Execute Sports 10QSB 2008 Q1 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 March 31, 2008.

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 April 18, 2008 was 90,446,790.

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 March 31, 2008 (Unaudited)		1

Consolidated Statements of Operations for the three months
Ended March 31, 2008 and 2007(unaudited)		2

Consolidated Statements of Stockholders Equity for the
three months Ended March 31, 2008 (unaudited)		3

Consolidated Statements of Cash Flows for the
three months ended March 31, 2008 and 2007 (unaudited)		4

Notes To Financial Statements (Unaudited)		5

Item 2.	Management's Discussion and Analysis or Plan of Operations..	25

Item 3.	Controls and Procedures	29

	Part II - Other Information

Item 1.	Legal Proceedings	31

Item 2.	Unregistered Sales of Equity Securities and use of Proceeds	31

Item 3.	Defaults Upon Senior Notes	31

Item 4.	Submission of Matters to a Vote of Security Holders	31

Item 5.	Other Information	31

Item 6.	Exhibits	32

Signatures		33

EXECUTE SPORTS, INC.
Consolidated Balance Sheet (Unaudited)
As of March 31, 2008

ASSETS
CURRENT ASSETS
Cash	$	78,102
Accounts receivable, net (Note A)		269,369
Inventory		231,694
Deferred financing costs (Note E)		60,542
Other current assets		5,441

TOTAL CURRENT ASSETS		645,148

Fixed assets, net (Note B)		985,884
Deferred financing costs (Note E)		211,948
Intangible assets, net (Note C)		3,925,000
Loans receivable, net (Note D)		146,128

TOTAL ASSETS	$	5,914,108

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Current portion of convertible debentures (Note E)	$	1,900,000
Short term borrowings (Note F)		549,610
Related party notes payable (Note F)		169,290
Accounts payable and accrued expenses		141,498
Interest accrued on convertible debentures (Note E)		351,501

TOTAL CURRENT LIABILITIES		3,111,899

Non-current portion of convertible debentures (Note E)		4,424,344
TOTAL LIABILITIES		7,536,243

Commitment		-

STOCKHOLDERS' EQUITY (Note G)

Common stock, par value $.001, 100,000,000 shares authorized
authorized; issued and outstanding 90,446,790 at March 31, 2008		90,442

Additional paid-in capital		11,684,655
Retained earnings <deficit>		(13,397,232	)

TOTAL STOCKHOLDERS' EQUITY		(1,622,135	)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	5,914,108

SEE NOTES TO FINANCIAL STATEMENTS

EXECUTE SPORTS, INC.
Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31, 2008 and 2007

	Three Months Ended
	March 31,
REVENUES & COST OF GOODS	2008			2007
Net watersports sales	$	329,223		$	553,482
Net Sugar Sand sales		1,475,731			-
Total net sales		1,804,954			553,482
Watersports cost of sales		249,310			340,947
Sugar Sand cost of sales		1,401,944			-
Total cost of sales		1,651,254			340,947
Gross profit		153,700			212,535
EXPENSES
General and administrative expenses		272,637			338,463
Selling and advertising		26,175			22,835
Depreciation expense		102,630			2,530
Total expense		401,442			363,828
Income (loss) from operations		(247,742	)		(151,293	)
OTHER INCOME AND EXPENSES
Other income					462
Interest expense		(242,187	)		(70,411	)
Loss due to discount on conversion to stock					(54,250	)
Amortization of beneficial conversion feature of convertible debenture		(63,184	)		(270,295	)
Amortization of warrant discount related to convertible debenture		(2,678	)		(90,381	)
Amortization of deferred financing costs		(15,032	)		(36,034	)
Total other income and expenses		(323,081	)		(520,909	)
Net loss before discontinued operations		(570,823	)		(672,202	)
Income (loss) from discontinued operations		-			(1,421	)
Gain (loss) on disposal of discontinued operations		-			208,112
Total discontinued operations		-			206,691
NET INCOME (LOSS)		(570,823	)		(465,511	)
Net (loss) per common share Basic and diluted from continuing operations	$	(0.006	)	$	(0.015	)
Net (loss) per common share basic and diluted after discontinued operations	$	(0.006	)	$	(0.010	)
Weighted average common shares outstanding basic and diluted		89,451,823			44,853,102
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
Warrants		16,161,667			3,440,238
Debt collateralized with common stock		808,472,298			12,792,228

