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 June 30, 2008




 ̈
            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 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
August 11, 2008, the issuer had 32,776,735 outstanding shares of Common
Stock.








TABLE
OF CONTENTS











PART
      I
            FINANCIAL
      INFORMATION
            1Item
      1.
            Financial
      Statements
            1Consolidated Balance Sheets –
      June 30, 2008 and December 31, 2007
            1Consolidated Statements of
      Operations for the Threeand SixMonths Ended June 30, 2008 and
      2007
            2Consolidated Statements of
      Stockholders' Deficit for theSixMonths
      Ended June 30, 2008
            3Consolidated Statements of Cash
      Flows for theSixMonths Ended June 30, 2008 and
      2007
            4Notes to Consolidated
      Financial Statements
            5Item
      2.
            Management’s Discussion and
      Analysis of Financial Condition and Results of
      Operations
            16Item
      4T.
            Controls
      and Procedures
            25PART
      II
            OTHER
      INFORMATION
            25Item
      1.
            Legal
      Proceedings
            25Item
      6.
            Exhibits
            26Signatures
            
            27








PART
I




FINANCIAL
INFORMATION







ITEM
1.  FINANCIAL STATEMENTS




WORLD
RACING GROUP, INC.


CONSOLIDATED
BALANCE SHEETS




June
30, 2008 and December 31, 2007




June
      30, 2008
              (Unaudited)
            
            
            December
      31, 2007ASSETSCurrent
      assetsCash
      and cash equivalents
            
            $
            1,329,103
            
            
            $
            1,668,611Accounts
      receivable — trade
            
            
            1,618,295
            
            
            
            317,678Inventory
            
            
            134,637
            
            
            
            10,252Prepaid
      interest, secured notes
            
            
            38,542
            
            
            
            721,424Prepaid
      expenses and other current assets
            
            
            285,693
            
            
            
            374,779Total
      current assets
            
            
            3,406,270
            
            
            
            3,092,744Land,
      buildings and equipment, net
            
            
            10,332,812
            
            
            
            10,300,476Trademarks
            
            
            100,000
            
            
            
            100,000Goodwill,
      net of impairment of $10,320,537 in 2008 and 2007
            
            
            —
            
            
            
            —Other
      assets, net of amortization of $439,274 in 2008 and $209,598 in
      2007
            
            
            946,212
            
            
            
            965,888Total
      assets
            
            $
            14,785,294
            
            
            $
            14,459,108LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)Current
      liabilitiesAccounts
      payable
            
            $
            807,844
            
            
            $
            620,973Accrued
      liabilities
            
            
            2,735,131
            
            
            
            1,125,404Deferred
      revenues
            
            
            853,064
            
            
            
            421,438Notes
      payable
            
            
            1,121,690
            
            
            
            689,208Total
      current liabilities
            
            
            5,517,729
            
            
            
            2,857,023Notes
      payable, net of discount of $2,163,112 in 2008 and $2,515,966 in
      2007
            
            
            16,050,456
            
            
            
            13,091,045Total
      liabilities
            
            
            21,568,185
            
            
            
            15,948,068Stockholders'
      Equity (Deficit)Series
      E Preferred stock, $0.01 par value; 50,000 shares
      authorized;  45,684 and 44,859 shares
              issued
      and outstanding at June 30, 2008 and  December 31, 2007,
      respectively
            
            
            457
            
            
            
            449Common
      stock, $0.0001 par value; 100,000,000 shares authorized; 32,776,735 and
      32,147,879
              shares
      issued and outstanding at June 30, 2008 and December 31, 2007,
      respectively
            
            
            3,278
            
            
            
            3,215Additional
      paid-in capital
            
            
            72,970,974
            
            
            
            71,883,978Accumulated
      deficit
            
            
            (79,757,600
            )
            
            
            (73,376,602
            )Total
      stockholders' equity (deficit)
            
            
            (6,782,891
            )
            
            
            (1,488,960
            )Total
      liabilities and stockholders' equity
            
            $
            14,785,294
            
            
            $
            14,459,108







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




-1-


WORLD
RACING GROUP, INC.




CONSOLIDATED
STATEMENTS OF OPERATIONS


For
the Three and Six Months Ended June 30, 2008 and 2007




(Unaudited)




Three Months Ended:
            
            
            Six Months Ended:2008
            
            
            2007
            
            
            2008
            
            
            2007RevenuesRace
      sanctioning and event fees
            
            $
            3,205,863
            
            
            $
            3,044,722
            
            
            $
            3,758,057
            
            
            $
            3,631,290Admission
      fees and ticket sales
            
            
            1,949,273
            
            
            
            2,135,883
            
            
            
            3,459,819
            
            
            
            3,555,599Sponsorship
      and advertising revenue
            
            
            2,331,680
            
            
            
            831,685
            
            
            
            3,106,732
            
            
            
            1,199,930Merchandise
      sales
            
            
            116,069
            
            
            
            127,722
            
            
            
            169,408
            
            
            
            184,787Other
      revenue
            
            
            7,177
            
            
            
            15,292
            
            
            
            60,025
            
            
            
            57,776Total
      revenues
            
            
            7,610,062
            
            
            
            6,155,304
            
            
            
            10,554,041
            
            
            
            8,629,382Operating
      expensesTrack
      and event operations
            
            
            7,716,924
            
            
            
            7,447,164
            
            
            
            10,876,830
            
            
            
            10,271,053Sales
      and marketing
            
            
            870,216
            
            
            
            502,312
            
            
            
            1,544,511
            
            
            
            878,176Merchandise
      operations and cost of  sales
            
            
            138,566
            
            
            
            74,371
            
            
            
            219,602
            
            
            
            136,890General
      and administrative
            
            
            742,191
            
            
            
            512,128
            
            
            
            1,369,345
            
            
            
            1,275,403Non-cash
      stock compensation
            
            
            323,379
            
            
            
            486,768
            
            
            
            880,817
            
            
            
            969,872Depreciation
      and amortization
            
            
            181,194
            
            
            
            207,004
            
            
            
            392,869
            
            
            
            408,743Total
      operating expenses
            
            
            9,972,470
            
            
            
            9,229,747
            
            
            
            15,283,974
            
            
            
            13,910,137Loss
      from operations
            
            
            (2,362,408
            )
            
            
            (3,074,443
            )
            
            
            (4,729,933
            )
            
            
            (5,280,755
            )Other
      (Expenses) IncomeInterest
      expense, net
            
            
            (843,032
            )
            
            
            (866,027
            )
            
            
            (1,651,065
            )
            
            
            (944,177
            )Total
      Other Expense
            
            
            (843,032
            )
            
            
            (866,027
            )
            
            
            (1,651,065
            )
            
