
establishment and monitoring of required internal controls and procedures; (2)
inadequate segregation of duties consistent with control objectives; (3)
insufficient written policies and procedures for accounting and financial
reporting with respect to the requirements and application of US GAAP and SEC
disclosure requirements; and (4) ineffective controls over period end financial
disclosure and reporting processes.





Management
believes that the material weaknesses set forth in items (2), (3) and (4) above
did not have an effect on the Company's financial results.  However,
management believes that the lack of a functioning audit committee, resulting in
ineffective oversight in the establishment and monitoring of required internal
controls and procedures, can impact the Company's financial statements for the
future years.





We are
committed to improving our financial organization. As part of this commitment,
we intend to create a position to segregate duties consistent with control
objectives and to increase our personnel resources and technical accounting
expertise within the accounting function when funds are available to the
Company, by: (i) appointing one or more outside directors of our board of
directors to an audit committee of the Company resulting in a fully functioning
audit committee who will undertake the oversight in the establishment and
monitoring of required internal controls and procedures; and(ii) preparing and
implementing sufficient written policies and checklists which will set forth
procedures for accounting and financial reporting with respect to the
requirements and application of US GAAP and SEC disclosure
requirements.





Management
believes that the appointment of one or more independent directors to a fully
functioning audit committee, will remedy the lack of a functioning audit
committee. In addition, management believes that preparing and implementing
sufficient written policies and checklists will remedy the following material
weaknesses: (i) insufficient written policies and procedures for accounting and
financial reporting with respect to the requirements and application of US GAAP
and SEC disclosure requirements; and (ii) ineffective controls over period end
financial close and reporting processes. Further, management believes that the
hiring of additional personnel who have the technical expertise and knowledge
will result in proper segregation of duties and provide more checks and balances
within the department. Additional personnel will also provide the cross training
needed to support the Company if personnel turn over issues within the
department occur. Management believes that this, coupled with the appointment of
additional outside directors, will greatly decrease any control and procedure
issues the company may encounter in the future.





We will
continue to monitor and evaluate the effectiveness of our internal controls and
procedures and our internal controls over financial reporting on an ongoing
basis and are committed to taking further action and implementing additional
enhancements or improvements, as necessary and as funds allow.





Because
of the material weaknesses noted above, management concluded that the Company
did not maintain effective internal control over financial reporting as of
January 31, 2009, based on the criteria in Internal Control-Integrated Framework
issued by COSO. This report does not include an attestation report of our
registered public accounting firm regarding our internal controls over financial
reporting. The disclosure contained under this Item 9A was not subject to
attestation by our registered public accounting firm pursuant to temporary rules
of the SEC that permit us to provide only the disclosure under this Item 9A
in this annual report.





Changes
in Internal Control over Financial Reporting





There
have been no changes in our internal control over financial reporting identified
in connection with the evaluation required by paragraph (d) of Rules 13a-15 or
15d-15 under the Exchange Act that occurred during the small business issuer's
last fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.





ITEM
9B.  OTHER INFORMATION.





None.








13








PART
III





ITEM 10. DIRECTORS, EXECUTIVE
OFFICERS, AND CORPORATE GOVERNANCE





Our
directors, executive officers and key executives of our operating groups during
fiscal year ended December 31, 2008 are as follows:




Name
              
              Age
              
              Position
      with Company
              
              Held
      SinceRichard
      P. Rifenburgh
              
              76
              
              Chairman
              
              June
      2006Boris
      Rubizhevsky
              
              58
              
              President/CEO/Director
              
              July
      2008Paul
      Lisak
              
              64
              
              Director
              
              February
      2007Barry
      Saxe
              
              65
              
              Director
              
              July
      2008Michael
      R. Wiechnik
              
              58
              
              Director
              
              July
      2008Winston
      Willis
              
              63
              
              Director
              
              February
      2007Julia
      M.
      Belden
              
              58
              
              Secretary/Treasurer
              
              June
      2006Kelly
      Hickel
              
              66
              
              Chairman/CEO
      of ETL
              
              October
      2007





RICHARD P. RIFENBURGH has
served as a Chairman of the Company’s Board of Directors since June 2008 and
previously served as Vice Chairman since July 2001.  He is a member of
the Board of Directors of United EcoEnergy Corp and Spring Creek Capital Corp.,
business development companies, since June
2008      and April 2009,
respectively.  He is the Chairman of the Board of Moval Management
Corporation, a management consulting firm since 1968. 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, a publicly reporting company.  From February 1989 until
May 1991 Mr. Rifenburgh served as Chairman of the Board and Chief Executive
Officer of Miniscribe Corporation. From 1987 to 1990 he was a General Partner at
Hambrecht and Quist Venture Partners, a venture capital
organization.





BORIS RUBISHEVSKY has been the
President and Chief Executive Officer and Director since July 2008. He is a
Director of United EcoEnergy Corp., a business development company, since June
2008.  Mr. Rubizhevsky founded NexGen Security Corporation, a
consulting firm specializing in homeland security, biological and environmental
products and technologies.  In 1992 Mr. Rubizhevsky co-founded Isonics
Corporation a diversified international company specializing in life science,
semi-conductor wafer services and homeland security products. Mr. Rubizhevsky
was the Vice Chairman of Isonics Corporation from 1992 to 2003. Before founding
Isonics, Mr. Rubizhevsky spent more than ten years with General Electric Company
in a number of international sales and marketing managerial positions. Mr.
Rubizhevsky holds a B.S. degree in engineering from the Stevens Institute of
Technology.





JULIA M. BELDEN has served as
our secretary since June 2006 and treasurer since February 2007.  She
has been a consultant to the Company since 2001.  Ms. Belden has
served as secretary and treasurer of the Company’s wholly owned subsidiary,
Environmental Testing Laboratories, Inc. (ETL) since its acquisition in February
2005, and she has held the position of comptroller for ETL since July
2005.  Previously, Ms. Belden has worked in the financial sector and
service industries in the areas of human resources, administration and
accounting.  Ms. Belden is a graduate of the University of Colorado,
with a Bachelors of Arts degree, and has attended graduate coursework at the
University of Denver.





PAUL LISAK has been a member
of the Board of Directors since February 2007.  Mr. Lisak retired in
2002 as Los Angeles County’s Hazardous Materials Control Manager, and has over
30 years service devoted to the administration and management of public health
and management of hundreds of millions of dollars in public funds. Mr. Lisak has
a Bachelor’s Degree in Biology and another in Environmental Science, from
Indiana State University. He also has a Master’s Degree in Environmental Science
and Occupational Health from California State University at
Northridge.





