World Racing (WRGI) 10-Q 2009 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2009

¨ 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

World Racing Group, Inc.

 (Exact name of registrant as specified in its charter)

Delaware	90-0284113
(State of incorporation)	(IRS Employer Identification No.)

7575 West Winds Blvd, Suite D, Concord, North Carolina 28027

 (Address of principal executive offices)

(704) 795-7223

 (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 past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [  ]

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

Large accelerated filer   ¨	Accelerated filer  ¨
Non-accelerated filer     ¨	Smaller reporting company  þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨    No  þ

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

As of May 15, 2009, the issuer had 42,751,735 outstanding shares of Common Stock.

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION	1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets – March 31, 2009 and December 31, 2008	1
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2009 and 2008	2
	Condensed Consolidated Statements of Stockholders' Deficit for the Three Months Ended March 31, 2009	3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2009 and 2008	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4T.	Controls and Procedures	31
PART II	OTHER INFORMATION	32
Item 1.	Legal Proceedings	32
Item 6.	Exhibits	33
Signatures		34

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PART I

FINANCIAL INFORMATION

ITEM  1.   FINANCIAL STATEMENTS

WORLD RACING GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2009 and December 31, 2008

	March 31, 2009 (Unaudited)			December 31, 2008 (audited)
ASSETS
Current assets
Cash and cash equivalents	$	1,685,606		$	886,245
Accounts receivable – trade, net of allowance of $385,000 in 2009 and 2008		824,173			416,466
Inventory		91,997			34,943
Prepaid expenses and other current assets		172,406			163,748
Total current assets		2,774,182			1,501,402
Land, buildings and equipment, net		9,969,338			10,094,930
Trademarks		100,000			100,000
Other assets, net of amortization of $827,063 in 2009 and $700,670 in 2008		534,994			661,387
Total assets	$	13,378,514		$	12,357,719
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable	$	1,203,401		$	1,081,814
Accrued liabilities		895,925			1,276,476
Deferred revenues		1,046,068			213,561
Notes payable, current portion		896,181			2,061,145
Total current liabilities		4,041,575			4,632,996
Notes payable, net of discount of $1,236,064 in 2009 and $1,545,080 in 2008		18,640,756			16,974,022
Total liabilities		22,682,331			21,607,018
Stockholders' Equity (Deficit)
Series A Preferred stock, $0.01 par value, liquidation preference: $10,000 per share; 1,500 shares authorized; 550 and 350 shares issued and outstanding at March  31, 2009 and December 31, 2008, respectively		5,500,000			3,500,000
Series E Preferred stock, $0.01 par value; 50,000 shares authorized: 50,000 shares issued and outstanding at March 31, 2009 and  December 31, 2008		500			500
Series E-1 Preferred stock, $0.01 par value; 50,000 shares authorized:  5,700 shares issued and outstanding at March 31, 2009		57			-
Common stock, $0.0001 par value; 100,000,000 shares authorized; 42,751,735 shares issued and outstanding at March 31, 2009 and December 31, 2008		4,275			4,275
Additional paid-in capital		73,669,782			73,567,817
Accumulated deficit		(88,478,431	)		(86,321,891	)
Total stockholders' equity (deficit)		(9,303,817	)		(9,249,299	)
Total liabilities and stockholders' equity	$	13,378,514		$	12,357,719

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

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WORLD RACING GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended March 31, 2009 and 2008

(Unaudited)

	2009			2008
Revenues
Race sanctioning and event fees	$	905,364		$	552,194
Admission fees and ticket sales		1,488,325			1,510,546
Sponsorship and advertising revenue		505,127			775,052
Merchandise sales		92,781			53,339
Other revenue		39,009			52,848
Total revenues		3,030,606			2,943,979
Operating expenses
Track and event operations		3,010,938			3,159,906
Sales and marketing		493,324			674,295
Merchandise operations and cost of sales		109,209			81,036
General and administrative		472,477			625,783
Non-cash stock compensation		252,022			557,529
Depreciation and amortization		156,472			212,955
Total operating expenses		4,494,442			5,311,504
Loss from operations		(1,463,836	)		(2,367,525	)
Other (Expenses) Income
Gain on modification of debt		350,843			-
Interest expense, net		(1,043,547	)		(808,033	)
Total Other Expense		(692,704	)		(808,033	)
Net (Loss)	$	(2,156,540	)	$	(3,175,558	)
Net loss applicable to common stock	$	(2,156,540	)	$	(3,175,558	)
Net loss applicable to common stock per common share - Basic and diluted	$	(0.05	)	$	(0.10	)
Weighted average common shares outstanding - Basic and diluted		42,751,735			32,152,262

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

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WORLD RACING GROUP, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

For the Three months ended March 31, 2009

(Unaudited)

							Additional
	Preferred Stock			Common Stock			Paid-in			Accumulated
	Shares	Amounts		Shares	Amounts		Capital			(Deficit)			Total
Balance, December 31, 2008	50,350	$	3,500,500	42,751,735	$	4,275	$	73,567,817		$	(86,321,891	)	$	(9,249,299	)
Value assigned to stock options, restricted stock and warrants, non-cash compensation expense	-		-	-		-		252,022			-			252,022
Placement agent fees paid	-		-	-		-		(150,000	)		-			(150,000	)
Issuance of Series A Preferred Stock	200		2,000,000	-		-		-			-			2,000,000
Issuance of Series E-1 Preferred Stock	5,700		57	-		-		(57	)		-			-
Net loss	-		-	-		-		-			(2,156,540	)		(2,156,540	)
Balance, March 31, 2009	56,250	$	5,500,557	42,751,735	$	4,275	$	73,669,782		$	(88,478,431	)	$	(9,303,817	)

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

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WORLD RACING GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three months ended March 31, 2009 and 2008

(Unaudited)

	2009			2008
Cash flows from operating activities:
Net (loss)	$	(2,156,540	)	$	(3,175,558	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		156,472			212,955
Gain on modification of debt		(350,843	)		-
Non-cash interest expense		931,602			279,552
Non-cash stock compensation		252,022			557,529
Increase (decrease) in cash for changes in:
Accounts receivable		(407,707	)		(670,241	)
Inventory		(57,054	)		(111,007	)
Prepaid expenses and other current assets		(8,658	)		231,301
Other non-current assets		-			91,499
Accounts payable		121,587			498,848
Accrued liabilities		(169,708	)		(188,909	)
Deferred revenue		832,507			813,008
Net cash (used in) operating activities		(856,320	)		(1,461,023	)
Cash flows from investing activities:
Purchase of property, contract rights, trademarks and goodwill		(23,378	)		(233,715	)
Net cash (used in) investing activities		(23,378	)		(233,715	)
Cash flows from financing activities:
Proceeds from the issuance of Preferred Stock		2,000,000			-
Payments on notes payable		(170,941	)		(48,398	)
Payment of Placement Agent Fees		(150,000	)		-
Proceeds from issuance of notes payable		-			335,925
Net cash provided by financing activities		1,679,059			287,527
Net increase (decrease) in cash and cash equivalents		799,361			(1,407,211	)
Cash and cash equivalents, beginning of period		886,245			1,668,611
Cash and cash equivalents, end of period	$	1,685,606		$	261,400
Cash payments for interest	$	32,048		$	127,629
Supplemental schedule of non-cash activities:
Issuance of secured notes payable for interest	$	503,695		$	-
Gain on modification of debt	$	350,843		$	-
Issuance of Series E-1 Preferred Stock, Series A financing	$	57		$	-

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

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WORLD RACING GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2009

NOTE 1. DESCRIPTION OF BUSINESS

Company Overview.