            
            (944,177
            )Net
      (Loss)
            
            $
            (3,205,440
            )
            
            $
            (3,940,470
            )
            
            $
            (6,380,998
            )
            
            $
            (6,224,932
            )Dividends
      on preferred stock:Stated
      dividends, Series D
            
            
            -
            
            
            
            (261,626
            )
            
            
            -
            
            
            
            (261,626
            )Net
      loss applicable to common stock
            
            $
            (3,205,440
            )
            
            $
            (4,202,096
            )
            
            $
            (6,380,998
            )
            
            $
            (6,486,558
            )Net
      loss applicable to common stock
              per
      common share —
              Basic
      and diluted
            
            $
            (0.10
            )
            
            $
            (0.29
            )
            
            $
            (0.20
            )
            
            $
            (0.45
            )Weighted
      average common shares outstanding
              —    Basic
      and diluted
            
            
            32,647,834
            
            
            
            14,598,042
            
            
            
            32,400,048
            
            
            
            14,563,816




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




-2-


WORLD
RACING GROUP, INC.




CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ DEFICIT




For
the Six months ended June 30, 2008




(Unaudited)




AdditionalPreferred Stock
            
            
            Common Stock
            
            
            Paid-in
            
            
            AccumulatedShares
            
            
            Amounts
            
            
            Shares
            
            
            Amounts
            
            
            Capital
            
            
            (Deficit)
            
            
            TotalBalance,
      December 31, 2007
            
            
            44,859
            
            
            $
            449
            
            
            
            32,147,879
            
            
            $
            3,215
            
            
            $
            71,883,978
            
            
            $
            (73,376,602
            )
            
            $
            (1,488,960
            )Value assigned to stock options,
      restricted stock and
              warrants,
      non-cash compensation expense
            
            
            —
            
            
            
            —
            
            
            
            330,000
            
            
            
            33
            
            
            
            791,165
            
            
            
            —
            
            
            
            791,198Value
      assigned to preferred stock, notes payable
            
            
            825
            
            
            
            8
            
            
            
            —
            
            
            
            —
            
            
            
            206,242
            
            
            
            —
            
            
            
            206,250Restricted
      stock issued in exchange for services
            
            
            —
            
            
            
            —
            
            
            
            96,000
            
            
            
            10
            
            
            
            28,790
            
            
            
            —
            
            
            
            28,800Restricted
      stock issued in exchange for warrants
            
            
            —
            
            
            
            —
            
            
            
            202,856
            
            
            
            20
            
            
            
            60,799
            
            
            
            —
            
            
            
            60,819Net
      loss
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (6,380,998
            )
            
            
            (6,380,998
            )Balance,
      June 30, 2008
            
            
            45,684
            
            
            $
            457
            
            
            
            32,776,735
            
            
            $
            3,278
            
            
            $
            72,970,974
            
            
            $
            (79,757,600
            )
            
            $
            (6,782,891
            )







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




-3-


WORLD
RACING GROUP, INC.




CONSOLIDATED
STATEMENTS OF CASH FLOWS


For
the Six Months Ended June 30, 2008 and 2007


(Unaudited)





2008
            
            
            2007Cash
      flows from operating activities:Net
      (loss)
            
            $
            (6,380,998
            )
            
            $
            (6,224,932
            )Adjustments
      to reconcile net loss to net cash used inoperating
      activities:Depreciation
      and amortization
            
            
            392,869
            
            
            
            408,743Non-cash
      interest expense, notes payable
            
            
            769,104
            
            
            
            664,813Non-cash
      stock compensation
            
            
            880,817
            
            
            
            939,872Increase
      (decrease) in cash for changes in:Accounts
      receivable
            
            
            (1,300,617
            )
            
            
            (219,113
            )Inventory
            
            
            (124,385
            )
            
            
            6,044Prepaid
      expenses and other current assets
            
            
            771,968
            
            
            
            79,952Other
      non-current assets and long term prepaid expenses
            
            
            (13,000
            )
            
            
            82,787Accounts
      payable
            
            
            186,871
            
            
            
            1,492,661Accrued
      liabilities
            
            
            1,609,727
            
            
            
            739,125Deferred
      revenue
            
            
            431,626
            
            
            
            964,988Net
      cash (used in) operating activities
            
            
            (2,776,018
            )
            
            
            (1,065,060
            )Cash
      flows from investing activities:Purchase
      of property, contract rights, trademarks and goodwill
            
            
            (392,529
            )
            
            
            (277,110
            )Net
      cash (used in) investing activities
            
            
            (392,529
            )
            
            
            (277,110
            )Cash
      flows from financing activities:Payments
      on notes payable
            
            
            (296,886
            )
            
            
            (137,919
            )Payments
      of placement agent fees and other issuance costs
            
            
            (210,000
            )
            
            
            -Proceeds
      from issuance of notes payable
            
            
            3,335,925
            
            
            
            1,500,000Net
      cash provided by financing activities
            
            
            2,829,039
            
            
            
            1,362,081Net
      increase (decrease) in cash and cash equivalents
            
            
            (339,508
            )
            
            
            19,911Cash
      and cash equivalents, beginning of period
            
            
            1,668,611
            
            
            
            532,230Cash
      and cash equivalents, end of period
            
            $
            1,329,103
            
            
            $
            552,141Supplemental
      schedule of non-cash activities:Purchase
      of vehicles and equipment through the issuance of notes
            
            $
            —
            
            
            $
            232,300Cash
      payments for interest
            
            $
            118,800
            
            
            $
            191,094Restricted
      stock issued in exchange for services
            
            $
            28,800
            
            
            $
            31,051Restricted
      stock issued in exchange for warrants
            
            $
            60,819
            
            
            $
            —Value
      assigned to stock options, restricted stock and
              warrants,
      non-cash compensation expense
            
            $
            791,198
            
            
            $
            908,821Non-cash
      revenues and expenses, barter agreements
            
            $
            53,703
            
            
            $
            119,138Stated
      dividends, Series D Preferred Stock, payable in common
    shares
            
            $
            —
            
            
            $
            261,626Value
      assigned to Series E Preferred Stock issued in connection
with
              secured
      notes  payable
            
            $
            206,250
            
            
            $
            —










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




-4-


WORLD
RACING GROUP, INC.




NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2008





NOTE
      1.
            DESCRIPTION
      OF BUSINESS




References
in this document to “the Company,” “Boundless,” “DIRT,” “WRG,” “we,” “us” and
“our” mean World Racing Group, Inc. and its wholly owned
subsidiaries.  Subsequent to the acquisition of DIRT Motorsports, Inc.
in 2004, we began operating under the name DIRT MotorSports and in July 2005, we
reincorporated in Delaware and changed our name from “Boundless Motor Sports
Racing, Inc.” to “DIRT Motor Sports, Inc.” We changed our name to World Racing
Group, Inc. in January 2008.