BARRY SAXE has been a member
of the Board of Director since July 2008. He has been President of Cedar
Electric, a design-build firm since 1969 and a member of the Board of Directors
of International Ranger, a publicly-held exploration company. In 2006, he
cofounded Ringbolt Ventures, a fertilizer exploration company and served on the
Board until 2008.  Mr. Saxe attended Brooklyn College of the
University of New York City and University of California at
Berkeley.





MICHAEL R. WIECHNIK has been a
Director of the Company since June 2008. Since 1976, Mr. Wiechnik has held
several key leadership positions in the State of New Jersey Department of
Corrections (DOC) including Chief of the Bureau of Correctional Systems, Chief
of the Bureau of Classification and Identification Services. Currently Mr.
Wiechnik is the driving force behind “Clean Energy” initiatives for the DOC;
planning distributive (electric) generation projects utilizing renewable and
sustainable alternative energy sources. Mr. Wiechnik received a Bachelor of Arts
degree in Psychology from the College of New Jersey (formerly Trenton State
College).





WINSTON ‘BUZZ’ WILLIS has been
a Director of the Company since February 2007.  Mr. Willis 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.






14







KELLY T. HICKEL has been the
Chairman and CEO of ETL, the Company’s wholly-owned subsidiary since October
2007 and was previously the Company’s Chairman from February 2001 until June
2006.  He has been the Chairman and CEO of United EcoEnergy Corp and
Spring Creek Capital Corp. since June 2008 and January 2009,
respectively.  Previously, Mr. Hickel was the President of Miniscribe
Corp., a troubled Fortune 500 disk drive manufacturer, from 1989 to 1990. He was
the President of the Maxwell Technology Information Systems Group from 1993
until 1997. Mr. Hickel was, Chairman and Chief Restructuring Office of The Tyree
Company in Farmingdale, New York from 2005 to 2006. Mr. Hickel is a
graduate of Indiana University, with a Bachelors of Science, and has also
attended Columbia University.





SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE


Section 16(a)
of the Securities Exchange Act of 1934 requires our officers and directors, and
persons who own more than ten percent of a registered class of our equity
securities, to file reports of ownership and changes in ownership with the SEC.
These persons are required by regulation to furnish us with copies of all
Section 16(a) reports that they file. Based on our review we believe that,
during fiscal 2008, our current officers, directors and greater than ten percent
beneficial owners have not been complied with any filing requirements
applicable.





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 to our 2004 Annual Report on Form 10-K
..  Any amendments or waivers to our Code of Ethics will be disclosed
following the date of any such amendment or waiver.





ITEM
11. EXECUTIVE COMPENSATION





Summary
Compensation Table





The
following Summary Compensation Table sets forth summary information as to
compensation paid or accrued during the last two fiscal years ended
December 31, 2008 and 2007 to our principal officers although no executive
earned over $100,000 in cash in the year ended December 31, 2008.
  ANNUAL
      COMPENSATION
                
                
                LONG
      TERM COMPENSATIONAWARDS
                
                
                PAYOUTSNAME
      AND
                  PRINCIPAL
                FISCAL
                
                
                
                
                
                
                
                OTHER
      ANNUAL
                
                
                RESTRICTED
                  STOCK
                
                
                SECURITIES
                  UNDERLYING
                
                
                LTIP
                
                
                ALL
      OTHERPOSITION
                YEAR
                
                SALARY
                
                
                BONUS
                
                
                COMPENSATION
                
                
                AWARD(S)
                
                
                OPTIONS/SARS
                
                
                PAYOUTS
                
                
                COMP.Richard
      P. Rifenburgh(Principal
      Executive
      Officer)
                2008
                
                
                -0-
                
                
                
                0
                
                
                
                0
                
                
                
                1,500,000
                
                
                
                125,000
                
                
                
                0
                
                
                
                02007
                
                
                5,000
                
                
                
                0
                
                
                
                0
                
                
                
                6,900,000
                
                
                
                0
                
                
                
                0
                
                
                
                0Boris
      RubizhevskyPresident/CEO
                2008
                
                
                -0-
                
                
                
                0
                
                
                
                0
                
                
                
                5,000,000
                
                
                
                3,125,000
                
                
                
                0
                
                
                
                02007
                
                
                -0-
                
                
                
                0
                
                
                
                0
                
                
                
                -0-
                
                
                
                0
                
                
                
                0
                
                
                
                0





Stock
awards include the common stock equivalent of issuances of Series C Preferred
Stock.





Directors'
Compensation





On March
20, 2008 the Board of Directors approved an annual compensation agreement for
the Board of Directors, as follows:




Each will
receive the following: 250,000 shares of common stock each year as a
grant;  warrants for 125,000 common shares each year as a grant;
$1,000 for each meeting attended in person including the annual
meeting;  expense reimbursement to physically attend board meetings;
and $500 for telephonic meetings.








15





ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS





The
following table sets forth certain information as of December 31, 2008 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)Richard
      Rifenburgh
              
              
              375,000
              
              
              
              0.54
              %Boris
      Rubizshevsky
              
              
              1,375,000
              
              
              
              1.96
              %Barry
      Saxe
              
              
              375,000
              
              
              
              0.54
              %Michael
      Wiechnik
              
              
              375,000
              
              
              
              0.54
              %Winston
      Willis
              
              
              2,625,000
              (5)
              
              
              3.80
              %Paul
      Lisak
              
              
              812,000
              (6)
              
              
              1.17
              %Julia M. Belden (7)
              
              
              5,475,000
              
              
              
              7.92
              %Kelly
      T. Hickel
              
              
              979,083
              (8)
              
              
              1.4
              %All
      Named ExecutiveOfficers
      and  Directors
      as a group(8
      persons)
              
              
              12,391,083
              
              
              
              17.48
              %Beneficial
      Owners inExcess
      of 5% (otherthan
      Named ExecutiveOfficers
      and Directors):Porter
      Capital Corp.
              
              
              6,125,000
              (9)
              
              
              8.84
              %Hickel
      Living Trust
              
              
              9,374,869
              
              
              
              13.5
              %









(1) The
address of each beneficial owner identified is c/o Paradise Music &
Entertainment, Inc., 1365 N. Courtenay Parkway, Suite A, Merritt Island, FL
32953, except for Porter Capital Corporation, which is 2112 First Avenue North,
Birmingham, AL 10168.





(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,
2008 upon the exercise of options and warrants. Conversion of the Series C
Preferred is restricted and therefore the impact of the conversion of these
securities was not included.





(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, 2008 have been exercised and converted, and (ii) 69,279,679 shares
of common stock were outstanding, before any consideration is given to such
options, warrants or convertible securities.





