##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the quarterly period ended June 30, 2005
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the transition period from  to
 0-18045
 
 Commission File Number
 Dirt
Motor Sports, Inc.
  Delaware
    
    84-0953839(State of incorporation)
    
    (IRS Employer Identification No.)
 2500 McGee Drive, Suite 147, Norman, OK 73072
 
  (405) 360-5047 or (877) 5-RACING
 
  þ o
 APPLICABLE ONLY TO CORPORATE ISSUERS
  There
were 12,489,554 shares of common stock outstanding as of August 15, 2005.
 þ o




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##### Table of Contents



TABLE OF CONTENTS
 PAGEPART I  FINANCIAL INFORMATIONItem 1. Consolidated Financial StatementsConsolidated Balance Sheets  June 30, 2005 and
September 30, 2004
    
    
    3Consolidated Statements of Operations for the Three and Nine Months
Ended June 30, 2005 and 2004
    
    
    4Consolidated Statements of Stockholders Equity for the Nine
Months Ended June 30, 2005
    
    
    5Consolidated Statements of Cash Flows for the Nine Months
Ended June 30, 2005 and 2004
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis
    
    
    19Item 3. Controls and Procedures
    
    
    29PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    29Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30Item 4. Submission of Matters to a Vote of Security Holders
    
    
    30Item 6. Exhibits and Reports on Form 8-K
    
    
    30Signatures
    
    
    32Rule 13a-14(a)/15d-14(a) Certification of Paul A. KrugerRule 13a-14(a)/15d-14(a) Certification of Brian CarterSection 1350 Certification of Paul A. Kruger and Brian Carter
 2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 DIRT MOTOR SPORTS, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2005 and September 30, 2004
 June 30,
    
    September 30,2005
    
    2004(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    2,227,791
    
    
    $
    5,005,930Accounts receivable  trade
    
    
    591,832
    
    
    
    356,614Inventory
    
    
    383,138
    
    
    
    72,891Prepaid expenses and other current assets
    
    
    174,074
    
    
    
    93,979Total current assets
    
    
    3,376,835
    
    
    
    5,529,414Land, buildings and equipment, net
    
    
    10,878,007
    
    
    
    3,998,112Trademarks
    
    
    242,452
    
    
    
    142,452Goodwill, net of impairment of $2,955,000 in 2005 and 2004
    
    
    8,290,559
    
    
    
    4,431,466Other assets, net of amortization of $26,000 in 2005 and $22,000 in 2004
    
    
    255,285
    
    
    
    214,369Total assets
    
    $
    23,043,138
    
    
    $
    14,315,813LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable
    
    $
    940,500
    
    
    $
    358,354Accrued liabilities
    
    
    2,771,273
    
    
    
    2,452,184Deferred revenues
    
    
    1,017,437
    
    
    
    1,259,028Notes payable  net of discount of $3,612,932 in 2005
    
    
    982,066
    
    
    
    160,000Total current liabilities
    
    
    5,711,276
    
    
    
    4,229,566Notes payable  long term , net of discount of $1,333,330 in 2004
    
    
    5,346,509
    
    
    
    666,667Total liabilities
    
    
    11,057,785
    
    
    
    4,896,233Commitments and contingencies (Notes 14 and 15)Stockholders equity:Series A Preferred stock, $0.01 par value; 7,500 shares authorized;
4,790 shares issued and outstanding at September 30, 2004
    
    
    
    
    
    
    12,933,988Series B Preferred stock, $0.01 par value; 8,000 shares authorized;
6,883 shares issued and outstanding at June 30, 2005
    
    
    20,648,456
    
    
    
    Series C Preferred stock, $0.01 par value; 2,500 shares authorized;
2,500 shares issued and outstanding at June 30, 2005
    
    
    6,250,000
    
    
    
    Common stock, $0.0001 par value; 100,000,000 shares authorized; 14,439,554
and 14,230,170 shares issued and outstanding at June 30, 2005 and
September 30, 2004, respectively
    
    
    1,444
    

    
    
    1,423Additional paid-in capital
    
    
    6,710,219
    
    
    
    4,665,965Accumulated deficit
    
    
    (21,624,766
    )
    
    
    (8,181,796
    )Total stockholders equity
    
    
    11,985,353
    
    
    
    9,419,580Total liabilities and stockholders equity
    
    $
    23,043,138
    
    
    $
    14,315,813
  3




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DIRT MOTOR SPORTS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended June 30, 2005 and 2004
(unaudited)
 Three months ended
    