We market
and promote motor sports entertainment in the United States.  Our
motorsports subsidiaries operate seven dirt motor sports tracks (four are owned
and three facilities are under short term lease agreements) in New York,
Pennsylvania and Florida.  We own and operate four sanctioning bodies
in dirt motor sports:  the World of Outlaws; DIRTcar Racing, formerly
known as DIRT MotorSports, and United Midwestern Promoters (UMP); and the Mid
America Racing Series (MARS).  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.




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 $12.7 million for the year ended December 31, 2007 and a
net loss of $3.2 million for the three months ended June 30,
2008.  The Company has an accumulated deficit of $79.8 million and
negative working capital of $2.1 million as of June 30, 2008, 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 the Company 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 the
Company 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.  The Company answered RTA’s complaint denying all claims, and
intends to vigorously defend the allegations set forth in the
complaint.  The Court has conducted an initial scheduling
conference.  The case is presently in its initial stages, and the
parties are currently engaged in discovery .   An adverse outcome
regarding this litigation could have a material adverse effect on the Company’s
ability to continue as a going concern.





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 its budgeted and anticipated
working capital requirements through the remainder of 2008.  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 it is 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.





To attain
profitable operations, management’s plan is to (i) increase the number of
sanctioned events; (ii) leverage existing owned and leased tracks to generate
ancillary revenue streams; (iii) partner with existing promoters to create
additional marquis events; and (iv)  continue to build sponsorship,
advertising and related revenue, including license fees related to the sale of
branded merchandise.   If the Company is unsuccessful in its
plan, we 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.





NOTE
      3.
            BASIS
      OF PRESENTATION





The
accompanying 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 consolidated financial statements and notes thereto included in the
Company’s latest Annual Report on Form 10-KSB for the year ended December 31,
2007. 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 June
30, 2008 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2008 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.


-5-







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.




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 $53,703 of total revenues
for the quarter ended June 30, 2008.





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.


-6-


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 June 30, 2008 and 2007, 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.





Three Months Ended:
            
            
            Six Months Ended:2008
            
            
            2007
            
            
            2008
            
            
            2007Net
      (Loss)
            
            $
            (3,205,440
            )
            
            $
            (3,940,470
            )
            
            $
            (6,380,998
            )
            
            $
            (6,224,932
            )Dividends
      on preferred stock:Stated
      dividends, Series D
            
            
            -
            
            
            
            (261,626
            )
            
            
            -
            
            
            
            (261,626
            )Net
      loss applicable to common stock
            
            $
            (3,205,440
            )
            
            $
            (4,202,096
            )
            
            $
            (6,380,998
            )
            
            $
            (6,486,558
            )Net
      loss applicable to common stock
              per
      common share —
              Basic
      and diluted
            
            $
            (0.10
            )
            
            $
            (0.29
            )
            
            $
            (0.20
            )
            
            $
            (0.45
            )Weighted
      average common shares outstanding —
              Basic
      and diluted
            
            
            32,647,834
            
            
            
            14,598,042
            
            
            
            32,400,048
            
            
            
            14,563,816




In
addition, as of June 30, 2008, the Company’s Series E Preferred Stock was
convertible into 45.7 million shares of common stock and the Company had
warrants outstanding to purchase 1.0 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 June 30, 2008.  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
            
            
            
            3.5UMP
      acquisition warrants
            
            
            40,000
            
            
            $
            3.65
            
            
            
            0.8Other
      Warrants
            
            
            275,059
            
            
            $
            3.00
            
            
            
            3.6Stock
      options
            
            
            420,000
            
            
            $
            3.95
            
            
            
            2.7Total
      warrants and stock options outstanding
            
            
            1,010,862
            
            
            $
            3.42
            
            
            
            3.1




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.


-7-


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.





Purchase
Accounting





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





Intangible
Assets





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





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





Income
Taxes





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





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.


-8-


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 June 30, 2008, the Company had bank deposits in
excess of FDIC insurance of approximately $1.1 million.





New
Accounting Pronouncements





In
February 2006, the FASB issued Statement No. 155,Accounting for Certain Hybrid
Financial Instruments (SFAS No. 155), which amends FASB
Statements No. 133 and 140. This Statement permits fair value
re-measurement for any hybrid financial instrument containing an embedded
derivative that would otherwise require bifurcation, and broadens a Qualified
Special Purpose Entity’s (QSPE) permitted holdings to include passive derivative
financial instruments that pertain to other derivative financial instruments.
This Statement is effective for all financial instruments acquired, issued or
subject to a re-measurement event occurring after the beginning of an entity’s
first fiscal year beginning after September 15, 2006. This Statement has no
current applicability to the Company’s financial
statements.  Management adopted this Statement on January 1, 2007
and the initial adoption of this Statement did not have a material impact on the
Company’s financial position, results of operations, or cash flows.





In June
2006, the FASB issued FIN 48, which clarifies the accounting and reporting
for income taxes where interpretation of the law is uncertain. FIN 48
prescribes a comprehensive model for the financial statement recognition,
measurement, presentation and disclosure of income tax uncertainties with
respect to positions taken or expected to be taken in income tax returns.
FIN 48 is effective for fiscal years beginning after December 15,
2006. The Company files tax returns in the United States and various state
jurisdictions.  The Company’s 2003-2006 U.S. federal and state income
tax returns remain open to examination by the Internal Revenue Service. The
Company is continuing its practice of recognizing interest and/or penalties
related to income tax matters as general and administrative expenses. The
Company may have nexus in more states than it is currently filing tax
returns.  Thus, upon examination, the Company could be required to
file additional tax returns.  Due to the losses incurred, it is
unlikely that any additional filings would result in any additional income
tax.  Management adopted this Statement on January 1, 2007 and
the initial adoption of FIN 48 did not have a material impact on the
Company’s financial position, results of operations, or cash flows.





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
FSAB issued Staff Position No. SFAS No. 157 (FSP No.157-2)
Effective Date of FASB Statement No. 157,  that defers the
effective date of SFAS 157 for one year for certain nonfinancial assets and
nonfinancial liabilities.  SFAS 157 is effective for certain
nonfinancial assets and nonfinancial liabilities for financial statements issued
for fiscal years beginning after November 15, 2008.  Management
is assessing the impact of the adoption of this Statement.