(4) Does
not include 50,000 Series C Preferred Shares convertible into common shares at
one to one hundred.





(5) Does
not include 25,000 Series C Preferred convertible into common shares at one to
one hundred.





(6) Does
not include 25,000 Series C Preferred Shares convertible into common shares at
one to one hundred.





(7) Does
not include 87,500 Series C Preferred convertible into common shares at one to
one hundred.





(8) Does
not include 115,000 Series C Preferred Shares convertible into common shares
at


one to
one hundred.





(9) Does
not include 22,500 Series C Preferred Shares convertible into common shares at
one to one hundred.





(10)  Does
not include 39,300 Series C Preferred Shares convertible into common shares at
one to one hundred.





ITEM
13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.





On
October 20, 2006 one of the Company’s officers loaned the Company $15,000 with
an interest rate of 10%.  On May 10, 2007 another officer loaned the
Company $10,075 with an interest rate of 10%. During 2008 several officers and
directors of the Company and its subsidiary loaned the Company a total of
$71,353. The total loan amount from related parties is $96,428 as of December
31, 2008.






16







PART
IV





ITEM
14.  PRINCIPAL ACCOUNTING FEES AND SERVICES.





(a)                      Audit
Fees





During
the years ended December 31, 2008 and 2007, our former accountant, James E.
Scheifley of Tinter Scheifley Tang, LLC, billed us $12,950 and $34,725,
respectively, 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.





(b)                      Audit-Related
Fees





Tinter Scheifley Tang, LLC did not bill
us for any audit-related fees for the
years ended December 31, 2008 and 2007.





(c)                      Tax
Fees





Tinter Scheifley Tang, LLC did not bill
us for any tax services for the years ended December 31, 2008 and
2007.





(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 years ended December
31, 2008 or and 2007.





Part
IV





ITEM
15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES.





(a) (1)
Financial Statements.





The
financial statements required by item 15 are submitted in a separate section of
this report, beginning on Page F-1, incorporated herein and made a part
hereof.





(2)
Financial Statement Schedules.


Schedules
have been omitted because of the absence of conditions under which they are
required or because the required information is included in the financial
statements or notes thereto.





(3)  
Exhibits


(a)   Exhibits




ExhibitNumber
              
              Description3.1
              
              Certificate
      of Incorporation of the Registrant (1)3.2
              
              Amended
      and Restated By-Laws of the Registrant (1)3.3
              
              Amendment
      to Certificate of Incorporation Authorizing Series A Preferred
      Stock3.4
              
              Amendment
      to Certificate of Incorporation Authorizing Series C Preferred
      Stock (2)10.1
              
              Form
      of Registrant’s 1996 Stock Option Plan (1)14
              
              Code
      of Ethics (3)21
              
              Subsidiaries
      of Registrant31
              
              Certification
      of Richard P. Rifenburgh under Rule 13a-14(a)32
              
              Certification
      of Richard P. Rifenburgh





(1)  Incorporated
by reference from the Company’s Registration Statement on Form SB-2(Reg No.
333-13941) filed on October 11, 1996.


(2)  Incorporated
by reference from the Company’s Annual Report on Form 10-K for the year ended
December 31, 2007 filed on March 6, 2009


(3)  Incorporated
by reference from the Company’s Annual Report on Form 10-KSB for the year ended
December 31, 2004 filed on February 15, 2006





(b)           Reports
on Form 8-K





None.








17





SIGNATURES





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





PARADISE
MUSIC & ENTERTAINMENT, INC.





Date:  January  28,
      2010
            /s/ Richard P. Rifenburgh
              
              Richard
      P. Rifenburgh
              ChairmanDate:  January  28,
      2010
            /s/Boris Rubizhevsky
              Boris
      P. Rubizhevsky
              President
      /CEO/Director and Acting Principal Financial and Accounting
      OfficerDate:  January  28,
      2010
            /s/Paul Lisak
              
              Paul
      Lisak
              DirectorDate:  January  28,
      2010
            /s/Barry Saxe
              
              Barry
      Saxe
              DirectorDate:  January  28,
      2010
            /s/Michael Wiechnik
              
              Michael
      Wiechnik
              DirectorDate:  January  28,
      2010
            /s/Winston Willis
              
              Winston
      Willis
              Director










18







INDEX TO
FINANCIAL STATEMENTS





Report
      of Independent Registered Public Accounting Firm
              F-2Report
      of Independent Registered Public Accounting Firm
              F-3Consolidated
      Balance sheets at December 31, 2008 and 2007
              F-4Consolidated
      Statements of Operations for the Years ended December
      31, 2008 and 2007
              F-5Consolidated
      Statements of Shareholders’ Deficiency for the Years
      ended December 31, 2008 and 2007
              F-6Consolidated
      Statements of Cash Flows for the Years ended December 31, 2008 and
      2007
              F-7Notes
      to the Consolidated Financial Statements
              F-8








F-1








Report of Independent Registered
Public Accounting Firm





To the
Board of Directors and Stockholders of


Paradise
Music and Entertainment, Inc.





We have
audited the accompanying consolidated balance sheet of Paradise Music and
Entertainment, Inc. and Subsidiary as of December 31, 2008 and the related
consolidated statement of operations, stockholders’ deficit, and cash flows for
the year then ended.   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.  The consolidated financial statements of Paradise Music and
Entertainment, Inc. and Subsidiary as of December 31, 2007, were audited by
other auditors whose report dated March 5, 2009, expressed an unqualified
opinion on those statements.





We also
have audited the correction described in Note 9 that was applied to restate
the 2007 financial statements.  In our opinion, such
correction is appropriate and has been properly applied.  We were
not engaged to audit, review, or apply any procedures to the 2007 financial
statements of the Company other than with respect to the corrections and,
accordingly, we do not express an opinion or any other form of assurance on the
2007 financial statements taken as a whole.





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 audits 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 audits included 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 consolidated financial position of Paradise Music and
Entertainment, Inc. and Subsidary as of December 31, 2008  and
the consolidated results of their operations and their cash flows for the year
ended December 31, 2008, in conformity with U.S. generally accepted accounting
principles.














Somerset,
New Jersey


January
28, 2010











F-2













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, 2007 and the related consolidated
statements of operations, stockholders’ deficiency and cash flows for the year
then ended. 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, 2007, and results of its operations and its cash flows
for the year then ended, 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




March 5,
2009








We included in this annual report
on Form 10-K the opinion of the independent public accounting firm that audited
our financial statements as of and for the year ended December 31, 2007
without currently obtaining a manually signed opinion of the firm.  That
firm Tinter Scheifley Tang, LLP, has ceased to exist and cannot either reissue
its report on the 2007 financial statements or consent to the use of its prior
opinion. We do not believe that our shareholders will be adversely impacted by
the failure to include such an updated opinion or consent.