We are a leading marketer and promoter of motor sports entertainment in the United States.  Our motorsports subsidiaries operate six dirt motor sports tracks (four are owned and two facilities are under short term lease agreements) in New York, Pennsylvania and Florida.  We own and operate the premier sanctioning bodies in dirt motor sports:  the World of Outlaws Sprint Car Series; the World of Outlaws Late Models Series: Advance Auto Parts Super DIRTcar Series; DIRTcar Racing formerly known as DIRT MotorSports and United Midwestern Promoters (UMP DIRTcar) which includes weekly event sanctions and regional series in the Northeast, Midwest and West.  Through these sanctioning bodies we organize and promote 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 125 tracks across the United States and Canada in 2009.  

Plan to Go Private.

On February 17, 2009, we announced that our Board of Directors and a majority of our stockholders had approved a 1-for-101 reverse stock split of our common stock (the “Reverse Split”).  The intended effect of the Reverse Split is to reduce the number of record holders of our common stock to fewer than 300 so that we will be eligible to terminate the public registration of our common stock under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Provided that the Reverse Stock Split has the intended effect, we will file to deregister our common stock with the Securities and Exchange Commission (the "Commission") and to terminate the listing of shares of our common stock on the Over the Counter Bulletin Board.  In such case, we will no longer be required to file periodic reports with the Commission. When the Reverse Split becomes effective, stockholders that hold fewer than 101 shares of common stock will receive a cash payment of $0.10 per pre-split share. Additionally, as the Company will not be issuing fractional shares, stockholders will also receive a cash payment of $0.10 per pre-split share if their pre-split holdings would not result in the issuance of whole shares.   The Company filed a preliminary Information Statement with the Commission and expects to distribute a definitive Information Statement to all holders of our common stock in the near future. The Reverse Split will not be affected prior to the 20th day following the distribution of the definitive Information Statement to stockholders. However, the Company reserves the right not to proceed with the Reverse Split in the discretion of its Board of Directors.

Plan of Operations.

The Reverse Split is not expected to affect our current business plan or operations, except for the anticipated cost and management time savings associated with termination of our obligations as a public company.  Management also anticipates that we will be able to more successfully compete for sponsorship, advertising and other revenue generating opportunities as a private company, which remains our principal focus.  Our plan of operations for the remainder of 2009 also includes continuing to streamline our operations, and grow our ticket and merchandise sales, sanction, membership and license fees, while expanding our position as a premier motor sports entertainment company.

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NOTE 2. GOING CONCERN

The accompanying 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. The Company incurred a net loss of $12.9 million for the year ended December 31, 2008 and a net loss of $2.2 million for the three months ended March 31, 2009.  The Company has an accumulated deficit of $88.5 million and negative working capital of $1.3 million as of March 31, 2009, 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.

Specialty Tires of America, Inc. and Race Tires America, Inc., a division of Specialty Tires of America, Inc. (RTA), brought a civil action against us and Hoosier Racing Tire Corporation (Hoosier) in the United States District Court for the Western District of Pennsylvania, in September 2007.  RTA has sought injunctive relief and damages for alleged violations of the Sherman Act, including alleged conspiracies between us and Hoosier to restrain trade in and monopolize race tire markets.  From RTA’s initial disclosures, it appears that they are claiming in excess of $91.2 million in monetary damages plus costs and attorneys fees.  We answered RTA’s complaint denying all claims, and are vigorously defending the allegations set forth in the complaint.    The discovery phase of the case concluded on January 30, 2009, and the Court is currently considering pending  motions for summary judgment.  In the event that the case is not disposed of on a motion for summary judgment, the Court will set a schedule for expert discovery.  As such, we cannot express with any certainty at this time an opinion as to the outcome of this matter.  An adverse outcome regarding this litigation will have a materially adverse effect on 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 Company is dependent on existing cash resources and external sources of financing to meet its working capital needs.  Current sources of liquidity may be insufficient to provide for budgeted and anticipated working capital requirements through the remainder of 2009.  The Company may therefore be required to seek additional financing to satisfy its working capital requirements. No assurances can be given that such capital will be available to the Company on acceptable terms, if at all. If the Company is unable to obtain additional financing when they are needed or if such financing cannot be obtained on terms favorable to the Company or if it is unable to renegotiate existing financing facilities, the Company may be required to delay or scale back its operations, which could delay development and adversely affect its ability to generate future revenues.

To attain profitable operations, management’s plan is to execute its strategy of (i) increasing the number of sanctioned events; (ii) leveraging existing owned and leased tracks to generate ancillary revenue streams; (iii) partnering with existing promoters to create additional marquis events; and (iv) continuing to build sponsorship, advertising and related revenue, including license fees related to the sale of branded merchandise.   In addition, the Company plans to consummate the Reverse Split, resulting in the termination of the Company’s requirement to file periodic and other reports with the Commission under the Exchange Act.  If consummated, the Company anticipates savings of approximately $250,000 to $300,000 per annum. If it is unsuccessful in its plans, the Company will continue to be dependent on outside sources of capital to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to amounts and classification of liabilities that may be necessary if the Company is unable to continue as a going concern.  The financial statements do not include any adjustments relating to the recoverability and clarification of recorded asset amounts or to the amounts and classification of liabilities that may be necessary if the Company is unable to continue as a going concern.

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NOTE 3. BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements have been prepared in compliance with Rule 8-03 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 year ended December 31, 2008. 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, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009 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 consolidated financial statements include the accounts of World Racing Group, 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. 

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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 $5,000 of total revenues for the quarter ended March 31, 2009 and $38,400 in the quarter ended March 31, 2008.

Presentation of Sales Taxes

The Company has customers in states and municipalities in which those governmental units impose a sales tax on certain sales. The Company collects those sales taxes from its customers and remits the entire amount to the various governmental units. The Company’s accounting policy is to exclude the tax collected and remitted from revenue and operating expenses.

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. Advertising expense totaled $57,548 and $60,574 for the three month periods ended March 31, 2009 and 2008, respectively.

Net Loss Per Share and Warrants Outstanding

Basic and diluted earnings per share (EPS) are calculated in accordance with FASB Statement No. 128, Earnings per Share. For the quarters ended March 31, 2009 and 2008, 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.

	March 31
	2009			2008
Net (Loss)	$	(2,156,540	)	$	(3,175,558	)
Net loss applicable to common stock	$	(2,156,540	)	$	(3,175,558	)
Net loss applicable to common stock per common share - Basic and diluted	$	(0.05	)	$	(0.10	)
Weighted average common shares outstanding - Basic and diluted		42,751,735			32,152,262

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In addition, as of March 31, 2009, the Company’s Series E Preferred Stock was convertible into 50.0  million shares of common stock, the Company’s Series E-1 Preferred Stock was convertible into 5.7 million shares of common stock,  and the Company had warrants outstanding to purchase 0.6 million common shares and options to purchase 0.4 million 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.

The following table summarizes the Company’s common stock purchase warrant and certain stock options outstanding at March 31, 2009.  These warrants and stock options were not considered in computing diluted earnings per share as their effect would be anti-dilutive:

	Shares		Weighted Average Exercise Price		Weighted Average Contractual Life (years)
Placement agent warrants		275,803	$	2.99		2.3
Other warrants		275,059	$	3.00		2.9
Stock options		420,000	$	3.95		1.9
Total warrants and stock options outstanding		970,862	$	3.41		2.3

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 three 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.