SEE NOTES TO FINANCIAL STATEMENTS

EXECUTE SPORTS, INC.
Statements of Stockholders' Equity (Unaudited)
Three Months Ended March 31, 2008

	Common Stock				Additional		Retained			Total
	Number of				Paid-in		Earnings			Stockholders'
	Shares		Amount		Capital		<Deficit>			Equity

December 31, 2007		87,456,541	$	87,452	$	11,647,807	$	(12,826,409	)	$	(1,091,150	)

Shares issued for director compensation		750,000		750		11,250					12,000
Shares issued for services		1,125,000		1,125		13,875					15,000
Shares issued for notes payable		991,349		991		10,806					11,797
Shares issued pursuant to put agreement
for repayment of debenture		123,900		124		917					1,041
Net loss							$	(570,823	)		(570,823	)
March 31, 2008		90,446,790	$	90,442	$	11,684,655	$	(13,397,232	)	$	(1,622,135	)

SEE NOTES TO FINANCIAL STATEMENTS

EXECUTE SPORTS, INC.
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 2008 and 2007

	March 31,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss from continuing operations	$	(570,823	)	$	(672,202	)
Net gain from discontinued operations		-			206,691
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization		102,630			2,530
Stock based compensation expense		27,000			112,500
Loss on the conversion of convertible debt		-			54,250
Amortization of beneficial conversion feature		63,184			270,295
Amortization of warrant discount related to convertible debenture		2,678			90,381
Issuance of common stock for debt principle		-			53,126
Changes in assets and liabilities, net of effect of acquisitions:
Accounts receivable		(242,246	)		38,236
Inventory		(166,077	)		(61,604	)
Prepaid expenses		-			49,494
Other current assets		-			(5,441	)
Accounts payable and accrued expenses		68,580			(354,111	)
Debenture interest payable		37,011			-

NET CASH USED FOR OPERATING ACTIVITIES		(678,063	)		(215,855	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of furniture and equipment		-			(1,058	)
NET CASH USED FOR INVESTING ACTIVITIES		-			(1,058	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock for cash					76,168
Proceeds from convertible debenture		193,447			-
Proceeds from related party notes payable		90,000			388,207
Repayment of related party notes payable		-			(307,300	)
Secured borrowings		-			(34,521	)
Financing related costs		15,032			36,034

NET CASH PROVIDED BY FINANCING ACTIVITIES		356,910			167,462

NET INCREASE <DECREASE> IN CASH		(321,153	)		(49,451	)

CASH, beginning of period		399,255			74,386

CASH, end of period	$	78,102		$	24,935

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID DURING THE YEAR FOR:
Taxes paid	$	-		$	-
Interest paid	$	-		$	-

Other non-cash investing and financing activities:
Shares issued for services	$	27,000		$	112,250
Shares issued for debt and accrued interest	$	1,041		$	271,323

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

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 March 31, 2008 and for the three month periods ended March 31, 2008 and 2007 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, 2007 filed with the SEC on March 31, 2008. 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 expanded its product offering without the added responsibilities and complexities of the manufacturing process, while positioning the Company to capitalize on existing sales and marketing relationships.

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Summary of Significant Accounting Principles

Basis of Presentation

The consolidated 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 consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the 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. As of March 31, 2008, the allowance for doubtful accounts was $10,000.

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.

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 and straight line methods. It is calculated over recovery periods as prescribed by management that range from 5 years for equipment to 7 years for furniture.