    Nine months endedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Revenues:Race sanctioning and event fees
    
    $
    2,634,549
    
    
    $
    699,852
    
    
    $
    3,605,420
    
    
    $
    890,433Admission fees and ticket sales
    
    
    797,900
    
    
    
    
    
    
    
    1,890,825
    
    
    
    Sponsorship and advertising
    
    
    453,273
    
    
    
    28,634
    
    
    
    924,303
    
    
    
    48,818Merchandise sales
    
    
    237,219
    
    
    
    228,631
    
    
    
    669,949
    
    
    
    321,008Other revenue
    
    
    91,104
    
    
    
    22,814
    
    
    
    200,808
    
    
    
    32,264Total revenues
    
    $
    4,214,045
    
    
    $
    979,931
    
    
    $
    7,291,305
    
    
    $
    1,292,523Operating expenses:Track and event operations
    
    
    4,599,753
    
    
    
    1,140,232
    
    
    
    8,531,590
    
    
    
    1,695,232Sales and marketing
    
    
    580,030
    
    
    
    8,767
    
    
    
    977,006
    
    
    
    52,707Merchandise operations and cost of sales
    
    
    223,385
    
    
    
    131,590
    
    
    
    535,026
    
    
    
    216,382General and administrative
    
    
    1,151,570
    
    
    
    534,990
    
    
    
    2,542,299
    
    
    
    1,142,335Non-cash stock compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    195,915
    
    
    
    20,467
    
    
    
    310,001
    
    
    
    39,237Total operating expenses
    
    
    6,750,653
    
    
    
    1,836,046
    
    
    
    12,895,922
    
    
    
    3,145,893Loss from operations
    
    
    (2,536,608
    )
    
    
    (856,115
    )
    
    
    (5,604,617
    )
    
    
    (1,853,370
    )Interest expense, net
    
    
    (119,902
    )
    
    
    (155,547
    )
    
    
    (1,588,353
    )
    
    
    (225,601
    )Net loss before income taxes
    
    $
    (2,656,510
    )
    
    $
    (1,011,662
    )
    
    $
    (7,192,970
    )
    
    $
    (2,078,971
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net (loss)
    
    $
    (2,656,510
    )
    
    $
    (1,011,662
    )
    
    $
    (7,192,970
    )
    
    $
    (2,078,971
    )Dividends on preferred stock:Warrants and beneficial conversion, Series BBeneficial conversion, Series C
    
    
    
    
    
    
    
    
    
    
    (5,000,000
    )
    
    
    Exchange of Series A for Series B Preferred
    
    
    
    
    
    
    
    
    
    
    (800,000
    )
    
    
    Stock Exchange of warrants for Series C
    
    
    
    
    
    
    
    
    
    
    (1,667,801
    )
    
    
    Preferred Stock
    
    
    
    
    
    
    
    
    
    
    (5,450,000
    )
    
    
    Net loss applicable to common stock
    
    $
    (2,656,510
    )
    
    $
    (1,011,662
    )
    
    $
    (20,110,771
    )
    
    $
    (2,078,971
    )Net loss applicable to common stock
per common share Basic and diluted
    
    $
    (0.18
    )
    
    $
    (0.06
    )
    
    $
    (1.40
    )
    
    $
    (0.12
    )Weighted average common shares outstandingBasic and diluted
    
    
    14,439,554
    
    
    
    17,403,047
    
    
    
    14,389,326
    
    
    
    17,277,697
  4




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DIRT MOTOR SPORTS, INC.
 
 CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS DEFICIT
For the Nine Months Ended June 30, 2005
(unaudited)
 AdditionalPreferred Stock
    
    Common Stock
    
    Paid-in
    
    AccumulatedShares
    
    Amounts
    
    Shares
    
    Amounts
    
    Capital
    
    (Deficit)
    
    TotalBalance, September 30, 2004
    
    
    4,790
    
    
    $
    12,933,988
    
    
    
    14,230,170
    
    
    $
    1,423
    
    
    $
    4,665,965
    
    
    $
    (8,181,796
    )
    
    $
    9,419,580Common stock issued, acquisitions
    
    
    
    
    
    
    
    
    
    
    164,384
    
    
    
    16
    
    
    
    599,984
    
    
    
    
    
    
    
    600,000Common stock issued
    
    
    
    
    
    
    
    
    
    
    45,000
    
    
    
    5
    
    
    
    8,995
    
    
    
    
    
    
    