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Purchase Accounting

The Company accounted for its acquisitions of assets in accordance with Statement of Financial Accounting Standards No. 141R (SFAS No. 141R), Business Combinations and Statement of Financial Accounting Standards No. 142, Goodwill and Intangible Assets (SFAS No. 142). SFAS No. 141R requires that all business combinations entered into subsequent to January 1, 2009 be recorded at full fair value and also requires that transaction-related costs be expensed in the period incurred.

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.

In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109 (FIN 48).  FIN 48 is intended to clarify the accounting for uncertainty in income taxes recognized in a company’s financial statements and prescribes the recognition and measurement of a tax position taken or expected to be taken in a tax return.  FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Under FIN 48, evaluation of a tax position is a two-step process.  The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position.  The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements.  A tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met.  Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met.

The adoption of FIN 48 at January 1, 2007 did not have a material effect on the Company’s financial position.

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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, 2009, the Company had bank deposits in excess of FDIC insurance of approximately $1.5 million.

New Accounting Pronouncements

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under GAAP. SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, with earlier adoption permitted. Management adopted this Statement on January 1, 2007 and the initial adoption SFAS 157 did not have a material impact on our financial position, results of operations, or cash flows. In February 2008, the FASB issued FASB Staff Position FAS 157-2, Effective Date of FASB Statement No. 157 (“FSP 157-2”), to partially defer FASB Statement No. 157, Fair Value Measurements (“FAS 157”). FSP 157-2 defers the effective date of FAS 157 for nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years, and interim periods within those fiscal years, beginning after November 15, 2008.  On October 29, 2008 the FASB issued FSP FAS 157-3, Determining the Fair Value of a Financial Asset When The Market for That Asset Is Not Active (FSP FAS 157-3) which clarifies the application of SFAS 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. Management has adopted the provisions of FAS 157 as it relates to non-financial assets and liabilities. The adoption did not have a material impact on our financial position, results of operations or cash flows.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51. This Statement changes the accounting and reporting for non-controlling interests in consolidated financial statements. A non-controlling interest, sometimes referred to as a minority interest, is the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent. Specifically, SFAS No. 160 establishes accounting and reporting standards that require (i) the ownership interests in subsidiaries held by parties other than the parent be clearly identified, labeled, and presented in the consolidated balance sheet within equity, but separate from the parent’s equity; (ii) the equity amount of consolidated net income attributable to the parent and to the non-controlling interest be clearly identified and presented on the face of the consolidated income statement (consolidated net income and comprehensive income will be determined without deducting minority interest, however, earnings-per-share information will continue to be calculated on the basis of the net income attributable to the parent’s shareholders); and (iii) changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently and similarly—as equity transactions. This Statement is effective for fiscal years, and interim period within those fiscal years, beginning on or after December 15, 2008. Early adoption is not permitted. SFAS No. 160 shall be applied prospectively as of the beginning of the fiscal year in which it is initially applied, except for its presentation and disclosure requirements, which shall be applied retrospectively for all periods presented. The Company adopted SFAS No. 160 on January 1, 2009.  The adoption did not have a material impact on our financial position, results of operations or cash flows.

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In December 2007, the FASB issued SFAS No. 141R, Business Combinations, which is a revision of SFAS No. 141, Business Combinations. SFAS No. 141R will apply to all business combinations and will require most identifiable assets, liabilities, non-controlling interests, and goodwill acquired in a business combination to be recorded at “full fair value.” At the acquisition date, SFAS No 141R will also require transaction-related costs to be expensed in the period incurred, rather than capitalizing these costs as a component of the respective purchase price. SFAS No. 141R is effective for acquisitions completed after January 1, 2009 and early adoption is prohibited. The adoption will have a significant impact on the accounting treatment for acquisitions occurring after the effective date. The Company adopted SFAS No. 141R on January 1, 2009.  The adoption did not have a material impact on our financial position, results of operations or cash flows.

In December 2007, the Securities and Exchange Commission issued SAB 110, Certain Assumptions Used in Valuation Methods, which extends the use of the "simplified" method, under certain circumstances, in developing an estimate of expected term of "plain vanilla" share options in accordance with SFAS No. 123R. Prior to SAB 110, SAB 107 stated that the simplified method was only available for grants made up to December 31, 2007.

In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities ("SFAS 161"). This Statement will require enhanced disclosures about derivative instruments and hedging activities to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged.  The Company adopted SFAS No. 161 on January 1, 2009.  The adoption did not have a material impact on our financial position, results of operations or cash flows.

Stock-Based Compensation

The Company’s 2004 Long Term Incentive Plan (2004 Plan) provides for the grant of share options and shares to its employees for up to 3,950,000 shares of common stock. Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant; those option awards generally vest based on three years of continuous service and have five year contractual terms. Share awards generally vest over three years. Certain option and share awards provide for accelerated vesting if there is a change in control, as defined in the 2004 Plan.

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).

The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table. Expected volatilities are based on the historical volatility of the market price of the Company’s common stock over a period of time ending on the grant date. Based upon historical experience of the Company, the expected term of options granted is equal to the vesting period. The risk-free rate for periods within the contractual life of the option is based on the U.S Treasury yield curve in effect at the time of the grant.

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The following table provides information relating to outstanding stock options as of March 31, 2009, no options were granted in 2009 or 2008: 

Expected volatility	58	%
Expected life in years	2.0
Weighted average risk free interest rate	4.66

The Company has not declared dividends and does not intend to do so in the foreseeable future, and thus did not use a dividend yield. In each case, the actual value that will be realized, if any, depends on the future performance of the common stock and overall stock market conditions. There is no assurance that the value an optionee actually realizes will be at or near the value estimated using the Black-Scholes model.

The fair value of restricted common stock awards is based on the closing price of the Company’s common stock on date of the grant. The Company issued 750,000 restricted shares of common stock in 2006 with a fair value of $2,737,500, which will be recorded as compensation expense over the three year vesting period of the restricted shares.

A summary of the status of stock options and related activity as of March 31, 2009 is presented below:

	Shares	Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Options outstanding at December 31, 2008	420,000	$	3.95	2.1	$       -
Granted	-
Exercised	-
Forfeited/expired/surrendered	-
Options outstanding at March 31, 2009	420,000	$	3.95	1.9	$            -
Options exercisable at March 31, 2009	420,000	$	3.95	1.9	$            -

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A summary of the status of stock purchase warrants and related activity for the three months ended March 31, 2009 is presented below:

	Shares	Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Warrants outstanding at December 31, 2008	550,862	$	2.99	2.8	$	-
Granted	-		-
Exercised	-		-
Forfeited/expired/surrendered	-		-
Warrants outstanding at March 31, 2009	550,862	$	2.99	2.6	$	-
Warrants  exercisable at March 31, 2009	550,862	$	2.99	2.6	$	-

Unrecognized compensation expense as of March 31, 2009 related to outstanding stock options and restricted stock grants was $0.1 million.

NOTE 5. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at March 31, 2009 and December 31, 2008:

	2009			2008			Depreciable Life
Land	$	6,916,338		$	6,916,338		N/A
Buildings and grandstands		3,514,779			3,509,384		7 - 40 years
Transportation equipment		1,914,283			1,910,409		5 - 7 years
Office furniture and equipment		881,708			867,599		3 - 7 years
		13,227,108			13,203,730
Less accumulated depreciation		(3,257,770	)		(3,108,800	)
Property and equipment, net	$	9,969,338		$	10,094,930

Depreciation is computed on a straight-line basis. Depreciation expense for the three month periods ended March 31, 2009 and 2008 was $148,970 and $193,200, respectively.

