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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-QSB þ      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 March 31, 2005
 or o     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
 0-18045 
  Boundless Motor Sports Racing, Inc. 
  Colorado
    
    84-0953839(State of incorporation)
    
    (IRS Employer Identification No.)
 2500 McGee Drive, Suite 147, Norman, OK 73072 
  (405) 360-5047 or (877) 5-RACING 
  Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuers classes of common equity, as of
the latest practicable date: There were 14,439,554 shares of common stock outstanding as of May 10, 2005. Transitional Small Business Disclosure Format (Check one): Yes þ No o




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TABLE OF CONTENTS  
 PAGEPART I  FINANCIAL INFORMATIONItem 1. Consolidated Financial StatementsConsolidated Balance Sheets  March 31, 2005 and
September 30, 2004
    
    
    3Consolidated Statements of Operations for the Three and Six Months
Ended March 31, 2005 and 2004
    
    
    4Consolidated Statements of Stockholders Equity for the Six
Months Ended March 31, 2005
    
    
    5Consolidated Statements of Cash Flows for the Six Months
Ended March 31, 2005 and 2004
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis
    
    
    18Item 3. Controls and Procedures
    
    
    27PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    28Item 4. Submission of Matters to a Vote of Security Holders
    
    
    28Item 6. Exhibits and Reports on Form 8-K
    
    
    28Signatures
    
    
    30Rule 13a-14(a)/15d-14(a) Certification of Paul A. KrugerRule 13a-14(a)/15d-14(a) Certification of Brian CarterSection 1350 Certification of Paul A. Kruger and Brian Carter
 2




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PART I  FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENTS BOUNDLESS MOTOR SPORTS RACING, INC. 
 CONDENSED CONSOLIDATED
BALANCE SHEETS
March 31, 2005 and September 30, 2004
 March 31,
    
    
    September 30,2005
    
    
    2004(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    2,179,671
    
    
    $
    5,005,930Accounts receivable  trade
    
    
    144,531
    
    
    
    356,614Inventory
    
    
    247,359
    
    
    
    72,891Prepaid expenses and other current assets
    
    
    131,851
    
    
    
    93,979Total current assets
    
    
    2,703,412
    
    
    
    5,529,414Land, buildings and equipment, net
    
    
    7,055,886
    
    
    
    3,998,112Trademarks
    
    
    242,452
    
    
    
    142,452Contract rights
    
    
    200,000
    
    
    
    Goodwill, net of impairment of $2,955,000 in 2005 and 2004
    
    
    8,278,835
    
    
    
    4,431,466Other assets, net of amortization of $26,000 in 2005 and $22,000 in 2004
    
    
    303,643
    
    
    
    214,369Total assets
    
    $
    18,784,228
    
    
    $
    14,315,813LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable
    
    $
    639,221
    
    
    $
    358,354Accrued liabilities
    
    
    1,733,398
    
    
    
    2,452,184Deferred revenues
    
    
    1,097,052
    
    
    
    1,259,028Notes payable
    
    
    480,000
    
    
    
    160,000Total current liabilities
    
    
    3,949,671
    
    
    
    4,229,566Notes payable  long term , net of discount of $1,333,330 in 2004
    
    
    3,605,627
    
    
    
    666,667Total liabilities
    
    
    7,555,298
    
    
    
    4,896,233Commitments and contingencies (Notes 14 and 15)Stockholders equity:Series A Preferred stock, $0.01 par value; 7,500 shares authorized;
4,790 shares issued and outstanding at September 30, 2004
    
    
    
    
    
    
    12,933,988Series B Preferred stock, $0.01 par value; 8,000 shares authorized;
6,883 shares issued and outstanding at March 31, 2005
    
    
    20,648,456
    
    
    
    Series C Preferred stock, $0.01 par value; 2,500 shares authorized;
2,500 shares issued and outstanding at March 31, 2005
    
    
    6,250,000
    
    
    
    Common stock, $0.0001 par value; 100,000,000 shares authorized; 14,439,554
and 14,230,170 shares issued and outstanding at March 31, 2005 and
September 30, 2004, respectively
    
    
    1,444
    
    
    
    1,423Additional paid-in capital
    
    
    3,297,285
    
    
    
    4,665,965Accumulated deficit
    
    
    (18,968,255
    )
    
    
    (8,181,796
    )Total stockholders equity
    
    
    11,228,930
    
    
    
    9,419,580Total liabilities and stockholders equity
    
    $
    18,784,228
    
    
    $
    14,315,813
 The accompanying notes are an integral part of these condensed consolidated financial
statements. 3




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BOUNDLESS MOTOR SPORTS RACING, INC. 
 CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
For the Three and Six Months Ended March 31, 2005 and 2004
(unaudited)
 Three months ended
    
    
    Six months endedMarch 31,
    
    
    March 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues:Race sanctioning and event fees
    
    $
    750,074
    
    
    $
    190,582
    
    
    $
    970,871
    
    
    $
    190,582Admission fees and ticket sales
    
    
    
    
    
    
    
    
    
    
    1,092,925
    
    
    
    Sponsorship and advertising
    
    
    243,953
    
    
    
    20,455
    
    
    
    471,031
    
    
    
    20,455Merchandise sales
    
    
    265,980
    
    
    
    92,377
    
    
    
    432,730
    
    
    
    92,377Other revenue
    
    
    31,022
    
    
    
