World Racing (WRGI) 10QSB 2006 Q1 Quarterly report (small business)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period endedMarch 31, 2006

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

0-18045

Commission File Number

DIRT Motor Sports, Inc.

(Exact name of registrant as specified in its charter)

Delaware	84-0953839
(State of incorporation)	(IRS Employer Identification No.)

3600 W. Main St., Suite 150, Norman, OK 73072

(Address of principal executive offices)

(877) 5-RACING

(Issuer’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.þ Yeso No

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

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

There were 11,720,555 shares of common stock outstanding as of May 12, 2006.

Transitional Small Business Disclosure Format (Check one): Yeso Noþ

TABLE OF CONTENTS

	PAGE
PART I — FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets – March 31, 2006 and December 31, 2005		3
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2006 and 2005		4
Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2006		5
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2006 and 2005		6
Notes to Condensed Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Item 3. Controls and Procedures		33
PART II — OTHER INFORMATION
Item 1. Legal Proceedings		33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		33
Item 4. Submission of Matters to a Vote of Security Holders		33
Item 6. Exhibits		34
Signatures		35
Certification Pursuant to Rule 13a-14(a)/15d-14(a) - Paul A. Kruger
Certification Pursuant to Rule 13a-14(a)/15d-14(a) - Brian Carter
Certification Pursuant to Section 1350 - Paul A. Kruger and Brian Carter

Rule 13a-14(a)/15d-14(a) Certification of Paul A. Kruger
Rule 13a-14(a)/15d-14(a) Certification of Brian Carter
Section 1350 Certification of Paul A. Kruger and Brian Carter

2

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DIRT MOTOR SPORTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2006 and December 31, 2005
(Unaudited)

	March 31,			December 31,
	2006			2005
ASSETS
Current assets:
Cash and cash equivalents	$	320,427		$	18,645
Accounts receivable — trade		35,920			180,628
Inventory		288,941			132,056
Prepaid expenses and other current assets		638,999			476,303
Total current assets		1,284,287			807,632
Land, buildings and equipment, net		10,800,753			10,795,359
Trademarks		100,000			100,000
Goodwill, net of impairment of $8,812,097 in 2006 and 2005		1,508,440			1,508,440
Prepaid Expenses – long term		296,296			333,333
Other assets, net of amortization of $123,301 in 2006 and $106,487 in 2005		219,137			230,562
Total assets	$	14,208,913		$	13,775,326
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Cash overdraft	$	—		$	253,232
Accounts payable		1,325,814			1,189,171
Accrued liabilities		1,688,711			1,009,181
Deferred revenues		732,621			178,784
Notes payable – net of discount of $4,030,977 in 2006 and $3,622,406 in 2005		9,004,248			7,140,915
Total current liabilities		12,751,394			9,771,283
Notes payable – long term		5,252,948			5,293,874
Total liabilities		18,004,342			15,065,157
Stockholders’ equity:
Series B Preferred stock, $0.01 par value; 8,000 shares authorized; 6,883 shares issued and outstanding at March 31, 2006 and December 31, 2005 respectively		20,648,456			20,648,456
Series C Preferred stock, $0.01 par value; 2,500 shares authorized; 2,500 shares issued and outstanding at March 31, 2006 and December 31, 2005 respectively		6,250,000			6,250,000
Common stock, $0.0001 par value; 100,000,000 shares authorized; 11,720,555 and 11,720,555 shares issued and outstanding at March 31, 2006 and December 31, 2005 respectively		1,172			1,172
Additional paid-in capital		12,088,953			9,727,830
Accumulated deficit		(42,784,010	)		(37,917,289	)
Total stockholders’ deficit		(3,795,429	)		(1,289,831	)
Total liabilities and stockholders’ equity	$	14,208,913		$	13,775,326

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

DIRT MOTOR SPORTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended March 31, 2006 and 2005
(Unaudited)

	Three months ended
	March 31,
	2006			2005
Revenues:
Race sanctioning and event fees	$	310,048		$	750,074
Track operations, ticket and concession sales		1,351,552			—
Sponsorship and advertising		217,526			243,953
Merchandise sales		94,031			265,980
Other revenue		46,910			31,022
Total revenues	$	2,020,067		$	1,291,029
Operating expenses:
Track and event operations		3,182,325			1,630,685
Sales and marketing		220,156			279,126
Merchandise operations and cost of sales		190,700			201,417
General and administrative		790,977			689,528
Non-cash stock option compensation		646,010			—
Depreciation and amortization		190,688			66,986
Total operating expenses		5,220,856			2,867,742
Loss from operations		(3,200,789	)		(1,576,713	)
Interest expense, net		(1,665,932	)		(413,977	)
Net (loss)	$	(4,866,721	)	$	(1,990,690	)
Dividends on preferred stock:
Warrants and beneficial conversion, Series B		—			(5,000,000	)
Beneficial conversion, Series C		—			(800,000	)
Exchange of Series A for Series B Preferred Stock		—			(1,667,801	)
Exchange of warrants for Series C Preferred Stock		—			(5,450,000	)
Net loss applicable to common stock	$	(4,866,721	)	$	(14,908,491	)
Net loss applicable to common stock per common share —
Basic and diluted	$	(0.42	)	$	(1.03	)
Weighted average common shares outstanding—
Basic and diluted		11,720,555			14,439,554

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

DIRT MOTOR SPORTS, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

For the Three Months Ended March 31, 2006

(Unaudited)

									Additional
	Preferred Stock				Common Stock				Paid-in		Accumulated
	Shares		Amounts		Shares		Amounts		Capital		(Deficit)			Total
Balance, December 31, 2005		9,383	$	26,898,456		11,720,555	$	1,172	$	9,727,830	$	(37,917,289	)	$	(1,289,831	)
Value assigned to warrants issued in connection with the issuance of $2.3 million notes payable		—		—		—		—		1,715,113		—			1,715,113
Value assigned to stock options issued in conjunction with employment agreements		—		—		—		—		632,710		—			632,710
Value assigned to stock options issued to advisory board consultants		—		—		—		—		13,300		—			13,300
Net (loss)												(4,866,721	)		(4,866,721	)
Balance, March 31, 2006		9,383	$	26,898,456		11,720,555	$	1,172	$	12,088,953	$	(42,784,010	)	$	(3,795,429	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

-5-

DIRT MOTOR SPORTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended March 31, 2006 and 2005

(Unaudited)

	2006			2005
Cash flows from operating activities:
Net (loss)	$	(4,866,721	)	$	(1,990,690	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		190,688			66,987
Non-cash interest expense, notes payable		1,306,580			482,949
Non-cash stock option compensation		646,010			—
Increase (decrease) in cash for changes in:
Accounts receivable		144,708			(118,370	)
Inventory		(156,885	)		(176,182	)
Prepaid expenses and other current assets		(125,659	)		(26,952	)
Other non-current assets		(12,222	)		—
Accounts payable		136,643			(47,213	)
Accrued liabilities		672,032			(219,124	)
Deferred revenue		553,837			606,143
Net cash (used in) operating activities		(1,510,989	)		(1,422,452	)
Cash flows from investing activities:
Purchase of property, contract rights, trademarks and goodwill		(164,936	)		(1,043,225	)
Net cash (used in) investing activities		(164,936	)		(1,043,225	)
Cash flows from financing activities:
Cash overdraft		(253,232	)		(55,279	)
Payments on notes payable		(44,061	)		(41,373	)
Payments of placement agent fees and other issuance costs		—			(545,000	)
Proceeds from issuance of preferred stock		—			5,000,000
Proceeds from issuance of notes payable		2,275,000			287,000
Net cash provided by financing activities		1,977,707			4,645,348
Net increase (decrease) in cash and cash equivalents		301,782			2,179,671
Cash and cash equivalents, beginning of period		18,645			—
Cash and cash equivalents, end of period	$	320,427		$	2,179,671
Supplemental schedule of non-cash activities:
Conversion of Convertible Preferred Stock: Series A to Series B	$	—		$	15,648,456
Cash payments for interest	$	359,359		$	—
Issuance of warrants with promissory notes	$	1,715,113		$	—
Issuance of warrants for property and contract rights	$	—		$	132,187
Issuance of common stock for property and contract rights	$	—		$	—
Non-cash revenues and expenses, barter agreements	$	67,000		$	25,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

-6-

DIRT MOTOR SPORTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2006

NOTE 1 – DESCRIPTION OF BUSINESS

     References in this document to “the Company,” “Boundless,” “DIRT,” “we,” “us” and “our” mean DIRT Motor Sports, Inc. and its wholly owned subsidiaries. Subsequent to the acquisition of DIRT Motorsports, Inc. in 2004, the Company began operating under the d/b/a name DIRT MotorSports and in July 2005, the Company reincorporated in Delaware and changed the Company’s name from “Boundless Motor Sports Racing, Inc.” to “DIRT Motor Sports, Inc.”

     We are a leading marketer and promoter of motorsports entertainment in the United States. Our motorsports subsidiaries operate 7 dirt motorsports tracks (4 are owned and 3 facilities are under short term lease agreements) in New York, Pennsylvania and Florida. We own and operate four of the premier sanctioning bodies in dirt motorsports: the World of Outlaws, DIRT MotorSports, United Midwestern Promoters (UMP) and the Mid America Racing Series (MARS). Through these sanctioning bodies we organize and promote 16 national and regional racing series including the World of Outlaw Sprint Series and the World of Outlaws Late Model Series and we expect to sanction races at nearly 200 tracks across the United States and Canada.

     On February 4, 2004, the Company completed the acquisition of substantially all the assets of the World of Outlaws, Inc. (“World of Outlaws”). Prior to this event, the Company was devoting substantially all of its efforts to establishing the business and was therefore a development stage enterprise until February 4, 2004.

     During the fiscal year ended September 30, 2004, the Company entered into a series of related transactions resulting in the acquisition of 100% of the outstanding stock of DIRT Motorsports, Inc. (“DIRT”) and two affiliated race tracks.

     On December 5, 2004, the Company acquired all of the outstanding membership interest in United Midwestern Promoters Motorsports, LLC (“UMP”).

     On November 7, 2004, the Company entered into an Asset Purchase Agreement to acquire substantially all of the assets of Lernerville Speedway, Inc. (“LSI”). This acquisition was completed in March 2005, and the total consideration for the assets acquired was $3,240,000.

     On March 10, 2005, the Company entered into and consummated an Asset Purchase Agreement pursuant to which the Company acquired all of the assets related to the business of sanctioning and conducting the dirt track racing events known as the Mid America Racing Series (“MARS”). The assets were acquired in exchange for an aggregate cash purchase price of $150,000.

     On June 30, 2005, the Company acquired substantially all of the assets of Volusia Speedway Park, Inc., (“Volusia Speedway”) in exchange for an aggregate purchase price of $3,600,000.

     We are continuing to focus our efforts as a dirt track style racing and sports entertainment company that seeks to acquire and operate motor sports sanctioning bodies and venues.

NOTE 2 — GOING CONCERN

     The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. As shown in the condensed consolidated financial statements, the Company incurred a net loss of $4.9 million for the three month period ended March 31, 2006. The Company has an accumulated deficit of $42.8 million and negative working capital of $11.5 million as of March 31, 2006, which raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

     The future success of the Company is dependent on its ability to attain profitable operations and upon its ability to obtain additional capital if necessary. There can be no assurance that the Company will attain positive cash flows from operations or be successful in obtaining such financing.

     We anticipate raising funds through additional private placements of preferred stock and additional sources of long-term financing. We believe the Company’s operations and sponsorship revenues will also provide additional cash flows as the Company strives to achieve profitability through operations.

NOTE 3 – BASIS OF PRESENTATION

-7-

     The accompanying condensed consolidated financial statements have been prepared in compliance with Rule 10-01 of Regulation S-X and U.S. generally accepted accounting principles, but do not include all of the information and disclosures required for audited financial statements. These statements should be read in conjunction with the condensed consolidated financial statements and notes thereto included in the Company’s latest Annual Report on Form 10-K for the transition period ended December 31, 2005. In the opinion of management, these statements include all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of operations, financial position and cash flows for the interim periods presented. Operating results for the three months ended March 31, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006 due to the seasonal nature of the Company’s business.

     The factors discussed in Footnote 2 above raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 4 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Reclassifications

     Certain amounts in prior periods presented have been reclassified to conform to the current financial statement presentation. These reclassifications have no effect on previously reported net income or loss.

Use of Estimates

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosures 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 accompanying condensed consolidated financial statements include the accounts of DIRT Motor Sports, Inc. and its wholly-owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.

Revenue Recognition and Deferred Revenue

     The Company derives its revenues from race sanctioning and event fees, admission fees and ticket sales, sponsorship and advertising, merchandise sales and other revenue. “Race sanctioning and event fees” includes amounts received from track owners and promoters for the organization and/or delivery of our racing series or touring shows including driver fees. “Admission fees and ticket sales” includes ticket sales for all events held at the Company’s owned or leased facilities and ticket sales for our touring shows where we rent tracks for individual events and organize, promote and deliver our racing programs. “Sponsorship and advertising” revenue includes fees obtained for the right to sponsor our motorsports events, series or publications, and for advertising in our printed publications or television programming.