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NOTE 6. GOODWILL AND OTHER INTANGIBLE ASSETS

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.  During the year ended September 30, 2004, an impairment of $2,954,978 was recorded related to 2004 acquisitions.  During the year ended December 31, 2005, impairments related to the goodwill associated with the acquisition of the World of Outlaws, UMP and Dirt was determined to be impaired by $2,027,248, $2,218,171 and $1,611,700 respectively.  In addition, the trademark associated with the World of Outlaws was determined to be impaired by $142,452.  These amounts were charged to current earnings for the quarter ended September 30, 2005.  The Company evaluated again in 2006 and it was determined that the remaining goodwill for each reporting unit was fully impaired and the remaining amounts recorded as goodwill were impaired and during the year ended December 31, 2006, an impairment of $1,508,440 was recorded related to the goodwill associated with the acquisitions of the UMP, MARS and Lernerville was determined to be impaired by $812,715, $148,000 and $547,725, respectively.

NOTE 7. ACCRUED LIABILITIES

Accrued liabilities at March 31, 2009 and December 31, 2008 consisted of the following:

	March 31,		December 31,
	2009		2008
Points fund	$	219,795	$	557,394
Interest		167,387		298,333
Salaries, wages and other compensation and benefits		191,573		154,608
Sales and other taxes		182,002		69,104
Professional fees		128,015		192,000
Other accrued liabilities		7,154		5,037
Total Accrued Liabilities	$	895,925	$	1,276,476

NOTE 8. DEFERRED REVENUE

Deferred revenues at March 31, 2009 and December 31, 2008 consisted of the following:

	March 31,		December 31,
	2009		2008
Sponsorship prepayments	$	722,206	$	140,463
Sanction fee advances		128,138		32,718
Season ticket  sales, advance ticket sales		94,799		11,280
Membership fees		100,925		29,100
	$	1,046,068	$	213,561

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NOTE 9. NOTES PAYABLE

From May 2005 through April 2006 we issued $12.4 million in promissory notes payable to existing shareholders.  These notes were 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 was payable on a quarterly basis.  The Company issued warrants to purchase 1,948,510 shares of our common stock at an exercise price of $4.50 in connection with these notes.  The warrants were valued based on the Black-Scholes fair value method and the value was recorded as a non-cash debt discount and was being amortized over the life of the notes.  In connection with the Series D Preferred Stock financing in May 2006, we repaid $867,506 of these notes plus accrued interest and we exchanged the remaining $11.6 million in notes plus accrued interest into 4,401 shares of our Series D Preferred stock and issued Series D warrants to purchase 1,320,178 shares of our common stock at an exercise price of $4.50.  At the time of conversion, the Company recognized the remaining unamortized debt discount as interest expense in 2006.  Additionally, the Company recognized interest expense for the conversion of the notes at 110% into Series D preferred stock (Note 9).

During the first quarter of 2007, the Company entered into a line of credit agreement with one of its principal shareholders to provide the Company with working capital advances.  Amounts outstanding bear interest at 8%, no amounts are outstanding under the line of credit as of December 31, 2008 or March 31, 2009.  As of March 31, 2009, $200,000 is available under the line of credit.

Beginning in March 2007, the Company issued to several of its principal shareholders $2.3 million in short-term secured promissory notes payable (“Short-Term Notes”). The Short-Term Notes bear interest at 8% per year and were secured by the assets of the Company.  The proceeds from the Short-Term Notes were used to fund the working capital needs of the Company.   An estimate of the fair value of the common shares expected to be issued upon the completion of a secured note financing was recorded as an increase in additional paid in capital and is recorded as a discount to these notes payable and was recognized as interest expense in the second quarter of 2007 in the amount of $0.7 million. In September 2007, the Company completed the initial closing of a secured note financing (“Note Financing”). At the closing, we issued $12.0 million principal amount of our senior secured promissory notes (“Senior Notes”) to a limited number of accredited investors pursuant to a Note Purchase Agreement by and among us and the investors (“Note Purchase Agreement”). The purchase price consisted of $10,150,000 of cash proceeds and cancellation of $1,850,000 principal amount of outstanding Short-Term Notes. We used approximately $470,000 of the proceeds to repay certain unsecured indebtedness and approximately $650,000 to repay the Short-Term Notes.

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The Senior Notes, as amended, are due March 15, 2011 and accrue interest at the rate of 12.5% per annum payable quarterly on each of December 15, March 15, June 15 and September 15. Upon issuance, we prepaid $1,167,347 of interest, representing the first three (3) interest payments. Commencing September 15, 2008, interest due under the Senior Notes has been paid additional Senior Notes that will accrue interest at 13.5% per annum. The Senior Notes are secured by substantially all of the assets of the Company and our subsidiaries, including our four race tracks, pursuant to a Security Agreement (“Security Agreement”) and mortgages (“Mortgages”) by and among us, certain of our subsidiaries, and the lenders. The Senior Notes contain various standard and customary covenants, including prohibitions on incurring additional indebtedness, except under certain limited circumstances, or granting a security interest in any of our properties. Our obligations under the Senior Notes are guaranteed by our principal operating subsidiaries pursuant to a Subsidiary Guarantee (“Guarantee”) by and among us, our principal operating subsidiaries, and the lenders.

The Senior Notes were issued together with 275,000 shares of common stock, $.0001 par value per share, for each $1.0 million principal amount of Senior Notes purchased. If the foregoing issuance would result in any investor becoming the beneficial owner of more than 4.99% of our common stock, such investor was issued shares of our Series E Convertible Preferred Stock, $.01 par value per share, convertible into a like number of shares of common stock (“Series E Shares”). We issued an aggregate of 1,828,750 shares of common stock and 2,103.75 Series E Shares convertible into an aggregate of 2,103,750 additional shares of common stock. Pursuant to prior agreement, at the closing we also issued an aggregate of 632,500 shares of common stock to the holders of the Short-Term Notes.   The fair value of the common stock and Series E shares was recorded as an increase in additional paid in capital and is recorded as a discount to these notes payable and will be recognized as interest expense through the maturity of the Secured Notes.

On May 14, 2008, the Company issued $3.0 million in additional Senior Notes due March 15, 2011.  The Senior Notes were issued to existing Senior Note Holders and were issued under the terms of a Note Purchase Agreement, dated September 27, 2007 which allowed for the issuance of up to $15.0 million in Secured Notes.  The Senior Notes accrue interest at the rate of 12.5% per annum payable quarterly on each of December 15, March 15, June 15 and September 15. Commencing September 15, 2008, interest due under the Senior Notes is payable at our option in cash or additional Senior Notes that will accrue interest at 13.5% per annum. The Company has paid interest due September 15, 2008 and December 15, 2008 in additional Senior Notes. The Senior Notes are secured by substantially all of the assets of the Company and our subsidiaries, including our four race tracks, pursuant to a Security Agreement (Security Agreement) and mortgages (Mortgages) by and among us, certain of our subsidiaries, and the lenders. The Senior Notes contain various standard and customary covenants, including prohibitions on incurring additional indebtedness, except under certain limited circumstances, or granting a security interest in any of our properties. Our obligations under the Senior Notes are guaranteed by our principal operating subsidiaries pursuant to a Subsidiary Guarantee (Guarantee) by and among us, our principal operating subsidiaries, and the lenders.