    9,000Partial conversion of note payable into Series A
preferred stock
    
    
    426
    
    
    
    1,149,622
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,149,622Value assigned to beneficial conversion feature and
warrants issued in connection with the
issuance of Series B preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000,000
    
    
    
    
    
    
    
    5,000,000Issuance of Series B preferred stock
    
    
    1,667
    
    
    
    5,000,000
    
    
    
    
    
    
    
    
    
    
    
    (5,000,000
    )
    
    
    
    
    
    
    Exchange of warrant for Series C preferred stock
    
    
    2,500
    
    
    
    6,250,000
    
    
    
    
    
    
    
    
    
    
    
    (800,000
    )
    
    
    (6,250,000
    )
    
    
    (800,000
    )Value assigned to beneficial conversion feature of
Series C preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    800,000
    
    
    
    
    
    
    
    800,000Exchange of Series B preferred stock for Series A
preferred stock, increase in liquidation
preference
    
    
    
    
    
    
    1,564,846
    
    
    
    
    
    
    
    
    
    
    
    (1,564,846
    )
    
    
    
    
    
    
    Value assigned to warrants issued in connection
with acquisitions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132,187
    
    
    
    
    
    
    
    132,187Placement agent fees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (500,000
    )
    
    
    
    
    
    
    (500,000
    )Registration and other costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (45,000
    )
    
    
    
    
    
    
    (45,000
    )Value assigned to warrants issued in connection
with issuance of notes payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,412,934
    
    
    
    
    
    
    
    3,412,934Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,192,970
    )
    
    
    (7,192,970
    )Balance, June 30, 2005
    
    
    9,383
    
    
    $
    26,898,456
    
    
    
    14,439,554
    
    
    $
    1,444
    
    
    $
    6,710,219
    
    
    $
    (21,624,766
    )
    
    $
    11,985,353
  -5-




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DIRT MOTOR SPORTS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended June 30, 2005 and 2004
(unaudited)
 2005
    
    2004Cash flows from operating activities:Net (loss)
    
    $
    (7,192,970
    )
    
    $
    (2,078,971
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization
    
    
    310,001
    
    
    
    39,237Assumption of prepaid sanction fees recognized as income
    
    
    
    
    
    
    (525,000
    )Non-cash interest expense, notes payable
    
    
    1,482,952
    
    
    
    Common stock issued for expenses
    
    
    9,000
    
    
    
    Increase (decrease) in cash for changes in:Accounts receivable
    
    
    (235,218
    )
    
    
    Inventory
    
    
    (310,247
    )
    
    
    (79,791
    )Prepaid expenses
    
    
    (96,932
    )
    
    
    (51,543
    )Other current assets
    
    
    16,837
    
    
    
    (104,440
    )Other non-current assets
    
    
    (98,191
    )
    
    
    Accounts payable
    
    
    227,146
    
    
    
    331,357Accrued liabilities
    
    
    (124,110
    )
    
    
    769,264Deferred revenue
    
    
    (241,591
    )
    
    
    417,381Net cash (used in) operating activities
    
    
    (6,253,320
    )
    
    
    (1,282,506
    )Cash flows from investing activities:Purchase of property, contract rights, trademarks and goodwill
    
    
    (6,821,327
    )
    
    
    (2,109,116
    )Advances on acquisition
    
    
    
    
    
    
    (1,008,139
    )Additions to other assets
    
    
    
    
    
    
    (265,100
    )Net cash (used in) investing activities
    
    
    (6,821,327
    )
    
    
    (3,382,355
    )Cash flows from financing activities:Issuance of common stock for cash
    
    
    
    
    
    
    250,002Issuance of preferred stock for cash
    
    
    5,000,000
    
    
    
    Payments on notes payable
    
    
    (1,145,491
    )
    
    
    (600,000
    )Payments of placement agent fees and other issuance costs
    
    
    (545,000
    )
    
    
    Proceeds
from issuance of notes payable
    
    
    6,987,000
    
    
    
    5,039,352Net cash provided by financing activities
    
    
    10,296,509
    
    
    
    4,689,354Net increase (decrease) in cash and cash equivalents
    
    
    (2,778,139
    )
    
    
    24,493Cash and cash equivalents, beginning of period
    
    
    5,005,930
    
    
    
    615Cash and cash equivalents, end of period
    
    $
    2,227,791
    
    
    $
    25,108Supplemental schedule of non-cash activities:Issuance of common stock, deposit on DIRT acquisition
    
    $
    
    
    