     The Company recognizes race sanctioning and event fees upon the successful completion of a scheduled race or event. Race sanction and event fees collected prior to a scheduled race event are deferred and recognized when earned upon the occurrence of the scheduled race or event. Track operations, ticket and concession sales are recognized as revenues on the day of the event. Income from memberships to our sanctioning bodies is recognized on a prorated basis over the term of the membership. The Company recognizes revenue from sponsorship and advertising agreements when earned in the applicable racing season as set forth in the sponsorship or advertising agreement either upon completion of events or publication of the advertising. Revenue from merchandise sales are recognized at the time of sale less estimated returns and allowances, if any. Revenues and related expenses from barter transactions in which the Company receives goods or services in exchange for sponsorships of motorsports events are recorded at fair value in accordance with Emerging Issues Task Force (“EITF”) Issue No. 99-17,Accounting for Advertising Barter Transactions. Barter transactions accounted for $67,000 and $25,000 of total revenues for the three and six month periods ended March 31, 2006 and 2005 respectively.

Expense Recognition and Deferral

     Certain direct expenses pertaining to specific events, including prize and point fund monies, advertising and other expenses associated with the promotion of our racing events are deferred until the event is held, at which point they are expensed. Annual points fund monies which are paid at the end of the racing season are accrued during the racing season based upon the races held and total races scheduled.

     The cost of non-event related advertising, promotion and marketing programs are expensed as incurred.

Net loss Per Share

-8-

     Basic and diluted earnings per share (EPS) are calculated in accordance with FASB Statement No. 128, Earnings per Share. For the three months ended March 31, 2006, the net loss per share applicable to common stock has been computed by dividing the net loss by the weighted average number of common shares outstanding.

     For the three months ended March 31, 2006 the Company had the following warrants and stock options outstanding:

• Series A warrants to purchase 4,172,925 shares of common stock at an exercise price of $3.00

• Series B warrants to purchase 933,334 shares of common stock at an exercise price of $4.00

• Series C warrants to purchase 2,200,000 shares of common stock at an exercise price of $5.00

• Placement Agent Warrants to purchase 1,186,266 shares of common stock at exercise prices ranging from $2.70 to $5.00

• Warrants to purchase 40,000 shares of common stock issued in connection with the UMP acquisition at an exercise price of $3.65

• Warrants issued to purchase 750,000 shares at an exercise price of $5.00 in exchange for the surrender of common stock

• Promissory note warrants to purchase 1,831,250 shares at an exercise price of $4.50 per share.

• Employee stock options totaling 650,000 shares at an exercise price of $3.63 per share.

• Employee stock options totaling 600,000 shares at an exercise price of $3.75 per share.

• Stock options issued to consultants totaling 50,000 shares at an exercise price of $4.00 per share.

• Stock options issued to consultants totaling 90,000 shares at an exercise price of $4.50 per share.

     In addition, as of March 31, 2006, the Company’s Series B Preferred Stock was convertible into 6,882,819 shares of common stock and the Company’s Series C Preferred Stock was convertible into 2,500,000 shares of common stock. None of these were included in the computation of diluted EPS because the Company had a net loss and all potential issuance of common stock would have been anti-dilutive.

Cash and Cash Equivalents

     For purposes of the statement of cash flows, the Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

Inventories

     Inventories of retail merchandise are stated at the lower of cost or market on the first in, first out method. Shipping, handling and freight costs related to merchandise inventories are charged to cost of merchandise.

Property and Equipment

     Property and equipment are stated at cost. Depreciation is provided for financial reporting purposes using the straight-line method over the estimated useful lives of the related assets ranging from 3 to 40 years. Expenditures for maintenance, repairs and minor renewals are expensed as incurred; major renewals and betterments are capitalized. At the time depreciable assets are retired or otherwise disposed of, the cost and the accumulated depreciation of the assets are eliminated from the accounts and any profit or loss is recognized.

     The carrying values of property and equipment are evaluated for impairment based upon expected future undiscounted cash flows. If events or circumstances indicate that the carrying value of an asset may not be recoverable, an impairment loss would be recognized equal to the difference between the carrying value of the asset and its fair value.

Purchase Accounting

     The Company accounted for its acquisitions of assets in accordance with Statement of Financial Accounting Standards No. 141 (“SFAS No. 141”), Business Combinations and Statement of Financial Accounting Standards No. 142, Goodwill and Intangible Assets (“SFAS No. 142”). SFAS no. 141 requires that all business combinations entered into subsequent to June

-9-

30, 2001 be accounted for under the purchase method of accounting and that certain acquired intangible assets in a business combination be recognized and reported as assets apart from goodwill.

Intangible Assets

     Upon its inception, the Company adopted Statement of Financial Accounting Standard (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.” Under SFAS No. 142 goodwill and intangible assets with indefinite lives are not to be amortized but are tested for impairment at least annually. Intangible assets with definite useful lives are to be amortized over the respective estimated useful lives or anticipated future cash flow streams when appropriate.

     At least annually the Company tests for possible impairment of all intangible assets and more often whenever events or changes in circumstances, such as a reduction in operating cash flow or a dramatic change in the manner that the asset is intended to be used indicate that the carrying amount of the asset is not recoverable. If indicators exist, the Company compares the discounted cash flows related to the asset to the carrying value of the asset. If the carrying value is greater than the discounted cash flow amount, an impairment charge is recorded in the operating expense section in the statement of operations for amounts necessary to reduce the carrying value of the asset to fair value. The Company has chosen the fourth quarter of its fiscal year to conduct its annual impairment test.

Income Taxes

     The Company accounts for income taxes under Financial Accounting Standards Number 109 (“SFAS 109”), “Accounting for Income Taxes”. Deferred income tax assets and liabilities are determined based upon differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to be reversed. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Concentration of Credit Risk

     Due to the nature of the Company’s sponsorship agreements, the Company could be subject to concentration of accounts receivable within a limited number of accounts. As of March 31, 2006 the Company had bank deposits in excess of FDIC insurance of $210,335.

New Accounting Pronouncements

     In November 2004, the FASB issued SFAS No. 151 “Inventory Costs — an amendment of ARB No. 43, Chapter 4”. Statement No. 151 requires that certain abnormal costs associated with the manufacturing, freight, and handling costs associated with inventory be charged to current operations in the period in which they are incurred. The adoption of SFAS 151 had no impact on the Company’s financial position, results of operations, or cash flows.

     In December 2004, the FASB issued SFAS No. 153 “Exchanges of Non-monetary Assets-amendment of APB Opinion No. 29”. Statement 153 eliminates the exception to fair value for exchanges of similar productive assets and replaces it with a general exception for exchange transactions that do not have commercial substance, defined as transactions that are not expected to result in significant changes in the cash flows of the reporting entity. This statement is effective for exchanges of non-monetary assets occurring after June 15, 2005.

     In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections – a replacement of APB Opinion No. 20 and FASB Statement No. 3. Statement 154 requires retrospective application of prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. The statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company does not expect this statement to have a material effect on its reporting.

     SFAS No. 155, Accounting for Certain Hybrid Financial Instruments – an amendment of FASB Statements No. 133 and No. 140 and SFAS No. 156, Accounting for Servicing of Financial Assets – an amendment of FASB Statement No. 140 were recently issued. These statements have no current applicability to the Company and have no effect on its financial position, results of operations, or cash flows.

Stock-Based Compensation

     Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standard No. 123(R),Share-Based Payment, (“SFAS No. 123(R)”), using the modified prospective transition method. SFAS No. 123(R) requires equity-classified share-based payments to employees, including grants of employee stock options, to be valued at fair value on the date of grant and to be expensed over the applicable vesting period. Under the modified prospective transition method, share-based awards granted or modified on or after January 1, 2006, are recognized in compensation expense over the applicable vesting period. Also, any previously granted awards that are not fully vested as of January 1, 2006 are recognized

-10-

as compensation expense over the remaining vesting period. No retroactive or cumulative effect adjustments were required upon The Company’s adoption of SFAS No. 123(R).

     Prior to adopting SFAS No. 123(R), The Company accounted for its fixed-plan employee stock options using the intrinsic-value based method prescribed by Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees,(“APB No. 25”) and related interpretations. This method required compensation expense to be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price.

     Had the Company elected the fair value provisions of SFAS No. 123(R), The Company’s 2005 net earnings and net earnings per share would not have differed from the amounts actually reported as no share-based payments were made during this period.

     As a result of adopting SFAS No. 123(R) on January 1, 2006, The Company’s net loss for the three-month period ended March 31, 2006 were $646,010 greater than if The Company had continued to account for share-based compensation under APB No. 25. Also, basic and diluted losses per share were approximately $0.06 per share higher as a result of the adoption. Prior to the adoption of SFAS No. 123(R), The Company presented all tax benefits of deductions resulting from the exercise of stock options as operating cash inflows in the statement of cash flows. SFAS No. 123(R) requires the cash inflows resulting from tax deductions in excess of the compensation expense recognized for those stock options (“excess tax benefits”) to be classified as financing cash inflows. The Company did not report any excess tax benefits as financing cash inflows for the three months ended March 31, 2006.

     Unrecognized compensation expense as of March 31, 2006 related to outstanding stock options was $1,949,348.

     The fair value of each option grant is estimated for disclosure purposes on the date of grant using the Black-Scholes option-pricing model with the expected lives equal to the vesting period. The weighted average contractual life of the unvested options at March 31, 2006 was 4.11 years.

     A summary of the status of stock options and related activity for the three month period ended March 31, 2006 is presented below:

Options outstanding at December 31, 2005	650,000	$	3.65
Granted	740,000		3.86
Exercised	—		—
Forfeited/expired	—		—
Options outstanding at March 31, 2006	1,390,000	$	3.76

     There were no options outstanding as of March 31, 2005.

NOTE 5 – ACQUISITIONS

World of Outlaws, Inc.

     On February 4, 2004 the Company completed the acquisition of substantially all the assets of World of Outlaws. World of Outlaws is one of the premier sanctioning bodies and touring racing series for dirt track racing across the United States. The acquisition allowed the Company to pursue its business plan to create a racing and sports entertainment company. The purchase price consisted of:

• Cash and acquisition costs of $2,419,319

• Forgiveness of $1,450,000 plus accrued interest of $21,815 promissory note payable to the Company

• Assumptions of obligations for $612,500 in deposits World of Outlaws had received for sanctioning of future sprint car racing events

• Assumption of $777,677 of other obligations of World of Outlaws

     The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition:

Transportation equipment	$	184,926
Other equipment		8,875
Trade-marks and Trade-names		142,452

-11-

Goodwill		4,945,058
Total assets acquired		5,281,311
Advances from promoters		612,500
Other current obligations		777,677
Total liabilities assumed		1,390,177
Net consideration paid in cash and debt forgiveness	$	3,891,134

     With the purchase of World of Outlaws, the Company acquired the corporate name “World of Outlaws, Inc.” and all associated trade-names, trade-marks, and trade-mark registrations. This allows the Company to sanction World of Outlaws sprint-car racing events and expand into other series, such as a World of Outlaws late-model series, without restrictions.

Dirt Motorsports, Inc.

     In October 2003, the Company made a cash deposit of $1,000,000 and issued 1,558,334 shares of its common stock to the owners of Dirt Motorsports, Inc. and two affiliated tracks known as Rolling Wheels Raceway and Cayuga County Fair Speedway towards the acquisition of these properties. This series of transactions is referred to as the “Dirt Acquisitions”.

     Effective May 24, 2004, the Company, through its wholly owned subsidiary, Boundless Racing, Inc., a Texas corporation (“Boundless Racing”), consummated the acquisition of substantially all of the assets of Finger Lake International, Inc., a New York corporation (“FLI”), pursuant to an Asset Purchase Agreement. The Company, through a separate wholly-owned subsidiary, had previously entered into an agreement to purchase the FLI assets (the “First Asset Purchase Agreement”), but the previous arrangement was mutually terminated in favor of the Asset Purchase Agreement.

     In exchange for the assets and real property acquired, which consisted of the Rolling Wheels Raceway located in Elbridge, New York, the Company paid $1,088,777 to FLI consisting of (a) cash in an aggregate of $1,000,000, and (b) 300,000 shares of the Company’s common stock, $0.0001 par value per share. The Company also incurred $28,777 of costs relating to the acquisition.

     The shares issued to FLI in connection with this acquisition were issued by the Company pursuant to an exemption (Section 4(2)) from the registration requirements of the Securities Act of 1933, as amended and are restricted shares.

     Effective August 6, 2004, the Company, through Boundless Racing, consummated the acquisition of all of the outstanding shares of capital stock of Dirt Motorsports, pursuant to a Stock Purchase Agreement, dated August 13, 2003, as amended and extended.

     In exchange for the outstanding capital stock of Dirt Motorsports, the Company paid to Mr. Glenn Donnelly, the sole shareholder of Dirt Motorsports, $2,107,180 consisting of (a) cash in an aggregate amount of $1,775,000, of which $925,000 remains unpaid and based upon the final accounting is expected to ultimately reduce the purchase price, and (b) 591,667 shares of the Company’s common stock, paid to Mr. Donnelly in October 2003. The Company also incurred $221,308 of costs relating to the acquisition.

     The Shares issued to Mr. Donnelly in connection with the acquisition of Dirt Motorsports were issued by the Company pursuant to an exemption (Section 4(2)) from the registration requirements of the Securities Act of 1933, as amended.

     On August 31, 2004 the Company consummated the acquisition of the Cayuga County Fair Speedway. In exchange for the assets and real property acquired, which consisted of the Cayuga County Fair Speedway located in Cayuga County, New York, the Company paid $2,293,333 consisting of (a) cash in of $2,150,000, and (b) 716,667 shares of the Company’s common stock which were previously paid and credited toward the purchase price.