The Senior Notes were issued together with 275 shares of our Series E Preferred stock for each $1.0 million principal amount of Senior Notes purchased. We issued an aggregate of 825 shares of Series E Preferred Stock in May 2008. The fair value of the Series E Preferred Stock was recorded as an increase in additional paid in capital and was recorded as a discount to the Senior Notes payable and will be recognized as interest expense through the maturity date of the Secured Notes.

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In October 2008, the Company received executed consents from the Required Lenders, as defined in the purchase agreement to amend the purchase agreement and Senior Notes.  Pursuant to Section 11(c) of the Note Purchase Agreement, the Required Lenders, have agreed to modify the Notes by extending the Maturity Date of the Senior notes from March 15, 2010 to March 15, 2011 and amend the Note Purchase Agreement by deleting Section 9(e) in its entirety and replacing it with “Intentionally Omitted.” As consideration for obtaining the consents, the Company issued 4,316 shares of Series E Convertible Preferred Stock to all Notes Holders on a pro-rata basis. The issuance of the Series E Convertible Stock was recorded in the fourth quarter of 2008. The amended maturity date of the Secured Notes is used throughout this report.

On March 31, 2009, the Company amended and restated that certain Secured Promissory Note issued on November 7, 2007, in the principal amount of $2.3 million, issued to Helen W. Martin (“Martin”) in consideration for the acquisition of Lernerville Speedway in 2004 (the “Old Note”).  The total amount due and owing Martin under the terms of the Old Note, prior to restatement, including principal and accrued interest, was $2.5 million.  The Company paid Martin $200,000 as consideration for the amended and restated note (the “Principal Deposit”) (the “New Note”), which New Note was issued in the principal amount of $2.0 million.  The Company recognized a gain on the amendment and restatement of $350,843 during the three month period ended March 31, 2009.  The principal amount under the terms of the New Note increases monthly at a rate per annum equal to 10% through the maturity date of the New Note, November 7, 2010.  In the event the New Note is paid in full prior to August 31, 2009, the Principal Deposit is credited to the Company, therefore decreasing the total principal due and owing Martin on such early repayment date.  In the event the New Note is not paid in full prior to August 31, 2009, the Principal Amount is retained by Martin without right of offset by the Company.  The Company is obligated to pay $30,000 per month under the terms of the New Note, until the maturity date, at which time all remaining principal shall be due in full.  The New Note remains subject to a mortgage securing repayment of all amounts due Martin under the terms of the New Note.

Notes payable at March 31, 2009 consisted of the following:

· $15.0 million of Senior Notes due March 15, 2011, as amended, bearing interest at 12.5% per annum payable quarterly.  These notes are secured by substantially all of the assets of the Company and our subsidiaries.

· $1.5 million of PIK notes issued in connection with the Senior Notes due March 15, 2011, as amended, bearing interest at 13.5% per annum payable quarterly.  These notes are secured by substantially all of the assets of the Company and our subsidiaries.

· $2.0 million note payable to Martin, as set forth above.

·  $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 principal balance on this note was $1,441,965 as of March 31, 2009.  This note is secured by a mortgage on the real property, and security agreement covering the other assets acquired from Volusia Speedway.  

· $685,940 in various vehicle notes payable, bearing interest at rates ranging from 6.25% to 8.25% and due in monthly installments of principal and interest through December 2026.

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The aggregate amounts of maturities of debt during each of the years ending December 31, 2009 through 2014 and thereafter are:

Remainder of 2009	$	819,204
2010		3,188,028
2011		16,577,183
2012		33,117
2013		50,923
2014 and thereafter		104,546
	$	20,773,001
Less:  Note Discount		(1,236,064	)
	$	19,536,937

NOTE 10. STOCKHOLDERS’ EQUITY

On December 14, 2007, the Company received consent agreements from holders of 100% of the issued and outstanding shares of our Series D Convertible Preferred Stock (“Series D Stock”), representing 17,684 shares, pursuant to which each holder received 3,000 shares of common stock for each share of Series D Stock held by such holder, or shares of Series E Convertible Preferred Stock, convertible into an equivalent number of shares of common stock (Series D Exchange). In connection with the execution of the Consent Agreement, all warrants held by each holder of Series D Stock were surrendered and cancelled, and each holder received two shares of common stock for every three warrants held by such holder (“Warrant Exchange”). As a result of the Series D Exchange and Warrant Exchange, we eliminated approximately $54.3 million in liquidation preference associated with the Series D Stock, and accrued dividends, and issued 15.7 million shares of common stock and 41,164 shares of Series E Convertible Preferred Stock convertible into 41.2 million shares of common stock.

The Company’s Series E Convertible Preferred Stock shall rank prior to the Company’s Common Stock and has a par value of $0.01 per share for purposes of liquidation preference.  The maximum number of shares of Series E Preferred Stock shall be 50,000 shares.  The Series E Preferred Stock has no voting rights other than as a class as related to the ownership of Series E Preferred Stock.  Each share of Series E Preferred Stock is convertible into 1,000 shares of Common Stock.  No dividends are payable to the holders of the Series E Preferred Stock.

In 2008 the Company designated a new Series E-1 Convertible Preferred Stock.  The Series E-1 Convertible Preferred Stock shall rank prior to the Company’s Common Stock and pari passu to the Company’s Series E Convertible Preferred Stock and has a par value of $0.01 per share for purposes of liquidation preference.  The maximum number of shares of Series E-1 Preferred Stock shall be 50,000 shares.  The Series E-1 Preferred Stock has no voting rights other than as a class as related to the ownership of Series E-1 Preferred Stock.  Each share of Series E-1 Preferred Stock is convertible into 1,000 shares of Common Stock.  No dividends are payable to the holders of the Series E-1 Preferred Stock.

On December 31, 2008 (the “Initial Closing”), the Company issued 350 shares of our 10% Cumulative Perpetual Series A Preferred Stock (“Series A Shares”) for $10,000 per Series A Share (the “Series A Financing”), resulting in gross proceeds to the Company of $3.5 million.  At the Initial Closing, 28,500 shares of our common stock were issued for each Series A Share purchased, resulting in the issuance of 9,975,000 shares of common stock in the aggregate.  In addition, on March 31, 2009, we issued an additional 200 Series A Shares and 5,700 shares of Series E-1 Preferred Stock, resulting in gross proceeds to the Company of $2.0 million.

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Under the terms of the Preferred Purchase Agreement, we may issue additional Series A Shares for $10,000 per share, resulting in additional gross proceeds to the Company of $4.5 million.  Under the terms of the Preferred Purchase Agreement, Series A Shares purchased at subsequent closings will include 28.5 shares of the Company’s Series E-1 Preferred Stock, convertible into 28,500 shares of common stock, for each Series A Share purchased.

Upon liquidation, the Series A Shares shall rank senior to the Company’s common stock the Series E Shares, and the Series E-1 Shares.  Under the terms of the Certificate of Designation of the Relative Rights and Preferences of the Series A Shares, the Company is prohibited from creating any series of equity securities that by their terms rank senior or pari-passu to the Series A Shares, without the affirmative vote or consent of the holders of at least three-fourths of the issued and outstanding Series A Shares.  Holders of Series A Shares are entitled to receive, on each Series A Share, cumulative cash dividends at a per annum rate of 10% on the (i) the amount of $10,000 per Series A Share and (ii) the amount of accrued and unpaid dividends on each Series A Share.    Other than as provided by applicable Delaware law, and except with respect to transactions upon which the Series A Shares shall be entitled to vote separately as a class, holders of Series A Shares have no voting rights.  The Company has the right to redeem the Series A Shares at a redemption price equal to the sum of $10,000 per Series A Share and the accrued and unpaid dividends thereon.

