Tank Sports (TNSP) 10QSB/A 2007 Q3 Quarterly report (small business) (amended)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB/A 

Amendment No. 2

x Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended November 30, 2006.

oTransition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _______ to____________ .

Commission file number: 333-129910 

TANK SPORTS, INC.

(Exact name of small business issuer as specified in its charter)

California	95-4849012
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

10925 Schmidt Road

El Monte, California 91733

(Address, including zip code, of principal executive offices)

 Issuer’s telephone number : (626) 350-4039

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, PAR VALUE $.001 PER SHARE

Check whether the Registrant: (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

Indicate by check mark whether the registrant is an accelerated filer (as defined in exchange A Rule 12b-2)

Yes  ¨    No  x

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

Yes  ¨    No  x

The number of outstanding shares of the Registrant's common stock, $0.001 par value, as of November 30, 2006 was 32,502,800.

1

TANK SPORTS, INC.

TABLE OF CONTENTS

PART I:	FINANCIAL INFORMATION	Page
Item 1.	Financial Statements:	5
	BALANCE SHEET NOVEMBER 30, 2006  (Unaudited)	5
	STATEMENTS OF OPERATIONS FOR THE THREE MONTH, SIX MONTH AND NINE MONTH PERIODS ENDED NOVEMBER 30, 2006 AND 2005(Unaudited)	5
	STATEMENTS OF CASH FLOWS FOR THE NINE MONTH PERIODS ENDED NOVEMBER 30, 2006 AND 2005 (Unaudited)	6
	NOTES TO UNAUDITED FINANCIAL STATEMENTS	7
Item 2.	Managements Discussion and Analysis of Financial Condition and Plan of Operations	14
Item 3.	Controls and Procedures	16
PART II:	OTHER INFORMATION	17
Item 1.	Legal Proceedings	17
Item 2.	Changes in Securities	17
Item 3.	Defaults upon Senior Securities	17
Item 4.	Submission of Matters for a Vote of Security Holders	17
Item 5.	Other Information	17
Item 6.	Exhibits and Reports on Form 8-K	17
SIGNATURES		18

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This Form 10-QSB contains forward-looking statements within the meaning of the "safe harbor" provisions under Section 21E of the Securities Exchange Act of 1934. We use forward-looking statements in our description of our plans and objectives for future operations and assumptions underlying these plans and objectives. Forward-looking terminology includes the words "November," "expects," "believes," "anticipates," "intends," "projects," or similar terms, variations of such terms or the negative of such terms. These forward-looking statements are based on management's current expectations and are subject to factors and uncertainties, which could cause actual results to differ materially from those, described in such forward-looking statements. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this Form 10-QSB to reflect any change in our expectations or any changes in events, conditions or circumstances on which any forward-looking statement is based. Factors, which could cause such results to differ materially from those described in the forward-looking statements, and elsewhere,, are incorporated by reference into this Form 10-QSB.

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PART I: FINANCIAL INFORMATION

Item1. Financial Statements

TANK SPORTS, INC.
BALANCE SHEET
NOVEMBER 30, 2006
(Unaudited)
ASSETS
CURRENT ASSETS
Cash & cash equivalents	$	230,251
Certificate of deposit		1,520,816
Accounts receivable, net		164,786
Loans receivable - current		191,437
Inventory		1,856,157
Prepaid expenses & other assets		38,865
Total current assets		4,002,312
PROPERTY AND EQUIPMENT, NET		65,883
LOANS RECEIVABLE - NON CURRENT		56,022
TOTAL ASSETS	$	4,124,217
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	139,065
Due to affiliate		1,798,794
Note payable		1,520,816
Loan payable - current		1,000,679
Customer deposit		13,558
Total current liabilities		4,472,911
LONG TERM LIABILITIES
Loan payable - non current		20,720
Total liabilities		4,493,631
STOCKHOLDERS' DEFICIT
Common stock (authorized 200,000,000 shares, par value $0.001,
issued and 32,502,800 shares outstanding)		32,503
Paid in capital		103,197
Accumulated deficit		(505,114	)
Total stockholders' deficit		(369,414	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	4,124,217