    9,449
    
    
    
    109,704
    
    
    
    9,449Total revenues
    
    $
    1,291,029
    
    
    $
    312,863
    
    
    $
    3,077,261
    
    
    $
    312,863Operating expenses:Track and event operations
    
    
    1,630,685
    
    
    
    544,836
    
    
    
    3,931,837
    
    
    
    759,174Sales and marketing
    
    
    279,126
    
    
    
    17,566
    
    
    
    396,976
    
    
    
    Merchandise operations and cost of sales
    
    
    201,417
    
    
    
    74,724
    
    
    
    311,641
    
    
    
    80,909General and administrative
    
    
    689,528
    
    
    
    426,501
    
    
    
    1,390,729
    
    
    
    450,997Non-cash stock compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    66,986
    
    
    
    14,405
    
    
    
    114,086
    
    
    
    18,770Total operating expenses
    
    
    2,867,742
    
    
    
    1,078,032
    
    
    
    6,145,269
    
    
    
    1,309,850Loss from operations
    
    
    (1,576,713
    )
    
    
    (765,169
    )
    
    
    (3,068,008
    )
    
    
    (996,987
    )Interest expense, net
    
    
    (413,977
    )
    
    
    (59,761
    )
    
    
    (1,468,451
    )
    
    
    (70,053
    )Net loss before income taxes
    
    $
    (1,990,690
    )
    
    $
    (824,930
    )
    
    $
    (4,536,459
    )
    
    $
    (1,067,040
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net (loss)
    
    $
    (1,990,690
    )
    
    $
    (824,930
    )
    
    $
    (4,536,459
    )
    
    $
    (1,067,040
    )Dividends on preferred stock:Warrants
and beneficial conversion, Series B
    
    
    (5,000,000
    )
    
    
    
    
    
    
    (5,000,000
    )
    
    
    Beneficial conversion, Series C
    
    
    (800,000
    )
    
    
    
    
    
    
    (800,000
    )
    
    
    Exchange of Series A for Series B
Preferred Stock
    
    
    (1,667,801
    )
    
    
    
    
    
    
    (1,667,801
    )
    
    
    Exchange of warrants
for Series C Preferred Stock
    
    
    (5,450,000
    )
    
    
    
    
    
    
    (5,450,000
    )
    
    
    Net loss applicable to common stock
    
    $
    (14,908,491
    )
    
    $
    (824,930
    )
    
    $
    (17,454,260
    )
    
    $
    (1,067,040
    )Net loss applicable to common stock
per common share Basic and diluted
    
    $
    (1.03
    )
    
    $
    (0.05
    )
    
    $
    (1.21
    )
    
    $
    (0.06
    )Weighted average common shares
outstandingBasic and diluted
    
    
    14,439,554
    
    
    
    17,382,168
    
    
    
    14,391,033
    
    
    
    17,225,747
 The accompanying notes are an integral part of these condensed consolidated financial statements. 4




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BOUNDLESS MOTOR SPORTS RACING, INC. 
 CONDENSED CONSOLIDATED
STATEMENT OF STOCKHOLDERS DEFICIT
For the Six Months Ended March 31, 2005
 (unaudited)
 AdditionalPreferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    AccumulatedShares
    
    
    Amounts
    
    
    Shares
    
    
    Amounts
    
    
    Capital
    
    
    (Deficit)
    
    
    TotalBalance, September 30, 2004
    
    
    4,790
    
    
    $
    12,933,988
    
    
    
    14,230,170
    
    
    $
    1,423
    
    
    $
    4,665,965
    
    
    $
    (8,181,796
    )
    
    $
    9,419,580Common stock issued, acquisitions
    
    
    
    
    
    
    
    
    
    
    164,384
    
    
    
    16
    
    
    
    599,984
    
    
    
    
    
    
    
    600,000Common stock issued
    
    
    
    
    
    
    
    
    
    
    45,000
    
    
    
    5
    
    
    
    8,995
    
    
    
    
    
    
    
    9,000Partial conversion of note payable into Series A
preferred stock
    
    
    426
    
    
    
    1,149,622
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,149,622Value assigned to beneficial conversion feature and
warrants issued in connection with the
issuance of Series B preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000,000
    
    
    
    
    
    
    
    5,000,000Issuance of Series B preferred stock
    
    
    1,667
    
    
    
    5,000,000
    
    
    
    
    
    
    
    
    
    
    
    (5,000,000
    )
    
    
    
    
    
    
    Exchange of warrant for Series C preferred stock
    
    
    2,500
    
    
    
    6,250,000
    
    
    
    
    
    
    
    
    
    
    
    (800,000
    )
    
    
    (6,250,000
    )
    
    
    (800,000
    )Value assigned to beneficial conversion feature of
Series C preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    800,000
    
    
    
    
    
    
    
    800,000Exchange of Series B preferred stock for Series A
preferred stock, increase in liquidation
preference
    
    
    
    
    
    
    1,564,846
    
    
    
    
    
    
    
    
    
    
    
    (1,564,846
    )
    
    
    
    
    
    
    Value assigned to warrants issued in connection
with acquisitions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132,187
    
    
    
    
    
    
    
    132,187Placement agent fees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (500,000
    )
    
    
    
    
    
    
    (500,000
    )Registration and other costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (45,000
    )
    
    
    
    
    
    
    (45,000
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,536,459
    )
    