     The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the dates of closing of the Dirt Acquisitions:

	Dirt Motorsports		Rolling Wheels		Cayuga County
Current Assets	$	459,217	$	—	$	—
Property and Equipment		249,635		1,088,777		2,293,333
Goodwill		2,536,700
Total assets acquired		3,245,552		1,088,777		2,293,333
Current Liabilities		1,130,910		—		—
Net assets acquired	$	2,114,642	$	1,088,777	$	2,293,333

-12-

United Midwestern Promoters Motorsports, LLC

     Effective November 30, 2004, the Company, entered into and consummated a Membership Interests Purchase Agreement by and among UMP, and its members, National Speedways of Iowa, Inc., Track Enterprises, Inc., Ken Schrader Racing, Inc., and Lebanon Valley Auto Racing Corp. (the “ UMP Purchase Agreement”), pursuant to which the Company acquired all of the outstanding membership interests in UMP, in exchange for an aggregate purchase price of $2,400,000, of which, $200,000 was previously paid under the terms of a letter of intent among the parties, $1,600,000 was paid in cash at closing, and the remaining $600,000 was satisfied through the issuance of 164,384 shares of the Company’s common stock. In addition, at closing the Company issued to certain members of UMP warrants to purchase an aggregate of 40,000 shares of the Company’s common stock for $3.65 per share. These warrants were valued at an aggregate amount of $132,187 based on Black-Scholes modeling and the fair market value of the warrants at the time of issuance.

     UMP is a dirt track race sanctioning body, and as such, sanctions races for both late model and open wheel modified cars. UMP assets include its agreements with drivers competing in its races, and sponsorship agreements with racing event sponsors. Under the terms of the Purchase Agreement, if the average closing price of the Company’s common stock for the ten-trading days immediately preceding the one-year anniversary of the date of the closing of the acquisition (the “Average Anniversary Price”) is less than $3.65 per share, then the Company shall, at its sole election, either (a) issue additional shares of its common stock equal to the difference between: (i) $600,000 divided by the Average Anniversary Price, less (ii) 164,384, or (b) purchase, at a purchase price of $3.65 a share, the Shares.

     The UMP acquisition amount was allocated as follows based on the preliminary determination of fair values:

Cash paid for acquisition	$	1,800,000
Value of stock issued		600,000
Value of warrants issued		132,187
Accrued points fund		443,200
Accounts payable assumed		355,000
Accrued closing costs		100,000
Closing expenses paid		25,443
	$	3,455,830
Allocation to goodwill	$	3,056,330
Allocation to land, buildings and equipment		99,500
Allocation to trademarks		100,000
Allocation to contract rights		200,000
	$	3,455,830

     UMP also had sponsorship agreements in place with a tire company, which call for payments of sponsorship fees based solely on the number of tires sold at each of the Company’s races. During the 12 months ended November 30, 2004 and December 31, 2005, UMP received $532,000 and $548,000 in sponsorship revenues from this tire company. For the period ending March 31, 2006 there was no sponsorship revenue from this tire company. These tire sponsorship agreements expire in 2007.

Lernerville Speedway

     On November 7, 2004, the Company, through Boundless Racing, entered into an Asset Purchase Agreement (the “Lernerville Agreement”) with Lernerville Speedway, Inc. (“LSI”), and Helen W. Martin, Donny Martin-Roenigk, and Patty Martin-Roenigk, pursuant to which the Company purchased substantially all of the assets of LSI and certain real estate owned by Ms. Martin and comprising the racing facility used by LSI and known as the “Lernerville Speedway”. This purchase was consummated on March 15, 2005.

     The terms of the Lernerville Agreement require Boundless Racing to pay a total purchase price of $3,240,000 for the Assets. The purchase price is payable by Boundless Racing as follows:

(a)	$500,000 was paid at the closing of the transactions under the Lernerville Agreement;
(b)	$110,000 was paid on May 30, 2005;
(c)	$110,000 was paid on October 30, 2005;
(d)	$110,000 will be payable on or prior to May 30, 2006;
(e)	$110,000 will be payable on or prior to May 30, 2007; and

-13-

(f) the remaining $2,300,000 is payable pursuant to the terms of a four year promissory note bearing interest at seven percent per year, with accrued interest payable annually.

     The four $110,000 payments described above, as well as the promissory note, is secured by a mortgage on the Lernerville Speedway facility, and is guaranteed by the Company.

     The Lernerville acquisition amount was allocated based on the preliminary estimated fair value as follows:

Consideration:
Cash paid at closing	$	500,000
Notes payable issued		2,300,000
Mortgage notes payable issued		440,000
Direct transaction costs		138,249
Adjusted purchase price	$	3,378,249
Land		(1,124,800	)
Buildings and improvements		(1,590,000	)
Vehicles and other operating assets		(104,000	)
Excess of cost over fair value of net identifiable assets (goodwill)	$	559,449

Mid America Racing Series (“MARS”)

     On March 10, 2005, the Company entered into and consummated an Asset Purchase Agreement (the “MARS Agreement”) with Mid America Racing Series (“Mid America”) and Mr. R. Mooney Starr pursuant to which the Company acquired all of the assets, free and clear of any and all liabilities and encumbrances, related to the business of sanctioning and conducting the dirt track racing events known as the Mid America Racing Series (MARS). The assets were acquired in exchange for an aggregate purchase price of $150,000.

     The purchase price was allocated based on the preliminary estimated fair value as follows:

Vehicles	$	1,500
Communications equipment		500
Excess of cost over fair value of identifiable assets (goodwill)		148,000
Total purchase price	$	150,000

Volusia Speedway

     On June 30, 2005, the Company, through Volusia Operations, LLC, a newly formed Florida wholly-owned subsidiary (“Volusia Operations”), acquired substantially all of the assets of Volusia Speedway, in exchange for an aggregate purchase price of $3,600,000, of which $1,600,000 was paid in cash, and the balance was paid by delivery of a five-year promissory note issued by Volusia Operations (the “Volusia Note”). The Volusia Note bears interest at one percent over prime, as adjusted quarterly, is amortized over ten years, and is payable in fifty-nine equal monthly installments of $24,000, with the balance of the outstanding principal and accrued interest being due on June 30, 2010. The Volusia Note is secured by a mortgage on the real property, and security agreement covering the other assets acquired from Volusia Speedway. Payments under the Volusia Note are also guaranteed by the Company.

     The Volusia Speedway acquisition amount was allocated based on the estimated fair value as follows:

Consideration:
Cash paid at closing	$	1,600,000
Notes payable issued		2,000,000
Direct transaction costs		26,393
Total purchase price	$	3,626,393
Land		(2,700,000	)
Buildings & equipment	$	(926,393	)

NOTE 6 – PROPERTY AND EQUIPMENT

     Property and equipment consisted of the following at March 31, 2006:

-14-

	Cost			Depreciable Life
Land		6,916,338		N/A
Transportation equipment		1,435,035		5 - 7 years
Buildings and grandstands		3,271,825		7 - 40 years
Office furniture and equipment		355,391		3 - 7 years
		11,978,589
Less accumulated depreciation		(1,177,836	)
Property and equipment, net	$	10,800,753

     Depreciation is computed on a straight-line basis. Depreciation expense for the three months ended March 31, 2006 was $167,041. Depreciation expense for the three months ended March 31, 2005 was $66,986.

NOTE 7 – GOODWILL

As discussed in Note 4, the Company conducts an annual impairment test as required by SFAS No. 142. Under SFAS 142, goodwill impairment is deemed to exist if the carrying value of a reporting unit exceeds its estimated fair value. In calculating the impairment charge, the fair values of the reporting units were estimated using the expected present value of future cash flows from those units. The World of Outlaws acquisition, the Dirt Acquisition, the UMP acquisition, the MARS acquisition, and the Lernerville acquisition were treated as separate reporting units for purposes of making these impairment calculations. As of March 31, 2006, the Company had $1,508,440 of goodwill net of impairments of $8,812,097. This goodwill which was incurred in connection with the acquisition of the World Of Outlaws, Dirt Motorsports, UMP, LSI and MARS. Goodwill was impaired by $2,954,978 (all related to World of Outlaws purchase) at September 30, 2004 resulting in a charge against current earnings at September 30, 2004. As of September 30, 2005 the UMP series Goodwill was impaired by $2,218,171. World of Outlaws Goodwill was impaired by an additional $2,027,248. Dirt Motorsports was impaired by $1,611,700 all resulting in a charge against current earnings at September 30, 2005. There was no additional goodwill impairment recognized in the quarter ended March 31, 2006.

NOTE 8 – ACCRUED LIABILITIES

     Accrued liabilities at March 31, 2006 and December 31, 2005 consisted of the following:

	March 31,		December 31,
	2006		2005
Points fund	$	377,472	$	—
Salaries, wages and other costs in connection with office closing		32,745		199,059
Interest		814,819		491,914
Acquisition liabilities		103,500		103,500
Other accrued liabilities		360,176		214,708
Total Accrued Liabilities	$	1,688,712	$	1,009,181

NOTE 9 – DEFERRED REVENUE

     Deferred revenues at March 31, 2006 and December 31, 2005 consisted of the following:

	March 31,		December 31,
	2006		2005
Sanction fee advances	$	133,258	$	48,958
Sponsorship prepayments		307,186		129,826
Memberships		112,962		—
Season Passes / Prepaid Tickets		179,215		—
	$	732,621	$	178,784

NOTE 10 – NOTES PAYABLE

-15-

On July 30, 2004, the Company entered into an agreement with Boundless Investments, LLC (“Boundless Investments”) to refinance an existing $2,000,000 promissory note issued by the Company to Boundless Investments on May 19, 2004 (the “Boundless Investments Note”). Terms of this refinancing reduced the interest rate on the Boundless Investments Note from 12% to 8%, eliminated the collateral requirement, and eliminated the requirement for certain shareholders guarantees.

As part of such agreement, certain shareholders delivered to Boundless Investments, 4,000,000 shares of their personal restricted common stock of the Company. Boundless Investments then returned these 4,000,000 shares of common stock to the Company in exchange for warrants to buy 4,000,000 shares of the Company common stock at an exercise price of $0.001 per share. Boundless Investments then sold these warrants to an unrelated third party for $800,000, or $0.20 per share.

In accordance with Emerging Issues Task Force Pronouncement 96-19, $800,000, the value of the shares issued to Boundless Investments by a shareholder on behalf of the Company, was charged to operations during the year ended September 30, 2004 as a debt extinguishment expense.

In connection with the Company’s financing in February 2005 (see Note 10) (the “Series B Financing”), the Company entered into an exchange letter agreement with Boundless Investments, pursuant to which the Company converted approximately $1,045,000 of the Boundless Investments Note into 425.786 shares of Series A Convertible Preferred Stock and Series A Warrants to purchase 340,629 shares of common stock. The Boundless Investments Note provided for conversion into shares of Series A Preferred Stock with a value equal to 110% of the principal of and accrued interest thereon. The increased conversion preference of $102,955 was recorded as additional interest expense for the year ended September 30, 2005. The Boundless Investments Note was subsequently amended to reflect the unconverted principal balance of $1,000,000 and the option of the holder to convert the principal of and interest on the Boundless Investments Note into Series B Convertible Preferred Stock of the Company (“Series B Preferred Stock”).

Notes payable at March 31, 2006 consisted of the following:

$1,000,000 principal amount of the Boundless Investments Note. The Boundless Investments note bears interest at 8% per annum, payable quarterly, and matures on May 19, 2007. Boundless Investments has the option to convert the outstanding principal plus accrued interest into shares of Series B Preferred Stock at a conversion ratio equal to 110% of the outstanding principal and interest at the conversion date. The Company incurred initial loan acquisition fees of $201,765. These fees were amortized to interest expense over six months, the period required for the preferential conversion features to vest. The initial proceeds of $2.0 million from the issuance of the Boundless Investments Note, the beneficial conversion ratio effective six months after the conversion date, and the warrants associated with the beneficial conversion rights were allocated to each instrument based on their fair values. The sum of the relative fair value of the beneficial conversion ratio and the warrants associated with the beneficial conversion rights was determined to be in excess of the total proceeds received by the Company; therefore, the entire amount of proceeds was considered non-cash discount. The debt discount was amortized to interest expense over the period from the date of issuance to the date of earliest conversion, six months from the date of issuance. The Company reported additional interest expense of $1,000,000 in the fiscal quarter ended December 31, 2004 related to the amortization of the discount on this note.

$220,000 note payable issued in connection with the purchase of Lernerville Speedway, which is due in $110,000 installments on May 30, 2006 and May 30, 2007. These notes are secured by a mortgage on the Lernerville Speedway Facility. Included in these notes are interest charges totaling $30,000.

$2,310,000 notes payable issued in connection with the purchase of Lernerville Speedway, bearing interest at 7% payable annually. The balance is due upon maturity on March 15, 2009. This note is secured by a mortgage on the Lernerville Speedway Facility.

$2,000,000 note payable issued in connection with the purchase of Volusia Speedway, bearing interest at one percent over prime and payable in fifty-nine equal monthly installments commencing at $24,000 per month and adjusted quarterly for changes in interest rates with the balance of the outstanding principal and accrued interest due on June 30, 2010. The outstanding principle balance on this note was $1,882,847 as of March 31, 2006. This note is secured by a mortgage on the real property, and security agreement covering the other assets acquired from Volusia Speedway. Payments under the Note are also guaranteed by the Company.