NOTE 11. 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.

At March 31, 2009, the Company had net operating loss carry forwards of approximately $64 million for federal 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 12. COMMITMENTS

In addition to its owned racing facilities, the Company leases three racing facilities, the Canandaigua Speedway, the Syracuse Fairgrounds Race Track, and the Orange County Fair Speedway.

The Canandaigua Speedway is leased on an annual basis, $22,000 per year, through November 1, 2011.  The track is located at the Ontario County Fairgrounds in Canandaigua, Ontario County, New York.

The Syracuse Fairgrounds Race Track is leased for the Super Dirt Week series of races held annually during October.  The track is located in Syracuse, New York.  The track is leased on a year-to-year basis for one week per year at a rental rate of $110,000.

The Company entered into a lease for a new corporate facility in Concord, North Carolina for approximately 9,000 square feet of office and 7,000 square feet of warehouse space.  It is leased under a 62 month lease for $9,492 per month for the first year escalating annually to $10,275 in year five.

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

	Payment Due by Period
	Total		Remainder of 2009		2010		2011		2012		2013 and Thereafter
Operating leases	$	471,238	$	110,884	$	142,285	$	144,694	$	73,375	$	-

Operating lease expense for the quarter ended March 31, 2009 and 2008 was $73,495 and $74,379, respectively.

The Company has employment agreements with its executive officers and other employees, the terms of which expire at various times over during 2009 and 2010. The aggregate commitment for future salaries at March 31, 2009 was $358,880 million.

NOTE 13. LITIGATION AND CONTINGENCIES

Specialty Tires of America, Inc. and Race Tires America, Inc., a division of Specialty Tires of America, Inc. (RTA), brought a civil action against us and Hoosier Racing Tire Corporation (Hoosier) in the United States District Court for the Western District of Pennsylvania, in September 2007.  RTA has sought injunctive relief and damages for alleged violations of the Sherman Act, including alleged conspiracies between us and Hoosier to restrain trade in and monopolize race tire markets.  From RTA’s initial disclosures, it appears that they are claiming in excess of $91.2 million in monetary damages plus costs and attorneys fees.  We answered RTA’s complaint denying all claims, and are vigorously defending the allegations set forth in the complaint.    The discovery phase of the case concluded on January 30, 2009, and the Court is currently considering pending  motions for summary judgment.  In the event that the case is not disposed of on a motion for summary judgment, the Court will set a schedule for expert discovery.  As such, we cannot express with any certainty at this time an opinion as to the outcome of this matter.

We are from time to time involved in various additional 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.

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

FORWARD LOOKING STATEMENTS

The following Management’s Discussion and Analysis is intended to assist the reader in understanding our results of operations and financial condition.  Management’s Discussion and Analysis is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements beginning on page 3 of this Quarterly Report. This Form 10-Q 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-Q that address activities, events or developments that we expect, project, believe, or anticipate will or may occur in the future, including matters having to do with expected and future revenues, our ability to fund our operations and repay debt, business strategies, expansion and growth of operations and other such matters, are forward-looking statements.  In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expects,” “intends,” “plans,” “projects,” “estimates,” “anticipates,” or “believes” or the negative thereof or any variation thereon or similar terminology or expressions.  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, that could cause actual results to differ materially from results proposed in such statements.  These include, but are not limited to, general economic and business conditions, the business opportunities (or lack thereof) that may be presented to and pursued by us, our performance on our current contracts and our success in obtaining new contracts, our ability to attract and retain qualified employees, and other factors, many of which are beyond our control, as well as those factors set forth under the caption "Risk Factors" in our Annual Report on Form 10-K for our fiscal year ended December 31, 2008 filed with the Securities and Exchange Commission.  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.  All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the foregoing.  Except as required by law, we assume no duty to update or revise our forward-looking statements based on changes in internal estimates or expectations or otherwise.

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

In 2008, we scheduled 80 World of Outlaw Sprint Series races and completed 66 races, 50 World of Outlaw Late Model Series Races and completed 43 races, 26 Advance Auto Parts Big Block Modified Events, and over 200 other major racing events in our other regional and touring racing series.  In 2009, we have scheduled 76 World of Outlaw Sprint Series races, 48 World of Outlaw Late Model Series Races, 24 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.

During the first quarter of 2009, inclement weather negatively impacted one World of Outlaws Sprint Car Series race and one World of Outlaws Late Model Series race, compared to five World of Outlaws Sprint Car Series races and no World of Outlaws Late Model Series races in the comparable period in 2008.  We had 39 events scheduled and were able to complete 37 events during the quarter.   We have not rescheduled any of these events.  If events are impacted by weather, many of the Series' operating costs, including personnel costs and travel costs, are incurred in preparation for the events.  The reduction in the number of events completed can also impact our merchandise sales, as our mobile store fronts continued to incur operating costs without having the ability to sell merchandise at the events if they are cancelled.  

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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.

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 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, 2009 (“2009”) and 2008 (“2008”)

Revenues – Our total revenues increased to $3.0 million in 2009 from $2.9 million in 2008.

Race sanctioning and event fees revenue increased to $905,000 in 2009 from $552,000 in 2008.  This increase is due to a increase in the number of sanctioned events completed in 2009 as compared to 2008, particularly in the World of Outlaws Sprint Series. In 2009, we completed six sanctioned events at non-owned facilities and three events at our facilities. In 2008 we completed four sanctioned events at non-owned facilities and three events at our facilities. In 2009 and 2008 we completed four and three World of Outlaw Late Model Series Events, respectively.  We expect sanction fees to reflect the increase in the number of completed sanctioned events at non-affiliated facilities for the remainder of 2009 as compared to 2008.

During 2009 we generated $1.49 million in track operations, ticket and concession sales as compared to $1.51 million in 2008. These revenues are generated at events held at our owned or operated racetracks, primarily at Volusia Speedway during February each year.   Our racing season at our tracks in New York and Pennsylvania typically begins in late March or early April each year but is dependent upon the weather in each region.  We expect our track operations, ticket and concession sales to remain about the same in 2009 as compared to 2008 for the remainder of the year.

Our sponsorship and advertising revenues decreased to $505,000 in 2009 from $775,000 in 2008.  We expect sponsorship and advertising revenues to decrease in 2009 due to the loss of a significant sponsor at the end of the 2008 racing season, and due to the general softness in the market for sponsorship and advertising resulting from current adverse economic conditions.

Sales of merchandise increased from 2008 to 2009 due to an increase in the number of completed events and increases in sales per event.  In 2007 and 2008, we entered into arrangements to license our product sales in areas other than our on-site sales at our World of Outlaw Sprint Series races; we continued those relationships in 2009.  We expect that our net operating cash generated from the new arrangements to increase our overall operating margins in these areas and we expect revenues for merchandise sold on-site at our World of Outlaw Sprint Series events to increase as compared to 2008.

Operating expenses – Our total operating expenses decreased to $4.5 million in 2009 from $5.3 million in 2008.  The decrease is principally due to decreases in operating costs including staffing and prize money, decreased sales and marketing costs, non-cash stock compensation expense, and other reductions resulting from the Company’s aggressive efforts to reduce operating costs.