    
    (4,536,459
    )Balance, March 31, 2005
    
    
    9,383
    
    
    $
    26,898,456
    
    
    
    14,439,554
    
    
    $
    1,444
    
    
    $
    3,297,285
    
    
    $
    (18,968,255
    )
    
    $
    11,228,930
 The accompanying notes are an integral part of these condensed consolidated financial
statements. -5-




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BOUNDLESS MOTOR SPORTS RACING, INC. 
 CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 2005 and 2004
 (unaudited)
 2005
    
    
    2004Cash flows from operating activities:Net (loss)
    
    $
    (4,536,459
    )
    
    $
    (1,067,040
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization
    
    
    114,086
    
    
    
    18,770Non-cash interest expense, notes payable
    
    
    1,482,952
    
    
    
    Common stock issued for expenses
    
    
    9,000
    
    
    
    Increase (decrease) in cash for changes in:Accounts receivable
    
    
    212,083
    
    
    
    Inventory
    
    
    (174,468
    )
    
    
    (52,475
    )Prepaid expenses and other assets
    
    
    (130,774
    )
    
    
    (150,227
    )Accounts payable and accrued liabilities
    
    
    (437,919
    )
    
    
    471,965Deferred revenue
    
    
    (161,976
    )
    
    
    81,545Net cash used in operating activities
    
    
    (3,623,475
    )
    
    
    (697,462
    )Cash flows from investing activities:Advances on acquisition
    
    
    
    
    
    
    (1,000,000
    )Purchase of property, contract rights, trademarks and goodwill
    
    
    (3,843,411
    )
    
    
    (1,092,445
    )Net cash used in investing activities
    
    
    (3,843,411
    )
    
    
    (2,092,445
    )Cash flows from financing activities:Proceeds from issuance of notes payable
    
    
    287,000
    
    
    
    2,947,352Proceeds from issuance of preferred stock
    
    
    5,000,000
    
    
    
    250,002Payments on notes payable
    
    
    (101,373
    )
    
    
    (390,000
    )Payments of placement agent fees and other issuance costs
    
    
    (545,000
    )
    
    
    Net cash provided by financing activities
    
    
    4,640,627
    
    
    
    2,807,354Net increase (decrease) in cash and cash equivalents
    
    
    (2,826,259
    )
    
    
    17,447Cash and cash equivalents, beginning of period
    
    
    5,005,930
    
    
    
    615Cash and cash equivalents, end of period
    
    $
    2,179,671
    
    
    $
    18,062Supplemental schedule of non-cash activities:Issuance of common stock, deposit on DIRT acquisition
    
    $
    
    
    
    $
    4,675,002Payment of note receivable through acquisition
    
    $
    
    
    
    $
    612,047Assumption of sanction deposits through acquisition
    
    $
    
    
    

    $
    525,000Purchase price of acquisition funded through note payable
    
    $
    
    
    
    $
    3,003,185Cash payments for interest
    
    $
    63,850
    
    
    $
    Issuance of warrants, acquisitions
    
    $
    132,187
    
    
    $
    Issuance of common stock, acquisitions
    
    $
    600,000
    
    
    $
    Conversion of Convertible Preferred Stock: Series A to Series B
    
    $
    15,648,456
    
    
    $
    Non-cash revenues and expenses, barter agreements
    
    $
    25,000
    
    
    $
    
 The accompanying notes are an integral part of these condensed consolidated financial statements. -6-




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BOUNDLESS MOTOR SPORTS RACING, INC. 
 NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2005
 (Unaudited)
 NOTE 1  DESCRIPTION OF BUSINESS References in this document to the Company, Boundless, DIRT, we, us and our mean
Boundless Motor Sports Racing, Inc. and its wholly owned subsidiaries. Subsequent to the
acquisition of DIRT Motorsports, Inc. in 2004, the Company began operating under the d/b/a name
DIRT MotorSports and management plans to change the Company name to DIRT MotorSports, Inc. in the
near future. We are a leading marketer and promoter of motorsports entertainment in the United States. Our
motorsports subsidiaries operate 5 dirt motorsports tracks (3 are owned and 2 facilities are under
short term lease agreements) in New York and Pennsylvania. We own and operate four of the premier
sanctioning bodies in dirt motorsports: the World of Outlaws, DIRT Motorsports, United MidWestern
Promoters (UMP) and the Mid America Racing Series (MARS). Through these sanctioning bodies we
organize and promote 16 national and regional racing series including the World of Outlaw Sprint
Series and the World of Outlaws Stacker 2 Late Model Series and we expect to sanction races at
nearly 200 tracks across the United States and Canada. On February 4, 2004, the Company finalized the acquisition of substantially all the assets of
the World of Outlaws, Inc. Prior to this event, the Company was devoting substantially all of its
efforts to establishing the business and was therefore a development stage enterprise until
February 4, 2004. During the fiscal year ended September 30, 2004, the Company entered into a series of related
transactions resulting in the acquisition of 100% of the outstanding stock of DIRT Motorsports,
Inc. and two affiliated race tracks. On December 5, 2004, the Company entered into and consummated a Membership Interests Purchase
Agreement by and among United Midwestern Promoters Motorsports, LLC, hereafter UMP. On November 7, 2004, the Company entered into an Asset Purchase Agreement with Lernerville
Speedway, Inc. The total consideration given for the assets acquired was $3,240,000 and the
purchase of Lernerville Speedway closed in March 2005. On March 10, 2005, the Company entered into and consummated an Asset Purchase Agreement
pursuant to which the Company acquired all of the assets related to the business of sanctioning and
conducting the dirt track racing events known as the Mid America Racing Series (MARS). The assets
were acquired in exchange for an aggregate cash purchase price of $150,000. 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. As shown in the consolidated financial statements,
the Company incurred a net loss of $2.0 million for the three month period ended March 31, 2005 and
$4.5 million for the six month period ended March 31, 2005. The company has an accumulated deficit
of $19.0 million and negative working capital of $1.2 million as of March 31, 2005, which raises
substantial doubt about the Companys ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty. The future success of the Company is dependent on its ability to attain profitable operations
and upon its ability to obtain additional capital if necessary. There can be no assurance that the
Company will attain positive cash flows from operations or be successful in obtaining such
financing. We anticipate raising funds through additional private placements of preferred stock and
additional sources of long-term financing. We believe the Companys operations and sponsorship
revenues will also provide additional cash flows as the Company strived to achieve profitability
through operations. NOTE 3  BASIS OF PRESENTATION The accompanying consolidated financial statements have been prepared in compliance with Rule
10-01 of Regulation S-X and U.S. generally accepted accounting principles, but do not include all
of the information and disclosures required for audited financial statements. These statements
should be read in conjunction with the consolidated financial statements and -7-