F-3














Paradise
      Music & Entertainment, Inc. and SubsidiaryConsolidated
      Balance SheetDecember 31,2008
              
              
              2007AssetsCurrent
      AssetsCash
              
              $
              66,670
              
              
              $
              8,657Accounts
      receivable, net of allowance fordoubtful
      accounts of $53,000 and $113,000
              
              
              137,784
              
              
              
              202,016Due
      from factor
              
              
              308,563
              
              
              
              260,712Prepaid
      expenses
              
              
              6,542
              
              
              
              13,744Total
      current assets
              
              
              519,559
              
              
              
              485,129Property
      and equipment, at cost, net of accumulateddepreciation
              
              
              327,662
              
              
              
              540,366TOTAL
      ASSETS
              
              $
              847,221
              
              
              $
              1,025,495Liabilities
      and Stockholders' DeficiencyCurrent
      LiabilitiesAccounts
      payable and accrued expenses
              
              $
              1,437,524
              
              
              $
              2,477,025Due
      to Factor
              
              
              557,086
              
              
              
              104,069Notes
      payable
              
              
              343,498
              
              
              
              550,773Equipment
      loans
              
              
              221,951
              
              
              
              252,000Notes
      payable - related parties
              
              
              96,428
              
              
              
              53,248Dividends
      Payable
              
              
              44,429
              
              
              
              30,429Total
      current liabilities
              
              
              2,700,916
              
              
              
              3,467,544Non-current
      indebtedness - less current installments
              
              
              395,822
              
              
              
              347,691Stockholders'
      DeficiencyPreferred
      stock, $.01 par value, 5,000,000 shares authorizedSeries
      A - 280,000 shares issued and outstanding
              
              
              2,800
              
              
              
              2,800Series
      C - 672,300 and 362,300 shares issued and outstanding;liquidation
      value of $268,920 and $144,920
              
              
              6,723
              
              
              
              3,623Common
      stock, $.01 par value, 75,000,000 authorized69,029,679
      and 60,595,441 shares issued and outstanding
              
              
              690,298
              
              
              
              605,955Additional
      paid-in capital
              
              
              27,801,024
              
              
              
              27,498,435Accumulated
      (deficit)
              
              
              (30,750,362
              )
              
              
              (30,900,553
              )Total
      stockholders' deficiency
              
              
              (2,249,517
              )
              
              
              (2,789,740
              )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIENCY
              
              $
              847,221
              
              
              $
              1,025,495




See
accompanying notes to consolidated financial statements.


F-4





Paradise
      Music & Entertainment, Inc. and SubsidiaryConsolidated
      Statements of OperationsYear Ended December 31,2008
              
              
              2007 (1)Sales
              
              $
              2,208,801
              
              
              $
              2,721,032Cost
      of sales
              
              
              996,085
              
              
              
              1,061,189Gross
      Margin
              
              
              1,212,716
              
              
              
              1,659,843Selling,
      general and administrative
              
              
              2,260,373
              
              
              
              2,103,647Loss
      from operations
              
              
              (1,047,657
              )
              
              
              (443,804
              )Other
      (income) and expenseInterest
      expense
              
              
              562,540
              
              
              
              393,733Other
      income
              
              
              (1,774,388
              )
              
              
              (5,318,445
              )(1,211,848
              )
              
              
              (4,924,712
              )Net
      income
              
              
              164,191
              
              
              
              4,480,909Preferred
      stock dividend
              
              
              (14,000
              )
              
              
              (14,000
              )Net
      income attributable to common shares
              
              $
              150,191
              
              
              $
              4,466,909Earnings
      per shareBasic
              
              $
              0.00
              
              
              $
              0.07Diluted
              
              $
              0.00
              
              
              $
              0.06Weighted
      average shares outstandingBasic
              
              
              63,475,129
              
              
              
              60,549,434Diluted
              
              
              164,158,792
              
              
              
              78,015,383_____(1)
      As restated






See
accompanying notes to consolidated financial statements.








F-5





Paradise
Music & Entertainment, Inc. and Subsidiary


Consolidated
Statement of Changes in Stockholders' Deficiency
   TotalSeries A Preferred
              
              Series C Preferred
              
              Common
              
              
              
              Paid-in
              
              Accumulated
              
              Stockholders'Shares
              
              Amount
              
              Shares
              
              Amount
              
              Shares
              
              Amount
              
              Capital
              
              Deficit
              
              (Deficiency)Balance,
      January 1, 2007
              
              
              280,000
              
              $
              2,800
              
              
              
              
              
              
              58,496,358
              
              $
              584,964
              
              $
              27,135,139
              
              $
              (35,367,462
              )
              $
              (7,644,559
              )Issuance
      of preferred stock at fair value:compensation
      for services
              
              
              
              
              
              
              
              
              314,300
              
              
              3,143
              
              
              -
              
              
              -
              
              
              319,657
              
              
              -
              
              
              322,800conversion
      of warrants
              
              
              
              
              
              
              
              
              48,000
              
              
              480
              
              
              -
              
              
              -
              
              
              47,520
              
              
              -
              
              
              48,000Accrued
      dividends on series A
                preferred stock
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (14,000
              )
              
              (14,000
              )Issue
      of common stock for
                services at fair value
              
              
              
              
              
              
              
              
              
              
              
              2,099,083
              
              
              20,991
              
              
              (6,298
              )
              
              
              
              
              14,693Warrants
      issued at fair value for financing
              
              
              
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              2,417
              
              
              -
              
              
              2,417Net
      income
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              4,480,909
              
              
              4,480,909Balance,
      December 31, 2007
              
              
              280,000
              
              
              2,800
              
              
              362,300
              
              
              3,623
              
              
              60,595,441
              
              
              605,955
              
              
              27,498,435
              
              
              (30,900,553
              )
              
              (2,789,740
              )Issuance
      of preferred stock at fair value:compensation
      for services
              
              
              
              
              
              
              
              
              310,000
              
              
              3,100
              
              
              -
              
              
              -
              
              
              313,198
              
              
              -
              
              
              316,298Accrued
      dividends on
                series A preferred stock
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              (14,000
              )
              
              (14,000
              )Issuance
      of common stock at fair value:conversion
      of convertible debenture
              
              
              
              
              
              
              
              
              -
              
              
              3,023,256
              
              
              30,233
              
              
              (17,233
              )
              
              -
              
              
              13,000compensation
      for services
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,850,000
              
              
              18,500
              
              
              -
              
              
              
              
              
              18,500repayment
      of loan
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,674,869
              
              
              16,749
              
              
              8,251
              
              
              
              
              
              25,000prior
      year rent
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,200,000
              
              
              12,000
              
              
              -
              
              
              
              
              
              12,000prior
      year acquisition
              
              
              
              
              
              
              
              
              -
              
              
              -
              
              
              686,113
              
              
              6,861
              
              
              (6,861
              )
              
              -
              
              
              0Compensation
      value of warrants
                issued
      for financing
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              5,234
              
              
              
              
              
              5,234Net
      income
              
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              164,191
              
              
              164,191Balance,
      December 31, 2008
              
              
              280,000
              
              $
              2,800
              
              
              672,300
              
              $
              6,723
              
              
              69,029,679
              
              $
              690,298
              
              $
              27,801,024
              
              $
              (30,750,362
              )
              $
              (2,249,517
              )


See
accompanying notes to consolidated financial statements.