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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 decreased to $3.0 million in 2009 from $3.2 million in 2008.  These decreases are due to decreased personnel, contract labor cost and other costs including year-end prize funds for our series and decreased operating expenses at our events at Volusia Speedway for 2009 as compared to 2008 offset by increases in the number of completed sanctioned events and the prize money at those events.

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 to $493,000 in 2009 from $674,000 in 2008 as a result of decreased staffing, professional fees, promotion and advertising.

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 our World of Outlaws touring series event and the cost of goods sold during 2009 and 2008.  Beginning in 2007, we have entered into arrangements that have resulted in our licensing the rights to sell merchandise at each of our touring series events other than at our World of Outlaws Sprint Series events.  The licensing agreements generally include a one-time rights fee and a percentage of sales over certain volume thresholds. These licensing fees will be recorded as sponsorship and advertising sales.   Our mobile store fronts travel to each series event and continue to incur operating costs, even if the event is cancelled or negatively impacted by weather without having the ability to sell merchandise at the events that were cancelled.   Our operating expenses in 2009 are higher than merchandise sales due to repairs made to equipment prior to the beginning of the season and a write off taken for stale merchandise.  Series' operations and merchandise operations have improved from 2008 to 2009, and we anticipate that such improvement will continue for the remainder of 2009.

General and administrative – Our general and administrative expenses decreased to $0.5 million in 2009 from $0.6 million in 2008. The decrease is principally due to a reduction in legal and related costs incurred in connection with the defense of the antitrust case currently pending against the Company and decreases in expenditures relating to the Company’s efforts to reduce all operating costs.

Non-cash stock compensation – Non-cash stock compensation of $0.3 million in 2009 and $0.6 million in 2008 represents the fair value of warrants and options issued to employees and non-employees for services provided.

Depreciation and amortization – Depreciation and amortization expense decreased slightly in 2009 from 2008 and is expected to continue to decrease as equipment and leasehold and track improvements and transportation equipment become fully depreciated.

Gain on modification of debt - On March 31, 2009, the Company amended and restated its note payable issued in connection with the purchase of Lernerville Speedway in 2004.  The amended note resulted in a reduction of principal and accrued interest which was forgiven resulting in a gain on modification of $350,843.

Interest expense, net – Interest expense increased to $1.0 million in 2009 from $0.8 million in 2008.  2009 includes the non-cash amortization of the discounts recorded for the value assigned to restricted stock granted in connection with the secured notes issued during the third quarter of 2007. Interest expense for 2009, 2010 and 2011 will reflect the interest incurred on our notes and mortgages payable on our two tracks and various vehicle notes and any non cash interest expense for the amortization of the discounts recorded for the value assigned to restricted stock granted in connection with the secured promissory notes issued during the third quarter of 2007.

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Liquidity and Capital Resources

The Company generated $3.0 million in revenues during the period ended March 31, 2009; however, we have not yet achieved a profitable level of operations. Our primary source of funding for our operating deficits during the quarter ended March 31, 2009 has been from cash on hand and the issuance of preferred stock.

During the period ended March 31, 2009, the Company used $0.9 million in operating activities primarily the result of a net loss of $2.2 million, non-cash interest expense of $0.9 million, depreciation and amortization of $0.2 million, non-cash stock compensation of $0.3 million and other working capital changes, primarily accounts receivable, deferred revenue, accounts payable and accrued liabilities.During the period ended March 31, 2008, the Company used $1.5 million in operating activities.

During the three months ended March 31, 2009, the Company used $23,000 in investing activities primarily for track improvements and for equipment purchases for our traveling series, compared to $234,000 during the comparable period in 2008.

During the three months ended March 31, 2009, financing activities provided $1.7 million primarily through the issuance of $2.0 million in Series A and Series E-1 Preferred Stock. During the three months ended March 31, 2008, financing activities provided $0.3 million primarily through the issuance of $0.3 million in notes payable offset by scheduled repayments of notes payable.

The Company incurred a net loss of $12.9 million for the year ended December 31, 2008 and a net loss of $2.2 million for the three months ended March 31, 2009.  The Company has an accumulated deficit of $88.5 million and negative working capital of $1.3 million as of March 31, 2009, 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.

We are dependent on existing cash resources and external sources of financing to meet our working capital needs.  The Company raised $2.0 million by issuing additional Series A and Series E-1 Preferred Stock on March 31, 2009, and we may be required to issue additional Series A Shares in 2009, as current sources of liquidity may be insufficient to provide for our budgeted and anticipated working capital requirements.  No assurances can be given that the Company will be able to issue additional Series A Shares or that other sources of capital will be available to the Company on acceptable terms, if at all.  If the Company is unable to obtain additional financing when needed or if such financing cannot be obtained on terms favorable to us, or if the Company is unable to renegotiate existing financing facilities, we may be required to delay or scale back our operations, which could delay development and adversely affect our ability to generate future revenues.

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The following table summarizes our contractual obligations as of March 31, 2009:

	Payment Due by Period
			Remainder of								2013 and
Contractual obligations	Total		2009		2010		2011		2012		thereafter
Operating leases	$	471,238	$	110,884	$	142,285	$	144,694	$	73,375	$	-
Employment agreements	$	358,880	$	317,213	$	41,667	$	-	$	-	$	-
Notes payable and interest	$	25,514,587	$	2,704,149	$	5,615,782	$	17,029,526	$	46,740	$	118,390

Operating lease expense for the quarter ended March 31, 2009 and 2008 was $73,495 and $74,379, respectively.

Off-Balance Sheet Arrangements

As of March 31, 2009, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities that had been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.  As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements and accompanying notes, which have been prepared in accordance with accounting principles generally accepted in the United States.  The significant accounting policies used by us in preparing our consolidated financial statements are described in note 4 to our consolidated condensed financial statements included elsewhere herein and should be read to ensure a proper understanding and evaluation of the estimates and judgments made by management in preparing those consolidated financial statements.  

Inherent in the application of some of these policies is the judgment by management as to which of the various methods allowed under generally accepted accounting principles is the most appropriate to apply to the Company.  In addition, management must take appropriate estimates at the time the consolidated financial statements are prepared.

The methods, estimates and judgments we use in applying our accounting policies, in conformity with generally accepted accounting principles in the United States, have a significant impact on the results we report in our consolidated financial statements.  We base our estimates on our historical experience, our knowledge of economic and market factors, and on various other assumptions that we believe to be reasonable under the circumstances.  The estimates affect the carrying values of assets and liabilities.  Actual results may differ from these estimates under different assumptions or conditions.  

Although all of the policies identified in note 4 to our consolidated condensed financial statements are important in understanding the consolidated financial statements, the policies discussed below are considered by management to be central to understanding the consolidated financial statements, because of the higher level of measurement uncertainties involved in their application.  We have identified the policies below as critical to our business operations and the understanding of our results of operations.  The impact and any associated risks related to these policies on our business operations is discussed throughout Management’s Discussion and Analysis when such policies affect our reported and expected financial results.

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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.

Revenue Recognition and Deferred Revenue

We derive our 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 our 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. 

We recognize 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. We recognize 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.

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.

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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 year ended December 31, 2008, 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.