4

TANK SPORTS, INC. STATEMENTS OF OPERATIONS FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED NOVEMBER 30, 2006 AND 2005 (Unaudited)
	Three month periods ended							Nine month periods ended
		November 30,						November 30,
		2006			2005			2006			2005
NET REVENUE	$	1,739,835		$	3,099,860		$	7,794,745		$	5,722,220
COST OF REVENUE		1,108,805			2,353,305			5,481,312			4,170,942
GROSS PROFIT		631,029			746,555			2,313,432			1,551,278
OPERATING EXPENSES
Selling expenses		139,565			341,392			631,408			598,888
General and administrative expenses		486,841			423,200			1,424,644			934,647
Total operating expenses		626,406			764,592			2,056,052			1,533,535
INCOME (LOSS) FROM OPERATIONS		4,623			(18,037	)		257,380			17,743
NON-OPERATING INCOME (EXPENSES)
Other income		7,837			-			30,486			258
Interest income (expense)		(1,196	)		(631	)		(1,196	)		(1460	)
Total non-operating income (expenses)		6,641			(631	)		29,290			(1,202	)
NET INCOME (LOSS) BEFORE INCOME TAX		11,265			(18,668	)		286,671			16,541
PROVISION FOR INCOME TAX		800			-			800			-
NET INCOME (LOSS)	$	10,465		$	(18,668	)	$	285,871		$	16,541
WEIGHTED AVERAGE SHARES OF COMMON STOCK
OUTSTANDING, BASIC AND DILUTED		32,502,800			32,176,808			32,502,800			32,176,808
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE	$	0.000		$	(0.001	)	$	0.009		$	0.001

5

TANK SPORTS, INC. STATEMENTS OF CASH FLOWS FOR THE NINE MONTH PERIODS ENDED NOVEMBER 30, 2006 AND 2005 (Unaudited)
	Nine month periods ended November 30,
		2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	285,871		$	16,541
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization		13,751			7,902
(Increase) decrease in current assets:
Accounts receivable		105,797			(234,562	)
Other receivable		33,411			(8,590	)
Inventory		(430,065	)		(1,819,282	)
Prepaid expense		28,025			(11,497	)
Other assets		11,600			500
Increase (decrease) in current liabilities:
Accounts payable, other payables, and accrued liabilities		38,862			244,718
Customer deposit		(45,813	)		92,951
Net cash used in operating activities		41,439			(1,711,319	)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments on purchase of property		(13,894	)		(17,579	)
Increase in loans receivable		(35,613	)		-
Net cash used in investing activities		(49,507	)		(17,579	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments to loans		(7,313	)		(5,654	)
Certificate of deposit		(1,520,816	)		-
Increase (decrease) of due to affiliate		(914,833	)		1,633,527
Increase of note & loans payable		2,517,753			-
Capital contribution		-			125,700
Net cash provided by financing activities		74,791			1,753,573
NET INCREASE IN CASH & CASH EQUIVALENTS		66,722			24,675
CASH & CASH EQUIVALENTS, BEGINNING BALANCE		163,528			40,941
CASH & CASH EQUIVALENTS, ENDING BALANCE	$	230,251		$	65,616

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NOTES TO UNAUDITED FINANCIAL STATEMENTS

1.   DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Tank Sports, Inc. (“Tank” or “the Company”) was incorporated in the state of California on March 5, 2001. The Company is located in the city of El Monte, California, U.S.A. The Company is engaged in the sales and distribution of high quality recreational and transportation motorcycles, all-terrain vehicles (“ATVs”), dirt bikes, scooters, and Go Karts. The Company’s motorcycles and ATVs products are manufactured in China and Mexico.

Basis of Preparation

The unaudited financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the audited financial statements and footnotes included in the Company’s Annual Report on Form 10-KSB. The results of the nine months ended November 30, 2006 are not necessarily indicative of the results to be expected for the full year ending February 28, 2007.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

2.   SUMMARY OF SIGNIFICANT ACCOUTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles 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.

Cash and Cash Equivalents

Cash and cash equivalents include cash in hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less.

Certificate of Deposit

The company has $1,520,816 certificate of deposit as of November 30, 2006. The certificate of deposit has a principal of $1,500,000, a twelve month term, with an interest of 5.25%, and is used as collateral for line of credit. Interest income of $20,816 has been accrued and recorded in the certificate of deposit as of November 30, 2006. The company had $996,937 outstanding line of credit as of November 30, 2006.