    $
    4,675,002Payment of note receivable through acquisition
    
    $
    
    
    
    $
    612,047Assumption of sanction deposits through acquisition
    
    $
    
    
    
    $
    525,000Purchase price of acquisition funded through note payable
    
    $
    
    
    
    $
    3,003,185Cash payments for interest
    
    $
    113,940
    
    
    $
    Issuance of warrants, acquisitions
    
    $
    132,187
    
    
    $
    Issuance of common stock, acquisitions
    
    $
    600,000
    
    
    $
    Conversion of Convertible Preferred Stock: Series A to Series B
    
    $
    15,648,456
    
    
    $
    Non-cash revenues and expenses, barter agreements
    
    $
    62,000
    
    
    $
    
  -6-




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DIRT MOTOR SPORTS, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005
(Unaudited)
 NOTE 1  DESCRIPTION OF BUSINESS
         NOTE 2  GOING CONCERN
    -7-




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NOTE 3  BASIS OF PRESENTATION
   NOTE 4  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Reclassifications
  Use of Estimates
  Principles of Consolidation
  Revenue Recognition and Deferred Revenue
  Accounting for Advertising Barter Transactions
 Expense Recognition and Deferral
   -8-




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Net loss Per Share
   
    
    Series A warrants to purchase 4,172,925 shares of common stock at an exercise price of $3.00
    
    Series B warrants to purchase 933,334 shares of common stock at an exercise price of $4.00
    
    Series C warrants to purchase 2,200,000 shares of common stock at an exercise price of $5.00
    
    Placement Agent Warrants to purchase 1,186,266 shares of common stock at exercise prices
ranging from $2.70 to $5.00
    
    Warrants to purchase 40,000 shares of common stock issued in connection with the UMP
acquisition at an exercise price of $3.65
  Cash and Cash Equivalents
  Inventories
  Property and Equipment
   Purchase Accounting
  Intangible Assets
   -9-




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Income Taxes
  Concentration of Credit Risk
  New Accounting Pronouncements
        -10-




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NOTE 5  ACQUISITIONS
 World of Outlaws, Inc.
  
    
    Cash and acquisition costs of $2,421,389
    
    Forgiveness of $1,450,000 plus accrued interest of $21,815 promissory note payable to the Company
    
    Assumptions of obligations for $612,500 in deposits World of Outlaws had received for
sanctioning of future sprint car racing events
    
    Assumption of $777,677 of other obligations of World of Outlaws
  Transportation equipment
    
    $
    184,926Other equipment
    
    
    8,875Trade-marks and Trade-names
    
    
    142,452Goodwill
    
    
    4,945,058Total assets acquired
    
    
    5,281,311Advances from promoters
    
    
    612,500Other current obligations
    
    
    777,677Total liabilities assumed
    
    
    1,390,177Net consideration paid in cash and debt forgiveness
    
    $
    3,891,134
  Dirt Motorsports, Inc.
       -11-




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##### Table of Contents



DIRT
    
    Rolling Wheels
    
    Cayuga CountyCurrent Assets
    
    $
    459,217
    
    
    $
    
    
    
    $
    Property and Equipment
    
    
    249,635
    
    
    
    1,088,777
    
    
    
    2,293,333Goodwill
    
    
    2,536,700Total assets acquired
    
    
    3,245,552
    
    
    
    1,088,777
    
    
    
    2,293,333Current Liabilities
    
    
    1,130,910
    
    
    
    
    
    
    
    Net assets acquired
    
    $
    2,114,642
    
    
    $
    1,088,777
    
    
    $
    2,293,333
 United Midwestern Promoters Motorsports, LLC
    Cash paid for acquisition
    
    $
    1,800,000Value of stock issued
    
    
    600,000Value of warrants issued
    
    
    132,187Accrued points fund
    
    
    443,200Accounts payable assumed
    
    
    355,000Accrued closing costs
    
    
    100,000Closing expenses paid
    
    
    25,443$
    3,455,830Allocation to goodwill
    
    $
    3,056,330Allocation to land, buildings and equipment
    
    
    99,500Allocation to trademarks
    
    
    100,000Allocation to contract rights
    
    
    200,000$
    3,455,830
 -12-




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SponsorshipYear
    
    Commitment2005
    
    $
    750,0002006
    
    
    950,000Total
    
    $
    1,700,000
     Lernerville Speedway
   (a)
    
    $500,000 was paid at the closing of the transactions under the Lernerville Agreement;(b)
    
