Execute Sports (EXCS) 10QSB 2007 Q3 Quarterly report (small business)

United States

Securities And Exchange Commission

Washington, D.C. 20549

FORM 10-QSB

x Quarterly Report Under Section 13 Or 15(d) Of The Securities Exchange Act Of 1934

For The Quarterly Period Ended September 30, 2007.

o Transition Report Under Section 13 Or 15(d) Of The Securities Exchange Act Of 1934

For The Transition Period From ______________To_________________

Commission File Number 333-125868

Execute Sports, Inc.

(Exact Name Of The Small Business Issuer As Specified In Its Charter)

Nevada	30-0038070
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

21143 Hawthorne BL #425

Torrance, CA 90503

(310) 515-8902

 (Address, Including Zip Code, And Telephone Number, Including

Area Code, Of Registrant's mailing address in California)

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 o

The number of outstanding shares of the issuer's common stock, $0.001 par value, as of November 12, 2007 was 79,389,973.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

Transitional Small Business Disclosure Format (Check one): Yes o No x

TABLE OF CONTENTS

		Page
	Part I
Item 1.	Financial Statements
	Consolidated Balance Sheet as of September 30, 2007 (Unaudited).......	1
	Consolidated Statements of Operations for the three and nine Months Ended September 30, 2007 and 2006(unaudited)	2
	Consolidated Statements of Stockholders Equity for the nine months Ended September 30, 2007 (unaudited	3
	Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2007 and 2006 (unaudited	4
	Notes To Financial Statements (Unaudited)	5
Item 2.	Management's Discussion and Analysis or Plan of Operations	24
Item 3.	Controls and Procedures	29
	Part II - Other Information
Item 1.	Legal Proceedings	30
Item 2.	Unregistered Sales of Equity Securities and use of Proceeds	30
Item 3.	Defaults Upon Senior Notes	30
Item 4.	Submission of Matters to a Vote of Security Holders	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
Signatures.		31

EXECUTE SPORTS, INC.

Consolidated Balance Sheet (Unaudited)

As of September 30, 2007

ASSETS
CURRENT ASSETS
Cash	$	632,729
Accounts receivable, net (Note A)		44,371
Inventory		30,811
Deferred financing costs (Note G)		302,512
Other current assets		5,441
TOTAL CURRENT ASSETS		1,015,864
Fixed assets, net (Note B)		91,043
Trademarks (Note C)		5,000,000
Loans receivable, net (Note D)		146,128
TOTAL ASSETS	$	6,253,035
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	120,933
Convertible debentures (Note G)		6,202,395
Notes Payable (Note H)		170,159
Promissory Notes Payable (Note H)		372,928
Related party notes payable (Note H)		32,065
TOTAL CURRENT LIABILITIES		6,898,480
STOCKHOLDERS' EQUITY (Note J)
Common stock, par value $.001, 100,000,000 shares authorized
authorized; issued and outstanding 73,150,497 at September 30, 2007		73,145
Additional paid-in capital		11,490,673
Retained earnings <deficit>		(12,209,263	)
TOTAL STOCKHOLDERS' EQUITY		(645,445	)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	6,253,035
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1

EXECUTE SPORTS, INC.

Consolidated Statements of Operations (Unaudited)

Three and Nine Months Ended September 30, 2007 and 2006

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
REVENUES	2007			2006			2007			2006
Net sales	$	86,910		$	531,932		$	1,438,429		$	1,634,456
Cost of sales		69,201			268,375			787,188			1,100,409
Gross profit		17,709			263,557			651,241			534,047
EXPENSES
General and administrative expenses		351,952			518,452			1,032,556			2,218,952
Selling and advertising		44,375			163,595			91,868			429,187
Depreciation expense		2,530			1,138			7,590			3,414
Total expense		398,857			683,185			1,132,014			2,651,553
Income (loss) from operations		(381,148	)		(419,628	)		(480,773	)		(2,117,506	)
OTHER INCOME AND EXPENSES
Interest income		-			-			-			6,739
Other income		53,224			48			100,807			2,851
Interest expense		(224,142	)		(87,078	)		(437,682	)		(138,171	)
Loss due to loan reserve		-			(250,000	)					(250,000	)
Loss due to discount on conversion to stock		-			(32,356	)		(54,250	)		(32,356	)
Amortization of beneficial conversion feature of convertible debenture		(389,165	)		(160,719	)		(1,009,990	)		(227,151	)
Amortization of warrant discount related to convertible debenture		(84,333	)		(81,138	)		(270,104	)		(120,153	)
Amortization of deferred financing costs		(36,172	)		(34,631	)		(108,963	)		(51,699	)
Total other income and expenses		(680,588	)		(645,874	)		(1,780,182	)		(809,940	)
Net loss before discontinued operations		(1,061,736	)		(1,065,502	)		(2,260,955	)		(2,927,446	)
Income (loss) from discontinued operations		-			-			(1,421	)		-
Gain (loss) on disposal of discontinued operations		-			-			208,112			-
Total discontinued operations		-			-			206,691			-
NET INCOME (LOSS)		(1,061,736	)		(1,065,502	)		(2,054,264	)		(2,927,446	)
Net (loss) per common share Basic and diluted from continuing operations	$	(0.017	)	$	(0.046	)	$	(0.039	)	$	(0.137	)
Net (loss) per common share basic and diluted after discontinued operations	$	(0.017	)	$	(0.046	)	$	(0.036	)	$	(0.137	)
Weighted average common shares outstanding basic and diluted		62,335,980			23,321,088			57,289,247			21,376,749
The average shares listed below were not included in the computation per share because to do so would have been antidilutive for the periods presented:
Stock options		450,000			900,000			450,000			900,000
Warrants		12,868,016			3,486,627			7,619,868			1,769,632
Debt collateralized with common stock		110,022,520			13,442,627			44,875,726			6,339,565

SEE NOTES TO FINANCIAL STATEMENTS

2

EXECUTE SPORTS, INC.

Consolidated Statement of Stockholder's Equity (Unaudited)

As of September 30, 2007

	Common Stock									Additional		Retained			Total
	Number of						Payable/			Paid-in		Earnings			Stockholders
	Shares			Amount			Subscribed			Capital		<Deficit>			Equity
December 31, 2005		18,706,501		$	18,702		$	788,900		$	4,958,951	$	(4,546,089	)	$	1,220,464
Shares subscriptions received											5,130					5,130
Shares issued for acquisition		1,932,569			1,933			(676,400	)		674,467					-
Shares issued for director compensation		1,073,808			1,073			(7,500	)		36,533					30,106
Shares issued for cash in connection with the SB-2 filed 6/16/05		300,000			300			(105,000	)		104,700					-
Founders shares voluntarily canceled		(1,000,000	)		(1,000	)					1,000					-
Shares issued pursuant to warrant exercises		655,000			655						137,595					138,250
Shares issued for cash		200,000			200						69,800					70,000
Shares issued for services		12,303,816			12,304						470,399					482,703
Shares issued for notes payable		1,862,127			1,862						368,480					370,342
Shares issued pursuant to PUT agreement		2,750,049			2,750						161,347					164,097
Stock options granted											85,313					85,313
Beneficial conversion feature of convertible debenture											1,425,000					1,425,000
Warrant discount to convertible debenture											475,000					475,000
Net loss													(5,608,910	)		(5,608,910	)
December 31, 2006		38,783,870		$	38,779		$	-		$	8,973,715	$	(10,154,999	)	$	(1,142,505	)
Shares issued for director compensation		2,516,968			2,517						93,015					95,532
Shares issued for services		2,690,271			2,690						89,088					91,778
Warrants issued for services											134,510					134,510
Shares issued to induce creditor to make loans to the Company		1,400,000			1,400						27,200					28,600
Shares issued for notes payable		8,190,040			8,190						163,054					171,244
Shares issued pursuant to put agreement for repayment of debenture		7,679,788			7,680						263,643					271,323
Shares issued pursuant to put agreement for repayment of loans		9,977,355			9,977						194,248					204,225
Shares issued for cash pursuant to put agreement		1,912,205			1,912						74,256					76,168
Beneficial conversion feature of convertible debenture											1,424,185					1,424,185
Warrant discount to convertible debenture											53,759					53,759
Net loss													(2,054,264	)		(2,054,264	)
September 30, 2007		73,150,497		$	73,145		$	-		$	11,490,673	$	(12,209,263	)	$	(645,445	)
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3

EXECUTE SPORTS, INC.