Accounts Receivable

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Terms of the sales vary from COD through a credit term up to 9 to 12 months. Reserves are recorded primarily on a specific identification basis. Allowance for doubtful debts amounted to $74,016 as of November 30, 2006.

7

Accounts Payable and Accrued liabilities

Accounts payable and accrued liabilities includes accrued payable to vendors amounting $96,974, accrued payroll amounting $29,989 and payroll tax payable amounting $12,102 as of November 30, 2006.

Revenue Recognition and Customer Deposit

The Company’s revenue recognition policies are in compliance with Staff accounting bulletin (SAB) 104. Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectibility is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue (customer deposit). Customer deposit was $13,558 at November 30, 2006.

Income Taxes

The Company utilizes SFAS No. 109, “Accounting for Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

Segment Reporting

Statement of Financial Accounting Standards No. 131 (“SFAS 131”), “Disclosure About Segments of an Enterprise and Related Information” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. SFAS 131 has no effect on the Company’s consolidated financial statements as the Company consists of one reportable business segment. All of the Company’s assets are located in one segment in its facility in California.

Recent Pronouncements

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections." This statement applies to all voluntary changes in accounting principle and requires retrospective application to prior periods' financial statements of changes in accounting principle, unless this would be impracticable. This statement also makes a distinction between "retrospective application" of an accounting principle and the "restatement" of financial statements to reflect the correction of an error. This statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005.

In February 2006, FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments”. SFAS No. 155 amends SFAS No 133, “Accounting for Derivative Instruments and Hedging Activities”, and SFAF No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”. SFAS No. 155, permits fair value remeasurement 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 SFAS No. 133, establishes a requirement to evaluate interest 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 SFAS No. 140 to eliminate the prohibition on the qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. This statement is effective for all financial instruments acquired or issued after the beginning of the Company’s first fiscal year that begins after September 15, 2006.

In December 2004, the FASB issued FASB Statement No. 123R, "Share-Based Payment, an Amendment of FASB Statement No. 123" ("FAS No. 123R"). FAS No. 123R requires companies to recognize in the statement of operations the grant- date fair value of stock options and other equity-based compensation issued to employees. FAS No. 123R is effective beginning in the Company's first quarter of fiscal 2006.

8

In June 2005, the EITF reached consensus on Issue No. 05-6, determining the Amortization Period for Leasehold Improvements ("EITF 05-6.") EITF 05-6 provides guidance on determining the amortization period for leasehold improvements acquired in a business combination or acquired subsequent to lease inception. The guidance in EITF 05-6 will be applied prospectively and is effective for periods beginning after June 29, 2005. EITF 05-6 is not expected to have a material effect on its consolidated financial position or results of operations.

In February 2006, FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments". SFAS No. 155 amends SFAS No 133, "Accounting for Derivative Instruments and Hedging Activities", and SFAF No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". SFAS No. 155, permits fair value remeasurement 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 SFAS No. 133, establishes a requirement to evaluate interest 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 SFAS No. 140 to eliminate the prohibition on the qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. This statement is effective for all financial instruments acquired or issued after the beginning of the Company's first fiscal year that begins after September 15, 2006. The Company has not evaluated the impact of this pronouncement its financial statements.

In March 2006 FASB issued SFAS 156 ‘Accounting for Servicing of Financial Assets’ this Statement amends FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, with respect to the accounting for separately recognized servicing assets and servicing liabilities. This Statement:

1.   Requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract.

2.   Requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable.

3.   Permits an entity to choose ‘Amortization method’ or ‘Fair value measurement method’ for each class of separately recognized servicing assets and servicing liabilities.

4.   At its initial adoption, permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights, without calling into question the treatment of other available-for-sale securities under Statement 115, provided that the available-for-sale securities are identified in some manner as offsetting the entity’s exposure to changes in fair value of servicing assets or servicing liabilities that a servicer elects to subsequently measure at fair value.

Requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities.

In September 2006, FASB issued SFAS 157 ‘Fair Value Measurements’. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The management is currently evaluating the effect of this pronouncement on financial statements.

9

In September 2006, FASB issued SFAS 158 ‘Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)’ This Statement improves financial reporting by requiring an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. An employer without publicly traded equity securities is required to recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after June 15, 2007. However, an employer without publicly traded equity securities is required to disclose the following information in the notes to financial statements for a fiscal year ending after December 15, 2006, but before June 16, 2007, unless it has applied the recognition provisions of this Statement in preparing those financial statements.