    $110,000 was paid on May 30, 2005;(c)
    
    $110,000 will be payable on or prior to October 30, 2005;(d)
    
    $110,000 will be payable on or prior to May 30, 2006;(e)
    
    $110,000 will be payable on or prior to May 30, 2007; and(f)
    
    the remaining $2,300,000 is payable pursuant to the terms of a four year promissory
note bearing interest at seven percent per year, with accrued interest payable annually.
   Consideration:Cash paid at closing
    
    $
    500,000Notes payable issued
    
    
    2,300,000Mortgage notes payable issued
    
    
    440,000Direct transaction costs
    
    
    138,249Adjusted purchase price
    
    $
    3,378,249Land
    
    
    (1,124,800
    )Buildings and improvements
    
    
    (1,590,000
    )Vehicles and other operating assets
    
    
    (104,000
    )Excess of cost over fair value of net identifiable assets (goodwill)
    
    $
    559,449
 Mid America Racing Series (MARS)
 -13-




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##### Table of Contents



Vehicles
    
    $
    1,500Communications equipment
    
    
    500Excess of cost over fair value of identifiable assets (goodwill)
    
    
    148,000Total purchase price
    
    $
    150,000
 Volusia Speedway
   Consideration:Cash paid at closing
    
    $
    1,600,000Notes payable issued
    
    
    2,000,000Direct transaction costs
    
    
    26,393Total purchase price
    
    $
    3,626,393Land
    
    
    (2,700,000
    )Buildings & equipment
    
    
    (926,393
    )
 NOTE 6  PROPERTY AND EQUIPMENT
  Cost
    
    Depreciable LifeLand
    
    
    6,773,818
    
    
    
    N/ATransportation equipment
    
    
    1,306,012
    
    
    5-7 yearsBuildings and grandstands
    
    
    3,002,615
    
    
    7-40 yearsOffice furniture and equipment
    
    
    273,722
    
    
    3-7 yearsAudio / Video equipment
    
    
    142,520
    
    
    5-7 years11,498,687Less accumulated depreciation
    
    
    (620,680
    )Property and equipment, net
    
    $
    10,878,007
  -14-




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NOTE 7  GOODWILL
  Goodwill incurred in connection with World of Outlaws acquisition
    
    $
    4,945,058Goodwill incurred in connection with the DIRT acquisition
    
    
    2,536,700Goodwill incurred in connection with the UMP acquisition
    
    
    3,056,330Goodwill incurred in connection with the MARS acquisition
    
    
    148,000Goodwill incurred in connection with the Lernerville acquisition
    
    
    559,449Less impairment of goodwill associated with the
World of Out laws acquisition
    
    
    (2,954,978
    )Net goodwill at June 30, 2005
    
    
    8,290,559Total net goodwill and intangibles
    
    $
    8,290,559
   NOTE 8  ACCRUED LIABILITIES
  June 30,
    
    September 30,2005
    
    2004Points fund
    
    $
    812,166
    
    
    $
    1,282,992Pre-existing liabilities  DIRT acquisition
    
    
    925,000
    
    
    
    925,000Interest
    
    
    146,064
    
    
    
    86,435Pre-existing liabilities  UMP acquisition
    
    
    261,121
    
    
    
    Other accrued liabilities
    
    
    626,922
    
    
    
    157,757Total Accrued Liabilities
    
    $
    2,771,273
    
    
    $
    2,452,184
 NOTE 9  DEFERRED REVENUE
  June 30,
    
    September 30,2005
    
    2004Sanction fee advances
    
    $
    374,200
    
    
    
    605,700Sponsorship prepayments
    
    
    423,200
    
    
    
    272,989Memberships
    
    
    117,973
    
    
    
    45,111Season Passes / Prepaid Tickets
    
    
    102,064
    
    
    
    335,228$
    1,017,437
    
    
    $
    1,259,028
 NOTE 10  NOTES PAYABLE
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##### Table of Contents



2005
    
    $
    4,276,0462006
    
    
    381,7412007
    
    
    1,282,0092008
    
    
    182,9922009 +
    
    
    3,818,721$
    9,941,509
 NOTE 11  STOCKHOLDERS EQUITY
   Preferred Stock
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NOTE 12  RELATED PARTY TRANSACTIONS
   NOTE 13  INCOME TAXES
    NOTE 14  COMMITMENTS
    Payment Due by PeriodLess than
    
    2 to 3
    
    4 to 5
    
    After 5Contractual obligations
    
    Total
    
    1 Year
    
    Years
    
    Years
    
    YearsOperating leases
    
    $
    50,580
    
    
    $
    28,580
    
    
    $
    22,000
    
    
    $
    
    
    
    $
    
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##### Table of Contents



NOTE 15  LITIGATION AND CONTINGENCIES
    NOTE 16  CONSOLIDATION OF OPERATIONS
  NOTE 17  SUBSEQUENT EVENTS
   
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 FORWARD LOOKING STATEMENTS
  -19-




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##### Table of Contents



Nature of Business
        World of Outlaws, Inc.
  