In
September 2006, the FASB issued Statement No. 158,Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans (SFAS No. 158),
an amendment of FASB Statements No. 87, 88, 106 and 132(R).
SFAS No. 158 requires (a) recognition of the funded status
(measured as the difference between the fair value of the plan assets and the
benefit obligation) of a benefit plan as an asset or liability in the employer’s
statement of financial position, (b) measurement of the funded status as of
the employer’s fiscal year-end with limited exceptions, and (c) recognition
of changes in the funded status in the year in which the changes occur through
comprehensive income. The requirement to recognize the funded status of a
benefit plan and the disclosure requirements are effective as of the end of the
fiscal year ending after December 15, 2006. The requirement to measure the
plan assets and benefit obligations as of the date of the employer’s fiscal
year-end statement of financial position is effective for fiscal years ending
after December 15, 2008.  This Statement has no current
applicability to the Company’s financial statements.  Management
adopted this Statement on December 31, 2006 and the adoption of
SFAS No. 158 did not have a material impact to the Company’s financial
position, results of operations, or cash flows.





In
September 2006, the Securities Exchange Commission issued Staff Accounting
Bulletin No. 108 (SAB No. 108). SAB No. 108
addresses how the effects of prior year uncorrected misstatements should be
considered when quantifying misstatements in current year financial statements.
SAB No. 108 requires companies to quantify misstatements using a
balance sheet and income statement approach and to evaluate whether either
approach results in quantifying an error that is material in light of relevant
quantitative and qualitative factors. When the effect of initial adoption is
material, companies will record the effect as a cumulative effect adjustment to
beginning of year retained earnings and disclose the nature and amount of each
individual error being corrected in the cumulative adjustment.
SAB No. 108 was effective beginning January 1, 2007 and the
initial adoption of SAB No. 108 did not have a material impact on the
Company’s financial position, results of operations, or cash
flows.


-9-


In
February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (SFAS 159). This statement permits
companies to choose to measure many financial assets and liabilities at fair
value. Unrealized gains and losses on items for which the fair value option has
been elected are reported in earnings. SFAS 159 is effective for fiscal years
beginning after November 15, 2007. 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
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.





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.





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.  We are assessing the
impact of the adoption of this Statement.





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.


-10-


The
following table provides information relating to outstanding stock options as of
June 30, 2008 however the Company did not grant any stock options in
2008:





Expected
      volatility
            
            
            58
            %Expected
      life in years
            
            
            2.0Weighted
      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 for the six months ended
June 30, 2008 is presented below:




Shares
            
            Weighted
              Average
              Exercise Price
              per
      Share
            
            Weighted
              Average
              Remaining
              Contractual Term
            Aggregate
              Intrinsic
              ValueOptions
      outstanding at December 31, 2007
            1,824,000
            
            $
            3.42
            
            3.2
            $
            -Granted
            -
            
            
            -Exercised
            -
            
            
            -Forfeited/expired/surrendered
            (1,404,000)
            
            
            3.26Options
      outstanding at June 30, 2008
            420,000
            
            $
            3.95
            
            2.7
            $
            -Options
      exercisable at June 30, 2008
            395,000
            
            $
            3.90
            
            2.7
            $
            -







Unrecognized
compensation expense as of June 30, 2008 related to outstanding stock options
and restricted stock grants were $0.8 million.







NOTE
      5.
            LAND,
      BUILDINGS AND EQUIPMENT





Land,
buildings and equipment consisted of the following at June 30, 2008 and December
31, 2007:





2008
            
            
            2007
            
            
            Depreciable
      LifeLand
            
            $
            6,916,338
            
            
            $
            6,916,338
            
            
            
            N/ABuildings
      and grandstands
            
            
            3,508,184
            
            
            
            3,444,624
            
            
            7 -
      40 yearsTransportation
      equipment
            
            
            1,920,857
            
            
            
            1,669,309
            
            
            5 -
      7 yearsOffice
      furniture and equipment
            
            
            813,335
            
            
            
            743,663
            
            
            3 -
      7 years13,158,714
            
            
            
            12,773,934Less
      accumulated depreciation
            
            
            (2,825,902
            )
            
            
            (2,473,458
            )Property
      and equipment, net
            
            $
            10,332,812
            
            
            $
            10,300,476








Depreciation
is computed on a straight-line basis. Depreciation expense for the three month
periods ended June 30, 2008 and 2007 was $168,272 and $192,669, respectively.
Depreciation expense for the six month periods ended June 30, 2008 and 2007 was
$360,193 and $380,072, respectively.


-11-







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 June 30, 2008 and December 31, 2007 consisted of the
following:





June
      30,
            
            December
      31,2008
            
            2007Points
      fund and prize money
            
            $
            1,242,961
            
            $
            587,875Television
      production costs
            
            
            490,914
            
            
            -Interest
            
            
            164,657
            
            
            84,378Salaries,
      wages and other compensation and benefits
            
            
            170,056
            
            
            170,263Sales,
      property and other taxes
            
            
            491,895
            
            
            64,548Office
      closure and relocation
            
            
            88,067
            
            
            79,639Acquisition
      liabilities
            
            
            15,000
            
            
            15,000Other
      accrued liabilities
            
            
            71,581
            
            
            123,701Total
      Accrued Liabilities
            
            $
            2,735,131
            
            $
            1,125,404





NOTE
      8.
            DEFERRED
      REVENUE





Deferred
revenues at June 30, 2008 and December 31, 2007 consisted of the
following:





June
      30,
            
            
            December
      31,2008
            
            
            2007Sponsorship
      prepayments
            
            $
            476,596
            
            
            $
            180,910Sanction
      fee advances
            
            
            160,511
            
            
            
            123,017Season
      ticket  sales, advance ticket sales
            
            
            121,449
            
            
            
            98,416Membership
      fees
            
            
            94,508
            
            
            
            19,095$
            853,064
            
            
            $
            421,438





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 into Series D preferred stock at 110% of the
principal amount (Note 10).


-12-





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, 2007.





Beginning
in March 2007, the Company issued to several of its principal shareholders $2.3
million in short-term secured promissory notes payable (the “Short-Term Notes”).
The Short-Term Notes were interest bearing 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. Under the terms of the Note Purchase
Agreement, we may issue up to an additional $3.0 million principal amount of
Senior Notes.





The
Senior Notes are due March 15, 2010 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 is payable at our option in cash or 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, 2010.  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 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.





Additionally,
in 2008 we issued $335,925 in notes in connection with the purchase of equipment
and vehicles.





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 common stock in May 2008. The fair value of
the Series E Preferred Stock was recorded as an increase in additional paid in
capital and will be recorded as a discount to the Senior Notes payable
and will be recognized as interest expense through the maturity date of the
Secured Notes.