Consolidated Statements of Cash Flows (Unaudited)

Three and Nine Months Ended September 30, 2007 and 2006

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss from continuing operations	$	(1,061,736	)	$	(1,065,502	)	$	(2,054,264	)	$	(2,927,446	)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation		2,530			1,138			7,590			3,414
Common stock issued for services		176,090			6,250			350,421			220,753
Compensation expense on options granted		-			-			-			85,313
Loss on the conversion of convertible debt		-			43,906			54,250			43,906
Gain on cancellation of debt		(47,224	)		-			(47,224	)		-
Amortization of beneficial conversion feature		389,165			160,719			1,009,990			227,151
Amortization of warrant discount related to convertible debenture		84,333			81,138			270,104			120,153
Issuance of common stock for convertible debenture		-			-			270,199			-
Issuance of common stock for notes payable		142,216			-			375,469			-
Increase in loan receivable loss reserve		-			250,000			-			250,000
CHANGES IN CURRENT ASSETS AND CURRENT
LIABILITIES:
(Increase) decrease in current assets:
Accounts receivable		171,679			(300,245	)		208,566			(470,094	)
Inventory		58,825			29,895			(2,456	)		(243,144	)
Prepaid expenses		-			81,299			49,494			300,680
Deferred financing costs		(271,328	)		3,448			(198,537	)		(139,301	)
Employee advance		-			14,258			-			(12,955	)
Other current assets		1,000			31,183			(4,441	)		-
Increase (decrease) in current liabilities:
Accounts payable and accrued expenses		(24,304	)		(291,787	)		(619,350	)		100,935
Customer deposits		-			-			-			(25,262	)
NET CASH USED FOR OPERATING ACTIVITIES		(378,754	)		(954,300	)		(330,189	)		(2,465,897	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan proceeds to unaffiliated company		-			-			-			(155,019	)
Acquisition of trademarks		(5,000,000	)		-			(5,000,000	)		-
Acquisition of furniture and equipment		-			(31,938	)		(1,058	)		(70,175	)
NET CASH USED FOR INVESTING ACTIVITIES		(5,000,000	)		(31,938	)		(5,001,058	)		(225,194	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in deposits		-			-			-			(1,858	)
Issuance of common stock for convertible debenture		-			-			(217,073	)		-
Issuance of common stock for cash		-			109,182			76,168			341,551
Proceeds from convertible debenture		5,877,907			-			5,930,120			1,900,000
Proceeds from notes payable		344,000			-			1,454,299			515,000
Repayment of notes payable		(141,471	)		(53,001	)		(1,263,107	)		(116,010	)
Proceeds from related party notes payable		-			-			18,207			58,431
Repayment of related party notes payable		(4,223	)		(31,306	)		(66,523	)		(182,179	)
Secured borrowings		(102,248	)		71,379			(42,501	)		(127,673	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		5,973,965			96,254			5,889,590			2,387,262
NET INCREASE <DECREASE> IN CASH		595,211			(889,984	)		558,343			(303,829	)
CASH, beginning of period		37,518			957,290			74,386			371,135
CASH, end of period	$	632,729		$	67,306		$	632,729		$	67,306
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID DURING THE YEAR FOR:
Taxes paid	$	-		$	-		$	800		$	13,268
Interest paid	$	-		$	-		$	-		$	24,829
Other non-cash investing and financing activities:
Shares issued for services	$	176,090		$	6,250		$	350,421		$	201,582
Shares issued for debt retirement	$	142,216		$	-		$	645,668		$	426,952

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited financial statements of Execute Sports, Inc. (“Execute Sports” or the “Company”) as of September 30, 2007 and for the three and nine month periods ended September 30, 2007 and 2006 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting. Accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Form 10-KSB for the fiscal year ended December 31, 2006 filed with the SEC on April 16, 2007. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the interim financial information have been included. The results of operations for any interim period are not necessarily indicative of the results of operations for the entire year.

Organization

Execute Sports was founded in 2002 as Padova International USA, Inc. to produce graphics kits and ancillary soft goods for the motocross, enduro and ATV markets.

In 2003, the Company launched its water sports division under the "Execute Sports" brand to provide wetsuits, vests, rash guards and ancillary products to the wake board and ski markets.

On March 3, 2005 the Company changed its name from Padova International U.S.A., Inc. (DBA Execute Sports) to Execute Sports, Inc.

In January 2006, the Company expanded its product mix by consummating the acquisition of Pacific Sports Group, Inc. (“PSG”), which owned and operated Academy Snowboards, Kampus Wakesk8s, Kampus Wake Shoes and Collective Development Bags and Bindings. In January, 2007, the Company entered into a trademark transfer and assignment agreement whereby all right, title, interest and good will in the Academy brand were transferred to the two former owners of PSG. In connection with the transfer, all of the Company’s accounts payable and accounts receivable relating to the trademark were assigned as well.

In August 2007, the Company further expanded its product mix by purchasing the right, title, interest and goodwill relating to the business of designing, manufacturing and marketing jet powered Sugar Sands boats, including the SUGAR SAND trade names, trademarks, service marks, and service names, including www.sugarsand.com. By acquiring the Sugar Sand brand, the Company expands our product offering without the added responsibilities and complexities of the manufacturing process, while positioning the company to capitalize on existing sales and marketing relationships.

5

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Summary of Significant Accounting Principles

Basis of Presentation

The financial statements include the accounts of Execute Sports and its wholly owned subsidiary PSG under the accrual basis of accounting.

Accounting 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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Principles of consolidation

The consolidated financial statements include the accounts of Execute Sports and its subsidiary, which is 100% consolidated in the financial statements. All material inter-company accounts and transactions have been eliminated.

Cash and cash equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

Accounts receivable

Accounts receivable are reported at the customers' outstanding balances less any allowance for doubtful accounts. Interest is not accrued on overdue accounts receivable. The Company evaluates receivables on a regular basis for potential reserve. During the three months ended September 30, 2007, the allowance for doubtful accounts decreased $10,000 from $20,000 at June 30, 2007 to $10,000 at September 30, 2007.

The Company has a factoring agreement with JD Factors. Pursuant to the agreement JD Factors’ will provide account receivable financing and factoring to the Company. JD Factors purchases the accounts receivable and may pay a portion of the purchase price, or lend money to the Company based upon accounts’ receivable of the Company.

6

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Inventories

Inventories are valued at the lower of cost or market. Cost is determined using the average costing method. Management performs periodic assessments to determine the existence of obsolete, slow moving and non-salable inventories, and records necessary provisions to reduce such inventories to net realizable value.

Property and equipment

Property and equipment are stated at cost. Major renewals and improvements are charged to the asset accounts while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed. At the time property and equipment are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements or sales are credited or charged to income.

Depreciation is provided using the 200% declining balance method. It is calculated over recovery periods as prescribed by management that range from 5 years for equipment to 7 years for furniture.

Long-lived assets

The Company has adopted Statement of Financial Accounting Standards No. 144 (SFAS 144). The Statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value.

Revenue recognition policy

Revenue from the sale of water sports clothing and apparel, and motorcycle accessories are recognized when the earning process is complete and the risk and rewards of ownership have transferred to the customer, which is generally considered to have occurred upon shipment to the customer.

Shipping and handling costs

The Company's policy is to classify shipping and handling costs as selling, general and administrative expenses.

7

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Advertising

The Company expenses all advertising costs as incurred. For the three and nine months ended September 30, 2007, the Company incurred approximately $4,972 and $13,090, respectively, in advertising expenses.

For the three and nine months ended September 30, 2006, the Company incurred approximately $28,270 and $80,449, respectively in advertising expenses.

Loss per common share

The Company adopted Statement of Financial Accounting Standards No. 128, which requires reporting of both basic and diluted earnings (loss) per share. Basic loss per share is calculated using the weighted average number of common shares outstanding in the period. Diluted loss per share includes potentially dilutive securities such as outstanding options and warrants, using the “treasury stock” method and convertible securities using the "if-converted" method. There were no adjustments required to net loss for the period covered in this report in the computation of diluted earnings per share.

Issuance of common stock

The Company accounts for stock-based compensation using the fair value method of Financial Accounting Standard No. 123r. Common shares issued for services rendered by a third party (both employees and non-employees) are recorded at management’s estimate of the fair value of the shares issued or services rendered, whichever is more readily determinable.

Comprehensive loss

The Company adopted Financial Accounting Standards Board Statement of Financial Standards No. 130, “Reporting Comprehensive Income,” which establishes standards for the reporting and display of comprehensive income and its components in the financial statements. There were no items of comprehensive income (loss) applicable to the Company during the periods covered in the financial statements included in this report.

Income taxes

On November 1, 2004, the Company amended its Articles of Incorporation to make the transition from an S-Corporation to a C-Corporation. Prior to the transition, the S-Corporation was not a tax paying entity for federal or state income tax purposes and thus no provision for income taxes was recognized. Subsequent to the change, the Company began recognizing the full valuation for deferred tax assets (See Note M).