$1,000,000 note payable to an individual bearing interest at 8% and due on May 15, 2006. This note was issued in connection with the reacquisition by the Company of 663,999 shares of its common stock.

$290,000 note payable to an individual bearing interest at 8% and payable in 5 monthly installments of $48,333 commencing on January 15, 2006 and a final payment of $48,335 due on June 15, 2006.

-16-

$103,725 in various vehicle notes payable, bearing interest at 6.25% and due in monthly installments of principal and interest through February 2011.

$9,173,561 of promissory notes payable to existing shareholders classified as current, due and payable on the first to occur of: (i) October 27, 2006 (ii) the completion of an equity or equity linked financing with gross proceeds of $9,000,000 or (iii) the acceleration of the obligations under the promissory notes. These promissory notes bear interest at 8% for the first 6 months from the date of issuance and 12% for the next 6 months and is payable on a quarterly basis. Upon the occurrence of an event of default interest will increase to a rate of 14%. The Company issued 1,262,500 of warrants in connection with these promissory notes. A $4.3 million value for the warrants was determined based on the Black-Scholes fair value method and is recorded as a non-cash debt discount. The debt discount was recorded at the date of issuance and the fees and warrant value will be amortized as interest expense over the terms of the promissory notes payable. Amortization expense for the three months ended March 31, 2006 was $1,087,000. The proceeds from these promissory notes were used to repay existing debt of $6,250,000 and accrued interest of $123,561 and to fund future operations.

$2,275,000 of promissory notes payable to existing shareholders classified as current, due and payable on the first to occur of: (i) April 30, 2006 (ii) the completion of an equity or equity linked financing with gross proceeds of $9,000,000 or (iii) the acceleration of the obligations under the promissory notes. These promissory notes bear interest at 8% and is payable on a quarterly basis. Upon the occurrence of an event of default interest will increase to a rate of 14%. The Company issued 568,750 of warrants in connection with these promissory notes. A $1.7 million value for the warrants was determined based on the Black-Scholes fair value method and is recorded as a non-cash debt discount. The debt discount was recorded at the date of issuance and the fees and warrant value will be amortized as interest expense over the terms of the promissory notes payable. Amortization expense for the three months ended March 31, 2006 was $219,860. The proceeds from these promissory notes were used to fund future operations.

$33,000 of other current non-interest bearing notes payable.

     The aggregate amounts of maturities of debt during each of the years ending March 31, 2007 through 2011 are:

2007	$	13,053,185
2008		1,293,574
2009		196,359
2010		2,520,033
2011 +		1,224,982
	$	18,288,133

NOTE 11 – STOCKHOLDERS’ EQUITY

     On November 30, 2004, the Company issued 164,384 shares of unregistered common stock and warrants to purchase 40,000 shares of the Company’s common stock in connection with the UMP acquisition as described in Note 4 above. The stock was valued at $600,000 and the warrants were valued at $132,187.

     On June 30, 2005, the Company issued warrants to purchase 774,000 shares of the Company’s common stock in connection with the issuance of $4 million in promissory notes as described in Note 10 above. The warrants were valued at $3.4 million.

     Effective July 26, 2005, the Company entered into and consummated a securities exchange agreement with Paul A. Kruger, the Company’s Chairman of the Board and Chief Executive Officer, pursuant to which Mr. Kruger surrendered 1,500,000 shares of the Company’s common stock, which shares were subsequently canceled by the Company, in exchange for a five year warrant to purchase 750,000 shares of the Company’s common stock, at an exercise price of $5.00 per share. The effect of these transactions was to reduce common stock by $150 and increase additional paid in capital by $150.

     Effective August 9, 2005, the Company, Mr. Kruger, Bobby Hartslief (the former Chief Operating Officer and a director of the Company), and members of Mr. Hartslief’s family entered into a Business Relationship Termination Agreement (the “Termination Agreement”). The Termination agreement provided for, among other things, the payment by the Company to Mr. Hartslief of $180,000 as severance pay, the cancellation of 50,000 issued shares of common stock of the Company owned by the Hartslief family and all other unissued stock and/or option grants made to Mr. Hartslief, the granting of an option to the Company, or its designee, to purchase the remaining 250,000 shares of common stock of the Company owned by the Hartslief family at a price of $2.00 per share, and the mutual releases by the Company and Mr. Kruger, on the one hand, and the Hartslief Family, on the other hand. In addition, as part of the Termination Agreement, Mr. Hartslief agreed for a period of one-year not to compete against the Company in the business of dirt track motor sports racing or the promotion and/or sanctioning of dirt track motor sports racing. The $180,000 severance payment was expensed in 2005. The par value of the cancelled shares was transferred from common stock to additional paid in capital during 2005.

-17-

     Effective September 22, 2005, the Company and Glenn Donnelly (Consultant) entered into a Business Relationship Termination Agreement (the “Termination Agreement”). The Termination Agreement provided for, among other things, the payment by the Company to Mr. Donnelly of $1,000,000 cash, a note payable in the amount of $500,000, the cancellation of 768,999 issued shares of common stock of the Company owned by Mr. Donnelly, and 500,000 shares currently held by Donnelly to be re-issued. In addition, as part of the Termination Agreement, Mr. Donnelly agreed for a period of two-years not to compete against the Company in the business of dirt track motor sports racing or the promotion and/or sanctioning of dirt track motor sports racing. Subsequent to year end this settlement amount was reduced to $1,290,000, payable in the form of two promissory notes, one in the principle amount of $1,000,000 bearing interest at 8% and due on May 15, 2006 and a second in the principle amount of $290,000 bearing interest at 8% and due in 5 monthly installments of $48,333 commencing on January 15, 2006 and a final payment of $48,335 due on June 15, 2006. The number of shares to be cancelled was also reduced from 768,999 to 663,999. The Company has retroactively reflected the $210,000 reduction in the termination agreement as of September 30, 2005. The entire $1,290,000 settlement was treated as the cost of retiring the 663,999 shares of stock returned by Glenn Donnelly and cancelled.

Preferred Stock

Effective July 30, 2004, the Company issued 4,790.37 shares of its newly designated Series A Convertible Preferred Stock, par value $0.01 per share (“Series A Stock”) and warrants to purchase 3,832,297 shares of it’s common stock, $0.0001 par value per share (the “Series A Warrants”), for an aggregate sales price of $11,560,199 net of offering cost of $1,373,796. In the event of the liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary, the holders of shares of the Series A Preferred Stock then outstanding shall be entitled to receive, out of the assets of the Company available for distribution to its stockholders, an amount equal to $2,700 per share (the “Liquidation Preference Amount”) of the Series A Preferred Stock plus any accrued and unpaid dividends before any payment shall be made or any assets distributed to the holders of the Common Stock or any other Junior Stock. If the assets of the Company are not sufficient to pay in full the Liquidation Preference Amount plus any accrued and unpaid dividends payable to the holders of outstanding shares of the Series A Preferred Stock and any series of preferred stock or any other class of stock on a parity, as to rights on liquidation, dissolution or winding up, with the Series A Preferred Stock, then all of said assets will be distributed among the holders of the Series A Preferred Stock and the other classes of stock on a parity with the Series A Preferred Stock, if any, ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. The liquidation payment with respect to each outstanding fractional share of Series A Preferred Stock shall be equal to a ratably proportionate amount of the liquidation payment with respect to each outstanding share of Series A Preferred Stock.

The Series A Stock is convertible at any time into an aggregate of 4,790,370 shares of common stock, representing a conversion price of $2.70 per share. Subject to an effective registration statement covering the resale of the shares of common stock into which the Series A Stock is convertible, the Series A Stock will automatically convert into shares of common stock after January 26, 2005, if (a) the closing bid price of our common stock is equal to or greater than $6.00 per share for ten consecutive trading days, and (b) the dollar trading volume for each of the ten trading days exceeds $500,000.

The Series A Warrants have a term of seven years at an exercise price of $3.00 per share. Subject to an effective registration statement covering the resale of the shares of common stock issuable upon exercise of the Series A Warrants, the Company may redeem the Series A Warrants for $0.0001 per warrant at any time after July 29 2006, if (a) the closing bid price of our common stock is equal to or greater than $6.00 per share for ten consecutive trading days, and (b) the dollar trading volume for each of the ten trading days exceeds $500,000. Commencing one year following the date of the initial issuance of the Series A Preferred Stock , the holders of record of shares of Series A Preferred Stock shall be entitled to receive dividends at the rate of four percent (4%) of the stated Liquidation Preference Amount per share per annum and increasing to six percent (6%) of the stated Liquidation Preference Amount per share per annum commencing two years following the Issuance date, payable semi-annually at the option of the Company in cash or in shares of Common Stock. The proceeds from issuance of the Series A Stock and the Series A Warrants were allocated to each instrument based on their relative fair values. Additionally, the Series A Stock included a beneficial conversion ratio at the issuance date. The fair value of the Warrants and the intrinsic value of the beneficial conversion ratio, limited to the amount of proceeds, are deemed a dividend to holders of the Preferred Stock. The Warrants are exercisable and the Preferred Stock is convertible immediately. The sum of the relative fair value of the Series A Warrants and the intrinsic value of the beneficial conversion ratio of the Series A Stock was determined to be in excess of the proceeds received by the Company; therefore, the entire $11,560,199 in proceeds is considered a non-cash dividend to the holders of the Series A Stock and was recorded at the date of issuance and included in the determination of net loss applicable to common stock. . Commencing one year following the date of the initial issuance of the Series A Preferred Stock , the holders of record of shares of Series A Preferred Stock shall be entitled to receive dividends at the rate of four percent (4%) of the stated Liquidation Preference Amount per share per annum and increasing to six percent (6%) of the stated Liquidation Preference Amount per share per annum commencing two years following the Issuance date, payable semi-annually at the option of the Company in cash or in shares of Common Stock.

The Series A Warrants expire on July 29, 2011 and have an exercise price of $3.00 per share. Subject to an effective registration statement covering the resale of the shares of common stock issuable upon exercise of the Series A Warrants,

-18-

the Company may redeem the Series A Warrants in a cashless conversion at any time after July 29, 2006, if (a) the closing bid price of our common stock is equal to or greater than $6.00 per share for ten consecutive trading days, and (b) the dollar trading volume for each of the ten trading days exceeds $500,000.

The Company entered into a registration rights agreement in connection with the issuance of the Preferred Series A shares. This agreement calls for the Company to file a registration statement by November 27, 2004. The agreement also calls for the registration statement to become effective by January 26, 2005. If these deadlines are not met the Company will be subject to liquidating damages to the preferred shareholders equal to 2% for the first calendar month and 11/2 % for each month thereafter of the issuance price of the preferred stock. The payment of liquidating damages, should any been incurred, would not result in the redemption of the preferred shares or the warrants associated therewith. Furthermore the preferred shareholders have no rights of redemption, should the Company fail to file a registration statement or if the registration statement fails to become effective.

On February 25, 2005, the Company entered into a Series B Convertible Stock Purchase Agreement pursuant to which the Company issued and sold 1,333.33 shares of its newly designated Series B Convertible Preferred Stock, par value $0.01 per share (“Series B Stock”) and warrants to purchase 666,667 shares of our common stock, $0.0001 par value per share (the “Series B Warrants”), for an aggregate purchase price of $4,000,000, which consisted of $3,300,000 in new investment and the conversion of $700,000 of outstanding debt into Series B Stock. In March 2005, the Company sold an additional 333.33 shares of Series B Convertible Preferred Stock and issued warrants to purchase 333,333 shares of our common stock for an aggregate purchase price of $1,000,000. The proceeds from issuance of the Series B Convertible Preferred Stock and Warrant issued and the fair value of the warrants issued to the holders of the Series B Stock has been allocated to each instrument based on their relative fair values. Additionally, the Series B Convertible Preferred Stock includes a beneficial conversion ratio at the issuance date. The fair value of the Warrants and the intrinsic value of the beneficial conversion ratio has been deemed a dividend to holders of the Series B Preferred Stock and considered a non-cash dividend recorded during the quarter and has been included in the determination of net loss applicable to common stock for the year ended September 30, 2005. Commencing eighteen months following the date of the initial issuance of the Series B Preferred Stock, the holders of record of shares of Series B Preferred Stock shall be entitled to receive dividends at the rate of four percent (4%) of the stated Liquidation Preference Amount per share per annum and increasing to six percent (6%) of the stated Liquidation Preference Amount per share per annum commencing 30 months following the issuance data payable semi-annually at the option of the Company in cash or in shares of Common Stock.

The Company entered into a registration rights agreement in connection with the issuance of the Preferred Series B shares. This agreement calls for the Company to file a registration statement by April 11, 2005. The agreement also calls for the registration statement to become effective by June 13, 2005. If these deadlines are not met the Company will be subject to liquidating damages to the preferred shareholders equal to 2% for the first calendar month and 11/2 % for each month thereafter of the issuance price of the preferred stock. The payment of liquidating damages, should any been incurred, would not result in the redemption of the preferred shares or the warrants associated therewith. Furthermore the preferred shareholders have no rights of redemption, should the Company fail to file a registration statement or if the registration statement fails to become effective.