-13-








Notes
payable at June 30, 2008 consisted of the following:





·
            $15.0
      million of Senior Notes due March 15, 2010 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.·
            $2,340,000
      note payable issued in connection with the purchase of Lernerville
      Speedway, bearing interest at 10% annually payable each
      November.  The balance is due in a $500,000 installment on
      November 7, 2008, a $900,000 installment on November 7, 2009 and the
      remaining balance and unpaid interst due upon maturity on November 7,
      2010.  As part of the agreement to extend the date of maturity of the
      note, the Company has agreed to pay the holder any additional taxes due
      related to the repayment of the note due to changes in tax rates or
      regulations.·
            $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
      $1,614,427 as of June 30, 2008.  This note is secured by a
      mortgage on the real property, and security agreement covering the other
      assets acquired from Volusia Speedway.·
            $380,831
      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.





The
aggregate amounts of maturities of debt during each of the years ending December
31, 2008 through 2012 and thereafter are:





Remainder
      of 2008
            
            $
            573,9742009
            
            
            1,132,1382010
            
            
            17,386,8562011
            
            
            43,5992012
            
            
            38,584Thereafter
            
            
            160,107$
            19,335,258Less:  Note
      Discount
            
            
            (2,163,112
            )$
            17,172,146





NOTE
      10.
            STOCKHOLDERS’
      EQUITY





In series
of transactions completed on May 19, 2006, effective May 16, 2006, the
Company entered into a Series D Convertible Preferred Stock Purchase
Agreement pursuant to which the Company issued and sold 4,000 shares of
Series D Convertible Preferred Stock (Series D Stock) and warrants to
purchase 1,200,000 shares of our common stock, $0.0001 par value per share
(Series D Warrants), for an aggregate purchase price of $12,000,000. The
Series D Stock was convertible into an aggregate of 4,000,000 shares of
common stock, representing a conversion price of $3.00 per share.





The
Company also entered into exchange agreements pursuant to which each of its
issued and outstanding shares of Series B Convertible Preferred Stock, par
value $.01 per share (Series B Stock), and Series C Convertible
Preferred Stock, par value $.01 per share (Series C Stock), were exchanged
for an aggregate of 9,843.3 shares of the Company’s Series D Stock. The
shares of Series D Stock issued in this exchange were convertible into
9,843,270 shares of common stock, the same number of shares of our common stock
as the original Series B Stock and Series C Stock could have been
converted.




The
Company also issued 4,400 shares of Series D Stock and 1,320,178
Series D Warrants in exchange of $12,001,616 of short term promissory notes
in connection with the Series D financing. Further, warrants to purchase an
aggregate of 5,839,701 shares of common stock, at exercise prices ranging from
$3.00 to $5.00 per share, were cancelled and exchanged into an aggregate of
917,187 shares of our common stock and warrants to purchase 542,738 shares of
our common stock at $.001 exercise price with a term of five years.





The
Series D Warrants had a term of five years and were exercisable at an
exercise price of $4.50 per share.





On
December 14, 2007, the Company received consent agreements from holders of 100%
of the issued and outstanding shares of our Series D Stock, representing 17,684
shares (Consent Agreements). Under the terms of the Consent Agreements, 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
Agreements, 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.


-14-








The
Company has designated 50,000 shares of preferred stock as Series E
Convertible Preferred Stock, which rank senior to the Company’s common
stock in the event of a liquidation.  The Series E Preferred Stock has
no voting rights other than class voting rights provided by applicable
law.  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.





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 June
30, 2008, the Company had net operating loss carry forwards of approximately
$50.6 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
Orange County Fair Speedway is leased on an annual basis at a rate of $115,000
per year.  The track is located in Middletown, New York.





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.





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





Payment
      Due by PeriodTotal
            
            
            Remainder
      of 2008
            
            
            2009
            
            
            2010
            
            
            2011
            
            
            2012
      and ThereafterOperating
      leases
            
            $
            593,378
            
            
            $
            93,093
            
            
            $
            139,931
            
            
            $
            142,285
            
            
            $
            144,694
            
            
            $
            73,375





Operating
lease expense for the six months ended June 30, 2008 and 2007 was $134,474 and
$118,101, respectively.





The
Company has employment agreements with its executive officers and other
employees, the terms of which expire at various times over the next three years.
The aggregate commitment for future salaries at June 30, 2008 was $0.4
million.





NOTE
      13.
            LITIGATION
      AND CONTINGENCIES





Race
Tires America, Inc., a division of Specialty Tires of America, Inc. and
Specialty Tires of America, Inc., (RTA), has brought a civil action against the
Company in the United States District Court for the Western District of
Pennsylvania.  This civil action was brought by RTA against Hoosier
Racing Tire Corp. (Hoosier) and the Company in September 2007.  RTA
has sought injunctive relief and damages for alleged violations of the Sherman
Act, including alleged conspiracies of the Company in combination with 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.  The
Company has answered RTA’s complaint denying all claims, and intends to
vigorously defend the allegations set forth in the complaint.  The
Court has conducted an initial scheduling conference.  The case is
presently in its initial stages, and the parties are currently engaged in
discovery.




-15-





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.







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-KSB for our fiscal year ended December 31, 2007 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 2007,
we scheduled 84 World of Outlaw Sprint Series races, 56 World of Outlaw Late
Model Series Races, 27 Advance Auto Parts Big Block Modified Events, and over
200 other major racing events in our other regional and touring racing
series.  In 2008, we have scheduled 83 World of Outlaw Sprint Series
races, 56 World of Outlaw Late Model Series Races, 27 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.





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.




During
the first two quarters of 2008, inclement weather had a significant negative
impact on the operations of our World of Outlaws Sprint Car Series
(Series).  We had 39 events scheduled during the first two quarters of
2008 and were only able to complete 24 events.   We have
rescheduled 9 of these events in the third quarter 2008; the remaining events
have been cancelled.  Had we completed the races as scheduled, we
estimate that we would have generated an additional $1.1 million in total
revenues.  Additionally, many of the Series' operating costs,
including personnel costs and travel costs were incurred during the quarter in
preparation for the events.  The reduction in the number of events
completed also impacted our merchandise sales, as our mobile store fronts
continued to incur operating costs without having the ability to sell
merchandise at the events that were cancelled.   Series' operations
and merchandise operations are anticipated to improve for the
remainder of 2008.




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.


-16-








Results
of Operations – Comparison of Three months ended June 30, 2008 (“2008”) and 2007
(“2007”)




Revenues – Our total revenues
increased to $7.6 million in 2008 from $6.2 million in 2007.