8

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Impact of accounting standards

In February 2006, the FASB issued SFAS Statement No. 155, “Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140” ("SFAS 155"). This Statement amends FASB Statements No. 133, Accounting for Derivative Instruments and Hedging Activities, and No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. This Statement resolves issues addressed in Statement 133 Implementation Issue No. D1, “Application of Statement 133 to Beneficial Interests in Securitized Financial Assets.” This Statement permits fair value re-measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement 133, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives and amends Statement 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS 155 is effective for all financial instruments acquired or issued for the Company for fiscal year begins after September 15, 2006. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

In March 2006, the FASB issued SFAS No. 156 ("FAS 156"), "Accounting for Servicing of Financial Assets--An Amendment of FASB Statement No. 140." Among other requirements, FAS 156 requires a company to recognize a servicing asset or servicing liability when it undertakes an obligation to service a financial asset by entering into a servicing contract under certain situations. Under FAS 156 an election can also be made for subsequent fair value measurement of servicing assets and servicing liabilities by class, thus simplifying the accounting and provide for income statement recognition of potential offsetting changes in the fair value of servicing assets, servicing liabilities and related derivative instruments. The Statement was effective beginning the first fiscal year that begins after September 15, 2006. The Company does not believe that this accounting pronouncement will have a material impact on its financial position or results of operations.

In June 2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB No. 109. This Interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB No. 109, “Accounting for Income Taxes”. This interpretation prescribes recognition of threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This interpretation is effective for fiscal years beginning after December 15, 2006.

9

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Impact of accounting standards (Continued)

Earlier application is permitted if the entity has not yet issued interim or annual financial statements for that fiscal year. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements.” The standard provides guidance for using fair value to measure assets and liabilities. Under the standard, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. The standard clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability. In support of this principle, the standard establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is currently evaluating the Statement to determine what impact, if any, it will have on the Company.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132R” (“SFAS 158”). This statement requires balance sheet recognition of the funded status, which is the difference between the fair value of plan assets and the benefit obligation, of pension and postretirement benefit plans as a net asset or liability, with an offsetting adjustment to accumulated other comprehensive income in shareholders’ equity. In addition, the measurement date, the date at which plan assets and the benefit obligation are measured, is required to be the company’s fiscal year end. The Company does not believe that this accounting pronouncement will have a material impact on its financial position or results of operations.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Company’s Board of Directors long-term measurement objectives for accounting for financial instruments. This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company does not believe that this recent accounting pronouncement will have a material impact on its financial position or results of operations.

10

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Concentrations of credit risk

The Company performs ongoing credit evaluations of its customers. As of September 30, 2007, the Company's five largest customers accounted for 88% (36%, 16%, 12%, 12% and 12%) of accounts receivable. As of September 30, 2006, the Company's two largest customers accounted for 47% (31% and 16%) of accounts receivable.

For the three and nine months ended September 30, 2007, three customers accounted for approximately 83% (42%, 23% and 18%) and 91% (53%, 24% and 14%) of sales, respectively. For the three and nine months ended September 30, 2006, one customers accounted for approximately 36% and three customers accounted for 63% (39%, 13% and 11%) of sales, respectively.

For the three and nine months ended September 30, 2007, none of the Company’s net sales were made to customers outside the United States. For the three nine months ended September 30, 2006, approximately 43% and 17%, respectively, of the Company’s net sales were made to customers outside the United States.

The Company is dependent of third-party manufacturers and distributors for all of its supply of inventory. For the three and nine months ended September 30, 2007, the Company's single and two largest supplier(s) individually accounted for approximately 100% and 98% (72%, and 26%) of product purchases, respectively. For the three and nine months ended September 30, 2006, the Company's two and three largest suppliers individually accounted for approximately 87% (55% and 32%) and 76% (35%, 21% and 20%) of product purchases, respectively. The Company is dependent on the ability of its suppliers to provide products and services on a timely basis and on favorable pricing terms. The loss of certain principal suppliers or a significant reduction in product availability from principal suppliers could have a material adverse effect on the Company.

Disclosure about Fair Value of Financial Instruments

The Company estimates that the fair value of all financial instruments at September 30, 2007, as defined in FASB 107, does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying balance sheet. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value, and accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

11

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

NOTE B - PROPERTY AND EQUIPMENT

Property and equipment at September 30, 2007 consists of the following:

	2007
Computer and office equipment	$	127,745
Furniture and fixtures		2,281
Machinery and equipment		11,262
	$	141,288
Less: Accumulated Depreciation		(50,245	)
	$	91,043

Depreciation expense for the three and nine months ended September 30, 2007 was $2,530 and $7,590, respectively. Depreciation expense for the three and nine months ended September 30, 2006 was $1,138 and $3,414, respectively.

NOTE C - TRADEMARKS

On August 29, 2007, Execute Sports, Inc. (the "Company" or "Execute Sports") entered into an Asset Purchase Agreement (the "Agreement") with Challenger Powerboats, Inc. ("Challenger") and its wholly owned subsidiary, IMAR Group, Inc. ("IMAR", together with Challenger, the "Sellers"), pursuant to which Execute Sports purchased from the Sellers, and Sellers sold and transferred to Execute Sports, all right, title, interest and goodwill in and to certain assets, properties and rights relating to, used in or held for use in IMAR's business of designing, manufacturing and marketing water jet powered Sugar Sands boats, including the SUGAR SAND trade names and associated trade names, trademarks, service marks and service names, and the associated logos and their goodwill, and all associated domain names, in particular the domain www.sugarsand.com, trades secrets and copyrights and their goodwill. The purchase price was approximately $5,000,000. Execute Sports did not assume any obligations of IMAR in connection with the acquisition, other than the obligation to procure or maintain permits in connection with the post-closing operation of the Business by the Company. No physical assets were purchased. The following trade names were included in the purchase: Sugar Sand, Sugar Sand Sting, Sugar Sand Tango, Sugar Sand Mirage, Sugar Sand Calais, Sugar Sand Oasis, and Sugar Sand Airwave.

In connection with the transaction, Execute Sports and IMAR entered into an Agreement for Exclusive Right of Supply, pursuant to which IMAR will manufacture and be the exclusive supplier of the Sugar Sand line of jet boats to Execute Sports, for an initial term of 10 years. In addition, Execute Sports entered into an Exclusive Sales and Marketing Agreement with Challenger, pursuant to which Challenger will provide sales and marketing services related to the Sugar Sand boats for an initial term of 10 years.

12

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

NOTE C - TRADEMARKS

Pursuant to Statement of Financial Accounting Standards No. 144 (SFAS 144), the Company does not believe any impairment currently exists. However, the Company will evaluate this asset for impairment at December 31, 2007.

NOTE D - LOANS RECEIVABLE

During 2005 and 2006, the Company made strategic loans totaling $396,127 for potential future association to an unaffiliated company that accrues interest at 2% per year and due 12 months from the date of draw.

As of September 30, 2007, the entire balance of the loans was in default. However, we are in the process of collections and believe a portion will be collected. Therefore, the Company has created a reserve of $250,000 against the loans.

NOTE G - CONVERTIBLE DEBENTURES

May 15, 2006 Debenture ($1,900,000)

On May 15, 2006, the Company completed a private placement of convertible debentures generating gross proceeds of $1.9 million, and the issuance of warrants to purchase $475,000 worth of the Company’s common stock. Third party fees totaled $191,000, which were paid in cash.

The terms of the warrants and debentures are substantially the same. The exercise price of the warrants is calculated the same as for the conversion price of the convertible debentures. The warrants and debentures are immediately exercisable. The debentures bear interest at 12% per annum, interest payable monthly at the option of the Holder in cash or common stock. The debenture agreement payment schedule provides for full repayment by September 30, 2011, the maturity date of this debenture, any remaining principle balance automatically converts to the Company’s common stock.

Prior to maturity, the debentures and warrants are convertible into the Company's common stock at a fixed conversion price equal to the lowest closing bid price of the common stock between the issuance date and the date of the filing the registration statement covering resale of the shares underlying the debenture, or at a conversion price of fifteen cents ($.15). Since the Company’s stock price did not decline below $0.15 prior to the filing of the registration statement, $0.15 is the fixed conversion price for this debenture and associated warrants.

The debentures provide that the Holders may only convert the debenture if the number of shares held by the lender or its affiliates after conversion would not exceed 4.99% of the outstanding shares of the Company's common stock following such conversion.

13

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

NOTE G - CONVERTIBLE DEBENTURES (Continued)

May 15, 2006 Debenture ($1,900,000) (Continued)

In connection with the transaction, the Company entered into a Registration Rights Agreement. Pursuant to the terms of the Registration Rights Agreement, within twenty-one calendar days following the initial closing date, or June 5, 2006, the Company was required to file with the Securities and Exchange Commission a registration statement under the Securities Act of 1933, as amended, covering the resale of all of the common stock underlying the convertible debenture and issuable upon the exercise of the warrants based on a conversion price of $0.15 per share.