    
    Cash and acquisition costs of $2,421,389
    
    Forgiveness of $1,450,000 plus accrued interest of $21,815 promissory note payable to the Company
    
    Assumptions of obligations for $612,500 in deposits World of Outlaws had received for
sanctioning of future sprint car racing events
    
    Assumption of $777,677 of other obligations of World of Outlaws
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##### Table of Contents



Transportation equipment
    
    $
    184,926Other equipment
    
    
    8,875Trade-marks and Trade-names
    
    
    142,452Goodwill
    
    
    4,945,058Total assets acquired
    
    
    5,281,311Advances from promoters
    
    
    612,500Other current obligations
    
    
    777,677Total liabilities assumed
    
    
    1,390,177Net consideration paid in cash and debt forgiveness
    
    $
    3,891,134
  Dirt Motorsports, Inc.
          DIRT
    
    Rolling Wheels
    
    Cayuga CountyCurrent Assets
    
    $
    459,217
    
    
    $
    
    
    
    $
    Property and Equipment
    
    
    249,635
    
    
    
    1,088,777
    
    
    
    2,293,333Goodwill
    
    
    2,536,700Total assets acquired
    
    
    3,245,552
    
    
    
    1,088,777
    
    
    
    2,293,333Current Liabilities
    
    
    1,130,910
    
    
    
    
    
    
    
    Net assets acquired
    
    $
    2,114,642
    
    
    $
    1,088,777
    
    
    $
    2,293,333
 United Midwestern Promoters Motorsports, LLC
  -21-




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##### Table of Contents



Cash paid for acquisition
    
    $
    1,800,000Value of stock issued
    
    
    600,000Value of warrants issued
    
    
    132,187Accrued points fund
    
    
    443,200Accounts payable assumed
    
    
    355,000Accrued closing costs
    
    
    100,000Closing expenses paid
    
    
    25,443$
    3,455,830Allocation to goodwill
    
    $
    3,056,330Allocation to land, buildings and equipment
    
    
    99,500Allocation to trademarks
    
    
    100,000Allocation to contract rights
    
    
    200,000$
    3,455,830
  SponsorshipYear
    
    Commitment2005
    
    $
    750,0002006
    
    
    950,000Total
    
    $
    1,700,000
     Lernerville Speedway
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##### Table of Contents



(g)
    
    $500,000 was paid at the closing of the transactions under the Lernerville Agreement;(h)
    
    $110,000 was paid on May 30, 2005;(i)
    
    $110,000 will be payable on or prior to October 30, 2005;(j)
    
    $110,000 will be payable on or prior to May 30, 2006;(k)
    
    $110,000 will be payable on or prior to May 30, 2007; and(l)
    
    the remaining $2,300,000 is payable pursuant to the terms of a four year promissory
note bearing interest at seven percent per year, with accrued interest payable annually.
   Consideration:Cash paid at closing
    
    $
    500,000Notes payable issued
    
    
    2,300,000Mortgage notes payable issued
    
    
    440,000Direct transaction costs
    
    
    138,249Adjusted purchase price
    
    $
    3,378,249Land
    
    
    (1,124,800
    )Buildings and improvements
    
    
    (1,590,000
    )Vehicles and other operating assets
    
    
    (104,000
    )Excess of cost over fair value of net identifiable assets (goodwill)
    
    $
    559,449
 Mid America Racing Series (MARS)
   Vehicles
    
    $
    1,500Communications equipment
    
    
    500Excess of cost over fair value of identifiable assets (goodwill)
    
    
    148,000Total purchase price
    
    $
    150,000
 Volusia Speedway
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Consideration:Cash paid at closing
    
    $
    1,600,000Notes payable issued
    
    
    2,000,000Direct transaction costs
    
    
    26,393Total purchase price
    
    $
    3,626,393Land
    
    
    (2,700,000
    )Buildings & equipment
    
    
    (926,393
    )
 Results of Operations  Impact of Seasonality and Weather on Quarterly Results
    Results of Operations  Comparison of Three Months Ended June 30, 2005 (2005) and 2004 (2004)
  Revenues
  Operating
expenses
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##### Table of Contents