Race
sanctioning and event fees revenue increased to $3.2 million in 2008 from $3.0
million in 2007.  This increase is due an increase in the number of
late model sanctioned races which includes the World of Outlaws Late Model
Series and our UMP/DIRTcar Summer Nationals Series
races   (collectively “Late Model Series’”) events completed
offset by a decrease in the number of World of Outlaws Sprint Series (“Sprint
Series”) sanctioned events completed in 2008 as compared to 2007 due to
inclement weather.  Ten Sprint Series events were cancelled or
postponed until later in 2008 due to inclement weather.  In 2008 we
completed 18 Sprint Series sanctioned events at non-owned facilities and 2
events at our facilities. In 2007 we completed 26 sanctioned events at non-owned
facilities and one event at our facilities. In 2008 and 2007 we completed 18 and
21 World of Outlaw Late Model Series Events, respectively. Three Late Model
Series Events were cancelled or postponed due to inclement weather in
2008.  We expect sanction fees to reflect the increase in the number
of sanctioned events at non-affiliated facilities for the remainder of 2008 as
compared to 2007.




During
2008 we generated $1.9 million in track operations, ticket and concession sales
as compared to $2.1 million in 2007. These revenues are generated at events held
at our owned or operated racetracks.   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. During 2008,
we cancelled 23 of 69 scheduled events at our tracks due to inclement weather,
including three World of Outlaws events. We estimate that revenues from the
three World of Outlaws events would have totaled $0.3 million in
2008.  We expect our track operations, ticket and concession sales to
remain higher for the remainder of 2008 as compared to 2007 for additional
events scheduled during the remainder of year.




Our
sponsorship and advertising revenues increased to $2.3 million in 2008 from $0.8
million 2007.  We expect sponsorship and advertising revenues to
increase in 2008 for new sponsorship agreements for our World of Outlaws touring
series and for our sanctioning bodies.  Additionally, we expect
sponsorship and advertising revenues to increase for sales of advertising within
our television broadcasts which began to air in May 2008 and will air through
October 2008.   We expect sponsorship and advertising revenues to
become a significant component of our operating revenue.  Sales of
merchandise decreased due to cancellation of 10 World of Outlaw Sprint Series
Events. In 2007 we entered into arrangements to license our product sales in
areas other than our on-site sales at our World of Outlaw Sprint Series events;
we continued those relationships in 2008.  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
2007.




Operating expenses – Our
total operating expenses increased to $10.0 million in 2008 from $9.2 million in
2007.  The increases are due to increased expenditures for sales and
marketing, event and track operations and legal and professional fees incurred
in connection with ongoing litigation.  These increases are offset in
part by decreases in non-cash stock compensation and decreases in other General
and Administrative Expenses from efforts across all aspects of the Company to
reduce operating costs.




Track and event operations -
Our track and event operations expenses include purses and other attendance fees
paid to our drivers, personnel costs and other operating costs for the
organization of our events and the operation of our tracks.  Track and
event operations expense increased to $7.7 million in 2008 from $7.4 million in
2007.  This increase includes expenses for prizes and purses
corresponding to increases in sanction fees during 2008 and increased operating
expenses for the scheduled increase in events that were postponed or
cancelled.  We estimate that an additional $0.2 million in television
production costs were incurred in 2008 due to postponement and delays of
scheduled 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 increased to $0.9
million in 2008 from $0.5 million in 2007 for increased staffing, professional
fees, promotion and advertising.




-17-


Merchandise operations –
Merchandise operations 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 2008 and 2007.  Beginning in 2007, we 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. During 2008 we
incurred increased operating expenses in efforts to increase our total
merchandise sales and Sprint Series events; however, due to the cancellation or
postponement of 10 events in 2008, we did not realize increases in total
merchandise revenues although we did experience increased sales per event as
compared to 2007.  We expect increases in merchandise sales for the
remainder of 2008.




General and administrative –
General and administrative expenses increased to $0.7 million in 2008 from $0.5
million in 2007. The increase from 2007 is due to $0.3 million in legal and
other professional fees incurred in connection with ongoing litigation offset by
decreases in personnel costs and costs incurred 2007 in connection with the
relocation of our corporate office from Oklahoma to North Carolina.




Non-cash stock Compensation –
Non-cash stock compensation of $0.3 million in 2008 and $0.5 million in 2007
represents the fair value of restricted stock, warrants and options issued to
employees and non-employees for services provided.




Depreciation and amortization
– Depreciation and amortization expense decreased slightly in 2008 from 2007 due
to fully depleting certain assets acquired in 2004 and 2005 offset by the
addition of equipment and leasehold and track improvements during 2007 and new
transportation equipment in 2008.




Interest expense, net –
Interest expense remained at $0.8 million in 2008 and 2007.  Interest
expense 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 2008, 2009 and
2010 will reflect the interest incurred on our secured 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 and in 2008.







Results
of Operations – Comparison of six months ended June 30, 2008 (“2008”) and 2007
(“2007”)





Revenues – Our total revenues
increased to $10.6 million in 2008 from $8.6 million in 2007.




Race
sanctioning and event fees revenue increased to $3.8 million in 2008 from $3.6
million in 2007.  This increase is due an increase in the number of
late model sanctioned races which includes the World of Outlaws Late Model
Series and our UMP/DIRTcar Summer Nationals Series
races   (collectively “Late Model Series’”) events completed
offset by a decrease in the number of World of Outlaws Sprint Series (“Sprint
Series”) sanctioned events completed in 2008 as compared to 2007 due to
inclement weather.  Fifteen Sprint Series events were cancelled or
postponed until later in 2008 due to inclement weather.  In 2008 we
completed 19 Sprint Series sanctioned events at non-owned facilities and 5
events at our facilities. In 2007 we completed 35 sanctioned events at non-owned
facilities and 6 event at our facilities. In 2008 and 2007 we completed 21 and
30 World of Outlaw Late Model Series Events, respectively. Three Late Model
Series Events were cancelled or postponed due to inclement weather in
2008.  We expect sanction fees to reflect the increase in the number
of sanctioned events at non-affiliated facilities for the remainder of 2008 as
compared to 2007.




During
2008 we generated $3.5 million in track operations, ticket and concession sales
as compared to $3.6 million in 2007. These revenues are generated at events held
at our owned or operated racetracks.   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. During 2008,
we cancelled 25 of 87 events scheduled, including four World of Outlaws events
at our tracks due to inclement weather. We estimate that revenues from the three
World of Outlaws events would have totaled $0.4 million in 2008.  We
expect our track operations, ticket and concession sales to remain higher for
the remainder of 2008 as compared to 2007 for additional events scheduled during
the remainder of year.