Goodwill and Other Intangible Assets

The Company accounts for goodwill and other intangible assets in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. This statement requires that goodwill and other intangible assets arising from an acquisition of a business be periodically assessed for impairment rather than amortized on a straight-line basis. Accordingly, the Company annually reviews the carrying value of this goodwill and other intangible assets to determine whether impairment, as measured by fair market value, may exist. SFAS No. 142 requires that goodwill and other intangible assets be assessed for impairment using fair value measurement techniques. Specifically, goodwill and other intangible asset impairment is determined using a two-step process. The first step of the goodwill and other intangible asset impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount. If the fair value of a reporting unit exceeds its carrying amount, then the goodwill and other intangible assets of the reporting unit are not considered to be impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the impairment test is performed to measure the amount of impairment loss, if any. The second step of the impairment test compares the implied fair value of the reporting unit's goodwill and other intangible assets with their carrying amount. If the carrying amount of the reporting unit's goodwill and other intangible assets exceeds their implied fair value, then an impairment loss is recognized in an amount equal to that excess.

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Long-lived assets

Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," 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 not be recovered. The Company assesses recoverability of the carrying value of an asset by estimating the fair value of the asset. If the fair value is 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 Sugar Sand boats is 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.

The Company recognizes revenue under the guidance provided by the SEC Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition” and the Emerging Issues Task Force (“EITF”) Abstract No. 99-19 “Reporting Revenue Gross as a Principal versus Net as an Agent” (“EITF 99-19”). Pursuant to EITF 99-19, The Company recognizes revenue from the sale of Sugar Sand boats on a gross basis.

Shipping and handling costs

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

Advertising

The Company expenses all advertising costs as incurred. For the three months ended March 31, 2008 and 2007, the Company incurred approximately $11,600 and $0, respectively, in advertising expenses.

Loss per common share

The Company adheres to 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.

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 I).

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.

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Impact of accounting standards (Continued)

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. 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.

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Impact of accounting standards (Continued)

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.

In December 2007, the FASB issued SFAS 141(revised 2007), Business Combinations (“SFAS 141R”). SFAS 141R will significantly change the accounting for business combinations in a number of areas including the treatment of contingent consideration, contingencies, acquisition costs, IPR&D and restructuring costs. In addition, under SFAS 141R, changes in deferred tax asset valuation allowances and acquired income tax uncertainties in a business combination after the measurement period will impact income tax expense. SFAS 141R is effective for fiscal years beginning after December 15, 2008 and, as such, the Company will adopt this standard in fiscal 2010. The Company has not yet determined the impact, if any, of SFAS 141R on its consolidated financial statements.

In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (“SFAS 160”). SFAS 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests (NCI) and classified as a component of equity. This new consolidation method will significantly change the account with minority interest holders. SFAS 160 is effective for fiscal years beginning after December 15, 2008 and, as such, the Company will adopt this standard in fiscal 2010. The Company does not believe that this recent accounting pronouncement will have a material impact on its financial position or results of operations.

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Concentrations of credit risk

The Company performs ongoing credit evaluations of its customers. As of March 31, 2008, four customers accounted for 87% (31%, 31%, 14 and 10%) of accounts receivable. As of March 31, 2007, two customers accounted for 59% (47% and 12%) of accounts receivable.

For the three months ended March 31, 2008, one customer accounted for approximately 82% of sales. For the three months ended March 31, 2007, two customers accounted for approximately 91% of sales (65% and 26%).

For the three months ended March 31, 2008 and 2007, approximately 2% and 0%, 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 months ended March 31, 2008, the Company's two largest suppliers accounted for 95% (85% and 10%) of product purchases. For the three months ended March 31, 2007, the Company's two largest suppliers accounted for 96% (77% and 19%) of product purchases.

The Company has maintained balances in excess of federally insured limits from time to time during the quarter. Management periodically reviews the adequacy and strength of the financial institutions and deems this to be an acceptable risk.

Disclosure about Fair Value of Financial Instruments

The Company estimates that the fair value of all financial instruments at March 31, 2008, 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.