In connection with the Series B financing, the Company entered into an exchange letter agreement, pursuant to which the Company converted approximately $1,045,000 in outstanding debt into 425.786 shares of Series A Convertible Preferred Stock, and Series A Warrants to purchase 340,629 shares of common stock. This conversion was completed in accordance with the conversion terms contained within the note. The note provided for the conversion of the note into Series A Preferred stock with a value equal to 110% of the note and accrued interest exchanged. The increased conversion preference of $102,955 was recorded as additional interest expense for the year ended September 30, 2005.

On March 30, 2005, the Company entered into an Exchange Agreement with the holders of the Series A Stock pursuant to which the holders of the Series A Stock exchanged each outstanding share of Series A Stock for one share of Series B Convertible Preferred Stock. The Series A Stock was convertible into an aggregate of 5,216,151 shares of common stock, representing a conversion price of $2.70 per share. The Series B Convertible Stock converted into 5,216,151 shares of the Company’s common stock representing a conversion price of $3.00. The increase in the face value from the Series A to Series B Convertible Preferred Stock of $1,564,846 is a deemed dividend to the holders of the Series B Convertible Preferred Stock and has been included in the determination of net loss applicable to common stock for the transition period ended December 31, 2005.

On February 25, 2005, the Company entered into a Series C Convertible Stock Purchase Agreement pursuant to which the Company converted common stock purchase warrants to purchase 4,000,000 shares of common stock at $0.001 per share into 2,125 shares of a newly designated Series C Convertible Preferred Stock with a stated value of $6,250,000, which shares are convertible into 2,125,000 shares of common stock, and Series C Warrants to purchase an additional 1,500,000 shares of common stock at an exercise price of $5.00 per share. The Company recorded the issuance of the Series C Convertible Preferred Stock as a dividend to the holders of the Series C Convertible Preferred Stock equal to the stated value of the preferred stock. A portion of the stated value was recorded as a decrease to additional paid in capital for the retirement of the warrants to purchase 4,000,000 shares of common stock at $0.001.

-19-

The Company entered into a registration rights agreement in connection with the issuance of the Preferred Series C shares. This agreement calls for the Company to file a registration statement by April 11, 2005. The agreement also calls for the registration statement to become effective by June 13, 2005. If these deadlines are not met the Company will be subject to liquidating damages to the preferred shareholders equal to 2% for the first calendar month and 11/2 % for each month thereafter of the issuance price of the preferred stock. The payment of liquidating damages, should any been incurred, would not result in the redemption of the preferred shares or the warrants associated therewith. Furthermore the preferred shareholders have no rights of redemption, should the Company fail to file a registration statement or if the registration statement fails to become effective.

The new issuance of $5.0 million of Series B Stock is convertible into an aggregate of 1,666,667 shares of common stock, representing a conversion price of $3.00 per share. The Series B Stock will automatically convert into shares into shares of common stock on the date at least one hundred eighty (180) days following the effective date of a registration statement covering the shares of common stock into which the Series B Stock is convertible, if (a) the closing bid price of our common stock is equal to or greater than $6.00 per share for ten consecutive trading days, and (b) the dollar trading volume for each of the ten trading days exceeds $500,000.

The Series B Warrants have a term of seven years and are exercisable at an exercise price of $4.00 per share. The Series C Warrants have a term of seven years and are exercisable at an exercise price of $5.00 per share.

The Company incurred $545,000 in placement agent and legal fees in connection with the issuance of the Series B Convertible Preferred Stock and is included as a reduction of additional paid in capital for the year ended September 30, 2005.

NOTE 12 – RELATED PARTY TRANSACTIONS

     The Company’s Chief Executive Officer, Paul A. Kruger leases an aircraft to Hildalgo Trading Company, LLC. Mr. Kruger previously leased an aircraft to Business Jet. The Company utilized both companies for travel services. The Company has spent approximately $15,000 and $20,940 with Hildalgo Trading Company, LLC and Business Jet for aircraft charter services during the three months ended March 31, 2006 and 2005, respectively.

     The Company rented office space for its corporate offices in Norman, Oklahoma, on a month-to-month basis through April 2006, from an entity controlled by Mr. Kruger. During the three months ended March 31, 2006 and 2005, respectively, the Company incurred $39,120 and $14,820 of rent expense for the Company’s corporate offices.

NOTE 13 – INCOME TAXES

     The Company accounts for income taxes under Financial Accounting Standards Number 109 (“SFAS 109”), “Accounting for Income Taxes”. Deferred income tax assets and liabilities are determined based upon differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to be reversed.

     As of December 31, 2005, the Company had net operating loss carry forwards of approximately $23,839,000 and a deferred tax asset of $12,241,000 for income tax purposes.

     The statutory income tax benefit resulting from the Company’s net operating loss carry forwards has been fully reserved. The valuation allowance has been provided due to the uncertainty that the Company will generate future profitable operations to utilize this net operating loss carry forward.

NOTE 14 – COMMITMENTS

     The Company leases a truck for use in transporting merchandise and equipment to the tracks in connection with the Company’s weekly racing series. The lease agreement continues on a month to month basis at a monthly rate of $1,667.

     A wholly-owned subsidiary of the Company has a lease agreement for the Canandaigua Track through July 1, 2006 at a yearly rate of $22,000.

     Total scheduled future minimum lease payments, under these operating leases are as follows:

	Payment Due by Period
			Less than		2 to 3		4 to 5		After 5
Contractual obligations	Total		1 Year		Years		Years		Years
Operating leases	$	138,548	$	135,287	$	3,261	$	—	$	—

-20-

     Operating lease expense for the three months ended March 31, 2006 and 2005 was $54,382 and $26,968, respectively.

     The Company has employment agreements with its executive officers and other employees, the terms of which expire at various times over the next three years. The aggregate commitment for future salaries at March 31, 2006 was $2.4 million.

NOTE 15 – LITIGATION AND CONTINGENCIES

     The Company has filed suit against a previous owner regarding issues involving the 2004 acquisition of Dirt Motorsports. The outcome is uncertain. No counterclaims have been made at this time.

     Additionally, the Company has filed suit against several former employees and a formerly leased track regarding issues surrounding the lease of said track. The outcome is uncertain. One of the parties has filed a counterclaim which we believe is without merit.

     We are from time to time involved in various legal proceedings incidental to the conduct of our business. We believe that the outcome of all such pending legal proceedings will not, in the aggregate, have a material adverse effect on our business, financial condition, results of operations or liquidity.

NOTE 16 – CONSOLIDATION OF OPERATIONS

     In an effort to streamline operations and administrative functions, and to better position the Company to effectively manage growth, The Company’s Colorado office has been closed and operations have been consolidated with the Company’s Oklahoma office. As part of this transition, the Company expensed $40,000 for the settlement amount of the remaining contractual obligation for the Colorado office lease in June of 2005. The Company also accrued $342,575 for the period ending June 30, 2005 for salaries, wages and other expenses incurred in connection with the closing of the Colorado office and consolidation of the Company’s office in Norman, Oklahoma. As of March 31, 2006 accruals of $32,745 remain related to these expenses.

NOTE 17 – SUBSEQUENT EVENTS

     None.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS

     This Form 10-QSB includes certain statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act. All statements, other than statements of historical fact, included in this Form 10-QSB that addresses activities, events or developments that the Company expects, projects, believes, or anticipates will or may occur in the future, including matters having to do with expected and future revenues, the Company’s ability to fund its operations and repay debt, business strategies, expansion and growth of operations and other such matters, are forward-looking statements. These statements are based on certain assumptions and analyses made by our management in light of its experience and its perception of historical trends, current conditions, expected future developments, and other factors it believes are appropriate in the circumstances. These statements are subject to a number of assumptions, risks and uncertainties, including general economic and business conditions, the business opportunities (or lack thereof) that may be presented to and pursued by the Company, the Company’s performance on its current contracts and its success in obtaining new contracts, the Company’s ability to attract and retain qualified employees, and other factors, many of which are beyond the Company’s control. You are cautioned that these forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in such statements.

Nature of Business

     We are a leading marketer and promoter of motorsports entertainment in the United States. Our motorsports subsidiaries operate 7 dirt motorsports tracks (4 are owned and 3 facilities are under short term lease agreements) in New York, Pennsylvania and Florida. We own and operate four of the premier sanctioning bodies in dirt motorsports: the World of Outlaws, DIRT MotorSports, United Midwestern Promoters (UMP) and the Mid America Racing Series (MARS). Through these sanctioning bodies we organize and promote 16 national and regional racing series including the World of Outlaw Sprint Series and the World of Outlaws Late Model Series and we expect to sanction races at nearly 200 tracks across the United States and Canada.

     On February 4, 2004, the Company completed the acquisition of substantially all the assets of the World of Outlaws, Inc. (“World of Outlaws”). Prior to this event, the Company was devoting substantially all of its efforts to establishing the business and was therefore a development stage enterprise until February 4, 2004.

-21-

     During the fiscal year ended September 30, 2004, the Company entered into a series of related transactions resulting in the acquisition of 100% of the outstanding stock of Dirt Motorsports, Inc. (“Dirt Motorsports”) and two affiliated race tracks.

     On December 5, 2004, the Company acquired all of the outstanding membership interest in United Midwestern Promoters Motorsports, LLC (“UMP”).

     On November 7, 2004, the Company entered into an Asset Purchase Agreement to acquire substantially all of the assets of Lernerville Speedway, Inc. (“LSI”). This acquisition was completed in March 2005, and the total consideration for the assets acquired was $3,240,000.

     On March 10, 2005, the Company entered into and consummated an Asset Purchase Agreement pursuant to which the Company acquired all of the assets related to the business of sanctioning and conducting the dirt track racing events known as the Mid America Racing Series (“MARS”). The assets were acquired in exchange for an aggregate cash purchase price of $150,000.

     On June 30, 2005, the Company acquired substantially all of the assets of Volusia Speedway Park, Inc., (“Volusia Speedway”) in exchange for an aggregate purchase price of $3,600,000.

World of Outlaws, Inc.

     On February 4, 2004 the Company completed the acquisition of substantially all the assets of World of Outlaws. World of Outlaws is one of the premier sanctioning bodies and touring racing series for dirt track racing across the United States. The acquisition allowed the Company to pursue its business plan to create a racing and sports entertainment company. The purchase price consisted of:

• Cash and acquisition costs of $2,419,319

• Forgiveness of $1,450,000 plus accrued interest of $21,815 promissory note payable to the Company

• Assumptions of obligations for $612,500 in deposits World of Outlaws had received for sanctioning of future sprint car racing events

• Assumption of $777,677 of other obligations of World of Outlaws

     The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition:

Transportation equipment	$	184,926
Other equipment		8,875
Trade-marks and Trade-names		142,452
Goodwill		4,945,058
Total assets acquired		5,281,311
Advances from promoters		612,500
Other current obligations		777,677
Total liabilities assumed		1,390,177
			��
Net consideration paid in cash and debt forgiveness	$	3,891,134

     With the purchase of World of Outlaws, the Company acquired the corporate name “World of Outlaws, Inc.” and all associated trade-names, trade-marks, and trade-mark registrations. This allows the Company to sanction World of Outlaws sprint-car racing events and expand into other series, such as a World of Outlaws late-model series, without restrictions.

Dirt Motorsports, Inc.

     In October 2003, the Company made a cash deposit of $1,000,000 and issued 1,558,334 shares of its common stock to the owners of Dirt Motorsports, Inc. and two affiliated tracks known as Rolling Wheels Raceway and Cayuga County Fair Speedway towards the acquisition of these properties. This series of transactions is referred to as the “Dirt Acquisitions”.

     Effective May 24, 2004, the Company, through its wholly owned subsidiary, Boundless Racing, Inc., a Texas corporation (“Boundless Racing”), consummated the acquisition of substantially all of the assets of Finger Lake International, Inc., a New York corporation (“FLI”), pursuant to an Asset Purchase Agreement. The Company, through a separate wholly-owned subsidiary, had previously entered into an agreement to purchase the FLI assets (the “First Asset Purchase Agreement”), but the previous arrangement was mutually terminated in favor of the Asset Purchase Agreement.

-22-

     In exchange for the assets and real property acquired, which consisted of the Rolling Wheels Raceway located in Elbridge, New York, the Company paid $1,088,777 to FLI consisting of (a) cash in an aggregate of $1,000,000, and (b) 300,000 shares of the Company’s common stock, $0.0001 par value per share. The Company also incurred $28,777 of costs relating to the acquisition.

     The shares issued to FLI in connection with this acquisition were issued by the Company pursuant to an exemption (Section 4(2)) from the registration requirements of the Securities Act of 1933, as amended and are restricted shares.

     Effective August 6, 2004, the Company, through Boundless Racing, consummated the acquisition of all of the outstanding shares of capital stock of Dirt Motorsports, pursuant to a Stock Purchase Agreement, dated August 13, 2003, as amended and extended.

     In exchange for the outstanding capital stock of Dirt Motorsports, the Company paid to Mr. Glenn Donnelly, the sole shareholder of Dirt Motorsports, $2,107,180 consisting of (a) cash in an aggregate amount of $1,775,000, of which $925,000 remains unpaid and based upon the final accounting is expected to ultimately reduce the purchase price, and (b) 591,667 shares of the Company’s common stock, paid to Mr. Donnelly in October 2003. The Company also incurred $221,308 of costs relating to the acquisition.

     The Shares issued to Mr. Donnelly in connection with the acquisition of Dirt Motorsports were issued by the Company pursuant to an exemption (Section 4(2)) from the registration requirements of the Securities Act of 1933, as amended.