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notes thereto included in the Companys latest Annual Report on Form 10-K for the year ended
September 30, 2004. In the opinion of management, these statements include all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair presentation of the
results of operations, financial position and cash flows for the interim periods presented.
Operating results for the three months ended March 31, 2005 are not necessarily indicative of the
results that may be expected for the year ending September 30, 2005 due to the seasonal nature of
the Companys business. The factors discussed in Footnote 2 above raise substantial doubt about the Companys ability
to continue as a going concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty. NOTE 4  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reclassifications Certain amounts in prior periods presented have been reclassified to conform to the current
financial statement presentation. These reclassifications have no effect on previously reported
net income or loss. Use of Estimates The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Boundless Motor
Sports Racing, Inc. and its wholly-owned subsidiaries. All material intercompany accounts and
transactions have been eliminated in consolidation. Revenue Recognition and Deferred Revenue The Company classifies its revenues as 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 and purses received.
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. Admission
fees and ticket 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 $25,000 of total revenues for the three and six months ended March 31,
2005. There were no barter transactions recorded as revenues for the three and six months ended
March 31, 2004. Expense Recognition and Deferral Certain direct expenses pertaining to specific events, including prize and point fund monies,
advertising and other expenses associated with the promotion of our racing events are deferred
until the event is held, at which point they are expensed. Annual points fund monies which are
paid at the end of the racing season are accrued during the racing season based upon the races held
and total races scheduled. The cost of non-event related advertising, promotion and marketing programs are expensed as
incurred. Net loss Per Share -8-




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Basic and diluted earnings per share (EPS) are calculated in accordance with FASB Statement
No. 128, Earnings per Share. For the three months ended March 31, 2005, the net loss per share
applicable to common stock has been computed by dividing the net loss by the weighted average
number of common shares outstanding. For the three months ended March 31, 2005 the Company had the following warrants outstanding:  
    Series A warrants to purchase 4,172,925 shares of common stock at an exercise price of $3.00
    Series B warrants to purchase 933,334 shares of common stock at an exercise price of $4.00
    Series C warrants to purchase 1,500,000 shares of common stock at an exercise price of $5.00
    Placement Agent Warrants to purchase 1,188,915 shares of common stock at exercise prices
ranging from $2.70 to $4.00
    Warrants to purchase 40,000 shares of common stock issued in connection with the UMP
acquisition at an exercise price of $3.65 In addition, as of March 31, 2005, the Companys Series B Preferred Stock was convertible into
6,882,819 shares of common stock and the Companys Series C Preferred Stock was convertible into
2,500,000 shares of common stock. None of these were included in the computation of diluted EPS
because the Company had a net loss and all potential issuance of common stock would have been
anti-dilutive. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all highly liquid
investments with original maturities of three months or less to be cash equivalents. Inventories Inventories of retail merchandise are stated at the lower of cost or market on the first in,
first out method. Shipping, handling and freight costs related to merchandise inventories are
charged to cost of merchandise. Property and Equipment Property and equipment are stated at cost. Depreciation is provided for financial reporting
purposes using the straight-line method over the estimated useful lives of the related assets
ranging from 3 to 40 years. Expenditures for maintenance, repairs and minor renewals are expensed
as incurred; major renewals and betterments are capitalized. At the time depreciable assets are
retired or otherwise disposed of, the cost and the accumulated depreciation of the assets are
eliminated from the accounts and any profit or loss is recognized. The carrying values of property and equipment are evaluated for impairment based upon expected
future undiscounted cash flows. If events or circumstances indicate that the carrying value of an
asset may not be recoverable, an impairment loss would be recognized equal to the difference
between the carrying value of the asset and its fair value. As of March 31, 2005, the Company
believes there is no impairment of property and equipment. Purchase Accounting The Company accounted for its acquisitions of assets in accordance with Statement of Financial
Accounting Standards No. 141 (SFAS No. 141), Business Combinations and Statement of Financial
Accounting Standards No. 142, Goodwill and Intangible Assets (SFAS No. 142). SFAS no. 141
requires that all business combinations entered into subsequent to June 30, 2001 be accounted for
under the purchase method of accounting and that certain acquired intangible assets in a business
combination be recognized and reported as assets apart from goodwill. Intangible Assets Upon its inception, the Company adopted Statement of Financial Accounting Standard (SFAS)
No. 142, Goodwill and Other Intangible Assets. Under SFAS No. 142 goodwill and intangible assets
with indefinite lives are not to be amortized but are tested for impairment at least annually.
Intangible assets with definite useful lives are to be amortized over the respective estimated
useful lives or anticipated future cash flow streams when appropriate. At least annually the Company tests for possible impairment of all intangible assets and more
often whenever events or changes in circumstances, such as a reduction in operating cash flow or a
dramatic change in the manner that the asset is intended to be used indicate that the carrying
amount of the asset is not recoverable. If indicators exist, the Company compares the discounted
cash flows related to the asset to the carrying value of the asset. If the carrying value is
greater than the discounted cash flow amount, an impairment charge is recorded in the operating
expense section in the statement -9-