Results of Operations  Comparison of Nine Months Ended June 30, 2005 (2005) and 2004 (2004)
  Revenues
  Operating
expenses
       Liquidity and Capital Resources
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Payment Due by PeriodLess than
    
    2 to 3
    
    4 to 5
    
    After 5Contractual obligations
    
    Total
    
    1 Year
    
    Years
    
    Years
    
    YearsOperating leases
    
    $
    50,580
    
    
    $
    28,580
    
    
    $
    22,000
    
    
    $
    
    
    
    $
    Notes payable and accrued interest
    
    $
    11,266,555
    
    
    $
    5,018,613
    
    
    $
    1,867,325
    
    
    $
    1,906,032
    
    
    $
    2,474,585
  The Companys significant accounting policies include:
 Reclassifications
  Use of Estimates
  Principles of Consolidation
  -26-




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##### Table of Contents



Revenue Recognition and Deferred Revenue
  Accounting for Advertising Barter Transactions
 Expense Recognition and Deferral
   Net loss Per Share
   
    
    Series A warrants to purchase 4,172,925 shares of common stock at an exercise price of $3.00
    
    Series B warrants to purchase 933,334 shares of common stock at an exercise price of $4.00
    
    Series C warrants to purchase 2,200,000 shares of common stock at an exercise price of $5.00
    
    Placement Agent Warrants to purchase 1,186, 266 shares of common stock at exercise
prices ranging from $2.70 to $5.00
    
    Warrants to purchase 40,000 shares of common stock issued in connection with the UMP
acquisition at an exercise price of $3.65
  Cash and Cash Equivalents
  -27-




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Inventories
  Property and Equipment
   Purchase Accounting
  Intangible Assets
   Income Taxes
  Concentration of Credit Risk
  New Accounting Pronouncements
   -28-




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ITEM 3. CONTROLS AND PROCEDURES
   
 PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   
   
 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
   2.1
    
    Membership Interests Purchase Agreement, dated as of November 30, 2004, by and among United
Midwestern Promoters Motorsports, LLC, National Speedways of Iowa, Inc., Track Enterprises,
Inc., Ken Schrader Racing, Inc., Lebanon Valley Auto Racing Corp., and Boundless Motor Sports
Racing, Inc. (Incorporated by reference to Exhibit 2.1 of the Companys Current Report on Form
8-K filed with the Commission on December 6, 2004).4.1
    
    Series B Convertible Preferred Stock Purchase Agreement, dated as of February 25, 2005, by
and among Boundless Motor Sports Racing, Inc., a Colorado corporation, and the purchasers set
forth therein. (Incorporated by reference to Exhibit 4.1 of the Companys Current Report on
Firm 8-K filed with the Commission on March 2, 2005)4.2
    
    Certificate of Designation of the Relative Rights and Preferences of the Series B Convertible
Preferred Stock. (Incorporated by reference to Exhibit 4.2 of the Companys Current Report on
Firm 8-K filed with the Commission on March 2, 2005)4.3
    
    Form of Series B Warrant. (Incorporated by reference to Exhibit 4.3 of the Companys Current
Report on Firm 8-K filed with the Commission on March 2, 2005)4.4
    
    Registration Rights Agreement dated as of February 25, 2005, by and among Boundless Motor
Sports Racing, Inc., a Colorado corporation, and the purchasers set forth therein.
(Incorporated by reference to Exhibit 4.4 of the Companys Current Report on Firm 8-K filed
with the Commission on March 2, 2005)4.5
    
    Series C Convertible Preferred Stock Purchase Agreement, dated as of February 25, 2005, by
and among Boundless Motor Sports Racing, Inc., a Colorado corporation, and the purchasers set
forth therein. (Incorporated by reference to Exhibit 4.5 of the Companys Current Report on
Firm 8-K filed with the Commission on March 2, 2005)4.6
    
    Certificate of Designation of the Relative Rights and Preferences of the Series C Convertible
Preferred Stock. (Incorporated by reference to Exhibit 4.6 of the Companys Current Report on
Firm 8-K filed with the Commission on March 2, 2005)4.7
    
    Form of Series C Warrant. (Incorporated by reference to Exhibit 4.7 of the Companys Current
Report on Firm 8-K filed with the Commission on March 2, 2005)4.8
    