F-6





Paradise
Music & Entertainment, Inc. and Subsidiary




Consolidated
Statements of Cash Flows




Year Ended December 31,2008
              
              
              2007Cash
      flows used in operating activities:Net
      Income (Loss)
              
              
              164,191
              
              
              
              4,480,909Adjustments
      to reconcile net income (loss) to netcash
      provided by operating activities:Depreciation
      and amortization
              
              
              212,704
              
              
              
              211,546Noncash
      compensation
              
              
              340,032
              
              
              
              387,910Accrued
      interest
              
              
              169,390Write-off
      of indebtedness
              
              
              (1,702,154
              )
              
              
              (4,518,204
              )Changes
      in assets and liabilities:Accounts
      receivable
              
              
              166,088
              
              
              
              (289,900
              )Prepaid
      expenses and other assets
              
              
              7,202
              
              
              
              26,461Accounts
      payable
              
              
              581,785
              
              
              
              (381,371
              )Net
      cash used in operating activities
              
              
              (60,762
              )
              
              
              (82,649
              )Cash
      flows from investing activities:Acquisition
      of property and equipment
              
              
              -
              
              
              
              (43,197
              )Net
      cash used in investing activities
              
              
              -
              
              
              
              (43,197
              )Cash
      flows from financing activities:Proceeds
      from  borrowings
              
              
              332,300
              
              
              
              135,986Repayment
      of borrowings
              
              
              (560,015
              )
              
              
              (232,310
              )Proceeds
      from loans - related party
              
              
              43,180
              
              
              
              38,248Advances
      from factor
              
              
              303,310
              
              
              
              -Net
      cash provided by (used in) financing activities
              
              
              118,775
              
              
              
              (58,076
              )Increase
      (decrease) in cash
              
              
              58,013
              
              
              
              (183,922
              )Cash
      and cash equivalents - beginning of year
              
              
              8,657
              
              
              
              192,579Cash
      and cash equivalents - end of period
              
              $
              66,670
              
              
              $
              8,657Supplemental
      cash flow information:Cash
      paid for interest
              
              $
              299,292
              
              
              $
              47,856Non-cash
      financing activities:Options,
      warrants and stock granted for services
              
              $
              340,032
              
              
              $
              387,910Accrued
      dividends
              
              
              14,000
              
              
              
              14,000Issuance
      of common stock:Conversion
      of debt
              
              
              38,000Prior
      year rent
              
              
              12,000





See
accompanying notes to consolidated financial statements.





F-7





PARADISE MUSIC & ENTERTAINMENT
INC. AND SUBSIDIARY





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2008





Note
1.  ORGANIZATION




Paradise Music & Entertainment,
Inc. and subsidiary ("Paradise" or the "Company”) has been focused on providing
environmental testing and other services, operating as a single segment, all
within the United States.





Note
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Principles
of Consolidation





The
accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary. Significant intercompany accounts and
transactions have been eliminated in consolidation.





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 revenues from providing environmental testing services is recorded
when the service is performed and accepted.





Cash
and Cash Equivalents





The
Company considers all highly liquid investments with maturities of three months
or less when purchased to be cash equivalents.





Accounts
Receivable





Accounts
receivable are stated at estimated net realizable value and are comprised of
balances due from customers net of estimated allowances for uncollectible
accounts. In determining collectability, historical trends are evaluated and
specific customer issues are reviewed to arrive at appropriate allowances.
Substantially all of the accounts receivable are pledged as security under the
factoring and purchase order financing arrangements as described in Note
3.





Property
and Equipment





Property
and equipment is recorded at cost. Depreciation of assets is computed using the
straight-line method over the following estimated useful lives.





Laboratory
equipment                                                                           3
- 10 years


Furniture
and
fixtures                                                                            3
-  7 years





Maintenance
and repairs of property and equipment are charged to operations. Major
improvements are capitalized. Upon retirement, sale or other disposition of
property and equipment, the cost and accumulated depreciation are eliminated
from the accounts and any gain or loss is included in operations.






F-8







Concentration
of Credit Risks





Financial
instruments, which potentially subject the Company to concentrations of credit
risk, consist primarily of cash and trade accounts receivable.  The
Company’s cash is primarily in demand deposit accounts placed with federally
insured financial institutions. Such deposit accounts at times may exceed
federally insured limits. However, the Company believes the risk of loss to be
minimal.





Financial
Instruments





Fair
value estimates discussed herein are based upon certain market assumptions and
pertinent information available to management as of December 31, 2008. The
respective carrying value of certain on-balance-sheet financial instruments
approximated their fair values. These financial instruments include cash,
accounts receivable, accounts payable and notes payable. Fair values were
assumed to approximate carrying values for these financial instruments because
they are short term in nature and their carrying amounts approximate fair
values.





Long
Lived Assets





The
carrying value of long-lived assets is reviewed on a regular basis for the
existence of facts and circumstances that suggest impairment. The Company will
measure the amount of any impairment based on the amount that the carrying value
of the impaired assets exceed the undiscounted cash flows expected to result
from the use and eventual disposal of the impaired assets.  At
December 31, 2008 no impairment of long-lived assets was deemed
necessary.





Use
of Estimates





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 $2,500 and $1,400 during 2008
and 2007, respectively.




Income
Taxes





The
Company follows SFAS 109 "Accounting for Income Taxes" for recording the
provision for income taxes. Deferred tax assets and liabilities are computed
based upon the difference between the financial statement and income tax basis
of assets and liabilities using the enacted marginal tax rate applicable when
the related asset or liability is expected to be realized or settled. Deferred
income tax expenses or benefits are based on the changes in the asset or
liability each period. If available evidence suggests that it is more likely
than not that some portion or all of the deferred tax assets will not be
realized, a valuation allowance is required to reduce the deferred tax assets to
the amount that is more likely than not to be realized. Future changes in such
valuation allowance are included in the provision for deferred income taxes in
the period of change.