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

NOTE B - PROPERTY AND EQUIPMENT

Property and equipment at March 31, 2008 consists of the following:

	2008
Computer and office equipment	$	127,745
Furniture and fixtures		2,281
Machinery and equipment		11,262
Boat molds		1,000,000
	$	1,141,288
Less: Accumulated Depreciation		(155,404	)
	$	985,884

Depreciation expense for the three months ended March 31, 2008 and 2007 was $102,630 and $2,530, respectively.

NOTE C - INTANGIBLE ASSETS

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 $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. 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.

The $5,000,000 purchase price was allocated $1,000,000 to boat molds, $500,000 to marketing/sales infrastructure and client lists, and $3,500,000 to trademarks resulting in an increase of $1,000,000 to our net fixed assets and $4,000,000 to intangible assets.

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

During the three months ended March 31, 2008, the Company recognized $25,000 of amortization related to the $500,000 of marketing/sales infrastructure and client lists.

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 March 31, 2008, 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 E - 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 15, 2007, or sixteen (16) months from the closing date. However, the debenture agreement maturity date is September 30, 2011 at which time any remaining principle balance automatically converts to the Company’s common stock. The Company has recorded the entire principle balance of $1,900,000 of this debenture as a current liability due to the short term nature of the agreement payment schedule.

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.

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

NOTE E - CONVERTIBLE DEBENTURES

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 deferred financing costs 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 $103,975 and $87,025 during the year ended December 31, 2007 and 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 $1.90 million yielding a warrant discount of $475,000. The discount to the debenture was amortized over the term of the repayment schedule, or sixteen (16) months, and is calculated based upon the effective interest method. The Company recognized $269,212 and $205,788 during the year ended December 31, 2007 and 2006, respectively, in non-cash amortization expense related to the warrant discount. The warrant discount was fully amortized as of September 30, 2007.

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

NOTE E - CONVERTIBLE DEBENTURES

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

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 was amortized over the debenture repayment term of sixteen (16) months and calculated based upon the effective interest method. The Company recognized $989,423 and $435,577 during year ended December 31, 2007 and 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.

During the three months ended March 31, 2008, the Company made no payments nor issued any stock in repayment of this debenture.

During the three months ended March 31, 2008 and 2007, the Company recognized $57,480 and $53,049, in interest expense related to the May 2006 debenture.

The debenture balance, including interest and principle as of March 31, 2008 is $1,950,476.

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.

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

NOTE E - CONVERTIBLE DEBENTURES

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. The Company is not obligated to make payments until maturity. Therefore, the Company has classified the entire balance of $4,424,344 of this debenture as a non current liability.

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 issuance costs related to the convertible debentures of approximately $307,500 in cash were capitalized to deferred financing costs on the balance sheet and are being amortized over the term of the debenture which is calculated based upon the effective interest method. During the three months ended March 31, 2008, the Company recognized $15,032 as other expense related to the amortization of the issuance costs. The balance of deferred financing costs as of March 31, 2008 was $272,490.

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-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. During the three months ended March 31, 2008, the Company recognized $63,184 in non-cash amortization expense attributable to the amortization of the BCF discount.

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

NOTE E - CONVERTIBLE DEBENTURES

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

During the three months ended March 31, 2008, the Company issued 123,900 shares of common stock in payment of $1,041 of interest related to the August 2007 debenture.

During the three months ended March 31, 2008, the Company recognized $172,027 in interest expense related to this debenture.

The debenture balance, including interest and principle as of March 31, 2008 is $6,051,025.

As of March 31, 2008, 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 $8,001,501. The following table represents the actual balance due compared to the amount recorded on the balance sheet as of March 31, 2008:

	December 31,
	2007
Amount borrowed under the convertible debentures		7,650,000
Accrued interest		351,501
Debenture balance payable		8,001,501

Unamortized beneficial conversion feature		(1,278,143	)
Unamortized Warrant discount		(47,513	)
Recorded debenture balance		6,675,845
BALANCE SHEET ACCOUNTS
Current portion of convertible debentures		1,900,000
Interest accrued on convertible debentures		351,501
Non-current portion of convertible debentures		4,424,344
Recorded debenture balance		6,675,845

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 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.