Our
sponsorship and advertising revenues increased to $3.1 million in 2008 from $1.2
million 2007.  We expect sponsorship and advertising revenues to
increase in 2008 for new sponsorship agreements for our World of Outlaws touring
series and for our sanctioning bodies.  Additionally, we expect
sponsorship and advertising revenues to increase for sales of advertising within
our television broadcasts which began to air in May 2008 and will air through
October 2008.   We expect sponsorship and advertising revenues to
become a significant component of our operating revenue.  Sales of
merchandise decreased slightly due to cancellation of 15 World of Outlaw Sprint
Series Events. In 2007 we entered into arrangements to license our product sales
in areas other than our on-site sales at our World of Outlaw Sprint Series
events; we continued those relationships in 2008.  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
2007.




-18-


Operating expenses – Our
total operating expenses increased to $15.3 million in 2008 from $13.9 million
in 2007.  The increases are due to increased expenditures for sales
and marketing, event and track operations and legal and professional fees
incurred in connection with ongoing litigation.  These increases are
offset in part by decreases in non-cash stock compensation and decreases in
other General and Administrative Expenses from efforts across all aspects of the
company to reduce operating costs.




Track and event operations -
Our track and event operations expenses include purses and other attendance fees
paid to our drivers, personnel costs and other operating costs for the
organization of our events and the operation of our tracks.  Track and
event operations expense increased to $10.9 million in 2008 from $10.3 million
in 2007.  This increase includes expenses for prizes and purses
corresponding to increases in sanction fees during 2008 and increased operating
expenses for the scheduled increase in events that were postponed or
cancelled.  We estimate that an additional $0.2 million in television
production costs were incurred in 2008 due to postponement and delays of
scheduled 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 increased to $1.5
million in 2008 from $0.9 million in 2007 for increased staffing, professional
fees, promotion and advertising.




Merchandise operations –
Merchandise operations 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 2008 and 2007.  Beginning in 2007, we 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. During 2008 we
incurred increased operating expenses in efforts to increase our total
merchandise sales and Sprint Series events; however, due to the cancellation or
postponement of 15 events in 2008 we did not realize increases in total
merchandise revenues although we did experience increased sales per event as
compared to 2007.  We expect increases in merchandise sales for the
remainder of 2008.




General and administrative –
General and administrative expenses increased to $1.4 million in 2008 from $1.3
million in 2007. The increase from 2007 is due to $0.4 million in legal and
other professional fees incurred in connection with ongoing litigation offset by
decreases in personnel costs and costs incurred 2007 in connection with the
relocation of our corporate office from Oklahoma to North Carolina.




Non-cash stock Compensation –
Non-cash stock compensation of $0.9 million in 2008 and $1.0 million in 2007
represents the fair value of restricted stock, warrants and options issued to
employees and non-employees for services provided.




Depreciation and amortization
– Depreciation and amortization expense decreased slightly in 2008 from 2007 due
to fully depleting certain assets acquired in 2004 and 2005 offset by the
addition of equipment and leasehold and track improvements during 2007 and new
transportation equipment in 2008.




Interest expense, net –
Interest expense increased to $1.7 million in 2008 from $0.9 million in
2007.  Interest expense 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 2008, 2009 and 2010 will reflect the interest incurred on
our secured 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 and in
2008.




Liquidity
and Capital Resources





The
Company generated $10.6 million in revenues during the six month period ended
June 30, 2008; however, we have not yet achieved a profitable level of
operations. Our primary source of funding for our operating deficits during the
quarter ended June 30, 2008 has been from cash on hand and the issuance of notes
payable.





During
the six months ended June 30, 2008, the Company used $2.8  million in
operating activities primarily the result of a net loss of $6.4 million,
depreciation and amortization of $0.4 million, non-cash stock compensation of
$0.9 million, non-cash interest expense of $0.8 million and other working
capital changes, primarily accounts receivable, accounts payable and accrued
liabilities.





During
the six months ended June 30, 2008, the Company used $0.4 million in investing
activities primarily for track improvements and for equipment purchases for our
traveling series.


-19-








During
the six months ended June 30, 2008, financing activities provided $2.8 million
primarily through the issuance of $3.3 million in notes payable offset by
scheduled repayments of notes payable.





During
the six months ended June 30, 2007, the Company used $1.1 million in operating
activities primarily the result of a net loss of $6.2 million, depreciation and
amortization of $0.4  million, non-cash stock compensation of $0.9
million, non-cash interest expense of $0.6 million and other working capital
changes, primarily accounts payable and accrued liabilities.





During
the six months ended June 30, 2007, the Company used $0.3 million in investing
activities primarily for track improvements and for leasehold improvements and
equipment purchases for our new corporate offices in Concord, North
Carolina.





During
the six months ended June 30, 2007, financing activities provided $1.4 million
primarily through the issuance of $1.5 million in notes payable offset by
repayment of $0.1 million in notes payable.





The
Company incurred a net loss of $12.7 million for the year ended December 31,
2007 and a net loss of $6.4 million for the six months ended June 30,
2008.  The Company has an accumulated deficit of $79.8 million and
negative working capital of $2.1 million as of June 30, 2008, 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 issued $3.0
million in additional Senior Notes on May 14, 2008, and we may be
required to obtain additional financing in 2008, as current sources of
liquidity may be insufficient to provide for our budgeted and anticipated
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
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.





The
following table summarizes our contractual obligations as of June 30,
2008:





Payment
      Due by PeriodRemainder
      of
            
            
            
            
            
            
            
            
            
            
            
            2012
      andContractual
      obligations
            
            Total
            
            
            2008
            
            
            2009
            
            
            2010
            
            
            2011
            
            
            thereafterOperating
      leases
            
            $
            593,378
            
            
            $
            93,093
            
            
            $
            139,931
            
            
            $
            142,285
            
            
            $
            144,694
            
            
            $
            73,375Employment
      agreements
            
            
            440,490
            
            
            
            279,000
            
            
            
            161,490Notes
      payable and accrued
              interest
            
            
            23,301,133
            
            
            
            1,860,213
            
            
            
            3,340,529
            
            
            
            17,837,176
            
            
            
            54,973
            
            
            
            208,242





Operating
lease expense for the six months ended June 30, 2008 and 2007 was $134,474 and
$118,101, respectively.




Off-Balance
Sheet Arrangements




As of
June 30, 2008, 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 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.


-20-








Although
all of the policies identified in note 4 to our consolidated 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.





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.





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, 2007, 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
June 30, 2008, 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·Other
      warrants to purchase 40,000 shares of common stock issued at an exercise
      price  of $3.65·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 June 30, 2008, our Series E Preferred Stock was convertible into
45.7 million shares of 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.


-21-








Purchase
Accounting





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





Intangible
Assets





Upon its
inception, we adopted SFAS No. 142.  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 we test 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





We
account for income taxes under Financial Accounting Standards No. 109 (SFAS No.
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.





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 June 30, 2008, the Company had bank deposits in
excess of FDIC insurance of $0.1 million.