Earnings
Per Common Share





Basic
earnings per share is computed by dividing the 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.





Stock-Based
Compensation





The
Company follows the provisions of Statement of Financial Accounting Standards
No.123R, “Accounting for Stock-Based Compensation (SFAS 123R),which requires
that new, modified and unvested share-based payment transactions with employees,
such as stock options and restricted stock, be recognized in the financial
statements based on their fair value and recognized as compensation expense over
the requisite service period.





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, are 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
is subject to adjustment until such time that the warrant was non-forfeitable,
fully vested and exercisable.





Recent
Accounting Pronouncements





In
September 2006, FASB issued SFAS No. 157 “Fair Value Measurements.” This
Statement defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles (GAAP), and expands disclosures
about fair value measurements. This Statement applies under other accounting
pronouncements that require or permit fair value measurements, the Board having
previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute. Accordingly, this Statement does not require any
new fair value measurements. However, for some entities, the application of this
Statement will change current practice. This Statement is effective for
financial statements issued for fiscal years beginning after November 15, 2008,
and interim periods within those fiscal years. The changes to current practice
resulting from the application of this Statement relate to the definition of
fair value, the methods used to measure fair value, and the expanded disclosures
about fair value measurements. Management is currently evaluating the effect of
this pronouncement on its financial statements.






F-9







In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (‘‘SFAS
141(R)’’), which establishes principles and requirements for how the acquirer:
(a) recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any non-controlling interest in an
acquire; (b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase; and (c) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. SFAS 141(R)
requires contingent consideration to be recognized at its fair value on the
acquisition date and, for certain arrangements, changes in fair value to be
recognized in earnings until settled. SFAS 141(R) also requires
acquisition-related transaction and restructuring costs to be expensed rather
than treated as part of the cost of the acquisition. SFAS 141(R) applies
prospectively to asset under SFAS No. 142, “Goodwill and Other Intangible
Assets” (“FAS 142”). This change is intended to improve the consistency between
the useful life of a recognized intangible asset under FAS 142 and the period of
expected cash flows used to measure the fair value of the asset under FAS 141R
and other GAAP. FSP 142-3 is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within those
fiscal years, which will be the Company’s fiscal year 2010. The requirement for
determining useful lives must be applied prospectively to intangible assets
acquired after the effective date and the disclosure requirements must be
applied prospectively to all intangible assets recognized as of, and subsequent
to, the effective date. The Company does not expect the adoption of this
statement to have a material impact on the Company’s consolidated results of
operations, financial position or cash flows.





In June
2008, the FASB ratified Emerging Issues Task Force (“EITF”) Issue No. 07-5,
“Determining Whether an Instrument (or Embedded Feature) Is Indexed to an
Entity’s Own Stock” (“EITF 07-5”). EITF 07-5 mandates a two-step process for
evaluating whether an equity-linked financial instrument or embedded feature is
indexed to the entity’s own stock. It is effective for fiscal years beginning
after December 15, 2008, and interim periods within those fiscal years. We do
not expect the adoption of EITF 07-05 will have a material impact on results of
operations, financial position, or cash flows.





In
June 2009, the FASB issued SFAS No. 168 “TheFASB Accounting
Standards CodificationTMand the Hierarchy of
Generally Accepted Accounting Principles—a replacement of FASB Statement No.
162” (‘‘SFAS 168’’) . SFAS 168 establishes the FASB Accounting Standards
Codification (“Codification”) as the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in conformity with U.S. GAAP. Rules and
interpretive releases of the SEC under authority of federal securities laws are
also sources of authoritative U.S. GAAP for SEC registrants. All guidance
contained in the Codification carries an equal level of authority. The
Codification superseded all existing non-SEC accounting and reporting standards.
All other non-grandfathered, non-SEC accounting literature not included in the
Codification is non-authoritative. The FASB will not issue new standards in the
form of Statements, FASB Staff Positions or Emerging Issues Task Force
Abstracts. Instead, it will issue Accounting Standards Updates (“ASUs”). The
FASB will not consider ASUs as authoritative in their own right. ASUs will serve
only to update the Codification, provide background information about the
guidance and provide the bases for conclusions on the change(s) in the
Codification. References made to FASB guidance throughout this document have
been updated for the Codification. SFAS No. 168 is effective for financial
statements issued for interim and annual periods ending after September 15,
2009.





In
May 2009, the FASB issued SFAS No. 165 “Subsequent Events” (“SFAS No. 165”).
SFAS No. 165 establishes general standards of accounting for and disclosure of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. It requires the disclosure of the date
through which an entity has evaluated subsequent events and the basis for that
date — that is, whether that date represents the date the financial statements
were issued or were available to be issued. This disclosure should alert all
users of financial statements that an entity has not evaluated subsequent events
after that date in the set of financial statements being presented. Adoption of
SFAS No. 165 is not anticipated to have a material impact on the Company’s
results of operations or financial condition.





In
October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue
Arrangements, (amendments to FASB ASC Topic 605, Revenue Recognition ) (“ASU
2009-13”) and ASU 2009-14, Certain Arrangements That Include Software Elements ,
(amendments to FASB ASC Topic 985, Software ) (“ASU 2009-14”). ASU 2009-13
requires entities to allocate revenue in an arrangement using estimated selling
prices of the delivered goods and services based on a selling price hierarchy.
The amendments eliminate the residual method of revenue allocation and require
revenue to be allocated using the relative selling price method. ASU 2009-14
removes tangible products from the scope of software revenue guidance and
provides guidance on determining whether software deliverables in an arrangement
that includes a tangible product are covered by the scope of the software
revenue guidance. ASU 2009-13 and ASU 2009-14 should be applied on a prospective
basis for revenue arrangements entered into or materially modified in fiscal
years beginning on or after June 15, 2010, with early adoption permitted.
The Company does not expect adoption of ASU 2009-13 or ASU 2009-14 to have a
material impact on the Company’s results of operations or financial
condition





Note
3.  FACTORED RECEIVABLES





The
Company uses a factor to approve credit and to collect the proceeds from a
substantial portion of its sales. Under the terms of the agreement, the Company
assigns to the factor and the factor purchases from the Company eligible
accounts receivable.





The
factor, in its sole discretion, determines whether or not it will accept a
receivable based on its assessment of credit risk. Once a receivable is accepted
by the factor, the factor assumes substantially all of the credit risk
associated with the receivable. The factor is required to remit payments to the
Company for the assigned accounts receivable in accordance with the terms of the
assigned invoice, regardless of whether the factor receives payment on the
receivable, so long as the customer does not have a valid dispute related to the
invoice. In certain cases, the Company assigns accounts receivable to the factor
to provide collection services and to serve as collateral for advances, however,
the company retains the credit risk.