As of March 31, 2009, we had the following warrants and stock options outstanding:

●    Placement Agent Warrants to purchase 275,803 shares of common stock at exercise prices ranging from $2.70 to $5.00

●    Warrants to purchase 275,059 shares of common stock at an exercise price of $3.00

●    Director stock options to purchase 75,000 shares at exercise price of $4.75 per share

●    Other stock options totaling 345,000 shares at exercise prices ranging from $3.00 to $4.50 per share

In addition, as of March 31, 2009, our Series E Preferred Stock was convertible into 50.0 million shares of common stock and our Series E-1 Preferred Stock was convertible into 5.7 million shares of our common stock. None of these were included in the computation of diluted EPS because we had a net loss and all potential issuance of common stock would have been anti-dilutive.

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 March 31, 2008, the Company believes there is no impairment of property and equipment.

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New Accounting Pronouncements

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under GAAP. SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, with earlier adoption permitted. Management adopted this Statement on January 1, 2007 and the initial adoption SFAS 157 did not have a material impact on our financial position, results of operations, or cash flows. In February 2008, the FASB issued FASB Staff Position FAS 157-2, Effective Date of FASB Statement No. 157 (“FSP 157-2”), to partially defer FASB Statement No. 157, Fair Value Measurements (“FAS 157”). FSP 157-2 defers the effective date of FAS 157 for nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years, and interim periods within those fiscal years, beginning after November 15, 2008.  On October 29, 2008 the FASB issued FSP FAS 157-3, Determining the Fair Value of a Financial Asset When The Market for That Asset Is Not Active (FSP FAS 157-3) which clarifies the application of SFAS 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. Management has adopted the provisions of FAS 157 as it relates to non-financial assets and liabilities. The adoption did not have a material impact on our financial position, results of operations or cash flows.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51. This Statement changes the accounting and reporting for non-controlling interests in consolidated financial statements. A non-controlling interest, sometimes referred to as a minority interest, is the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent. Specifically, SFAS No. 160 establishes accounting and reporting standards that require (i) the ownership interests in subsidiaries held by parties other than the parent be clearly identified, labeled, and presented in the consolidated balance sheet within equity, but separate from the parent’s equity; (ii) the equity amount of consolidated net income attributable to the parent and to the non-controlling interest be clearly identified and presented on the face of the consolidated income statement (consolidated net income and comprehensive income will be determined without deducting minority interest, however, earnings-per-share information will continue to be calculated on the basis of the net income attributable to the parent’s shareholders); and (iii) changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently and similarly—as equity transactions. This Statement is effective for fiscal years, and interim period within those fiscal years, beginning on or after December 15, 2008. Early adoption is not permitted. SFAS No. 160 shall be applied prospectively as of the beginning of the fiscal year in which it is initially applied, except for its presentation and disclosure requirements, which shall be applied retrospectively for all periods presented. The Company adopted SFAS No. 160 on January 1, 2009.  The adoption did not have a material impact on our financial position, results of operations or cash flows.

In December 2007, the FASB issued SFAS No. 141R, Business Combinations, which is a revision of SFAS No. 141, Business Combinations. SFAS No. 141R will apply to all business combinations and will require most identifiable assets, liabilities, non-controlling interests, and goodwill acquired in a business combination to be recorded at “full fair value.” At the acquisition date, SFAS No 141R will also require transaction-related costs to be expensed in the period incurred, rather than capitalizing these costs as a component of the respective purchase price. SFAS No. 141R is effective for acquisitions completed after January 1, 2009 and early adoption is prohibited. The adoption will have a significant impact on the accounting treatment for acquisitions occurring after the effective date. The Company adopted SFAS No. 141R on January 1, 2009.  The adoption did not have a material impact on our financial position, results of operations or cash flows.

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In December 2007, the Securities and Exchange Commission issued SAB 110, Certain Assumptions Used in Valuation Methods, which extends the use of the "simplified" method, under certain circumstances, in developing an estimate of expected term of "plain vanilla" share options in accordance with SFAS No. 123R. Prior to SAB 110, SAB 107 stated that the simplified method was only available for grants made up to December 31, 2007.

In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities ("SFAS 161"). This Statement will require enhanced disclosures about derivative instruments and hedging activities to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged.  The Company adopted SFAS No. 161 on January 1, 2009.  The adoption did not have a material impact on our financial position, results of operations or cash flows.

Stock-Based Compensation

Effective January 1, 2006, we 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 our adoption of SFAS No. 123(R).

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 outstanding options at March 31, 2009 was 1.9 years.

A summary of the status of stock options and related activity for the three months ended March 31, 2009 is presented below:

Options outstanding at December 31, 2008	420,000	$	3.95
Granted	-
Exercised	-
Forfeited/expired	-
Options outstanding at March 31, 2009	420,000	$	3.95

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

A smaller reporting company is not required to provide the information required by this Item.

ITEM 4T. CONTROLS AND PROCEDURES

 a) Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of the end of the period covered by this Quarterly Report. Based on that evaluation, our principal executive officer and principal financial officer concluded that these controls and procedures were effective as of the end of the period covered by this Quarterly Report to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that information required to be disclosed is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.  

b) Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

 OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Specialty Tires of America, Inc. and Race Tires America, Inc., a division of Specialty Tires of America, Inc. (RTA), brought a civil action against us and Hoosier Racing Tire Corporation (Hoosier) in the United States District Court for the Western District of Pennsylvania, in September 2007.  RTA has sought injunctive relief and damages for alleged violations of the Sherman Act, including alleged conspiracies between us and Hoosier to restrain trade in and monopolize race tire markets.  From RTA’s initial disclosures, it appears that they are claiming in excess of $91.2 million in monetary damages plus costs and attorneys fees.  We answered RTA’s complaint denying all claims, and are vigorously defending the allegations set forth in the complaint.    The discovery phase of the case concluded on January 30, 2009, and the Court is currently considering pending  motions for summary judgment.  In the event that the case is not disposed of on a motion for summary judgment, the Court will set a schedule for expert discovery.  As such, we cannot express with any certainty at this time an opinion as to the outcome of this matter.

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 1A. RISK FACTORS

In addition to the risk factors previously disclosed in Part II, Item 6, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2008, you should consider the following risk in connection with the Company’s recent announcement of its intent to go private:

If we go private, our stockholders may not have access to current information regarding the Company.

Our Board of Directors and a majority of our stockholders have approved a 1-for-101 reverse stock split of our common stock (the “Reverse Split”).  The intended effect of the Reverse Split is to reduce the number of record holders of our common stock to fewer than 300 so that we will be eligible to terminate the public registration of our common stock under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Provided that the Reverse Stock Split has the intended effect, we will file to deregister our common stock with the Securities and Exchange Commission (the "Commission") and to terminate the listing of shares of our common stock on the Over the Counter Bulletin Board (“OTCBB”).  In such case, we will no longer be required to file periodic reports with the Commission. As a result, and assuming consummation of the Reverse Split, our stockholders may not have access to current financial or other information regarding the Company that would otherwise be available to stockholders in the event we were required to file periodic and other reports with the Commission under the Exchange Act.

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ITEM 6. EXHIBITS

The following exhibits are included as part of this Quarterly Report:

Exhibit Number	Description
10.1	Amended and Restated Secured Promissory Note, dated March 31, 2009, in the principal amount of $2.0 million
31	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14 a under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002
32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer and Chief Financial Officer

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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.

	WORLD RACING GROUP, INC. (Registrant)
Date:  May 15, 2009	By:	/s/ Brian M. Carter
		Brian M. Carter
		Chief Executive Officer and Chief Financial Officer