3.   LOANS RECEIVABLE

On January 10, 2004, the Company loaned $146,451 to an unrelated party at an interest rate of 6% per annum. The loan is unsecured, both principal and interest are payable on May 31, 2007. Interest income has been accrued and recorded in loan receivable. As of November 30, 2006, the loan receivable is		$165,470
On December 20, 2004, the Company loaned $50,167 to an unrelated party at interest rate of 6% per annum. The loan is unsecured, both principal and interest are payable on December 20, 2007. Interest income has been accrued and recorded in loan receivable. As of November 30, 2006, the loan receivable is		$56,022
On July 27, 2004, the Company loaned $23,000 to an unrelated party at interest rate of 5% per annum. The loan is unsecured, and both principal and interest are due on demand. Interest income has been accrued and recorded in loan receivable. As of November 30, 2006, the loan receivable is		$25,967
	Total	$247,459
	Current	$191,437
	NonCurrent	$56,022

4.   PREPAID EXPENSES & OTHER ASSETS

Prepaid expenses amounted to $35,164 as of November 30, 2006. Prepaid expenses mainly include prepaid insurances and deposits.

Other assets amounted to $3,701 as of November 30, 2006.

5.   PROPERTY, PLANT & EQUIPMENT

Property, Plant & Equipment consist of the following as of November 30, 2006:

Leasehold improvement		4,500
Office furnitures		19,413
Equipment		37,288
Automobile		40,036
Accumulated depreciation		(35,354	)
	$	65,883

Depreciation expenses for the nine month periods ended November 30, 2006 and 2005 were $13,751 and $7,902, respectively.

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6.   LOAN PAYABLE

On June 1, 2005, the company signed a five year note payable against auto loan. The loan was unsecured, with an interest of 5.90% with monthly payment of $743. As of November 30, 2006, the loan payable amounted to		$28,141
Line of credit is also recorded under loan payable. (Refer to note 14). The balance as of November 30, 2006 amounted to		$993,258
	Total	$1,021,399
	Current	$1,000,679
	Non Current	$1,021,399

7.   NOTE PAYABLE

On August 14, 2006, the company borrowed $1,500,000 from an unrelated party. The note is unsecured, with an interest rate of 5.25%, and due on August 15, 2007. As of November 30, 2006, $20,816 interest expense has been accrued and grouped with note payable in the accompanying financial statements. The note payable is subordinated to the loan payable to United Commercial bank. (Refer to note 14).

8.   STOCKHOLDERS’ EQUITY

On November 6, 2006, the company’s board of directors approved a 4-for-1 forward stock split of the Company’s common shares. Each shareholder of record at the close of business on November 27, 2006 received three (3) additional shares for every outstanding share held as of the date hereof. The financial statements have been adjusted retroactively to reflect the stock split.

9.   INCOME TAXES

Through November 30, 2006, the Company incurred net operating losses for tax purposes of approximately $505,114. Differences between financial statement and tax losses consist primarily of bad debts allowance of $74,016 as of November 30, 2006. The net operating loss carry forward may be used to reduce taxable income through the year 2026. Net operating loss for carry forward for the State of California is generally available to reduce taxable income through the year 2011. The availability of the Company's net operating loss carry forward is subject to limitation if there is a 50% or more positive change in the ownership of the Company's stock. The provision for income taxes consists of the state minimum tax imposed on corporations.

The gross deferred tax asset balance, due to net operating loss carry forward and allowance for bad debts, as of November 30, 2006 was . A 100% valuation allowance has been established against the deferred tax assets, as the utilization of the loss carry forward cannot reasonably be assured. Components of deferred tax assets at November 30, 2006 are as follows:

Net operating loss	$	202,046
Allowance for bad debt .		(29,606	)
Deferred tax asset		172,439
Less: valuation allowance		(172,439	)
	$	-

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The following is a reconciliation of the provision for income taxes at the U.S. federal and California state income tax rate to the income taxes reflected in the Statements of Operations:

	November 30
		2006		2005
Tax expense (credit) at statutory rate-federal		34	%	(34	)%
State tax expense net of federal tax		6		( 6	)
Changes in valuation allowance		(40	)	40
Tax expense at actual rate		-		-

10.   BASIC AND DILUTED NET INCOME (NET LOSS) PER SHARE

Net income (net loss) per share is calculated in accordance with the Statement of financial accounting standards No. 128 (SFAS No. 128), “Earnings per share”. Basic net income (loss) per share is based upon the weighted average number of common shares outstanding. Diluted net income (loss) per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Weighted average number of shares used to compute basic and diluted net income (loss) per share is the same since there are no dilutive securities. The basic and diluted net income per share were $0.009 and $0.001 for the nine month periods ended November 30, 2006 and 2005, respectively.