In
addition, the Company may request that the factor provide cash advances based
upon the Company’s accounts receivable. The factor may either accept or reject
the request for advances in its discretion. Amounts to be advanced to the
Company by the factor for any assigned receivable are offset by any amounts
previously advanced by the factor. As of December 31, 2008, the factor was
advancing approximately 80 % of the eligible accounts receivable.  The
interest rate is 18 % on outstanding advances. The factor’s charges and interest
expense on the advances are included in ''interest and financing costs’’ in the
accompanying consolidated statement of operations.





Due
from factor consists of the following as of December 31:




2008
            
            
            2007Accounts
      receivable assigned to factor
            
            $
            477,290
            
            
            $
            860,000Less:  advances
      from factor
            
            
            (168,727
            )
            
            
            (599,288
            )$
            308,563
            
            
            $
            260,712






F-10







In
addition, the Company borrowed additional amounts from the factor through
advances of $557,000 and $104,000 and equipment loans  of $222,000 and
$600,000, as of December 31, 2008 and 2007, respectively (See Note 5). These
loans are collateralized by equipment with a net book value of $328,000 and the
accounts receivable.





NOTE
4.   PROPERTY AND EQUIPMENT








2008
              
              
              2007Furniture
      and office equipment
              
              $
              42,219
              
              
              $
              42,219Vehicles
              
              
              31,737
              
              
              
              31,737Website
      design expenses
              
              
              15,000
              
              
              
              15,000Laboratory
      equipment
              
              
              966,184
              
              
              
              966,1841,055,140
              
              
              
              1,055,140Less:Accumulated
      depreciation
              
              
              (727,478
              )
              
              
              (514,774
              )$
              327,662
              
              
              $
              540,366





Depreciation
and amortization expense for the years ended December 31, 2008 and 2007 was
$213,000 and $212,000, respectively. Substantially all of the property and
equipment is pledged as security for lo debt as described in Note
5.





NOTE
5.   INDEBTEDNESS




Indebtedness
consists of:




December
      31,2008
              
              
              2007Due
      to factor
              
              $
              557,086
              
              
              $
              104,069Convertible
      debentures – principal amount $319,300, due2010,
      interest at 14%
              
              
              395,822
              
              
              
              -Notes
      payable (interest
      12 % to 13 %)
              
              
              343,498
              
              
              
              550,773Equipment
      loans – interest – 14%
              
              
              221,951
              
              
              
              599,691Notes
      payable – officers (interest 10 %)
              
              
              96,428
              
              
              
              53,2481,614,785
              
              
              
              1,307,781Less:
      current portion
              
              
              (1,218,963
              )
              
              
              (960,090
              )Non-
      current
              
              $
              395,822
              
              
              $
              347,691





During
2008, the Company borrowed $319,300 and issued secured convertible debentures
with the principal amount and interest at 14% payable 2 years from date of
issuance.  The notes are convertible into the Company’s common stock
at 75% of the average of the three (3) lowest closing bid prices during the
twenty trading days preceding conversion.  The Company accounted for
the  convertible debentures in accordance with FASB Statement No.
150-“Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity”, as the conversion feature embedded in the debentures
could result in the principal being converted into a variable number of the
Company’s common shares.  The Company determined the fair value of the
debentures at the dates of issuance to be $388,000 which represented the face
value of the debenture plus the present value of the conversion
feature.  The total liability for the notes and the conversion feature
is anticipated to continue to increase from the carrying value of $396,000 at
December 31, 2008 to the estimated settlement amounts aggregating $413,000
through December 21, 2010.  For the year ended December 31, 2008 the
Company recorded approximately $78,000 as interest expense for the accretion of
the value of the conversion feature including the initial application of FASB
150 at the dates of issuance.


NOTE
6.  STOCKHOLDERS' EQUITY





Preferred
Stock





Each
share of Series A Preferred is convertible into 10 shares of common stock and
has the equivalent voting rights of 10 shares of common stock.  The
holders of each share of Series A Preferred are entitled to receive
distributions in cash at the rate of $0.05 per share which is payable on or
before the 30th day after the end of the year.





Each
share of Series C Preferred is convertible into 100 shares of common stock and
has the equivalent voting rights of 100 shares of common stock.  The
Company has agreed to register under the Securities Act of 1933, as amended, at
its expense, the shares of Common Stock into which the shares of Series C
Preferred stock are convertible. Upon the effectiveness of such registration,
the shares of Series C Preferred Stock will automatically be converted into
shares of Common Stock.  Dividends if declared by the Board of
Directors are payable only in common stock.





Common
Stock





In March
2008, a majority of the shareholders gave consent to the amendment of the
Company’s articles of incorporation to increase the authorized capital to
500,000,000 shares of $0.01 par value common stock and 15,000,000 shares of
$0.01 par value preferred stock.  The action of the shareholders must
be submitted to all shareholders before it can be effective in the form of an
Information Statement which the Company will file as soon as it complies with
applicable SEC rules and regulations.








F-11





Stock
Options





The
activity in the Option Plan is as follows:




Number
      of Options
              
              
              Per
      share rangeBalances
      outstanding – January 1,2007
              
              
              298,333
              
              
              
              3.00 –
    5.00Granted
              
              
              - 0 -
              
              
              
              n/aCancelled
              
              
              -0
      -
              
              
              
              n/aBalances
      outstanding – December 31, 2008
              
              
              298,333
              
              
              
              3.00
      – 5.00





Stock
Warrants





The
following table summarizes common stock warrant activity:




ExerciseShares
              
              
              PricesWarrants
      outstanding as of 1/1/
      2007
              
              
              3,407,798
              
              
              
              0.002
      - 0.05Cancelled-
      expired
              
              
              1,632,798
              
              
              
              0.002
      – 0.01Warrants
      outstanding as of
      12/31/2007
              
              
              1,775,000
              
              
              
              0.002
      – 0.05Granted
              
              
              5,625,000
              
              
              
              0.03Cancelled-
      expired
              
              
              1,500,000
              
              
              
              0.002Warrants
      outstanding as of
      12/31/2008
              
              
              5,900,000
              
              
              
              0.002 – 0.05







In July
2008, the Company granted the Chairman of the Board warrants to purchase
3,000,000 shares of the Company’s common stock at $.03 per share which vest over
3 years and granted each member of the Board and an officer warrants to purchase
an aggregate of 2,625,000 shares at $.03per share, which vest over 3
years.  During 2008, the Company recorded $5,200 as non-cash
compensation expense related to the issuance of the warrants.  The
fair value of the warrants was determined using the Black-Scholes option pricing model using the
following weighted-average assumptions: volatility of 258%; risk-free interest
rate of 3.05%; expected life of 3 years and estimated dividend yield of
0%.