     On August 31, 2004 the Company consummated the acquisition of the Cayuga County Fair Speedway. In exchange for the assets and real property acquired, which consisted of the Cayuga County Fair Speedway located in Cayuga County, New York, the Company paid $2,293,333 consisting of (a) cash in of $2,150,000, and (b) 716,667 shares of the Company’s common stock which were previously paid and credited toward the purchase price.

     The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the dates of closing of the Dirt Acquisitions:

	Dirt Motorsports		Rolling Wheels		Cayuga County
Current Assets	$	459,217	$	—	$	—
Property and Equipment		249,635		1,088,777		2,293,333
Goodwill		2,536,700
Total assets acquired		3,245,552		1,088,777		2,293,333
Current Liabilities		1,130,910		—		—
Net assets acquired	$	2,114,642	$	1,088,777	$	2,293,333

United Midwestern Promoters Motorsports, LLC

     Effective November 30, 2004, the Company, entered into and consummated a Membership Interests Purchase Agreement by and among UMP, and its members, National Speedways of Iowa, Inc., Track Enterprises, Inc., Ken Schrader Racing, Inc., and Lebanon Valley Auto Racing Corp. (the “ UMP Purchase Agreement”), pursuant to which the Company acquired all of the outstanding membership interests in UMP, in exchange for an aggregate purchase price of $2,400,000, of which, $200,000 was previously paid under the terms of a letter of intent among the parties, $1,600,000 was paid in cash at closing, and the remaining $600,000 was satisfied through the issuance of 164,384 shares of the Company’s common stock. In addition, at closing the Company issued to certain members of UMP warrants to purchase an aggregate of 40,000 shares of the Company’s common stock for $3.65 per share. These warrants were valued at an aggregate amount of $132,187 based on Black-Scholes modeling and the fair market value of the warrants at the time of issuance.

     UMP is a dirt track race sanctioning body, and as such, sanctions races for both late model and open wheel modified cars. UMP assets include its agreements with drivers competing in its races, and sponsorship agreements with racing event sponsors. Under the terms of the Purchase Agreement, if the average closing price of the Company’s common stock for the ten-trading days immediately preceding the one-year anniversary of the date of the closing of the acquisition (the “Average Anniversary Price”) is less than $3.65 per share, then the Company shall, at its sole election, either (a) issue additional shares of its common stock equal to the difference between: (i) $600,000 divided by the Average Anniversary Price, less (ii) 164,384, or (b) purchase such shares, at a purchase price of $3.65 a share.

     The UMP acquisition amount was allocated as follows based on the preliminary determination of fair values:

Cash paid for acquisition	$	1,800,000
Value of stock issued		600,000
Value of warrants issued		132,187

-23-

Accrued points fund		443,200
Accounts payable assumed		355,000
Accrued closing costs		100,000
Closing expenses paid		25,443
	$	3,455,830
Allocation to goodwill	$	3,056,330
Allocation to land, buildings and equipment		99,500
Allocation to trademarks		100,000
Allocation to contract rights		200,000
	$	3,455,830

     UMP also had sponsorship agreements in place with a tire company, which call for payments of sponsorship fees based solely on the number of tires sold at each of the Company’s races. During the 12 months ended November 30, 2004 and December 31, 2005, UMP received $532,000 and $548,000 in sponsorship revenues from this tire company. For the period ending March 31, 2006 there was no sponsorship revenue from this tire company. These tire sponsorship agreements expire in 2007.

Lernerville Speedway

     On November 7, 2004, the Company, through Boundless Racing, entered into an Asset Purchase Agreement (the “Lernerville Agreement”) with Lernerville Speedway, Inc. (“LSI”), and Helen W. Martin, Donny Martin-Roenigk, and Patty Martin-Roenigk, pursuant to which the Company purchased substantially all of the assets of LSI and certain real estate owned by Ms. Martin and comprising the racing facility used by LSI and known as the “Lernerville Speedway”. This purchase was consummated on March 15, 2005.

     The terms of the Lernerville Agreement require Boundless Racing to pay a total purchase price of $3,240,000 for the Assets. The purchase price is payable by Boundless Racing as follows:

(a)	$500,000 was paid at the closing of the transactions under the Lernerville Agreement;
(b)	$110,000 was paid on May 30, 2005;
(c)	$110,000 was paid on October 30, 2005;
(d)	$110,000 will be payable on or prior to May 30, 2006;
(e)	$110,000 will be payable on or prior to May 30, 2007; and
(f)	the remaining $2,300,000 is payable pursuant to the terms of a four year promissory note bearing interest at seven percent per year, with accrued interest payable annually.

     The four $110,000 payments described above, as well as the promissory note, is secured by a mortgage on the Lernerville Speedway facility, and is guaranteed by the Company.

     The Lernerville acquisition amount was allocated based on the preliminary estimated fair value as follows:

Consideration:
Cash paid at closing	$	500,000
Notes payable issued		2,300,000
Mortgage notes payable issued		440,000
Direct transaction costs		138,249
Adjusted purchase price	$	3,378,249
Land		(1,124,800	)
Buildings and improvements		(1,590,000	)
Vehicles and other operating assets		(104,000	)
Excess of cost over fair value of net identifiable assets (goodwill)	$	559,449

Mid America Racing Series (“MARS”)

     On March 10, 2005, the Company entered into and consummated an Asset Purchase Agreement (the “MARS Agreement”) with Mid America Racing Series (“Mid America”) and Mr. R. Mooney Starr pursuant to which the Company acquired all of the assets, free and clear of any and all liabilities and encumbrances, related to the business of sanctioning

-24-

and conducting the dirt track racing events known as the Mid America Racing Series (MARS). The assets were acquired in exchange for an aggregate purchase price of $150,000.

     The purchase price was allocated based on the preliminary estimated fair value as follows:

Vehicles	$	1,500
Communications equipment		500
Excess of cost over fair value of identifiable assets (goodwill)		148,000
Total purchase price	$	150,000

Volusia Speedway

     On June 30, 2005, the Company, through Volusia Operations, LLC, a newly formed Florida wholly-owned subsidiary (“Volusia Operations”), acquired substantially all of the assets of Volusia Speedway, in exchange for an aggregate purchase price of $3,600,000, of which $1,600,000 was paid in cash, and the balance was paid by delivery of a five-year promissory note issued by Volusia Operations (the “Volusia Note”). The Volusia Note bears interest at one percent over prime, as adjusted quarterly, is amortized over ten years, and is payable in fifty-nine equal monthly installments of $24,000, with the balance of the outstanding principal and accrued interest being due on June 30, 2010. The Volusia Note is secured by a mortgage on the real property, and security agreement covering the other assets acquired from Volusia Speedway. Payments under the Volusia Note are also guaranteed by the Company.

     The Volusia Speedway acquisition amount was allocated based on the estimated fair value as follows:

Consideration:
Cash paid at closing	$	1,600,000
Notes payable issued		2,000,000
Direct transaction costs		26,393
Total purchase price	$	3,626,393
Land		(2,700,000	)
Buildings & equipment	$	(926,393	)

Results of Operations – Impact of Seasonality and Weather on Quarterly Results

     In 2006, we plan to conduct 78 World of Outlaw Sprint Series races, 41 World of Outlaw Late Model Series Races, 32 Advance Auto Parts Big Block Modified Events, and over 200 other major racing events in our other regional and touring racing series. Most of these events are scheduled in the period from March to November each year. As a result, our business has been, and is expected to remain, highly seasonal.

     The concentration of racing events in any particular quarter, and the growth in our operations with attendant increases in overhead expenses, may tend to reduce operating income in quarters outside of our peak operating months. Our racing schedules from year to year may change from time to time which can lessen the comparability of operating results between quarters of successive years and increase or decrease the seasonal nature of our motorsports business. The results of operations for the three months ended March 31, 2006 are not indicative of results that may be expected for the entire year because of such seasonality.

     We market and promote outdoor motorsports events. Weather conditions surrounding these events affect the completion of scheduled racing, the sale of tickets and the sale of merchandise and concessions. Poor weather conditions can have a negative effect on our results of operations. Additionally, our owned and operated tracks are currently primarily geographically concentrated in New York, Pennsylvania and Florida and adverse weather conditions in these regions could have a greater negative effect on our results of operations.

Results of Operations – Comparison of Three Months Ended March 31, 2006 (“2006”) and 2005 (“2005”)

     The overall increase in our revenues and expenses from 2005 to 2006 is due to the acquisitions made in late 2004 and during 2005 and the addition of a leased facility in 2006. At March 31, 2006 we had 88 employees and at March 31, 2005 we had 62 employees.

     Revenues– Our total revenues increased from $1.3 million in 2005 to $2.0 million in 2006.

     Race sanctioning and event fees revenue decreased from $750,000 in 2005 to $310,000 in 2006. This decrease is due to a decrease in sanctioned events from 2005 to 2006. In 2005 we completed 12 World of Outlaws Sprint Series sanctioned

-25-

events at non-affiliated facilities. In 2006 we completed 5 sanctioned events at non-owned facilities and 2 events at our facilities. During the full calendar year 2005 we completed 87 World of Outlaw Sprint Series sanctioned events at non-affiliated facilities that generated sanctioning fees and 4 events at our facilities that generated admission fees and ticket sales. For the full calendar year 2006 we have scheduled 74 World of Outlaw Sprint Series events at non-affiliated facilities and 6 at our facilities. We expect sanction fees to reflect the decrease in the number of sanctioned events at non-affiliated facilities for the remainder of 2006. We expect this decrease to be offset by increases in track operations, ticket and concession sales as we hold more events at our facilities and co-promote more events during the year.

     During 2006 we generated $1,352,000 in track operations, ticket and concession sales. These revenues were generated at events held at Volusia Speedway. In 2005, we generated no track operations revenue due to a lack of events held at Company owned tracks during this timeframe. Our racing season at our other tracks typically begins in April each year but is dependent upon the weather in each region. We expect our track operations, ticket and concession sales to increase in 2006 as compared to 2005 for our additional tracks.

     Our sponsorship and advertising revenues decreased from $244,000 in 2005 to $218,000 in 2006. This decrease is due in part to the loss of our NVE sponsorship in 2005 partially offset by new sponsorships in 2006. We expect sponsorship and advertising revenues to increase in 2006 for new sponsorship agreements for our sanctioning bodies and sponsorship and advertising at our facilities. Sales of merchandise decreased from $266,000 in 2005 to $94,000 in 2006. This decrease is due in part to an $87,000 decrease in timing equipment sales during the quarter that were sold to sanctioned tracks in 2005 and were not expected to recur in 2006. Additionally, merchandise sales decreased due to the decrease in the number of events during 2006 as compared to 2005. We expect merchandise sales to increase as compared to 2005 for the remainder of 2006.

     Operating expenses– Our total operating expenses increased from $2.9 million in 2005 to $5.2 million in 2006. This increase is due primarily to our additional facilities in 2006 as compared to 2005.

     Track and event operations — Our track and event operations expenses include purses and other attendance fees paid to our drivers, personnel costs and other operating costs for the organization of our events and the operation of our tracks. Track and event operations expense increased from $1.6 million in 2005 to $3.2 million in 2006. An increase of $1.3 million related to direct expenses for the events and track repairs and maintenance at Volusia Speedway during the quarter. The track repairs and maintenance are expected to decline for the remainder of 2006. Additionally, the increase is due to staffing and repairs and maintenance on our other facilities in preparation for the beginning of the 2006 season. In 2006 and 2005, we incurred $1.1 million and $593,000 respectively in fees paid to drivers as purse/prizes or attendance fees, this increase is due to the events held at Volusia Speedway in February. In 2006 and 2005, we incurred expenses of $174,000 and $112,000 respectively for the accumulation of the year-end drivers’ point fund and other awards.

     Sales and marketing – Sales and marketing expenses includes expenses incurred by our sales, marketing and public relations departments. The expenses are primarily personnel related to the pursuit of corporate and event sponsors along with professional fees and printing for our advertising publications and fulfillment under our sponsorship agreements. Sales and marketing expense decreased from $279,000 in 2005 to $220,000 in 2006 due to decreases in travel related expenditures.

     Merchandise operations and cost of sales – Merchandise operations and cost of sales includes all operating expenses related to the distribution of our merchandise which includes mobile store fronts that are present at each major touring series event and the cost of goods sold during the period. Merchandise operations and cost of sales decreased from $201,000 in 2005 to $191,000 in 2006. Decreases in these expenses correspond with the decrease in timing equipment sales offset by increases in cost of goods sold and operating expenses of our mobile store fronts.

     General and administrative – Our general and administrative expenses increased from $690,000 in 2005 to $791,000 in 2006 due in part to an increase in the number of personnel. Additionally, professional fees including legal and accounting fees increased $50,000 due to the changing of our fiscal year end and other corporate matters during the quarter.

     Non-cash stock Compensation – Non-cash stock compensation of $646,010 in 2006 represents the fair value of warrants and options issued to employees and non-employees now recognized as an expense due to the implementation of SFAS 123R effective January 1, 2006.

     Depreciation and amortization – Depreciation and amortization expense increased from $67,000 in 2005 to $191,000 in 2006 due to an increase in assets as a result of the acquisitions described herein.