The Registration Rights Agreement further provides that if a registration statement is not filed within 21 days from the initial closing date, then in addition to any other rights the Holder may have, and until the registration statement is filed, the Company would be required to pay the Holder an amount in cash, as liquidated damages, equal to an aggregate two percent (2%) of the purchase price of the debentures. In addition, the conversion price would decrease by 10% of the fixed conversion price for each fifteen (15) day calendar period that a registration statement is not filed. The Registration Rights Agreement further provides that if a registration statement is not declared effective within 80 days from the initial closing date, then the Company would be required to pay the Holder an amount in cash, as liquidated damages, equal to an aggregate two percent (2%) of the purchase price of the debentures until the registration statement becomes effective. The Company initially filed the registration statement on May 24, 2006 and it was declared effective on June 15, 2006, or 30 days from the initial close date both within the time frames set forth in the Registration Rights Agreement.

The issuance costs related to the convertible debentures of approximately $191,000 in cash were capitalized to prepaid expenses on the balance sheet and are being amortized over the term of the repayment schedule which is calculated based upon the effective interest method. The Company recognized $36,172 and $108,963 during the three and nine months ended September 30, 2007, and $34,631 and $51,699 during the three and nine months ended September 30, 2006, respectively, as other expense related to the amortization of the issuance costs. The deferred financing costs were fully amortized as of September 30, 2007.

Pursuant to Paragraph 9-32 of EITF 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock, the warrants issued in connection with the convertible debentures meet the requirements of and are accounted for as permanent equity since the filing of an effective registration statement within the allotted time frames negated any liquidated damages, settlement is by delivery of shares only and the exercise price is fixed. The initial value of the warrants was treated as a discount to the debenture and recorded as additional paid in capital. The Company calculated the initial value of the warrants on the closing date of the transaction as being $633,333 as determined using a Black-Scholes option pricing model with the following assumptions: expected term 5 years, exercise price $0.15, volatility 7.6%, risk free rate 5.15%, and zero dividend yield. The total value of the warrants and the debenture was $2.53 million of which the warrants represented 25%. Thus, the relative value of the warrants to the total value, or 25% was applied to the debenture value of

14

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

NOTE G - CONVERTIBLE DEBENTURES (Continued)

May 15, 2006 Debenture ($1,900,000) (Continued)

$1.90 million yielding a warrant discount of $475,000. The discount to the debenture is being amortized over the term of the repayment schedule, or sixteen (16) months, and is calculated based upon the effective interest method. The Company recognized $84,333 and $270,104 during the three and nine months ended September 30, 2007, and $81,138 and $120,153 during the three and nine months ended September 30, 2006, respectively, in non-cash amortization expense related to the warrant discount. The warrant discount was fully amortized as of September 30, 2007.

The Company determined that the $1.90 million debenture was issued with a beneficial conversion feature (“BCF”) due to the conversion price ($0.15) being less than the closing stock price ($.32) on the date of issuance, and the conversion feature being in-the-money. Thus, pursuant to EITF 00-27, 27, Application of Issue No. 98-5 to Certain Convertible Instruments, the BCF has been determined based on the gross debenture amount less the portion attributable to the warrants described above, and recorded as a discount to reduce the carry value of the debenture and increase additional-paid-in-capital. The Company calculated the initial BCF on the closing date of the transaction to be $1,615,000 using the intrinsic value method. Since this amount is greater than the $1,425,000 remaining value of the debenture after deducting for the warrant discount described above, the Company reduced the initial carry value of the debenture to zero effectively recording a BCF of $1,425,000 as additional-paid-in-capital. The BCF discount is being amortized over the debenture repayment term of sixteen (16) months and calculated based upon the effective interest method. The Company recognized $389,165 and $1,009,990 during the three and nine months ended September 30, 2007, and $160,719 and $227,151 during the three and nine months ended September 30, 2006, respectively, in non-cash amortization expense attributable to the amortization of the beneficial conversion feature discount. The beneficial conversion feature was fully amortized as of September 30, 2007.

The Company recognized $54,710 and $159,971 during the three and nine months ended September 30, 2007, and $66,930 and $85,759 during the three and nine months ended September 30, 2006, respectively, in interest expense related to the May 2006 debenture.

The May 2006 debenture balance, including interest and principle as of September 30, 2007 is $1,836,605.

August 23, 2007 Debenture ($5,750,000)

On August 23, 2007, the Company completed a private placement of convertible debentures generating gross proceeds of $5.75 million, and the issuance of warrants to purchase 5,750,000 shares of the Company’s common stock for $.02 per share. Fees totaled $307,500, which were paid in cash.

15

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

NOTE G - CONVERTIBLE DEBENTURES (Continued)

August 23, 2007 Debenture ($5,750,000) (Continued)

The warrants and debentures are immediately exercisable. The debentures bear interest at 12% per annum, interest payable monthly at the option of the Holder in cash or common stock. The debenture has a term of five (5) years and matures August 23, 2012. Any remaining principle balance automatically converts to the Company’s common stock.

Prior to maturity, the debentures are convertible into the Company's common stock at the lesser of (i) seventy-five percent (75%) of the lowest closing bid price of the Common Stock during the twenty (20) trading days immediately prior to a Conversion Notice; or (ii) 2/100 U.S. dollars ($.02).

The debentures provide that the Holders may only convert the debenture if the number of shares held by the lender or its affiliates after conversion would not exceed 4.99% of the outstanding shares of the Company's common stock following such conversion.

The issuance costs related to the convertible debentures of approximately $307,500 in cash were capitalized to prepaid expenses on the balance sheet and are being amortized over the term of the debenture which is calculated based upon the effective interest method. The Company recognized $4,988 during the three and nine months ended September 30, 2007, respectively, as other expense related to the amortization of the issuance costs. The balance of deferred financing costs as of September 30, 2007 was $302,512.

Pursuant to Paragraph 9-32 of EITF 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock, the warrants issued in connection with the convertible debentures meet the requirements of and are accounted for as permanent equity since settlement is by delivery of shares only and the exercise price is fixed. The initial value of the warrants was treated as a discount to the debenture and recorded as additional paid in capital. The Company calculated the initial value of the warrants on the closing date of the transaction as being $53,759 as determined using a Black-Scholes option pricing model with the following assumptions: expected term 5 years, exercise price $0.02, Strike price $.025, volatility 14.28%, risk free rate 4.62%, and zero dividend yield. The discount to the debenture is being amortized over the term of the debenture and is calculated based upon the effective interest method. The Company recognized $892 and $892 during the three and nine months ended September 30, 2007, respectively, in non-cash amortization expense related to the warrant discount.

The Company determined that the debenture was issued with a beneficial conversion feature (“BCF”) due to the conversion price ($0.020) being less than the closing stock price ($.025) on the date of issuance, and the conversion feature being in-the-money. Thus, pursuant to EITF 00-27, 27, Application of Issue No. 98-5 to Certain Convertible Instruments, the BCF has been determined based on the gross debenture amount less the portion attributable to the warrants, and recorded as a discount to reduce the carry value of the debenture and increase additional-paid-in-

16

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

NOTE G - CONVERTIBLE DEBENTURES (Continued)

August 23, 2007 Debenture ($5,750,000) (Continued)

capital. The Company calculated the initial BCF on the closing date of the transaction to be $1,424,185 using the intrinsic value method. The BCF discount is being amortized over the term of the debenture. The Company recognized $20,567 and $20,567 during the three and nine months ended September 30, 2007, respectively, in non-cash amortization expense attributable to the amortization of the BCF discount.

The Company recognized $72,274 during the three and nine months ended September 30, 2007, respectively, in interest expense related to this debenture.

The debenture balance, including interest and principle as of September 30, 2007 is $5,822,275.