11.   SHIPPING AND HANDLING EXPENSES

Tank has included $473,565 and $435,619 freight out shipping into selling expenses for the nine month periods ended November 30, 2006 and 2005, respectively.

12.   SUPPLEMENTAL DISCLOSURE OF CASH FLOWS

The Company prepares its statements of cash flows using the indirect method as defined under the Financial Accounting Standard No. 95.

The Company paid $0 for income tax during the nine month periods ended November 30, 2006 and 2005. The Company paid $0 and $1,460 for interest during the nine month periods ended November 30, 2006 and 2005, respectively.

13.   RELATED PARTIES

Lease

On August 1, 2005, Tank entered into a lease agreement for the new facilities in which they operate. The lessors are Tank’s 2 shareholders who are also Tank’s directors. The term of the lease is 60 months with monthly payments of $19,900. As of November 30, 2006, the amount due was $0.

Minimum annual rent expense for Tank for the next 4 years subsequent to November 30, 2006 is as follows:

Period     Amount

1 year after       $238,800

2 year after       $238,800

3 year after       $238,800

4 year after       $238,800

Rent expenses were $179,100 and $117,221 for the nine month periods ended November 30, 2006 and 2005, respectively.

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Due to affiliate

The Company issues purchase orders to third party vendors in China. However, most of the third party vendors are paid by a US company owned by some of the shareholders of the Company. This affiliated company issues letter of credit in favor of vendors when the Company issues purchase order to the vendors. The Company makes payment to this affiliated company, which in turn pays to the vendors. As of November 30, 2006, the amount due to this affiliate was $1,798,794. The amount is due on demand, interest free, and unsecured.

14.   COMMITMENT AND CONTIGENCIES

Line of Credit

The company has entered into a revolving line of credit agreement dated September 3, 2006 with United Commercial Bank for a total of $5,500,000. This loan is secured by the business assets of the Company and its affiliate Steady Star, Inc, (related by common major officer) by three personal properties owned by its president amounting at appropriate $4,400,000, by a certificate of deposit of $1,500,000 in the name of the Company, by two certificates of deposits in the name of the CEO and an unrelated party, and partially by a certificate of deposit in the name of an unrelated party. The above loan is also guaranteed by the Company’s president, CEO, and its affiliate Steady Star, Inc. The interest rate is 8.5%. Interest on advances is due and payable monthly. The loan is due on July 31, 2007. As November 30, 2006, the line of credit is $996,937 and the accrued interest is $3,679. Line of credit balance and accrued interest are recorded in loan payable.

15.   SUBSEQUENT EVENTS

On December 28th, 2006, the Company entered into a Stock Purchase Agreement (the “Agreement”) with Darin and Michelle Oreman, Hexagon Financial, LLC and Low Price.com, Inc., an Arizona corproration d/b/a RedCat Motors (“Redcat”) whereby the Company agreed to purchase 100% of the common stock of RedCat. Redcat is a power-sports equipment importer and distributor. Its products include ATV’s & off-road motorcycles. Upon the closing of the transaction, we have agreed to make a $1,600,000 capital contribution to Redcat which will be immediately used to pay off the current debt of Redcat. The capital contribution will be made in common stock, cash or a combination of both as follows:

$1,600,000 in cash, or $1,000,000 cash, along with an additional $600,000 in cash, upon completion of a successful $5,000,000 private placement by us on or before January 31, 2007. If our private placement fails to raise the maximum offering amount, we will pay $1,000,000 minimum in cash and an additional $600,000 in a combination of cash and stock.