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of operations for amounts necessary to reduce the carrying value of the asset to fair value.
The Company has chosen the fourth quarter of its fiscal year to conduct its annual impairment test. Income Taxes The Company accounts for income taxes under Financial Accounting Standards Number 109 (SFAS
109), Accounting for Income Taxes. Deferred income tax assets and liabilities are determined
based upon differences between financial reporting and tax basis of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the differences are
expected to be reversed. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of the deferred tax
assets will not be realized. Concentration of Credit Risk As of March 31, 2005 the Company does not believe it has any material concentration of credit
risks. New Accounting Pronouncements In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities (SFAS 149). SFAS 149 amends and clarifies accounting for
certain derivative instruments embedded in other contracts, and for hedging activities under SFAS
133. SFAS 149 is effective for certain contracts entered into or modified by the Company after June
30, 2003. The adoption of SFAS 149 had no impact on the Companys financial position, results of
operations, or cash flows. In May 2003, the FASB issued SFAS No. 150, Accounting for Instruments with Characteristics of
Both Debt and Equity (SFAS 150). Statement 150 requires liability classification for three types
of instruments: 1) Mandatory redeemable shares that obligate the company to deliver cash or other
assets to shareholders on fixed or determinable dates; 2) Freestanding written put options and
forward purchase contracts on a companys own shares that obligate the company to deliver cash or
other assets, and 3) Contracts that obligate a company to issue its own shares in amounts that are
unrelated to, or inversely related to, the value of the shares. The adoption of SFAS 150 had no
impact on the Companys financial position, results of operations, or cash flows. In November 2004, the FASB issued SFAS No. 151 Inventory Costs  an amendment of ARB No. 43,
Chapter 4. Statement No. 151 requires that certain abnormal costs associated with the
manufacturing, freight, and handling costs associated with inventory be charged to current
operations in the period in which they are incurred. The adoption of SFAS 151 had no impact on the
Companys financial position, results of operations, or cash flows. In December 2004, the FASB issued a revision of SFAS No. 123 Share-Based Payment. The
statement establishes standards for the accounting for transactions in which an entity exchanges
its equity investments for goods and services. It also addresses transactions in which an entity
incurs liabilities in exchange for goods or services that are based on the fair value of the
entitys equity instruments or that may be settled by the issuance of those equity instruments. The
statement does not change the accounting guidance for share-based payments with parties other than
employees. The statement requires a public entity to measure the cost of employee service received in
exchange for an award of equity instruments based on the grant date fair value of the award (with
limited exception). That cost will be recognized over the period during which an employee is
required to provide service in exchange for the award (usually the vesting period). A public entity
will initially measure the cost of employee services received in exchange for an award of liability
instrument based on its current fair value; the fair value of that award will be re-measured
subsequently at each reporting date through the settlement date. Changes in fair value during the
requisite service period will be recognized as compensation over that period. The grant-date for
fair value of employee share options and similar instruments will be estimated using option-pricing
models adjusted for the unique characteristics of these instruments. The statement is effective
for the quarter beginning January 1, 2006. In December 2004, the FASB issued SFAS No. 153 Exchanges of Non-monetary Assets-amendment of
APB Opinion No. 29. Statement 153 eliminates the exception to fair value for exchanges of similar
productive assets and replaces it with a general exception for exchange transaction that do not
have commercial substance, defined as transaction that are not expected to result in significant
changes in the cash flows of the reporting entity. This statement is effective for exchanges of
non-monetary assets occurring after June 15, 2005. NOTE 5  ACQUISITIONS World of Outlaws, Inc. On February 4, 2004 the Company completed the acquisition of substantially all the assets of
World of Outlaws, Inc. (World of Outlaws). World of Outlaws is one of the premier sanctioning
bodies and touring racing series for dirt track racing -10-




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across the United States. The acquisition allowed the Company to pursue its business plan to
create a racing and sports entertainment company. The purchase price consisted of:  
    Cash and acquisition costs of $2,421,389
    Forgiveness of $1,450,000 plus accrued interest of $21,815 promissory note payable to the Company
    Assumptions of obligations for $612,500 in deposits World of Outlaws had received for
sanctioning of future sprint car racing events
    Assumption of $777,677 of other obligations of World of Outlaws The following table summarizes the estimated fair value of the assets acquired and liabilities
assumed at the date of acquisition: Transportation equipment
    