As of September 30, 2007, the actual dollar amount due to the Holders of the Company’s May 15, 2006 ($1.9 million), and August 23, 2007 ($5.75 million) debentures was $7,658,880. The following table represents the actual balance due compared to the amount recorded on the balance sheet as of September 30, 2007:

	September 30, 2007
Amount borrowed under the convertible debentures		7,650,000
Accrued interest		223,985
Payments applied to principle		(214,183	)
Debenture balance		7,659,802
Unamortized beneficial conversion feature		(1,404,540	)
Unamortized Warrant discount		(52,867	)
Recorded debenture balance		6,202,395

Investment Agreement

In connection with the debenture, the Company entered into a separate Investment Agreement on May 15, 2006 with Dutchess Private Equities Fund, L.P. ("Dutchess"), which provides for the sale and issuance from time to time of up to $10,000,000 in shares of Common Stock for a period of up to 36 months from the date the Registration Statement is declared effective. The maximum number of shares that the Company may put to Dutchess at any one time shall be equal to, at the Company's election, either (a) 200% of the average daily volume in the U.S. market of the Common Stock for the ten trading days prior to the date the Company notifies

Dutchess of its intent to sell shares to Dutchess, multiplied by the average of the three daily closing bid prices immediately preceding the date a Put Notice is delivered, or (b) a number of shares having a value of $100,000. The Company may not submit a Put Notice until after the completion of a previous sale under the Investment Agreement. The purchase price for the Common Stock to be sold shall be equal to 93% of the lowest closing best bid price of the

17

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

NOTE G - CONVERTIBLE DEBENTURES (Continued)

Investment Agreement (Continued)

Common Stock during the five-day period following the date the Company delivers a Put Notice. Since the price of the shares put to Dutchess are expected to be below market price at 93% of the market price, there is no added benefit to the Company. Thus, the Company has not recorded an asset related to this agreement. Upon the delivery of shares and receipt of cash related to this Investment Agreement, the Company records the increase in cash or decrease in debenture interest and principle, and an increase in common stock and additional paid in capital. During the nine months ended September 30, 2007, the Company placed puts with Dutchess totaling $551,716 resulting in the issuance of 19,569,348 shares of common stock. Of the $551,716, $76,168 was received as cash, $204,225 was applied to promissory notes made to the Company (See Note H, Promissory Notes Payable), $54,250 was recognized as a loss due to the conversion discount and $217,073 was applied to accrued interest and principle on the May 2006 debenture.

During the three and nine months ended September 30, 2007 and 2006, the Company recognized $0 and $54,250 and $0 and $0, respectively as a non-cash loss due to the conversion discount applied upon the conversion of interest and principle into common stock of the Company pursuant to the Investment Agreement and Debenture Agreement.

NOTE H - NOTES PAYABLE

Notes Payable

Non related party notes payable at September 30, 2007 is as follows:

Unsecured demand note payable bearing interest at 2% per year; currently in default.	$	9,538
Unsecured demand note payable bearing interest at 4% per year; matures 3/31/09.	$	89,221
Unsecured demand note payable to New Heart Ministries, bearing interest at 4% per year; currently in default.	$	2,925
Unsecured demand note payable to Pacific Sports Investors LLC, bearing interest at 10% per year; currently in default.	$	40,375
Secured demand note payable to Christian Beckas, bearing interest at 12% per year collateralized by 80,000 shares of common stock; currently in default.	$	19,300
Secured demand note payable to Hector Peneda, bearing interest at 12% per year collateralized by 40,000 shares of common stock; currently in default.	$	8,800
Total	$	170,159

The interest rate offered on the 2% through 4% loans above is below market rate. The Company has determined the difference between the stated interest rate and the rate available at the date of the loan(s) would be immaterial to these financial statements.

18

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

NOTE H - NOTES PAYABLE (Continued)

Related Party Notes Payable (Continued)

Related party Notes payable at September 30, 2007 is as follows:

Secured demand note payable to Craig Hudson, bearing interest at 12% per year collateralized by 116,000 shares of common stock; currently in default	$	32,065
Total	$	32,065

Notes Payable and Related Party Notes Payable

During the three and nine months ended September 30, 2007, the Company recognized $1,083 and $6,934, respectively, of interest expense related to all the notes above. During the three and nine months ended September 30, 2006, the Company recognized $19,414 and $37,054, respectively, of interest expense related to the notes above.

During the three months ended September 30, 2007, the Company repaid $75,000 ($70,606 of principle and $4,394 of interest) on non related party debt by converting into 3,000,000 shares of common stock. The common stock had a fair market value of $69,000 on the date of conversion resulting in a $6,000 gain on conversion of the debt.

During the nine months ended September 30, 2007, the Company repaid $204,751 ($190,606 of principle and $14,145 of interest) on non related party debt by converting into 8,190,040 shares of common stock. The common stock had a fair market value of $171,244 on the date of conversion resulting in a $33,507 gain on conversion of the debt.

Promissory Notes Payable

Secured promissory note to Dutchess Private Equities Fund, Ltd., bearing interest at 12% per year and collateralized by however many shares are needed to settle the debt; matures May 1, 2008.	$	60,928
Secured promissory note to Dutchess Private Equities Fund, Ltd., bearing interest at 12% per year and collateralized by however many shares are needed to settle the debt; matures September 13, 2008.	$	312,000
Total	$	372,928

On April 9, 2007, the Company issued to Dutchess a promissory note in the face amount of $132,000 for gross proceeds of $110,000. The Note bears interest at 12% per annum and matures on April 9, 2008. Pursuant to the Note, the Company is required to make payments to Dutchess in the amount of the greater of a) one hundred percent (100%) of each Put (as defined in the Investment Agreement (See Note G) between the Company and the Investor given to Dutchess from the Company; or b) eleven thousand seven hundred twenty-one dollars and 39/100 ($11,721.39) until the Face Amount is paid in full, minus any fees due. In connection with the issuance of the Note, the Company has agreed to provide Collateral to Dutchess in the form of

19

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

NOTE H - NOTES PAYABLE (Continued)

Promissory Notes Payable (Continued)

thirty (30) Put Notices. In the event that the Company has not repaid the Face Amount by the maturity date, then as liquidated damages, the face amount shall be increased by ten percent (10.0%) as an initial penalty and an additional two and one-half percent (2.5%) per month (pro rata for partial periods), compounded daily, for each month until the face amount is paid in full.

As an incentive to enter into this note, the Company issued to Dutchess 600,000 shares of the Company’s restricted common stock.

During the nine months ended September 30, 2007, the Company issued 5,998,489 shares of common stock in repayment of the April 9, 2007 promissory note, which has been repaid in full as of September 30, 2007.

On May 1, 2007, the Company issued to Dutchess a promissory note in the face amount of $132,000 for gross proceeds of $110,000. The Note bears interest at 12% per annum and matures on May 1, 2008. Pursuant to the Note, the Company is required to make payments to Dutchess in the amount of the greater of a) one hundred percent (100%) of each Put (as defined in the Investment Agreement (See Note G) between the Company and the Investor given to Dutchess from the Company; or b) eleven thousand seven hundred twenty-one dollars and 39/100 ($11,721.39) until the Face Amount is paid in full, minus any fees due. In connection with the issuance of the Note, the Company has agreed to provide Collateral to Dutchess in the form of thirty (30) Put Notices. In the event that the Company has not repaid the Face Amount by the maturity date, then as liquidated damages, the face amount shall be increased by ten percent (10.0%) as an initial penalty and an additional two and one-half percent (2.5%) per month (pro rata for partial periods), compounded daily, for each month until the face amount is paid in full.

As an incentive to enter into this note, the Company issued to Dutchess 800,000 shares of the Company’s restricted common stock.

During the nine months ended September 30, 2007, the Company issued 3,983,866 shares of common stock in repayment of $71,072 of the May 1, 2007 promissory note, which has a balance of $60,928 as of September 30, 2007.

On August 13, 2007, the Company issued to Dutchess a promissory note in the face amount of $312,000 for gross proceeds of $260,000. The Note bears interest at 12% per annum and matures on September 13, 2008. Pursuant to the Note, the Company is required to make payments to Dutchess in the amount of one hundred percent (100%) of each Put (as defined in the Investment Agreement (See Note G) until the Face Amount is paid in full, minus any fees due. In connection with the issuance of the Note, the Company has agreed to provide Collateral to Dutchess in the form of thirty (30) Put Notices. In the event that the Company has not repaid the Face Amount by the maturity date, then as liquidated damages, the face amount shall be increased by ten percent (10.0%) as an initial penalty and an additional two and one-half percent (2.5%) per month (pro rata for partial periods), compounded daily, for each month until the face amount is paid in full.

20

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

NOTE H - NOTES PAYABLE (Continued)

Promissory Notes Payable (Continued)

During the three and nine months ended September 30, 2007, the Company recognized $94,000 and $126,000 of interest expense related to the notes above.

Purchase Order Financing

During the nine months ended September 30, 2007, the Holders of our convertible debentures advanced to the Company $869,425 to be used specifically for production of watersports goods. The advances bear interest of three percent (3%) per month and mature within three months. The advances are secured by the Company’s assets and are convertible into shares of common stock of the Company at the lenders discretion pursuant to the Investment Agreement as described in Note G above. During the nine months ended September 30, 2007, the Company repaid $869,425 of principle and incurred $70,192 of interest expense related to the purchase order financing. No debt was converted into common stock.

NOTE J - STOCKHOLDERS’ EQUITY

On August 18, 2004, the Company entered into a service contract valued at $100,000 in exchange for 400,000 shares of common stock, which represents the fair market value of the common stock as of that date. The contract term was 24 months. During the three and nine months ended September 30, 2006, the Company recognized $12,465 and $24,795, respectively, of expense in connection with this contract, which has been fully expensed as of December 31, 2006.