NOTE 7.   OTHER INCOME





The
Company recorded income from the reduction in obligations of $1,702,000 (2008)
and $5,235,000 (2007). The obligations principally related to activities of the
Company’s discontinued operations and based upon the advice of Company’s counsel
as a result of the passage of time cannot be legally enforced against the
Company.








NOTE
8.   INCOME TAXES





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, 2008, the Company has a net operating loss carry forward of
approximately $17,406,000.  This loss will be available to offset
future taxable income.  If not used, this carry forward will expire
through 2026.  No deferred tax asset has been reflected on the
accompanying financial statements because of the lack of certainty if and when
such operating losses may be realized; therefore the tax effect of the operating
losses have been offset by an equivalent amount of valuation
allowance.




December 312008
              
              
              2007Deferred
      tax asset
              
              $
              6,092,055
              
              
              $
              6,147,880Valuation
      reserve
              
              $
              (6,092,055
              )
              
              $
              (6,147,880
              )





The
reduction on the deferred tax asset of $56,000 (2008) and $2,692,000 (2007) was
the result of realization of the asset as a result of taxable income in the
periods.






F-12







NOTE  9.  EARNINGS
PER SHARE




Basic earnings per share is computed by
dividing net income by the weighted average common shares outstanding during a
period. Diluted earnings per share is based on the treasury stock method and
includes the effect from potential issuance of common stock such as shares
issuable pursuant to conversion rights of the outstanding preferred stocks and
convertible debentures as well as the exercise of stock options and warrants,
assuming the exercise of all stock options and warrants. Common share
equivalents have been excluded where their inclusion would be anti-dilutive. A
reconciliation of the numerators and denominators of basic and diluted earnings
per share for the twelve months ended December 31, 2008 and 2007 consisted of
the following:




Year Ended December 31,
2008Per-ShareIncome
                
                
                Shares
                
                
                AmountNet
      income
                
                $
                164,191Less:
      Preferred stock dividends
                
                
                14,000Basic
      earnings per shareIncome
      attributable to common shares
                
                $
                150,191
                
                
                
                63,475,129
                
                
                $
                0.00Effect
      of Dilutive SecuritiesOptions
      and warrants (1)Preferred
      - Series A
                
                
                14,000
                
                
                
                2,800,000Preferred
      - Series C
                
                
                
                
                
                
                61,964,247Convetible
      debentures
                
                
                106,928
                
                
                
                35,919,416Diluted
      earnings per shareIncome
      available to commonstockholders
      - including assumed conversions
                
                $
                271,119
                
                
                
                164,158,792
                
                
                $
                0.00
  (1) -
Options and warrants to purchase 298,000 and 5,900,000 shares of common stock
were outstanding during the year but were not include in the computation of
diluted earnings per share because the exercise price was gretere thatn the
average
market price of the common shares.


Earnings
per share for 2007 was incorrectly calculated. The reported basic and diluted
earnings per share amounts were $.07 and $.04 and the reported weighted average
number of common shares outstanding used for these calculations was 60,595,441
and 104,891,739. The following is the corrected calculation and amounts for
2007.




Year Ended December 31, 2007, as
      restatedPer-ShareIncome
                
                
                Shares
                
                
                AmountNet
      income
                
                $
                4,480,909Less:
      Preferred stock dividends
                
                
                14,000Basic
      earnings per shareIncome
      attributable to common shares
                
                
                4,466,909
                
                
                
                60,549,434
                
                
                $
                0.07Effect
      of Dilutive SecuritiesOptions
      and warrants (2)
                
                
                
                
                
                
                2,219,182Preferred
      - Series A
                
                
                14,000
                
                
                
                2,800,000Preferred
      - Series C
                
                
                -
                
                
                
                12,446,767Diluted
      earnings per shareIncome
      available to commonstockholders
      - including assumed conversions
                
                $
                4,480,909
                
                
                
                78,015,383
                
                
                $
                0.06
  (2) -
Options and warrants to purchase 298,000 and275,000 shares of common stock
were outstanding during the year but were not include in the computation of
diluted earnings per share because the exercise price was greater than the average
market price of the common shares.






F-13








NOTE
10.  LITIGATION





In 2008,
one of the Company’s lenders filed suit to recover debt of $12,500 in a state
court in New York. While the unpaid amount is included in notes payable as of
December 31, 2008, in the opinion of management, upon the advice of counsel,
since this debt was past due since 2002 the applicable statute of limitations to
collect on the debt has expired.





One of
the law firms representing the company from which the Company acquired the
assets of ETL has threatened to sue the Company for approximately $94,000 for
legal fees incurred by the selling company. The Company believes that this claim
has no standing and the outcome of such matter will not have a material impact
on the Company’s consolidated results of operations or its consolidated
financial condition.





A counsel
to the Company in prior years has asserted a claim against the Company in an
amount of approximately $62,500 for allegedly unpaid fees and expenses incurred.
The amount claimed is included in accounts payable in the financial statements.
The full amount of the claimed fees and other merger related costs were provided
for in connection with the merger with ETL and are included in the accompanying
balance sheet as an accrued liability.





NOTE
11.  COMMITMENTS





The
Company’s subsidiary leases its office and laboratory facility at an annual rate
of $186,000 plus utilities.  Rent and utility expense for the years
ended December 31, 2008 and 2007 including was $236,000 and $249,000,
respectively. The lease expired on December 31, 2008 and was renewed for one
year at base annual rate of $164,000 with options for 2 additional years with 3
% increases in the base rent each year.





NOTE
12.  INFORMATION ABOUT MAJOR CUSTOMERS





The
Company had one major client which comprised more than 22% and 30 % of the
Company revenues during 2008 and 2007, respectively.





NOTE
13.  SUBSEQUENT EVENTS





In
October 2009 the Company approved a plan to re-establish the Company’s former
business of providing entertainment services principally booking, sponsoring and
managing entertainers and venues.





As part
of the renewed focus of the Company on the entertainment industry, the Company’s
Board of Directors approved the distribution of the shares of the Company’s
wholly-owned subsidiary, Environmental Testing Laboratories, Inc. (ETL) to the
shareholders of the Company, on a pro-rata basis.  ETL then will
operate as a stand-along company in the environmental testing market and will
have no further affiliation with the Company.  This separation of
focus is expected to enhance shareholder value.