    $
    184,926Other equipment
    
    
    8,875Trade-marks and Trade-names
    
    
    142,452Goodwill
    
    
    4,945,058Total assets acquired
    
    
    5,281,311Advances from promoters
    
    
    612,500Other current obligations
    
    
    777,677Total liabilities assumed
    
    
    1,390,177Net consideration paid in cash and debt forgiveness
    
    $
    3,891,134
 With the purchase of World of Outlaws, the Company acquired the corporate name World of
Outlaws, Inc. and all associated trade-names, trade-marks, and trade-mark registrations. This
allows the Company to sanction World of Outlaws sprint-car racing events and expand into other
series, such as a World of Outlaws late-model series, without restrictions. Dirt Motorsports, Inc. In October 2003, the Company made a cash deposit of $1,000,000 and issued 1,558,334 shares of
its common stock to the owners of Dirt Motorsports, Inc. (DIRT) and two affiliated tracks known
as Rolling Wheels Dirt Race Track and Cayuga County Dirt Track towards the acquisition of these
properties. This series of transactions is referred to as the Dirt Acquisitions. Effective May 24, 2004, the Company, through its wholly owned subsidiary, Boundless Racing,
Inc., a Texas corporation, consummated the acquisition of substantially all of the assets of Finger
Lake International, Inc., a New York corporation (FLI), pursuant to an Asset Purchase Agreement.
The Company, through a separate wholly-owned subsidiary, had previously entered into an agreement
to purchase the FLI assets (the First Asset Purchase Agreement), but the previous arrangement was
mutually terminated in favor of the Asset Purchase Agreement. In exchange for the assets and real property acquired, which consisted of the Rolling Wheels
motor sports racing track located in Elbridge, New York, the Company paid $1,088,777 to FLI
consisting of (a) cash in an aggregate of $1,000,000, and (b) 300,000 shares of the Companys
common stock, $0.0001 par value per share. The Company also incurred $28,777 of costs relating to
the acquisition. The Shares issued to FLI in connection with this acquisition were issued by the Company
pursuant to an exemption (Section 4(2)) from the registration requirements of the Securities Act of
1933, as amended and are restricted shares. Effective August 6, 2004, the Company, through its wholly owned subsidiary, Boundless Racing,
Inc., a Texas corporation (as the assignee of Boundless Track), consummated the acquisition of all
of the outstanding shares of capital stock of DIRT, pursuant to a Stock Purchase Agreement, dated
August 13, 2003, as amended and extended. In exchange for the outstanding capital stock of DIRT, the Company paid to Mr. Glenn Donnelly,
the sole shareholder of DIRT, $2,107,180 consisting of (a) cash in an aggregate amount of
$1,775,000, of which $925,000 remains unpaid and based upon the final accounting is expected to
ultimately reduce the purchase price, and (b) 591,667 shares of the Companys common stock, paid to
Mr. Donnelly in October 2003. The Company also incurred $221,308 of costs relating to the
acquisition. At this time, Mr. Donnelly has been retained by the Company in a consultative
capacity to assist the Company with its Super Dirt Week racing events pursuant to the terms of a
Consulting Agreement. -11-




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The Shares issued to Mr. Donnelly in connection with the acquisition of DIRT were issued by
the Company pursuant to an exemption (Section 4(2)) from the registration requirements of the
Securities Act of 1933, as amended and are restricted shares. On August 31, 2004 the Company consummated the acquisition of the Cayuga County race track. In
exchange for the assets and real property acquired, which consisted of the Cayuga County motor
sports racing track located in Cayuga County, New York, the Company paid $2,293,333 consisting of
(a) cash in of $2,150,000, and (b) 716,667 shares of the Companys common stock which were
previously paid and credited toward the purchase price. The following table summarizes the estimated fair value of the assets acquired and liabilities
assumed at the date of acquisitions for the DIRT transactions: DIRT
    
    
    Rolling Wheels
    
    
    Cayuga CountyCurrent Assets
    
    $
    459,217
    
    
    $
    
    
    
    $
    Property and Equipment
    
    
    249,635
    
    
    
    1,088,777
    
    
    
    2,293,333Goodwill
    
    
    2,536,700Total assets acquired
    
    
    3,245,552
    
    
    
    1,088,777
    
    
    
    2,293,333Current Liabilities
    
    
    1,130,910
    
    
    
    
    
    
    