On March 1, 2004, the Company entered into a service contract valued at $62,500 in exchange for 250,000 shares of common stock, which represents the fair market value of the stock as of that date. The contract term is 24 months. The Company recognized $0 and $5,137 during the three and nine months ended September 30, 2007, and $7,877 and $23,373 during the three and nine months ended September 30, 2006, respectively, of expense in connection with this contract, which has been fully expensed as of September 30, 2007.

During the nine months ended September 30, 2007, the Company issued 2,516,968 shares of common stock valued at the closing price of the stock on the date of issuance, or $95,532 to two of its directors as payment in lieu of cash.

During the nine months ended September 30, 2007, the Company issued 2,690,271 shares of common stock valued at the closing price of the stock on the date of issuance, or $91,778 as payment for services rendered in lieu of cash.

21

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

NOTE J - STOCKHOLDERS’ EQUITY (Continued)

During the nine months ended September 30, 2007, the Company issued 1,400,000 shares of common stock valued at the closing price of the stock on the date of issuance, or $28,600 to the Holders of our convertible debentures as an inducement to make short term loans to the Company for the purpose of financing production and working capital.

During the nine months ended September 30, 2007, the Company issued 8,190,040 shares of common stock in exchange for the retirement of $190,606 of principle and $14,145 of accrued interest. The stock was valued at the closing price of the stock on the date of issuance and resulted in an increase to shareholders equity of $171,244 and a gain of $33,507.

During the nine months ended September 30, 2007, the Company issued 19,569,348 shares to Dutchess pursuant to the Investment Agreement (See NOTE G). The total value of the shares on the dates of issuance was $551,716. Of this amount $76,168 was received in cash, $204,225 was applied to promissory notes made to the Company (See Note H, Promissory Notes Payable), $54,250 was recognized as a loss due to the conversion discount and $217,073 was applied to accrued interest and principle on the May 2006 debenture.

NOTE K - WARRANTS

At September 30, 2007, the Company had 3,440,238 Warrants outstanding entitling the holder thereof the right to purchase one share of common stock for each warrant held as follows:

			Exercise
Warrant	Number of		Price Per		Expiration
Class	Warrants		Warrant		Date
A		500,000	$	0.350		3/31/08
A		28,571	$	0.350		9/30/07
May 2006 Debenture		2,911,667	$	0.150		5/15/11
August 2007 Debenture		5,750,000	$	0.020		8/23/12
B		5,000,000	$	0.001		5/23/012
B		2,000,000	$	0.001		5/23/012
Total		16,190,238

During the nine months ended September 30, 2007, the Company issued 12,750,000 warrants, including the August 2007 warrants (See Note G) and “B” class warrants.

Stock Warrants Issued to Third Parties

The Company accounts for stock-based compensation issued to non-employees in accordance with the provisions of SFAS 123 and the Emerging Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services."

22

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

NOTE K - WARRANTS (Continued)

In addition, the Company evaluates each derivative issued to determine whether treatment as either equity or a liability is warranted for that derivative pursuant to EITF 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a Company's Own Stock of that derivative.

The August 23, 2007 warrant for 5,750,000 shares of common stock was issued in conjunction with the debenture of the same date and is discussed in Note G. The “B” class warrants were recorded to permanent equity and resulted in $134,510 of expense using the Black-Scholes Option Pricing Model with the following assumptions: expected term 5 years, exercise price $0.001, Strike price $.020, volatility 14.23%, risk free rate 4.86%, and zero dividend yield.

NOTE L - STOCK INCENTIVE PLAN

On December 13, 2005, pursuant to an Employment Agreement and in anticipation of approval of the Stock Incentive Plan, the Company awarded its then Product Manager, Duane Pacha a non-qualified stock option to purchase 300,000 shares of common stock of the Company at an exercise price of $.35 per share with an expiration date of December 12, 2015. The option vests and become exercisable at a rate of 12,500 per month over a twenty-four month period. On December 31, 2006, the Company terminated Mr. Pacha’s position as Product Manager due to the disposition of the Academy business. At the time of departure from the Company, options to purchase 150,000 shares had vested. The remaining options to purchase 150,000 shares were canceled. As of September 30, 2007, the vested options were canceled due to non exercise within 90 days of separation from the Company.

On December 13, 2005, pursuant to an Employment Agreement and in anticipation of approval of the Stock Incentive Plan, the Company awarded its then Marketing Director, Jeff Baughn a non-qualified stock option to purchase 300,000 shares of common stock of the Company at an exercise price of $.35 per share with an expiration date of December 12, 2015. The option vests and become exercisable at a rate of 12,500 per month over a twenty-four month period. On December 15, 2006, the Company terminated Jeff Baughn’s position as Marketing Director due to the disposition of the Academy business. At the time of departure from the Company, options to purchase 150,000 shares had vested. The remaining options to purchase 150,000 shares were canceled. As of September 30, 2007, the vested options were canceled due to non exercise within 90 days of separation from the Company.

On December 15, 2005, pursuant to an Employment Agreement and in anticipation of approval of the Stock Incentive Plan, the Company awarded its President, Todd Pitcher a non-qualified stock option to purchase 300,000 shares of common stock of the Company at an exercise price of $.35 per share with an expiration date of December 14, 2015. The option vests and become exercisable at a rate of 12,500 per month over a twenty-four month period. On December 22, 2006, the Company and Todd Pitcher mutually agreed to terminate Mr. Pitcher as President in order to improve operational cash flow. At the time of departure from the Company, options to purchase 150,000 shares had vested. The remaining options to purchase 150,000 shares were

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EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

NOTE L - STOCK INCENTIVE PLAN (Continued)

canceled. As of September 30, 2007, the vested options were canceled due to non exercise within 90 days of separation from the Company.

The following table summarizes the Company's stock option activity for the nine months ended September 30, 2007:

	2007
				Weighted Average
	Shares			Exercise Price
Outstanding at beginning of period		450,000		$	0.35
Granted		-
Forfeited		(450,000	)		0.35
Exercised		-
Outstanding at end of period		-		$	0.35
Options exerciseable at end of period		-

The Company accounts for stock options pursuant to Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment. The Company values each option grant utilizing the grant date fair value for fixed awards based on the Black-Scholes Option Pricing Model. Compensation cost is amortized over the vesting period.

During the nine months ended September 30, 2007, no compensation expense related to options was recognized. To date, the Company has recognized compensation expense of $85,313.

NOTE M - NET OPERATING LOSS CARRY FORWARD

In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

At December 31, 2006, a valuation allowance for the full amount of the net deferred tax asset was recorded because of uncertainties as to the amount of taxable income that would be generated in future years.

United States Corporation Income Taxes

Period of Loss	Amount	Expiration Date
December 31, 2006	$5,602,753	December 31, 2026
December 31, 2005	$3,559,866	December 31, 2025
December 31, 2004	$420,421	December 31, 2024

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EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

NOTE M - NET OPERATING LOSS CARRY FORWARD (Continued)

Prior to November 2004 the Company was organized as an S-Corporation and all losses were distributed and recognized through the tax returns of the owners. The loss for the fiscal year ended December 31, 2006, was $5,608,910. As of December 31, 2006, a valuation allowance for the full amount of the net deferred tax asset has been recognized over the period for $2,243,564, based on an anticipated tax rate of 40%.

NOTE N - GOING CONCERN AND MANAGEMENT’S PLANS

The Company has suffered recurring losses from operations since inception. In addition, the Company has yet to generate an internal cash flow from its business operations. These factors raise substantial doubt about its ability to continue as a going concern.

Management’s plans with regard to these matters encompass the following actions: 1) obtain funding from new investors to alleviate the Company’s working capital deficiency; and 2) implement a plan to generate additional sales. The Company’s continued existence is dependent upon its ability to resolve its liquidity problems and increase profitability in its current business operations. However, the outcome of management’s plans cannot be ascertained with any degree of certainty. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of these risks and uncertainty.

NOTE O - RELATED PARTY TRANSACTIONS

As of December 31, 2006, Mr. Apicella was owed $54,700 for advances made to the Company. During the three months ended March 31, 2007, the Company incurred $11,800 of expenses paid on its behalf by Geno Apicella, CEO. In addition, during the three months ended March 31, 2007, the Company repaid $62,300 to Mr. Apicella leaving a balance due to Mr. Apicella of $4,223 as of March 31, 2007. During the three months ended June 30, 2007, the Company repaid an additional $1,200 bringing the balance due Mr. Apicella’s to $3,023 which was repaid in full during the three months ended September 31, 2007..