On December 4, 2006, we entered into an Investment Agreement with Dutchess Private Equities Fund, L.P. (the “Investor”). Pursuant to this Agreement, the Investor shall commit to purchase up to $10,000,000 of our common stock over the course of thirty-six (36) months. The amount that we shall be entitled to request from each purchase (“Puts”) shall be equal to, at our election, either (i) $150,000 or (ii) 200% of the average daily volume (U.S. market only) of the common stock for the three (3) trading days prior to the applicable put notice date, multiplied by the average of the three (3) daily closing prices immediately preceding the put date. The put date shall be the date that the Investor receives a put notice of a draw down by us. The purchase price shall be set at ninety-five percent (95%) of the lowest closing Best Bid price of the common stock during the pricing period. The pricing period shall be the five (5) consecutive trading days immediately after the put notice date. There are put restrictions applied on days between the put date and the closing date with respect to that particular Put. During this time, we shall not be entitled to deliver another put notice. Further, we shall reserve the right to withdraw that portion of the Put that is below seventy-five percent (75%) of the lowest closing bid prices for the 10-trading day period immediately preceding each put notice.

We are obligated to file a registration statement with the Securities and Exchange Commission (“SEC”) covering 6,000,000 shares of the common stock underlying the Investment Agreement within 21 days after the closing date. In addition, we are obligated to use all commercially reasonable efforts to have the registration statement declared effective by the SEC within 90 days after the closing date. We shall have an ongoing obligation to register additional shares of our common stock as necessary underlying the draw downs.

The closing of the stock purchase is subject to certain terms and conditions.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Plan of Operations

The following discussion is intended to provide an analysis of our financial condition and Plan of Operation and should be read in conjunction with our financial statements and the notes thereto set forth herein. The matters discussed in this section that are not historical or current facts, deal with potential future circumstances and developments. Our actual results could differ materially from the results discussed in the forward-looking statements. Factors that could cause or contribute to such differences include those discussed below.

MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATION

Plan of Operation

Since our inception, we commenced the sale and distribution of motorcycles and ATV’s under the brand name of TANK. In order to succeed, we intend to do the following:

1. Generate Dealer Interest and Recruit Dealers. We have used our power sports vehicles to create awareness within the power sports industry. We have also displayed these vehicles at trade shows and events to generate dealer interest in TANK products. We intend to continue our promotional efforts through public relations program, attending and displaying our products at dealer trade shows, direct mail efforts and direct solicitations of prospective customers. As of November 30, 2006, we have dealer agreements with 199 dealers and have identified 50 new dealers that we expect will enter into dealer agreements with us. We believe our dealer qualification criteria are strict and they include experience, reputation, ability to serve the geographic territory and financial strength.

2. Generate Consumer Interest and Develop the TANK Brand. To date, our products have appeared in over 10 publications. We believe this publicity is critical to creating awareness of the TANK brand. We intend to continue our public relations efforts to create additional consumer interest and to support our dealers in targeted advertising and marketing efforts in their geographic territories. We also plan to continue to attend trade shows and events targeted to consumers to provide them with opportunities to see, and in some cases ride, our products. We believe these efforts, as well as mailing information to persons who have inquired about our products, will generate the customer awareness we believe is necessary to sell our products, and to develop the TANK brand.

Our focus in the next 12 months has been to seek necessary working capital, and to develop our marketing plan. Our marketing plan focuses on dealers and the retail market, through comprehensive print advertising, participation in trade shows and other direct marketing efforts. Our marketing strategy is based on a reliable product, consistent quality and the delivery of a unique name and image. We estimate the necessary proceeds to implement this marketing campaign to be $180,000. We do not plan to carry out these actions until we have secured funds from our cash flows to fully fund this marketing plan. At this time, it is uncertain as if we can secure necessary financing.

Results of Operation

Nine Months Ended November 30, 2006 and November 30, 2005.

We generated revenues of $7,794,745 for the nine month period ending November 30, 2006, a 36% increase as compared to $5,722,220 in revenues for the same period ended November 30, 2005. The increase is primarily attributable to favorable fluctuation in gasoline prices during June and July, improved brand recognition, the success of the launch of two new special edition VISION^TM 250E motorcycle models and the 150T-12 engine scooter. Additionally, improvement in the dealer network is contributing to the higher sales.