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

NOTE E - CONVERTIBLE DEBENTURES (Continued)

Investment Agreement (Continued)

During the three months ended March 31, 2008, the Company placed puts with Dutchess totaling $1,041 resulting in the issuance of 123,900 shares of common stock that reduced the same amount of accrued interest.

NOTE F - NOTES PAYABLE

Notes Payable

Non-related party notes payable at March 31, 2008 is as follows:

Unsecured demand note payable bearing interest at 2% per year; currently in default.	$	9,538

Unsecured demand note payable to John Helms bearing interest at 4% per year; matures 3/31/09.	$	63,370

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 15% per year; currently in default.	$	48,923

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 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.	$	45,623

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

Unsecured demand note payable April 21, 2008 and including a 4.5% fee of $2,516.	$	58,431

TOTAL	$	549,610

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

NOTE F - NOTES PAYABLE (Continued)

Notes Payable (Continued)

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.

In January 2008, the Company issued 991,349 shares of common stock to John Helms in exchange for $11,797 in amounts owed to him, including accrued interest of $816 and principle of $10,981.

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 year ended December 31, 2007, the Company issued 4,699,033 shares of common stock in repayment of $86,377 of the May 1, 2007 promissory note, which has a balance of $45,623 as of March 31, 2008.

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 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.

During the three months ended March 31, 2008, the Company borrowed $55,915 from a single source for the purchase of goods for resale. The loan includes a 4.5% fee, or $2,516 bringing the total amount due to $58,431, which is due April 21, 2008.

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

NOTE F - NOTES PAYABLE (Continued)

Notes Payable (Continued)

During the three months ended March 31, 2008 and 2007, the Company recognized $6,130 and $3,674 of interest expense related to the notes above. No interest was paid during the three months ended March 31, 2008 or 2007.

Related Party Notes Payable

Related party Notes payable at March 31, 2008 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

Unsecured demand note payable to Sheryl Gardner, former CFO, bearing interest at 4% per year.	$	47,225

Unsecured demand note payable to Phase 2 Sales, owned by Geno Apicella, CEO, bearing fees of 4.5% per purchase order transaction and maturing May 15, 2008.	$	90,000

Total	$	169,290

During the three months ended March 31, 2008, the Company borrowed $90,000 from Phase 2 Sales, a corporation owned by Geno Apicella, CEO. The funds are being used to purchase goods for resale and bear interest of 4.5% per purchase transaction. The funds are due May 15, 2008.

During the three months ended March 31, 2008 and 2007, the Company recognized $5,484 and $1,434, respectively, of interest expense related to the notes above. No interest was paid during the three months ended March 31, 2008 or 2007.

NOTE G - STOCKHOLDERS’ EQUITY

During the year ended December 31, 2007, the Company issued 3,266,968 shares of common stock valued at the closing price of the stock on the date of issuance, or $110,532 to two of its directors as payment in lieu of cash.

During the year ended December 31, 2007, the Company issued 3,177,271 shares of common stock valued at the closing price of the stock on the date of issuance, or $101,519 as payment for services rendered in lieu of cash.

During the year ended December 31, 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.

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

NOTE G - STOCKHOLDERS’ EQUITY (Continued)

During the year ended December 31, 2007, the Company issued 8,933,552 shares of common stock in exchange for the retirement of $205,476 of principal amount owed and $14,145 of accrued interest thereon. 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 $186,114 and a gain of $33,507.

During the year ended December 31, 2007, the Company issued 31,894,880 shares to Dutchess pursuant to the Investment Agreement (See NOTE E). The total value of the shares on the dates of issuance was $683,543. Of this amount $76,168 was received in cash, $219,530 was applied to promissory notes made to the Company (See Note F), $54,250 was recognized as a loss due to the conversion discount, $217,073 was applied to accrued interest on the May 2006 debenture and $116,525 was applied to accrued interest on the August 2007 debenture.

During three months ended March 31, 2008, the Company issued 750,000 shares of common stock valued at the closing price of the stock on the date of issuance, or $12,000 to two of its directors as payment in lieu of cash.