     Interest expense, net – Interest expense increased from $414,000 in 2005 to $1.7 million in 2006. The non-cash amortization of the discounts recorded for the value assigned to warrants granted in connection with the promissory notes issued during the fourth quarter of 2005 and quarter ending March 31, 2006 resulted in $1.3 million of interest expense.

Liquidity and Capital Resources

-26-

     At March 31, 2006, the Company had negative working capital of $11.5 million. The Company generated $2.0 million in revenues during the quarter ended March 31, 2006; however, we have not yet achieved a profitable level of operations. Our primary source of funding for acquisitions and operating deficits during the quarter ended March 31, 2006 has been from the issuance of notes payable.

     During the quarter ended March 31, 2006, the Company used $1.5 million in operating activities primarily the result of a net loss of $4.9 million, net prepayments of marketing expenses of $126,000 and net payments for inventory items of $157,000.

     During the quarter ended March 31, 2006, the Company used $165,000 in investing activities primarily for track improvements.

     During the quarter ended March 31, 2006 financing activities provided $2.0 million primarily through the issuance of notes payable.

     The Company incurred a net loss of $4.9 million for the quarter ended March 31, 2006. The Company has an accumulated deficit of $42.8 million and negative working capital of $11.5 million as of March 31, 2006, which raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

     The future success of the Company is dependent on its ability to attain profitable operations and upon its ability to obtain additional capital. There can be no assurance that the Company will attain positive cash flows from operations or be successful in obtaining such financing. As the future success of the Company is dependent on our ability to fund operations, the Company’s ability to continue as a going concern is at a high degree of risk.

     We anticipate raising funds through additional private placements of preferred stock and additional sources of long-term financing. We believe the Company’s operations and sponsorship revenues will also provide additional cash flows as the Company progresses toward attaining increased profitability through operations.

     The following table summarizes our contractual obligations as of March 31, 2006:

	Payment Due by Period
			Less than		2 to 3		4 to 5		After 5
Contractual obligations	Total		1 Year		Years		Years		Years
Operating leases	$	138,548	$	135,287	$	3,261	$	—	$	—
Employment agreements	$	2,352,500	$	787,500	$	1,565,000	$	—	$	—
Notes payable and accrued interest	$	19,102,952	$	13,850,004	$	1,517,932	$	3,735,016	$	—

     Operating lease expense for the three months ended March 31, 2006 and 2005 was $54,382 and $26,968, respectively.

The Company’s significant accounting policies include:

Reclassifications

     Certain amounts in prior periods presented have been reclassified to conform to the current financial statement presentation. These reclassifications have no effect on previously reported net income or loss.

Use of Estimates

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosures 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 accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.

Revenue Recognition and Deferred Revenue

     The Company derives its revenues from race sanctioning and event fees, admission fees and ticket sales, sponsorship and advertising, merchandise sales and other revenue. “Race sanctioning and event fees” includes amounts received from

-27-

track owners and promoters for the organization and/or delivery of our racing series or touring shows including driver fees. “Admission fees and ticket sales” includes ticket sales for all events held at the Company’s owned or leased facilities and ticket sales for our touring shows where we rent tracks for individual events and organize, promote and deliver our racing programs. “Sponsorship and advertising” revenue includes fees obtained for the right to sponsor our motorsports events, series or publications, and for advertising in our printed publications or television programming.

     The Company recognizes race sanctioning and event fees upon the successful completion of a scheduled race or event. Race sanction and event fees collected prior to a scheduled race event are deferred and recognized when earned upon the occurrence of the scheduled race or event. Track operations, ticket and concession sales are recognized as revenues on the day of the event. Income from memberships to our sanctioning bodies is recognized on a prorated basis over the term of the membership. The Company recognizes revenue from sponsorship and advertising agreements when earned in the applicable racing season as set forth in the sponsorship or advertising agreement either upon completion of events or publication of the advertising. Revenue from merchandise sales are recognized at the time of sale less estimated returns and allowances, if any. Revenues and related expenses from barter transactions in which the Company receives goods or services in exchange for sponsorships of motorsports events are recorded at fair value in accordance with Emerging Issues Task Force (“EITF”) Issue No. 99-17,Accounting for Advertising Barter Transactions. Barter transactions accounted for $67,000 and $25,000 of total revenues for the respective three month periods ended March 31, 2006 and 2005.

Expense Recognition and Deferral

     Certain direct expenses pertaining to specific events, including prize and point fund monies, advertising and other expenses associated with the promotion of our racing events are deferred until the event is held, at which point they are expensed. Annual points fund monies which are paid at the end of the racing season are accrued during the racing season based upon the races held and total races scheduled.

     The cost of non-event related advertising, promotion and marketing programs are expensed as incurred.

Net loss Per Share

     Basic and diluted earnings per share (EPS) are calculated in accordance with FASB Statement No. 128, Earnings per Share. For the three months ended March 31, 2006, the net loss per share applicable to common stock has been computed by dividing the net loss by the weighted average number of common shares outstanding.

     For the three months ended March 31, 2006 the Company had the following warrants and stock options outstanding:

• Series A warrants to purchase 4,172,925 shares of common stock at an exercise price of $3.00

• Series B warrants to purchase 933,334 shares of common stock at an exercise price of $4.00

• Series C warrants to purchase 2,200,000 shares of common stock at an exercise price of $5.00

• Placement Agent Warrants to purchase 1,186,266 shares of common stock at exercise prices ranging from $2.70 to $5.00

• Warrants to purchase 40,000 shares of common stock issued in connection with the UMP acquisition at an exercise price of $3.65

• Warrants issued to purchase 750,000 shares at an exercise price of $5.00 in exchange for the surrender of common stock

• Promissory note warrants to purchase 1,831,250 shares at an exercise price of $4.50 per share.

• Employee stock options totaling 650,000 shares at an exercise price of $3.63 per share.

• Employee stock options totaling 600,000 shares at an exercise price of $3.75 per share.

• Stock options issued to consultants totaling 50,000 shares at an exercise price of $4.00 per share.

• Stock options issued to consultants totaling 90,000 shares at an exercise price of $4.50 per share.

     In addition, as of March 31, 2006, the Company’s Series B Preferred Stock was convertible into 6,882,819 shares of common stock and the Company’s Series C Preferred Stock was convertible into 2,500,000 shares of common stock. None of these were included in the computation of diluted EPS because the Company had a net loss and all potential issuance of common stock would have been anti-dilutive.

-28-

Cash and Cash Equivalents

     For purposes of the statement of cash flows, the Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

Inventories

     Inventories of retail merchandise are stated at the lower of cost or market on the first in, first out method. Shipping, handling and freight costs related to merchandise inventories are charged to cost of merchandise.

Property and Equipment

     Property and equipment are stated at cost. Depreciation is provided for financial reporting purposes using the straight-line method over the estimated useful lives of the related assets ranging from 3 to 40 years. Expenditures for maintenance, repairs and minor renewals are expensed as incurred; major renewals and betterments are capitalized. At the time depreciable assets are retired or otherwise disposed of, the cost and the accumulated depreciation of the assets are eliminated from the accounts and any profit or loss is recognized.

     The carrying values of property and equipment are evaluated for impairment based upon expected future undiscounted cash flows. If events or circumstances indicate that the carrying value of an asset may not be recoverable, an impairment loss would be recognized equal to the difference between the carrying value of the asset and its fair value. As of June 30, 2005, the Company believes there is no impairment of property and equipment.

Purchase Accounting

     The Company accounted for its acquisitions of assets in accordance with Statement of Financial Accounting Standards No. 141 (“SFAS No. 141”), Business Combinations and Statement of Financial Accounting Standards No. 142, Goodwill and Intangible Assets (“SFAS No. 142”). SFAS no. 141 requires that all business combinations entered into subsequent to June 30, 2001 be accounted for under the purchase method of accounting and that certain acquired intangible assets in a business combination be recognized and reported as assets apart from goodwill.

Intangible Assets

     Upon its inception, the Company adopted Statement of Financial Accounting Standard (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.” Under SFAS No. 142 goodwill and intangible assets with indefinite lives are not to be amortized but are tested for impairment at least annually. Intangible assets with definite useful lives are to be amortized over the respective estimated useful lives or anticipated future cash flow streams when appropriate.

     At least annually the Company tests for possible impairment of all intangible assets and more often whenever events or changes in circumstances, such as a reduction in operating cash flow or a dramatic change in the manner that the asset is intended to be used indicate that the carrying amount of the asset is not recoverable. If indicators exist, the Company compares the discounted cash flows related to the asset to the carrying value of the asset. If the carrying value is greater than the discounted cash flow amount, an impairment charge is recorded in the operating expense section in the statement of operations for amounts necessary to reduce the carrying value of the asset to fair value. The Company has chosen the fourth quarter of its fiscal year to conduct its annual impairment test.

Income Taxes

     The Company accounts for income taxes under Financial Accounting Standards Number 109 (“SFAS 109”), “Accounting for Income Taxes”. Deferred income tax assets and liabilities are determined based upon differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to be reversed. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Concentration of Credit Risk

     Due to the nature of the Company’s sponsorship agreements, the Company could be subject to concentration of accounts receivable within a limited number of accounts. As of March 31, 2006 the Company had bank deposits in excess of FDIC insurance of $210,335.

New Accounting Pronouncements

     In November 2004, the FASB issued SFAS No. 151 “Inventory Costs — an amendment of ARB No. 43, Chapter 4”. Statement No. 151 requires that certain abnormal costs associated with the manufacturing, freight, and handling costs

-29-

associated with inventory be charged to current operations in the period in which they are incurred. The adoption of SFAS 151 had no impact on the Company’s financial position, results of operations, or cash flows.

     In December 2004, the FASB issued SFAS No. 153 “Exchanges of Non-monetary Assets-amendment of APB Opinion No. 29”. Statement 153 eliminates the exception to fair value for exchanges of similar productive assets and replaces it with a general exception for exchange transactions that do not have commercial substance, defined as transactions that are not expected to result in significant changes in the cash flows of the reporting entity. This statement is effective for exchanges of non-monetary assets occurring after June 15, 2005.

     In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections – a replacement of APB Opinion No. 20 and FASB Statement No. 3. Statement 154 requires retrospective application of prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. The statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company does not expect this statement to have a material effect on its reporting.

     SFAS No. 155, Accounting for Certain Hybrid Financial Instruments – an amendment of FASB Statements No. 133 and No. 140 and SFAS No. 156, Accounting for Servicing of Financial Assets – an amendment of FASB Statement No. 140 were recently issued. These statements have no current applicability to the Company and have no effect on its financial position, results of operations, or cash flows.

Stock-Based Compensation

     Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standard No. 123(R),Share-Based Payment, (“SFAS No. 123(R)”), using the modified prospective transition method. SFAS No. 123(R) requires equity-classified share-based payments to employees, including grants of employee stock options, to be valued at fair value on the date of grant and to be expensed over the applicable vesting period. Under the modified prospective transition method, share-based awards granted or modified on or after January 1, 2006, are recognized in compensation expense over the applicable vesting period. Also, any previously granted awards that are not fully vested as of January 1, 2006 are recognized as compensation expense over the remaining vesting period. No retroactive or cumulative effect adjustments were required upon The Company’s adoption of SFAS No. 123(R).

     Prior to adopting SFAS No. 123(R), The Company accounted for its fixed-plan employee stock options using the intrinsic-value based method prescribed by Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees,(“APB No. 25”) and related interpretations. This method required compensation expense to be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price.

     Had The Company elected the fair value provisions of SFAS No. 123(R), The Company’s 2005 net earnings and net earnings per share would not have differed from the amounts actually reported as no share-based payments were made during this period.

     As a result of adopting SFAS No. 123(R) on January 1, 2006, The Company’s net loss for the three-month period ended March 31, 2006 were $646,010 greater than if The Company had continued to account for share-based compensation under APB No. 25. Also, basic and diluted losses per share were approximately $0.06 per share higher as a result of the adoption. Prior to the adoption of SFAS No. 123(R), The Company presented all tax benefits of deductions resulting from the exercise of stock options as operating cash inflows in the statement of cash flows. SFAS No. 123(R) requires the cash inflows resulting from tax deductions in excess of the compensation expense recognized for those stock options (“excess tax benefits”) to be classified as financing cash inflows. The Company did not report any excess tax benefits as financing cash inflows for the three months ended March 31, 2006.

     Unrecognized compensation expense as of March 31, 2006 related to outstanding stock options was $1,949,348.

     The fair value of each option grant is estimated for disclosure purposes on the date of grant using the Black-Scholes option-pricing model with the expected lives equal to the vesting period. The weighted average contractual life of the unvested options at March 31, 2006 was 4.11 years.

     A summary of the status of stock options and related activity for the three month period ended March 31, 2006 is presented below:

Options outstanding at December 31, 2005	650,000	$	3.65
Granted	740,000		3.86
Exercised	—		—
Forfeited/expired	—		—
Options outstanding at March 31, 2006	1,390,000	$	3.76

-30-

     There were no options outstanding as of March 31, 2005.

Certain Risks

     The Company’s business is subject to numerous risk factors, including the following:

We may not have sufficient capital to successfully affect our business strategy.

     We anticipate the need to obtain additional financing to implement our business plan and acquisition strategy. If our capital needs are met through the issuance of equity or convertible debt securities, the percentage ownership of our shareholders will be reduced. Our success may be determined in a large part by our ability to obtain additional financing, and we can give no assurance that we will be successful in obtaining adequate financing on favorable terms, if at all. The absence of financing may impair our ability to implement our business plan. In all likelihood we will issue additional shares of common stock or securities convertible into such shares in the future. Any such shares issued would further dilute the percentage ownership of our common stock held by our shareholders.