    Registration Rights Agreement dated as of February 25, 2005, by and among Boundless Motor
Sports Racing, Inc., a Colorado corporation, and the purchasers set forth therein.
(Incorporated by reference to Exhibit 4.8 of the Companys Current Report on Firm 8-K filed
with the Commission on March 2, 2005)4.9
    
    Certificate of Designation of the Relative Rights and Preferences of the Series A Convertible
Preferred Stock (filed as Exhibit 4.2 to the Companys Current Report on Form 8-K filed with
the Commission on August 4, 2004).
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##### Table of Contents



4.10
    
    Form of Series A Warrant (filed as Exhibit 4.3 to the Companys Current Report on Form 8-K
filed with the Commission on August 4, 2004).10.1
    
    Form of Promissory Note dated January 13, 2005, issued by Boundless Motor Sports Racing, Inc.
(Incorporated by reference to exhibit 10.1 of the Companys current report on 8-K filed with
the Commission on January 19, 2005)10.2
    
    Asset Purchase Agreement, dated as of June 7, 2005, by and among Volusia Operations, LLC,
Volusia Speedway, Inc. and Richard F. Murphy. (Incorporated by reference to exhibit 10.1 if
the Companys current report on 8-K filed with the Commission on July 7, 2005)10.3
    
    Form of Promissory Note dated June 30, 2005, issued by Boundless Motor Sports Racing, Inc.
(Incorporated by reference to exhibit 10.2 of the Companys current report on 8-K filed with
the Commission on July 7, 2005)10.4
    
    Form of Mortgage dated June 30, 2005, issued by Boundless Motor Sports Racing, Inc.
(Incorporated by reference to exhibit 10.3 of the Companys current report on 8-K filed with
the Commission on July 7, 2005)10.5
    
    Form of Security Agreement dated June 30, 2005, by and between Volusia Operations, LLC and
Richard F. Murphy. (Incorporated by reference to exhibit 10.4 of the Companys current report
on 8-K filed with the Commission on July 7, 2005)10.6
    
    Form of Guaranty dated June 30, 2005, issued by Boundless Motor Sports Racing, Inc. for the
benefit of Richard F. Murphy. (Incorporated by reference to exhibit 10.5 of the Companys
current report on 8-K filed with the Commission on July 7, 2005)10.7
    
    Form of Promissory Note dated June 30, 2005, issued by Boundless Motor Sports Racing, Inc.
(Incorporated by reference to exhibit 10.1 of the Companys current report on 8-K filed with
the Commission on July 8, 2005)10.8
    
    Form of Warrant dated June 30, 2005, issued by Boundless Motor Sports Racing, Inc.
(Incorporated by reference to exhibit 10.2 of the Companys current report on 8-K filed with
the Commission on July 8, 2005)10.9
    
    Securities Exchange Agreement dated July 26, 2005, by and between Mr. Paul A. Kruger and Dirt
Motor Sports, Inc. (Incorporated by reference to exhibit 10.1 of the Companys current report
on 8-K filed with the Commission on July 26, 2005)10.10
    
    Business Relationship Termination Agreement dated August 9, 2005, by and among Dirt Motor
Sports, Inc., a Delaware corporation, Bobby P. Hartslief, Renee Hartslief, Cale Henry
Hartslief, Tess Jordan Hartslief and Paul A. Kruger. (Incorporated by reference to exhibit
10.1 of the Companys current report on 8-K filed with the Commission on August 10, 2005)31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Paul A. Kruger *31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Brian Carter *32
    
    Section 1350 Certification of Paul A. Kruger and Brian Carter *
 
 *
    Filed herewith   (1)
    
    Form 8-K filed on April 5, 2005 reporting under items 1 and 9, the issue and sale of Series B
and C Convertible Preferred Stock.(2)
    
    Form 8-K filed on June 30, 2005 reporting under items 1, and 9, the entry into a material
definitive agreement for the acquisition of substantially all the assets of Volusia Speedway
Park, Inc.(3)
    
    Form 8-K filed on June 30, 2005 reporting under items 1, and 9, the entry into a material
definitive agreement for the creation of a direct financial obligation for an aggregate
principle of $4,000,000.
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SIGNATURES
  DIRT MOTOR SPORTS, INC.
(Registrant)Date: August 15, 2005
    /s/ Paul A. KrugerPaul A Kruger, Chief Executive Officer Date: August 15, 2005
    /s/ Brian CarterBrian Carter, Chief Financial Officer -32-