Our gross profit for the nine month period ended November 30, 2006, was $2,313,432, a 49% increase as compared to $1,551,278 in gross profit for the same period ended November 30, 2005. Gross profit, as a percentage of revenue, was 30% for the nine month period ended November 30, 2006, a 3% increase from 27% in the comparable period of 2005. The increased growth in profit margin was primarily due to decreased cost of raw materials and manufacturing costs in China.

Our net income for the nine month period ended November 30, 2006 was $285,871, a 1600% percent increase as compared to net income of $16,541 for the same period ended November 30, 2005. The increase in our net income is primarily attributable to increased sales.

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During the nine month period ended November 30, 2006, we recorded operating expenses of $2,056,052, consisting primarily of (i) $631,408 in selling expenses; and (ii) $1,424,644 in general and administrative expenses. During the nine month period ended November 30, 2005, we recorded operating expenses of $1,533,535, consisting primarily of (i) $598,888in selling expenses; and (ii) $934,647 in general and administrative expenses. General and administrative expenses generally include corporate overhead, financial and administrative services.

During the nine month period ended November 30, 2006, net cash flow used in operating activities was $41,439. Our net cash flows used in operating activities consisted primarily of $430,065in Inventory. During the nine month period ended November 30, 2005, net cash flow used in operating activities was $(1,711,319). Our net cash flows used in operating activities consisted primarily of $(1,819,282) in Inventory.

During the nine month period ended November 30, 2006, net cash flows used in investing activities was $(49,507), which was primarily the result of purchases of computers, other office equipments and interior modification of an office space. During the nine month period ended November 30, 2005, net cash flows used in investing activities was $(17,579), which was primarily the result of purchases of computers, other office equipments.

During the nine month period ended November 30, 2006, net cash flow provided by financing activities was $74,791, consisting primarily of (i) $2,517,753 increase in a note payable; (ii) $(914,833), increase of due to affiliate, and a Certificate of Deposit of $(1,520,816). During the nine month period ended November 30, 2005, net cash flow provided by financing activities was $1,753,573, consisting primarily of increase in a loan due to an affiliate.

Liquidity and Capital Resources.

At November 30, 2006, our current assets were $4,002,312, current liabilities were $4,472,911, resulting in a working capital deficit of $470,599.

At November 30, 2006, we had cash and cash equivalents of $230,251.

The Company anticipates the future cash flow from revenue and existing financing facilities would be adequate to fund our operations over the next twelve (12) months. As of September 3, 2006, we entered into a revolving line of credit with United Commercial Bank of a total of $5,500,000. This loan is secured by our business assets and the assets of an affiliate company, Steady Star, Inc., and the three personal properties owned by our president amounting at approximately $4,400,000 and a certificate of deposit of $1,500,000 in the name of Tank Sports, Inc., and other certificates of deposits by our CEO and unrelated parties. (SEE NOTES TO UNAUDITED FINANCIAL STATEMENTS). The interest rate of this credit agreement is 8.5%, due and payable monthly. The loan is due on July 31, 2007.

Item 2. Management’s Discussion and Analysis of Financial Condition and Plan of Operations - continued

Generally, we have financed operations to date through cash flow and shareholder loans. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to advertisement and marketing of our brand name and the expansion of dealership networks. We intend to finance these expenses from current and future revenues from operations.

OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements.

MATERIAL COMMITMENTS

On December 4, 2006, we entered into an Investment Agreement with Dutchess Private Equities Fund, L.P. (the “Investor”). Pursuant to this Agreement, the Investor shall commit to purchase up to $10,000,000 of our common stock over the course of thirty-six (36) months. The amount that we shall be entitled to request from each purchase (“Puts”) shall be equal to, at our election, either (i) $150,000 or (ii) 200% of the average daily volume (U.S. market only) of the common stock for the three (3) trading days prior to the applicable put notice date, multiplied by the average of the three (3) daily closing prices immediately preceding the put date. The put date shall be the date that the Investor receives a put notice of a draw down by us. The purchase price shall be set at ninety-five percent (95%) of the lowest closing Best Bid price of the common stock during the pricing period. The pricing period shall be the five (5) consecutive trading days immediately after the put notice date. There are put restrictions applied on days between the put date and the closing date with respect to that particular Put. During this time, we shall not be entitled to deliver another put notice. Further, we shall reserve the right to withdraw that portion of the Put that is below seventy-five percent (75%) of the lowest closing bid prices for the 10-trading day period immediately preceding each put notice.