We have a limited operating history. As a result, evaluating our current business model and prospects may be difficult.

     We began operations in February 2004 with the acquisition of World of Outlaws. Since then we have completed the acquisition of Dirt Motorsports, UMP, LSI, MARS and Volusia Speedway. Thus, we have only a limited operating history with which you can evaluate our current business model and our prospects, and our historical financial data may be of limited value in evaluating our future revenue and operating expenses.

Speculative nature of our proposed operations.

     The success of our plan of operation will depend to a great extent on the operations, financial condition and management of targeted acquisitions and our ability to identify additional business opportunities. If we cannot acquire additional business opportunities, we may not be able to grow our Company. Further, our ability to successfully implement our business plan requires an effective plan for managing our future growth. Future expansion efforts will be capital intensive and may significantly strain our managerial and other resources. To manage future growth effectively, we must maintain and enhance our financial and accounting systems and controls, integrate new personnel and manage expanded operations. If we do not manage growth properly, it could harm our operating results and financial condition.

Our failure to achieve or maintain profitability could force us to cease our operations.

     We have not operated at a profit over the course of our brief history, and there can be no assurance that we will be able to achieve or maintain profitability. Our recent acquisitions have resulted in operating losses since inception, and we expect to incur operating losses in future periods. Our ability to attain profitability and positive cash flow is dependent upon a number of factors, including our ability to increase revenues while reducing costs per racing event. We may not be successful in increasing or maintaining revenues or achieving positive cash flow. Even if we do maintain profitability, we may not be able to sustain or increase our profitability on a quarterly or annual basis. If we fail to maintain profitability, we might ultimately be forced to discontinue our operations.

Possible impairment of goodwill.

     Our failure to meet projected revenue and earnings could result in the impairment of goodwill incurred in connection with various acquisitions of existing operations. As of December 31, 2005, the Company had $10,320,538 in goodwill which was incurred in connection with the acquisition of the World of Outlaws, Dirt Motorsports, UMP, LSI and MARS. Goodwill was impaired by $2,954,978 (all related to World of Outlaws purchase) at September 30, 2004 resulting in a charge against current earnings at September 30, 2004. As of September 30, 2005 the UMP series Goodwill was impaired by $2,218,171. World of Outlaws Goodwill was impaired by an additional $2,027,248. Dirt Motorsports was impaired by $1,611,700 all resulting in a charge against current earnings at December 31, 2005. There was no additional goodwill impairment recognized in the three month period ended March 31, 2006.

Our success depends in part upon sales of our racing series and racing events.

     Our business model depends, in part, on our ability to attract and maintain sponsorships for our racing series and racing events. A sponsor’s willingness to continue their relationship with us is subject to many risks beyond our control, including:

-31-

     Competition for advertising and promotional dollars; General market and industry conditions that may affect our sponsors; and the introduction and success of competition for new racing events and racing series.

     In the event we are not able to attract new sponsors or retain current sponsorships, we could experience revenue shortfalls.

Our executive officers, directors and principal stockholders have substantial influence over us.

     As of May 12, 2006, our executive officers, directors and principal stockholders together beneficially own approximately 85% of the outstanding shares of common stock. As a result, these stockholders, acting together, may be able to exercise substantial influence over all matters requiring approval by our stockholders, including the election of directors and approval of significant corporate transactions. The concentration of ownership may also have the effect of delaying or preventing a change in our control that may be viewed as beneficial by the other stockholders.

     In addition, our certificate of incorporation does not provide for cumulative voting with respect to the election of directors. Consequently, our present directors, executive officers, principal stockholders and our respective affiliates may be able to control the election of the members of the Board of Directors. Such a concentration of ownership could have an adverse effect on the price of the common stock, and may have the effect of delaying or preventing a change in control, including transactions in which stockholders might otherwise receive a premium for their shares over then current market prices.

Our quarterly operating results may fluctuate significantly.

     Our success depends on a number of factors, many of which are beyond our control. These factors include (1) the attendance at our racing events; (2) capital expenditures and other costs relating to the expansion of operations, (3) changes in our pricing policies and those of our competitors, (4) the number of racing events scheduled during the quarter, (5) weather that may effect attendance or cause us to cancel or postpone our racing events, (6) changes in operating expenses, (7) changes in strategy, (8) personnel changes, (9) the introduction of competitive racing events, (10) the timing and effect of potential acquisitions, and (11) other general economic factors.

     Our operating results, cash flows and liquidity may fluctuate significantly. Our revenues depend on our ability to hold racing events and attract attendees. Our expense levels are based, in part, on our expectations regarding future revenues, which could be inaccurate. Moreover, our operations often require up-front expenses, but result in trailing revenues. To the extent that revenues are below expectations, we may be unable to reduce expenses proportionately, and operating results, cash flow and liquidity could be negatively affected. Due to these and other factors, our operating results and/or growth rate may be below the expectations of analysts, management and investors. This, in turn, could cause the price of our common stock to drop.

Acquisitions of companies or joint venture investments may disrupt our business or dilute shareholder value.

     We may acquire companies or enter into joint ventures. If we are unable to integrate these acquisitions with our existing operations, we may not receive the intended benefits of the acquisitions. Also, acquisitions may subject us to unanticipated liabilities or risks. Any acquisition or joint venture may temporarily disrupt our operations and divert management’s attention from day-to-day operations. If we make future acquisitions, we may incur debt or issue equity securities to finance the acquisitions. The issuance of equity securities for any acquisition could cause our shareholders to suffer significant dilution. Also, our profitability may suffer due to acquisition-related expenses, additional interest expense or amortization costs for acquired goodwill and other intangible assets and operating losses generated by the acquired entity or joint venture. Acquisitions and joint ventures that do not successfully complement our existing operations may harm our business.

Dependence on qualified and key personnel.

     We believe our future success will depend in large part upon our ability to identify, attract and retain highly skilled managerial, sales and marketing, finance and operations personnel. Competition for personnel with the type of experience in these areas is intense, and we compete for personnel against numerous companies, including larger, more established companies with significantly greater financial resources. There can be no assurance we will be successful in identifying, attracting and retaining personnel.

Illiquidity of our common stock.

     Although there is a public market for our common stock, trading volume has been historically low which substantially increases your risk of loss. We can give no assurance that an active and liquid public market for the shares of the common stock will develop in the future. Low trading volume in our common stock could affect your ability to sell the shares of common stock. The development of a public trading market depends upon not only the existence of willing buyers and sellers, but also on market makers. The market bid and asked prices for the shares may be significantly influenced by decisions of the market makers to buy or sell the shares for their own account, which may be critical for the establishment and maintenance of a liquid public market in the shares. Market makers are not required to maintain a continuous two-sided

-32-

market and are free to withdraw firm quotations at any time. Additionally, in order to maintain our eligibility for quotation on the OTC Bulletin Board, we need to have at least one registered and active market maker. No assurance can be given that any market making activities of any additional market makers will commence or that the activities of current market makers will be continued.

Our common stock price has been volatile, which could result in substantial losses for stockholders.

     Our common stock is currently traded on the OTC under the symbol DMSP. We have in the past experienced, and may in the future experience, limited daily trading volume. The trading price of our common stock has been and may continue to be volatile. This volatility often has been unrelated to the operating performance of the Company. These broad market fluctuations may significantly affect the trading price of our common stock, regardless of our actual operating performance. The trading price of our common stock could be affected by a number of factors, including, but not limited to, changes in expectations of our future performance, changes in estimates by securities analysts (or failure to meet such estimates), quarterly fluctuations in our sales and financial results and a variety of risk factors, including the ones described elsewhere in this prospectus. Periods of volatility in the market price of a company’s securities sometimes result in securities class action litigation. If this were to happen to us, such litigation would be expensive and would divert management’s attention. In addition, if we needed to raise equity funds under adverse conditions, it would be difficult to sell a significant amount of our stock without causing a significant decline in the trading price of our stock.

Our stock price may decline if additional shares are sold in the market.

     As of May 12, 2006, we had 11,720,555 shares of common stock outstanding. In addition, as of December 31, 2005, the Company’s Series B Preferred Stock was convertible into 6,882,819 shares of common stock and the Company’s Series C Preferred Stock was convertible into 2,500,000 shares of common stock and we had warrants exercisable for 12,631,023 shares of common stock outstanding. Future sales of substantial amounts of shares of our common stock by our existing stockholders in the public market, or the perception that these sales could occur, may cause the market price of our common stock to decline. We may be required to issue additional shares upon exercise of previously granted options and warrants that are currently outstanding.

Our certificate of incorporation and bylaws may delay or prevent a potential takeover of us.

     Our Certificate of Incorporation, as amended, and Bylaws, as amended, contain provisions that may have the effect of delaying, deterring or preventing a potential takeover of us, even if the takeover is in the best interest of our shareholders. The Bylaws limit when shareholders may call a special meeting of shareholders. The Certificate of Incorporation also allows the Board of Directors to fill vacancies, including newly-created directorships.

ITEM 3. CONTROLS AND PROCEDURES

     The Company’s Chief Executive Officer and the Company’s principal financial officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rule 13a-14(c) and 15d-14(c) as of the date of the financial statements included in this report on Form 10-QSB, have concluded that as of the evaluation date, the Company’s disclosure controls and procedures are adequate and effective to ensure that material information relating to the Company (including consolidated subsidiaries) required to be included in our periodic SEC filings would be made known to them by others within those entities.

     There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect the Company’s disclosure controls and procedures subsequent to the evaluation date, nor any significant deficiencies or material weaknesses in such disclosure controls and procedures requiring corrective actions. As a result, no corrective actions were taken.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     We are from time to time involved in various legal proceedings incidental to the conduct of our business. We believe that the outcome of all such pending legal proceedings will not in the aggregate have a material adverse effect on our business, financial condition, results of operations or liquidity.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     On March 31, 2006 the Company issued warrants to purchase 568,750 shares of the Company’s common stock in connection with the issuance of $2,275,000 in promissory notes as described in Note 10 to the financial statements. The warrants were valued at $1.7 million.

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

-33-

     None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

The following documents are filed as part of this report:

(a) Exhibits

2.1	Membership Interests Purchase Agreement, dated as of November 30, 2004, by and among United Midwestern Promoters Motorsports, LLC, National Speedways of Iowa, Inc., Track Enterprises, Inc., Ken Schrader Racing, Inc., Lebanon Valley Auto Racing Corp., and Boundless Motor Sports Racing, Inc. (Incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed with the Commission on December 6, 2004).
4.1	Series B Convertible Preferred Stock Purchase Agreement, dated as of February 25, 2005, by and among Boundless Motor Sports Racing, Inc., a Colorado corporation, and the purchasers set forth therein. (Incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Firm 8-K filed with the Commission on March 2, 2005)
4.2	Certificate of Designation of the Relative Rights and Preferences of the Series B Convertible Preferred Stock. (Incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Firm 8-K filed with the Commission on March 2, 2005)
4.3	Form of Series B Warrant. (Incorporated by reference to Exhibit 4.3 of the Company’s Current Report on Firm 8-K filed with the Commission on March 2, 2005)
4.4	Registration Rights Agreement dated as of February 25, 2005, by and among Boundless Motor Sports Racing, Inc., a Colorado corporation, and the purchasers set forth therein. (Incorporated by reference to Exhibit 4.4 of the Company’s Current Report on Firm 8-K filed with the Commission on March 2, 2005)
4.5	Series C Convertible Preferred Stock Purchase Agreement, dated as of February 25, 2005, by and among Boundless Motor Sports Racing, Inc., a Colorado corporation, and the purchasers set forth therein. (Incorporated by reference to Exhibit 4.5 of the Company’s Current Report on Firm 8-K filed with the Commission on March 2, 2005)
4.6	Certificate of Designation of the Relative Rights and Preferences of the Series C Convertible Preferred Stock. (Incorporated by reference to Exhibit 4.6 of the Company’s Current Report on Firm 8-K filed with the Commission on March 2, 2005)
4.7	Form of Series C Warrant. (Incorporated by reference to Exhibit 4.7 of the Company’s Current Report on Firm 8-K filed with the Commission on March 2, 2005)
4.8	Registration Rights Agreement dated as of February 25, 2005, by and among Boundless Motor Sports Racing, Inc., a Colorado corporation, and the purchasers set forth therein. (Incorporated by reference to Exhibit 4.8 of the Company’s Current Report on Firm 8-K filed with the Commission on March 2, 2005)
4.9	Certificate of Designation of the Relative Rights and Preferences of the Series A Convertible Preferred Stock (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the Commission on August 4, 2004).
4.10	Form of Series A Warrant (filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K filed with the Commission on August 4, 2004).
31.1	Rule 13a-14(a)/15d-14(a) Certification of Paul A. Kruger *
31.2	Rule 13a-14(a)/15d-14(a) Certification of Brian Carter *
32	Section 1350 Certification of Paul A. Kruger and Brian Carter *

* Filed herewith

-34-

SIGNATURES

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

	DIRT MOTOR SPORTS, INC. (Registrant)
Date: May 12, 2006	/s/ Paul A. Kruger
	Paul A Kruger, Chief Executive Officer
Date: May 12, 2006	/s/ Brian Carter
	Brian Carter, Chief Financial Officer

-35-