    Net assets acquired
    
    $
    2,114,642
    
    
    $
    1,088,777
    
    
    $
    2,293,333
 United Midwestern Promoters Motorsports, LLC Effective November 30, 2004, the Company, entered into and consummated a Membership Interests
Purchase Agreement by and among United Midwestern Promoters Motorsports, LLC, hereafter (UMP),
National Speedways of Iowa, Inc., Track Enterprises, Inc., Ken Schrader Racing, Inc., and Lebanon
Valley Auto Racing Corp. (the Purchase Agreement), pursuant to which the Company acquired all of
the outstanding membership interests in UMP, in exchange for an aggregate purchase price of
$2,400,000, of which, $200,000 was previously paid under the terms of a letter of intent among the
parties, $1,600,000 was paid in cash at closing, and the remaining $600,000 was satisfied through
the issuance of 164,384 shares of the Companys common stock. In addition, at closing the Company
has provided warrants to purchase an aggregate of 40,000 shares of the Companys common stock for
$3.65 per share. These warrants were valued at an aggregate amount of $132,187 based on
Black-Scholes modeling and the fair market value of the warrants at the time of issuance. UMP is a dirt track race sanctioning body, and as such, sanctions races for both late model
and open wheel modified cars. UMP assets include its agreements with drivers competing in its
races, and sponsorship agreements with racing event sponsors. Under the terms of the Purchase
Agreement, if the average closing price of the Companys common stock for the ten-trading days
immediately preceding the one-year anniversary of the date of the closing of the acquisition (the
Average Anniversary Price) is less than $3.65 per share, then the Company shall, at its sole
election, either (a) issue additional shares of its common stock equal to the difference between:
(i) $600,000 divided by the Average Anniversary
Price, less (ii) 164,384, or (b) purchase, at a purchase price of $3.65 a share, the Shares. The UMP acquisition amount was allocated as follows based on the preliminary determination of
fair values: Cash paid for acquisition
    
    $
    1,800,000Value of stock issued
    
    
    600,000Value of warrants issued
    
    
    132,187Accrued points fund assumed
    
    
    443,200Accounts payable assumed
    
    
    355,000Accrued closing costs
    
    
    100,000Closing expenses paid
    
    
    25,443$
    3,455,830Allocation to goodwill
    
    $
    3,056,330Allocation to land, buildings and equipment
    
    
    99,500Allocation to trademarks
    
    
    100,000Allocation to contract rights
    
    
    200,000$
    3,455,830
 - 12 -




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As part of the UMP acquisition, the Company acquired the contractual rights to the NVE
Pharmaceuticals, Inc sponsorship agreement. The original sponsorship agreement commenced in 2004
and has been amended in 2005. Future sponsorship commitments under the amended agreement by year
are as follows: SponsorshipYear
    
    Commitment2005
    
    $
    750,0002006
    
    
    950,000Total
    
    $
    1,700,000
 In addition, sponsorship revenues will include 10% of gross revenues for sales of NVE
Pharmaceuticals, Inc. products sold at tracks and additional retail outlets established by the
Company. The NVE contract contains various performance criteria on the part of the Company for which
the failure to comply would result in the termination of this agreement. During 2004 NVE
Pharmaceuticals, Inc. paid $990,000 in sponsorship fees to the Extreme Dirt Car, Inc., the previous
party to this agreement. UMP also had sponsorship agreements in place with a tire company, which call for payments of
sponsorship fees based solely on the number of tires sold at each of the Companys races. During
the year ended November 30, 2004, UMP received $532,417 in sponsorship revenues from this tire
company. These tire sponsorship agreements expire in 2007. Lernerville Speedway On November 7, 2004, the Company, through its wholly owned subsidiary, Boundless Racing, Inc.,
a Texas corporation (BRI), entered into an Asset Purchase Agreement (the Lernerville Agreement)
with Lernerville Speedway, Inc., a corporation organized under the Commonwealth of Pennsylvania
(the LSI), and Helen W. Martin, Donny Martin-Roenigk, and Patty Martin-Roenigk (the Purchase
Agreement), pursuant to which the Company purchased substantially all of the assets of LSI and
certain real estate owned by Ms. Martin and comprising the racing facility used by LSI and known as
the Lernerville Speedway (the Assets). This purchase was consummated on March 15, 2005. The terms of the Lernerville Agreement require BRI to pay a total purchase price of $3,240,000
for the Assets. The purchase price is payable by BRI as follows:  (a)
    $500,000 was paid at the closing of the transactions under the Lernerville Agreement;(b)
    $110,000 will be payable on or prior to May 30, 2005;(c)
    $110,000 will be payable on or prior to October 30, 2005;(d)
    $110,000 will be payable on or prior to May 30, 2006;(e)
    $110,000 will be payable on or prior to May 30, 2007; and(f)
    the remaining $2,300,000 is payable pursuant to the terms of a four year promissory
note bearing interest at seven percent per year, with accrued interest payable annually. The four $110,000 payments described above, as well as the promissory note, is secured by a
mortgage on the Lernerville Speedway facility, and is guaranteed by the Company. The Lernerville acquisition amount was allocated based on the preliminary estimated fair value
as follows: Consideration:Cash paid at closing
    
    $
    500,000Notes payable issued
    
    
    2,300,000Mortgage notes payable issued
    
    
    440,000Direct transaction costs
    
    
    126,525Adjusted purchase price
    
    $
    3,366,525Land
    
    
    (1,124,800
    )Buildings and improvements
    
    
    (1,590,000
    )Vehicles and other operating assets
    
    
    (104,000
    )Excess of cost over fair value of net identifiable assets (goodwill)
    
    $
    547,725
 - 13 -




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Mid America Racing Series (MARS) On March 10, 2005, entered into and consummated an Asset Purchase Agreement (the MARS
Agreement) by and among Mid America Racing Series and Mr. R. Mooney Starr pursuant to which the
Company acquired all of the assets, free and clear of any and all liabilities and encumbrances,
related to the business of sanctioning and conducting the dirt track racing events known as the Mid
America Racing Series (MARS). The assets were acquired in exchange for an aggregate purchase price
of $150,000. The purchase price was allocated based on the preliminary estimated fair value as
follows: Vehicles
    
    $
    1,500Communications equipment
    
    
    500Excess of cost over fair value of identifiable assets (goodwill)
    