New
Accounting Pronouncements





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).


-22-








In
February 2006, the FASB issued Statement No. 155,“Accounting for Certain Hybrid
Financial Instruments” (SFAS No. 155), which amends FASB
Statements No. 133 and 140. This Statement permits fair value remeasurement
for any hybrid financial instrument containing an embedded derivative that would
otherwise require bifurcation, and broadens a Qualified Special Purpose Entity’s
(“QSPE”) permitted holdings to include passive derivative financial instruments
that pertain to other derivative financial instruments. This Statement is
effective for all financial instruments acquired, issued or subject to a
remeasurement event occurring after the beginning of an entity’s first fiscal
year beginning after September 15, 2006. This Statement has no current
applicability to our financial statements.  Management adopted this
Statement on January 1, 2007 and the initial adoption of this Statement did
not have a material impact on our financial position, results of operations, or
cash flows.





In June
2006, the FASB issued Interpretation 48,“Accounting for Uncertainty in
Income Taxes” (FIN 48), an interpretation of FASB Statement
No. 109,“Accounting for
Income Taxes.”  FIN 48 clarifies the accounting and
reporting for income taxes where interpretation of the law is uncertain.
FIN 48 prescribes a comprehensive model for the financial statement
recognition, measurement, presentation and disclosure of income tax
uncertainties with respect to positions taken or expected to be taken in income
tax returns. FIN 48 is effective for fiscal years beginning after
December 15, 2006. We file tax returns in the United States and various
state jurisdictions.  Our 2003-2006 U.S. federal and state income tax
returns remain open to examination by the Internal Revenue Service. We are
continuing our practice of recognizing interest and/or penalties related to
income tax matters as general and administrative expenses. We may have a nexus
in more states than we are currently filing tax returns.  Thus, upon
examination, we could be required to file additional tax returns.  Due
to the losses incurred, it is unlikely that any additional filings would result
in any additional income tax.  Management adopted this Statement on
January 1, 2007 and the initial adoption of FIN 48 did not have a
material impact on our financial position, results of operations, or cash
flows.





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
FSAB issued Staff Position No. SFAS No. 157 (FSP No.157-2)
Effective Date of FASB Statement No. 157,  that defers the
effective date of SFAS 157 for one year for certain nonfinancial assets and
nonfinancial liabilities.  SFAS 157 is effective for certain
nonfinancial assets and nonfinancial liabilities for financial statements issued
for fiscal years beginning after November 15, 2008.  Management
is assessing the impact of the adoption of this Statement.




In
September 2006, the FASB issued Statement No. 158,“Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans” (SFAS No. 158),
an amendment of FASB Statements No. 87, 88, 106 and 132(R).
SFAS No. 158 requires (a) recognition of the funded status
(measured as the difference between the fair value of the plan assets and the
benefit obligation) of a benefit plan as an asset or liability in the employer’s
statement of financial position, (b) measurement of the funded status as of
the employer’s fiscal year-end with limited exceptions, and (c) recognition
of changes in the funded status in the year in which the changes occur through
comprehensive income. The requirement to recognize the funded status of a
benefit plan and the disclosure requirements are effective as of the end of the
fiscal year ending after December 15, 2006. The requirement to measure the
plan assets and benefit obligations as of the date of the employer’s fiscal
year-end statement of financial position is effective for fiscal years ending
after December 15, 2008.  This Statement has no current
applicability to our financial statements.  Management adopted this
Statement on December 31, 2006 and the adoption of SFAS No. 158
did not have a material impact to our financial position, results of operations,
or cash flows.





In
September 2006, the Securities Exchange Commission issued Staff Accounting
Bulletin No. 108 (SAB No. 108). SAB No. 108
addresses how the effects of prior year uncorrected misstatements should be
considered when quantifying misstatements in current year financial statements.
SAB No. 108 requires companies to quantify misstatements using a
balance sheet and income statement approach and to evaluate whether either
approach results in quantifying an error that is material in light of relevant
quantitative and qualitative factors. When the effect of initial adoption is
material, companies will record the effect as a cumulative effect adjustment to
beginning of year retained earnings and disclose the nature and amount of each
individual error being corrected in the cumulative adjustment.
SAB No. 108 was effective beginning January 1, 2007 and the
initial adoption of SAB No. 108 did not have a material impact on the
Company’s financial position, results of operations, or cash flows.





In
February 2007, the FASB issued Statement No. 159 “The Fair Value Option for Financial
Assets and Financial Liabilities” (SFAS 159). This statement permits
companies to choose to measure many financial assets and liabilities at fair
value. Unrealized gains and losses on items for which the fair value option has
been elected are reported in earnings. SFAS 159 is effective for fiscal years
beginning after November 15, 2007. Management adopted this Statement on
January 1, 2007 and the initial adoption SFAS 159 did not have a material
impact on our financial position, results of operations, or cash
flows.


-23-








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 noncontrolling interests in
consolidated financial statements. A noncontrolling 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 noncontrolling
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.





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, noncontrolling 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.





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.  We are assessing the
impact of the adoption of this Statement.





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).





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





Unrecognized
compensation expense as of June 30, 2008 related to outstanding stock options
was $0.8 million.





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 December 31, 2007 was 2.7 years.


-24-





A summary
of the status of stock options and related activity for the six months ended
June 30, 2008 is presented below:




Shares
            
            Weighted
              Average
              Exercise Price
              per
      Share
            
            Weighted
              Average
              Remaining
              Contractual Term
            Aggregate
              Intrinsic
              ValueOptions
      outstanding at December 31, 2007
            1,824,000
            
            $
            3.42
            
            3.2
            $
            -Granted
            -
            
            
            -Exercised
            -
            
            
            -Forfeited/expired/surrendered
            (1,404,000)
            
            
            3.26Options
      outstanding at June 30, 2008
            420,000
            
            $
            3.95
            
            2.7
            $
            -Options
      exercisable at June 30, 2008
            395,000
            
            $
            3.90
            
            2.7
            $
            -







Unrecognized
compensation expense as of June 30, 2008 related to outstanding stock options
and restricted stock grants were $0.8 million.





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.











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 the Company 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 the
Company 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.  The Company answered RTA’s complaint denying all claims, and
intends to vigorously defend the allegations set forth in the
complaint.  The Court has conducted an initial scheduling
conference.  The case is presently in its initial stages,
and  the parties are currently engaged in 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
could 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.





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.


-25-





ITEM
      6.
            EXHIBITS





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







Exhibit
              Number
            Description31
            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
  200232
            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: 
      August 13, 2008
            By:
            /s/ Brian
      M. CarterBrian
      M. CarterChief
      Executive Officer and Chief Financial Officer











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