During three months ended March 31, 2008, the Company issued 1,125,000 shares of common stock valued at the closing price of the stock on the date of issuance, or $15,000 as payment for services rendered in lieu of cash.

During three months ended March 31, 2008, the Company issued 991,349 shares of common stock in exchange for the retirement of $10,981 of principal amount owed and $816 of accrued interest. The stock was valued at the closing price of the stock on the date of issuance.

During three months ended March 31, 2008, the Company issued 123,900 shares to Dutchess pursuant to the Investment Agreement (See NOTE E). The total value of the shares on the dates of issuance was $1,041. This amount was applied to accrued interest on the August 2007 debenture.

NOTE H - WARRANTS

At March 31, 2008, the Company had 15,661,667 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
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		15,661,667

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

NOTE H - WARRANTS (Continued)

During the three months ended March 31, 2008, the Company canceled 500,000 warrants that had expired.

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."

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.

NOTE I - 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, 2007, 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, 2007	$	2,276,281		December 31, 2027
December 31, 2006	$	5,089,954		December 31, 2026
December 31, 2005	$	574,866		December 31, 2025
December 31, 2004	$	420,421		December 31, 2024

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 book loss for the fiscal year ended December 31, 2007, was $2,671,410. As of December 31, 2007, a valuation allowance for the full amount of the net deferred tax asset has been recognized over the period for $3,344,610, based on an anticipated tax rate of 40%.

EXECUTE SPORTS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

NOTE J - 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 K - RELATED PARTY TRANSACTIONS

In January 2008, just prior to his departure as a board member, the Company made payments totaling $2,000 to Craig Washington for accounting services.

During the three months ended March 31, 2008, the Company borrowed $90,000 from Phase 2 Sales, a corporation owned by Geno Apicella, CEO (See NOTE F).

NOTE L - CONTINGENCIES

Litigation

The Company is involved in various legal proceedings arising in the ordinary course of business. The ultimate outcome of these proceedings cannot be determined because of the uncertainties that exist. In the opinion of management, the disposition of matters that are pending or asserted will not have a materially adverse effect on the financial position, results of operations or cash flows of the Company.

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, 2007. Except as required by law, we undertake no obligation to update any of these forward-looking statements.

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The following discussion of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements for the years ended December 31, 2007 and 2006, together with notes thereto included on Form 10-KSB as filed with the Commission on March 31, 2008.

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.

Revenue recognition

The Company recognizes revenue when the product is shipped. 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.

The Company recognizes revenue under the guidance provided by the SEC Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition” and the Emerging Issues Task Force (“EITF”) Abstract No. 99-19 “Reporting Revenue Gross as a Principal versus Net as an Agent” (“EITF 99-19”). Pursuant to EITF 99-19, the Company recognizes revenue from the sale of Sugar sand boats on a gross basis.

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 this transaction, 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.

Overview

Results of Operations

THREE MONTHS ENDED MARCH 31, 2008 AND 2007

Revenue

Net Sales for the three months ended March 31, 2008 and 2007 were $1,804,954 and $553,482, respectively, representing a $1,251,472, or 226% increase. The three month year-over-year increase is due to $1,475,731 of sales related to Sugar Sand boats that were not part of the Company’s product portfolio during the same period in the previous year. Watersports sales decreased $224,259, or 41% from the previous year due to production delays that pushed deliveries in to the first quarter compared to the first quarter of 2007.

Gross Margin

Gross margin for the three months ended March 31, 2008 and 2007 was $153,700 or 9% of revenue and $212,535, or 38% of revenue, respectively. The $58,835 decrease in gross margin over the previous year was primarily due to Sugar Sand sales which have approximately a 5% gross margin compared to watersports whose gross margin is higher than Sugar Sand boats at 24% and 38% during the three months ended March 31, 2008 and 2007, respectively.