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We are obligated to file a registration statement with the Securities and Exchange Commission (“SEC”) covering 6,000,000 shares of the common stock underlying the Investment Agreement within 21 days after the closing date. In addition, we are obligated to use all commercially reasonable efforts to have the registration statement declared effective by the SEC within 90 days after the closing date. We shall have an ongoing obligation to register additional shares of our common stock as necessary underlying the draw downs.

On December 28th, 2006, we entered into a Stock Purchase Agreement (the “Agreement”) with Darin and Michelle Oreman, Hexagon Financial, LLC and Low Price.com, Inc., an Arizona corporation d/b/a RedCat Motors (“Redcat”) whereby we agreed to purchase 100% of the common stock of RedCat. Upon the closing of the transaction, we have agreed to make a $1,600,000 capital contribution to Redcat which will be immediately used to pay off the current debt of Redcat. The capital contribution will be made in common stock, cash or a combination of both as follows:

$1,600,000 in cash, or $1,000,000 cash, along with an additional $600,000 in cash, upon completion of a successful $5,000,000 private placement by us on or before January 31, 2007. If our private placement fails to raise the maximum offering amount, we will pay $1,000,000 minimum in cash and an additional $600,000 in a combination of cash and stock..

The closing of the stock purchase shall be on or before January 31, 2007.

We have entered into a revolving line of credit agreement dated September 3, 2006 with United Commercial Bank for a total of $5,500,000. This loan is secured by the business assets of the Company and our affiliate Steady Star, Inc, (related by common major officer) by three personal properties owned by its president amounting at appropriate $4,400,000, by a certificate of deposit of $1,500,000 in the name of the Company, by two certificates of deposits in the name of the CEO and an unrelated party, and partially by a certificate of deposit in the name of an unrelated party. The above loan is also guaranteed by the Company’s president, CEO, and our affiliate Steady Star, Inc. The interest rate is 8.5%. Interest on advances is due and payable monthly. The loan is due on July 31, 2007. As November 30, 2006, the line of credit is $996,937 and the accrued interest is $3,679. Line of credit balance and accrued interest are recorded in loan payable. (See Note 14 to Financial Statements).

PURCHASE OF SIGNIFICANT EQUIPMENT

We do not intend to purchase any significant equipment during the next twelve (12) months.

Item 3.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act of 1934 are recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Principal Executive Officer and Principal Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure.

At end of the period covered by this report, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15 and 15d-15(e). This evaluation was done under the supervision and with the participation of our Principal Executive Officer/Principal Accounting Officer. Based upon that evaluation, we have concluded that our disclosure controls and procedures are effective in gathering, analyzing and disclosing information needed to satisfy our disclosure obligations under the Exchange Act.

Changes in Internal Controls

There were no changes in our internal controls or in other factors during the last quarter that materially affected, or was reasonably likely to materially affect, internal control over financial reporting.

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PART II: OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 2. Changes in Securities

On November 3, 2006, the Board of Directors approved a 4 for 1 forward stock split of our common stock. The effect of this forward stock split increased the authorized common stock of the Company from 50,000,000 shares to 200,000,000 shares, and increased the issued and outstanding shares of the Company’s common stock from 8,125,700 to 32,502,800 of the issued and outstanding common stock of the Company, with all fractional shares to be dropped.

Item 3. Defaults upon Senior Securities

None

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

None

Item 5: Other Information

None

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

31.1 Certificate of Principal Executive Officer

31.2 Certificate of Principal Accounting Officer

32.1 Certification Pursuant to 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 Certification Pursuant to 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

Form 8-k filed on November 14, 2006

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SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TANK SPORTS, INC.

(Registrant)

Date: March 9, 2007	By:	/s/ Jing Jing Long
		Jing Jing Long
		Title: Principal Executive Officer

Date: March 9, 2007	By:	/s/ Jing Jing Long
		Jing Jing Long
		Title: Principal Accounting Officer
		Principal Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Date: March 9, 2007	By:	/s/ Jing Jing Long
		Jing Jing Long
		Title: Director

Date: March 9, 2007	By:	/s/ Jiangyong Ji
		Jiangyong Ji
		Title: Director

Date: March 9, 2007	By:	/s/ Jim Ji
		Jim Ji
		Title: Director

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