NOTE P - DISPOSITION OF ACADEMY LINE

On February 5, 2007 the Company filed a current report on Form 8-k with the United States Securities and Exchange Commission relating to the January 31, 2007, Trademark Transfer and Assignment Agreement (the “Agreement”) with Duane Pacha (“Duane”) and Jeff Baughn (“Jeff”, with Duane, the “Buyers”) pursuant to which the Company transferred all right, title, interest and good will in the ACADEMY SNOWBOARD CO. and ACADEMY trademarks, and the associated ACADEMY logo and their goodwill, and all associated domain names, in particular the domain www.academysnowboards.com, trades secrets and copyrights and their goodwill (collectively, the “Brand”). Moreover, as per the Agreement, there was no cash component relating to the transfer and assignment of the Brand and the Company shall assign to Buyers certain of the Company’s accounts payable and accounts receivable relating to the Brand. Specifically, the accounts receivable in the amount of $107,761.52 were transferred to the

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EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

NOTE P - DISPOSITION OF ACADEMY LINE (Continued)

Buyers resulting in a decrease to accounts receivable. Accounts payable in the amount of $345,321.50 were transferred to the Buyers resulting in a decrease to accounts payable.

NOTE Q - SUBSEQUENT EVENTS

From October 1, 2007 through November 1, 2007, the Company issued 4,258,964 shares of common stock to Dutchess in exchange for the reduction of $57,862 of short term loans.

From October 1, 2007 through November 12, 2007, the Company issued 475,000 and 750,000 shares of common stock to two officers and two directors, respectively, with a combined value of $24,500 based on the closing stock price on the date of issuance.

From October 1, 2007 through November 12, 2007, the Company issued 12,000 shares in lieu of payment to an outside consultant for services valued at $240 based on the closing stock price on the date of issuance.

From October 1, 2007 through November 12, 2007, the Company issued 743,512 shares in exchange for debt valued at $14,870 based on the closing stock price on the date of issuance.

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Item 2 - Management's Discussion and Analysis or Plan of Operations

This management’s discussion and analysis of results of operations and financial condition contains forward-looking statements that involve risks and uncertainties. In some cases, you can identify these statements by forward-looking words such as "may," "might," "will," "should," "expect(s)," "plan(s)," "anticipate(s)," "believe(s)," "estimate(s)," "predict(s)," "intend(s)," "potential" and similar expressions. All of the forward-looking statements contained in this registration statement are based on estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market and other factors. Although we believe such estimates and assumptions are reasonable, they are inherently uncertain and involve risks and uncertainties. In addition, management’s assumptions about future events may prove to be inaccurate. We caution you that the forward-looking statements contained in this registration statement are not guarantees of future performance and we cannot assure you that such statements will be realized. In all likelihood, actual results will differ from those contemplated by such forward-looking statements as a result of a variety of factors, including, but not limited to, those factors discussed in "Risk Factors" and included in our on Form 10-KSB for the fiscal year ended December 31, 2006. Except as required by law, we undertake no obligation to update any of these forward-looking statements.

Critical Accounting Policies

The Company's discussion and analysis of its results of operations, financial condition and liquidity are based upon the Company's financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period.  The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances.  Actual results may materially differ from these estimates under different assumptions or conditions.  On an on-going basis, the Company reviews its estimates to ensure that the estimates appropriately reflect changes in its business.

Inventories

Inventories are valued at the lower of cost or market and primarily consist of wetsuits, sticker kits and related accessories.  Cost is determined using the average cost method.  The inventory balance reflects management’s estimate of net realizable value. Management performs periodic assessments based on our understanding of market conditions and forecasts of future product demand to determine the existence of obsolete, slow moving and non-salable inventories, and records the necessary adjustment at the time of assessment directly to the statement of operations to reduce such inventories to their net realizable value. If the actual amount of obsolete inventory significantly exceeds the inventory balance, the Company's costs of goods sold and gross profit and resulting net income or loss would be significantly adversely affected.

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Revenue recognition

The Company recognizes revenue when the product is shipped to the customer.  At that time, the title and risk of loss transfer to the customer, and collectability is reasonably assured.  Collectability is evaluated on an individual customer basis taking into consideration historical payment trends, current financial position, results of independent credit evaluations and payment terms. Additionally, an estimate of product returns are recorded when revenue is recognized.  Estimates are based on historical trends taking into consideration current market conditions, customer demands and product sell through.  If actual sales returns significantly exceed the recorded estimated expense, the Company's sales would be adversely affected.

Allowance for doubtful accounts

The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments.  An estimate of uncollectible amounts is made by management based upon historical bad debts, current customer receivable balances and aging, the customer's financial condition and current economic conditions.  If a significant number of customers with significant receivable balances in excess of the allowance fail to make required payments, the Company's operating results would be significantly adversely affected.  Based on management's assessment, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to the valuation allowance.  Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable.  The Company generally does not require collateral.

Product Warranty

The Company's Watersports products carry a ninety-day warranty. Warranty costs are charged against sales in the period products are sold as a reduction in the selling price.  Historically, warranty costs have been less than 1% of sales. In estimating its warranty obligations, the Company considers various relevant factors, including the Company's stated warranty policies, the historical frequency of claims, and the cost to replace or repair the product.  If the actual amount of warranty claims significantly exceeds the estimated expense, the Company's costs of goods sold and gross profit and resulting net income or loss would be significantly adversely affected.

Income taxes

On November 1, 2004, the Company amended its Articles of Incorporation to make the transition from an S-Corporation to a C-Corporation. Prior to the transition the S Corporation was not a tax paying entity for federal or state income tax purposes and thus no provision for income taxes was recognized. The Company accounts for income taxes using the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.  Deferred tax assets and liabilities are measured using enacted rates recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  In assessing the realizability of deferred income tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred income tax assets will be realized.  The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  SFAS No. 109 requires a valuation allowance to be recorded when it is more likely than not that some or all of the deferred tax assets will not be realized. The Company has recorded a valuation allowance for the full amount of the net deferred tax asset because of uncertainties as to the amount of taxable income that would be generated in future years. 

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Overview

Results of Operations

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

Net Sales for the three months ended September 30, 2007 and 2006 were $86,910 and $531,932, respectively, representing a $445,022, or 84% decrease. The three month year-over-year decrease is due primarily to the inclusion of revenue from the Academy, Eagle Rider and Kampus lines in the prior year compared to no such revenue in the current year.

Net Sales for the nine months ended September 30, 2007 and 2006 were $1,438,429 and $1,634,456, respectively, representing a $196,027, or 12% decrease. The nine month year-over-year decrease is primarily due to the inclusion of revenue from the Academy, Eagle Rider and Kampus lines in the prior year compared to no such revenue in the current year. However, the watersports line gross revenue for the nine months ended September 30, 2007 was $1,435,391 compared to $921,589 in 2006 representing a 56% increase and a result of the hiring of Celeste Berouty, our new President, and the increased confidence currently being exhibited by our existing customer base.

Gross margin for the three months ended September 30, 2007 and 2006 was $17,709, or 20% and $263,557, or 50%, respectively. The decrease in gross margin over the previous year was primarily due to the company ceasing sales of snowboard products and its licensed apparel program.

Gross margin for the nine months ended September 30, 2007 and 2006 was $651,241, or 45% and $534,047, or 33%, respectively. The $117,194 increase in gross margin over the previous year was due to more favorable materials prices for manufactured products, lower shipping rates and reduced overhead.

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Selling, General and Administrative expenses for the three months ended September 30, 2007 and 2006 was $398,857 and $683,185, respectively, representing a $284,328 or 42% decrease. Selling, General and Administrative expenses for the nine months ended September 30, 2007 and 2006 was $1,132,014 and $2,651,553, respectively, representing a $1,519,539 or 57% decrease. The three and nine month year-over-year decrease was the result of no acquisition costs, significantly less stock based compensation expense, lower selling and advertising costs and lower personnel and professional service costs compared to the same periods in the prior year.

Net loss from for the three months ended September 30, 2007 and 2006 was $1,061,736 and $1,065,502, respectively. Net loss for the nine months ended September 30, 2007 and 2006 was $2,054,264 and $2,927,446, respectively. The net loss from continuing operations decreased for the three and nine month periods by $3,766, and $873,182 or 30%, respectively. The improvement in net loss is due primarily to decreased operating costs described above offset by higher financing related costs such as interest expense and amortization of the beneficial conversion feature on our debentures.

Financial Condition

From inception to September 30, 2007, we incurred an accumulated deficit of $12,209,263, and we expect to incur additional losses through the fiscal year ending December 31, 2007 and for the foreseeable future. This loss has been incurred through a combination of selling and operating expenses related to expensing of stock, as well as in support of our plans to expand sales and distribution channels, as well as to develop new products.

We have financed our operations since inception primarily through debt and equity financing. During the nine months ended September 30, 2007, we had a net increase in cash of $558,343 primarily due to receipt of funds from our August 23, 2007 debenture. Total cash resources as of September 30, 2007 was $632,729, compared with $74,386 at December 31, 2006.