Operating Expenses

Selling, General and Administrative expenses for the three months ended March 31, 2008 and 2007 was $401,442 and $363,828, respectively, representing a $37,614 or 10% increase. The year-over-year increase was due to an increase of $100,100 related to depreciation and amortization of Sugar Sand offset by a decrease of $65,826 primarily related to less stock based compensation expense in the current quarter compared to the same quarter in the prior year.

Other Income and Expenses

Other expense for the three months ended March 31, 2008 and 2007 was $323,081 and $520,909, respectively, representing a $197,828 or 38% decrease in expense. The decrease is due to $315,816 less in amortization expense related to our debentures offset by a $171,776 increase in interest expense primarily related to our outstanding debentures.

Net Loss

Net loss from continuing operations for the three months ended March 31, 2008 and 2007 was $570,823 and $672,202, respectively, representing a $101,379, or 15% decrease in the net loss from continuing operations compared to the same period last year. The improvement in net loss is due primarily to decreased amortization costs related to our convertible debentures.

Net loss for the three months ended March 31, 2008 and 2007 was $570,823 and $465,511, respectively, representing a $105,312, or 23% increase in net loss compared to the same period last year. The net loss for the three months ended March 31, 2007 includes a net gain of $206,691 recognized by the Company upon the disposition of the Academy brand.

Financial Condition

From inception to March 31, 2008, we incurred an accumulated deficit of $13,397,232, and we expect to incur additional losses for the foreseeable future. This loss has been incurred through a combination of convertible debenture amortization, selling and operating expenses related to expensing of stock, support of our plans to expand sales and distribution channels, development of new products and higher than anticipated cost of sales relative to sales.

We have financed our operations since inception primarily through a combination of debt and equity financing. During the three months ended March 31, 2008, we had a net decrease in cash of $321,153. Total cash resources as of March 31, 2008, were $78,102, compared with $399,255 at December 31, 2007. We currently do not have sufficient funds to continue for the next twelve months.

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 2007 and the latter half of 2006, 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.

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.

Management is currently in the process of seeking additional debt and equity financing with related and unrelated parties. 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.

ITEM 3. CONTROLS AND PROCEDURES

As of December 31, 2007, we conducted an evaluation, under the supervision and participation of our management, including the Company’s Chief Executive Officer (who is also the principal accounting officer) to evaluate the effectiveness of the Company’s disclosure controls and procedures and manage the Company’s operations as of the end of the period covered by this report, as required by Rule 13a-15(b) under the Exchange Act.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Execute Sports, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company's principal executive and principal financial officers and effected by the company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

* Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

* Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

* Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

Management assessed the effectiveness of the Company's internal control over financial reporting as of March 31, 2008. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework.

Inherent in small business is the pervasive problem of segregation of duties. Given that the Company only employs two executive officers, one of which is a director, segregation of duties is not possible at this stage in the corporate lifecycle.

Based on its assessment, management concluded that, as of March 31, 2008, the Company's internal control over financial reporting is effective based on those criteria.

Changes in internal Control over Financial Reporting

Our Chief Executive Officer (who is also the Principal Accounting Officer) has indicated that there were no significant changes in our internal controls or other factors that could significantly affect such controls subsequent to the date of their evaluation, and there were no such control actions with regard to significant deficiencies and material weaknesses.

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 three months ended March 31, 2008.

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 15% per year; currently in default.	$	48,923

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 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	$	102,251

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.

Item 6. Exhibits

Exhibit Number	Description	Incorporated By Reference to
10.1	Departure of director Craig Washington, effective February 1, 2008.	Form 8-K filed February 7, 2008

10.2	Departure of director Benjamin Amendolara, effective February 8, 2008.	Form 8-K filed February 8, 2008

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

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	April 30, 2008

INDEX TO EXHIBITS

Exhibit Number	Description	Incorporated By Reference to
10.1	Departure of director Craig Washington, effective February 1, 2008.	Form 8-K filed February 7, 2008

10.2	Departure of director Benjamin Amendolara, effective February 8, 2008.	Form 8-K filed February 8, 2008

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

Execute Sports (EXCS) Inactive 10QSB2008 Q1 Quarterly report (small business)