Our available working capital and capital requirements will depend on numerous factors, including progress in our distribution and sales of our products, the timing and cost of expanding into new markets, the cost of developing new products, changes in our existing collaborative and licensing relationships, the resources that we devote to developing new products and commercializing capabilities, the status of our competitors, our ability to establish collaborative arrangements with other organizations, our ability to attract and retain key employees, our management of inventory and our need to purchase additional capital equipment.

The Company’s Liquidity Plan

Recent operating results give rise to concerns about the Company’s ability to generate cash flow from operations sufficient to sustain ongoing viability. During 2006 and the latter half of 2005, the Company’s cost control strategies focused on managing general and administrative expenses through keeping headcount to a minimum, amongst other things, and maintaining a focused marketing and sales strategy that leverages existing channel partnerships.

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The Company’s need to raise additional equity or debt financing and the Company’s ability to generate cash flow from operations will depend on its future performance and the Company’s ability to successfully implement business and growth strategies. The Company’s performance will also be affected by prevailing economic conditions. Many of these factors are beyond the Company’s control. If future cash flows and capital resources are insufficient to meet the Company’s commitments, the Company may be forced to reduce or delay activities and capital expenditures or obtain additional equity capital. In the event that the Company is unable to do so, the Company may be left without sufficient liquidity.

In September 2004, we commenced a private placement to sell up to 7,000,000 shares of our common stock at a per share cost of $.25. We closed the financing on May 27, 2005, accepting no further subscription agreements pursuant to the September 2004 private placement offering, and have received proceeds of $729,500 in connection with the financing.

On December 26, 2005, the Company’s SB-2 registration statement was declared effective by the Securities and Exchange Commission. Pursuant to the terms of the Offering, the Company offered to certain investors up to 3,571,428 shares of the Company’s common stock for consideration of $0.35 per share. As of December 31, 2005, the Company has received $1,246,550 in proceeds $70,000 of which was received on January 3, 2006.

On June 15, 2006, pursuant to the filing of another effective SB-2 registration statement, we finalized a private placement and received $1,900,000 of convertible debentures with a $10,000,000 equity line of credit whereby the company places stock puts with the creditor in exchange for cash or repayment of debt.

On August 23, 2007, we finalized a private placement and received $5,750,000 of convertible debentures of which $5,000,000 was used to purchase Sugar Sand.

During the nine months ended September 30, 2007, the Company recognized $551,716 from the stock puts (See Footnote J to the financial statements).

Management is currently in the process of seeking additional equity financing with potential investors. Management is also working with the holders of our convertible debentures to finance production and provide working capital when needed. There can be no assurance that such additional financing will be obtained. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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ITEM 3. CONTROLS AND PROCEDURES

(a) As of December 31, 2006, we conducted an evaluation, under the supervision and participation of our management, including the Company’s President and Chief Executive Officer (who is the principal accounting officer) of the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report, as required by Rule 13a-15(b) under the Exchange Act of 1934, as amended (the “Exchange Act”)

In connection with the audit of our Consolidated Financial Statements for the fiscal year ended December 31, 2006, our independent registered public accounting firm informed us that we had significant deficiency constituting material weaknesses as defined by the standards of the Public Company Accounting Oversight Board, which had been identified in connection with the audit of our Consolidated Financial Statements for the fiscal year ended December 31, 2006

The significant deficiency in internal control identified consisted of inadequate segregation of duties affecting initiating, recording and processing financial data.

Based on the evaluation, which disclosed a deficiency in the segregation of financial duties, the Company’s President and Chief Executive Officer (who is the principal accounting officer) concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

The Company has taken, and will continue to take, steps to address the specific problems identified by the auditors including, but not limited to, emphasizing enhancement of the segregation of duties based on the limited resources the Company has, and, where practical, the Company will continue to assess the cost versus benefit of adding additional resources that would mitigate the situation. Our President and Chief Executive Officer will monitor our accounting policies to assure proper accounting on an ongoing basis.

(b) There were no changes in the Company’s internal controls over financial reporting identified in connection with the evaluation by management described above that occurred during the period covered by this report that has materially effected, or is reasonably likely to materially effect the Company’s internal control over financial reporting.

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Part II - Other Information

Item 1. Legal Proceedings

No change since previous filing.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no unregistered sales of equity securities during the nine months ended September 30, 2007.

Item 3. Defaults Upon Senior Notes.

Due to our inability to pay, the Company is currently in default on the following Notes:

Unsecured demand note payable bearing interest at 2% per year; currently in default.	$	9,538
Unsecured demand note payable to New Heart Ministries, bearing interest at 4% per year; currently in default.	$	2,925
Unsecured demand note payable to Pacific Sports Investors LLC, bearing interest at 10% per year; currently in default.	$	40,375
Secured demand note payable to Christian Beckas, bearing interest at 12% per year collateralized by 80,000 shares of common stock; currently in default.	$	19,300
Secured demand note payable to Hector Peneda, bearing interest at 12% per year collateralized by 40,000 shares of common stock; currently in default.	$	8,800
Secured demand related party note payable to Craig Hudson, bearing interest at 12% per year collateralized by 116,000 shares of common stock; currently in default	$	32,065
Total	$	113,003

Item 4. Submission of Matters to A Vote of Security Holders.

None.

Item 5. Other Information.

There were no matters required to be disclosed on a current report on Form 8-K during the period covered by this report that were not so disclosed.

There were no changes to the procedures by which security holders may recommend nominees to the Company’s Board of Directors since the Company last disclosed these procedures.

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Item 6. Exhibits

Exhibit Number	Description	Incorporated By Reference to
10.1	Addendum to Payment in Kind Promissory Note entered into between Execute Sports, Inc. and John Helms, dated July 31, 2007.	Exhibit 10.1 to Execute Sports, Inc.’s Form 8-K filed August 1, 2007
10.2	Promissory Note issued by Execute Sports, Inc. to Dutchess Private Equities Find, Ltd., dated August 13, 2007.	Exhibit 10.1 to Execute Sports, Inc.’s Form 8-K filed August 17, 2007
10.3	Asset Purchase Agreement dated August 29, 2007 by and between Execute Sports, Inc. and Challenger Powerboats, Inc. and IMAR Group, Inc.	Exhibit 10.1 to Execute Sports, Inc.’s Form 8-K filed September 12, 2007
10.4	Debenture, issued by Execute Sports, Inc. to Dutchess Private Equities Fund, Ltd., dated August 23, 2007	Exhibit 10.2 to Execute Sports, Inc.’s Form 8-K filed September 12, 2007
10.5	Subscription Agreement, dated August 23, 2007 by and between Execute Sports, Inc. and Dutchess Private Equities Fund, Ltd.	Exhibit 10.3 to Execute Sports, Inc.’s Form 8-K filed September 12, 2007
10.6	Warrant, issued by Execute Sports, Inc. to Dutchess Private Equities Fund, Ltd., dated August 23, 2007	Exhibit 10.4 to Execute Sports, Inc.’s Form 8-K filed September 12, 2007
31.1	Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act	*
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	*

* Filed herewith

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Signature	Title	Date
/s/ Geno M. Apicella	Chief Executive Officer
Name: Geno M. Apicella	and Principle Accounting Officer	November 14, 2007

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INDEX TO EXHIBITS

Exhibit Number	Description	Incorporated By Reference to
10.1	Addendum to Payment in Kind Promissory Note entered into between Execute Sports, Inc. and John Helms, dated July 31, 2007.	Exhibit 10.1 to Execute Sports, Inc.’s Form 8-K filed August 1, 2007
10.2	Promissory Note issued by Execute Sports, Inc. to Dutchess Private Equities Find, Ltd., dated August 13, 2007.	Exhibit 10.1 to Execute Sports, Inc.’s Form 8-K filed August 17, 2007
10.3	Asset Purchase Agreement dated August 29, 2007 by and between Execute Sports, Inc. and Challenger Powerboats, Inc. and IMAR Group, Inc.	Exhibit 10.1 to Execute Sports, Inc.’s Form 8-K filed September 12, 2007
10.4	Debenture, issued by Execute Sports, Inc. to Dutchess Private Equities Fund, Ltd., dated August 23, 2007	Exhibit 10.2 to Execute Sports, Inc.’s Form 8-K filed September 12, 2007
10.5	Subscription Agreement, dated August 23, 2007 by and between Execute Sports, Inc. and Dutchess Private Equities Fund, Ltd.	Exhibit 10.3 to Execute Sports, Inc.’s Form 8-K filed September 12, 2007
10.6	Warrant, issued by Execute Sports, Inc. to Dutchess Private Equities Fund, Ltd., dated August 23, 2007	Exhibit 10.4 to Execute Sports, Inc.’s Form 8-K filed September 12, 2007
31.1	Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act	*
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	*

* Filed herewith

36