    
    148,000Total purchase price
    
    $
    150,000
 NOTE 6  PROPERTY AND EQUIPMENT Property and equipment consisted of the following at March 31, 2005: Cost
    
    
    Depreciable LifeLand
    
    $
    4,063,441
    
    
    N/ATransportation equipment
    
    
    1,070,920
    
    
    5 - 7 yearsBuildings and grandstands
    
    
    2,057,150
    
    
    7 - 40 yearsOffice furniture and equipment
    
    
    200,267
    
    
    3 - 7 yearsAudio / Video equipment
    
    
    142,520
    
    
    5 - 7 years7,534,298Less accumulated depreciation
    
    
    (478,412
    )Property and equipment, net
    
    $
    7,055,886
 Depreciation is computed on a straight-line basis. Depreciation expense for the three and
six months ended March 31, 2005 was $65,000 and $110,000, respectively. Depreciation expense for
the three and six months ended March 31, 2004 was $14,000 and $19,000, respectively. NOTE 7  GOODWILL Goodwill included in the financial statements as of March 31, 2005 are as follows: Goodwill incurred in connection with World of Outlaws acquisition
    
    $
    4,945,058Goodwill incurred in connection with the DIRT acquisition
    
    
    2,536,700Goodwill incurred in connection with the UMP acquisition
    
    
    3,056,330Goodwill incurred in connection with the MARS acquisition
    
    
    148,000Goodwill incurred in connection with the Lernerville acquisition
    
    
    547,725Less impairment of goodwill associated with the
World of Outlaws acquisition
    
    
    (2,954,978
    )Total net goodwill
    
    $
    8,278,835
 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 and the DIRT acquisition were treated as
separate reporting units for purposes of making these impairment calculations. As of September 30,
2004, the World of Outlaws goodwill was determined to be impaired by $2,954,978. Due to the extended amount of time needed to complete additional acquisitions, the World of
Outlaws reporting units operating profit and cash flows were lower than expected in the year ended
September 30, 2004. Based on these factors the revenue forecasts for World of Outlaws were reduced
resulting in the impairment of the goodwill. - 14 -




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NOTE 8  ACCRUED LIABILITIES Accrued liabilities at March 31, 2005 and September 30, 2004 consisted of the following: March 31,
    
    
    September 30,2005
    
    
    2004Points fund accrual
    
    $
    149,597
    
    
    $
    1,282,992Accrued Purchase settlement  DIRT acquisition
    
    
    925,000
    
    
    
    925,000Accrued interest
    
    
    78,469
    
    
    
    86,435Accrued UMP expenses
    
    
    465,211
    
    
    
    Other accrued liabilities
    
    
    115,121
    
    
    
    157,757Total Accrued Liabilities
    
    $
    1,733,398
    
    
    $
    2,452,184
 NOTE 9  DEFERRED REVENUE Deferred revenues at March 31, 2005 and September 30, 2004 consisted of the following: March 31,
    
    
    September 30,2005
    
    
    2004Sanction fee advances
    
    $
    490,700
    
    
    $
    605,700Sponsorship prepayments
    
    
    464,335
    
    
    
    272,989Memberships
    
    
    110,222
    
    
    
    45,111Season Passes / Prepaid Tickets
    
    
    31,795
    
    
    
    335,228Total deferred revenue
    
    $
    1,097,052
    
    
    $
    1,259,028
 NOTE 10  NOTES PAYABLE On July 30, 2004, the Company entered into an agreement with Boundless Investments, LLC to
refinance an existing $2,000,000 note dated May 19, 2004. Terms of this refinancing reduced the
interest rate from 12% to 8%, eliminated the collateral requirement, and eliminated the requirement
for certain shareholders guarantees. In consideration for this exchange of debt instruments,
certain shareholders gave Boundless Investments, LLC 4,000,000 shares of their personal restricted
common stock of the Company. Boundless Investment, LLC then returned these 4,000,000 shares of common stock to the Company
in exchange for warrants to buy 4,000,000 shares of the Company common stock for at an exercise
price of $0.001 per share or $4,000 in total. Boundless Investments, LLC then sold these warrants to an unrelated third party for $800,000
or $0.20 per share. In accordance with Emerging Issues Task Force Pronouncement 96-19, $800,000 was charged to
current operations as a debt extinguishment expense. In connection with the Series B financing in February 2005(see NOTE 11), the Company entered
into an exchange letter agreement, pursuant to which the Company converted approximately $1,045,000
in outstanding debt and accrued interest into 425.786 shares of Series A Convertible Preferred
Stock and Series A Warrants to purchase 340,629 shares of common stock. This conversion was
completed in accordance with the conversion terms contained within the note. The note provided for
the conversion of the note into Series A Preferred stock with a value equal to 110% of the note and
accrued interest exchanged. The increased conversion preference of $102,955 was recorded as
additional interest expense for the three and six months ended March 31, 2005.The note payable was
subsequently amended to reflect the unconverted principal balance of $1,000,000 and its conversion
into Series B preferred stock. Notes payable at March 31, 2005 consisted of the following: $1,000,000 note payable dated July 30, 2004 (amended February 2005) due to Boundless
Investments, LLC. This note bears interest at eight percent per annum, payable quarterly,
and matures on May 19, 2007. The note holder has the option to convert the outstanding
principal plus accrued interest into shares of Series B Convertible Preferred Stock at a
conversion ratio equal to 110% of the outstanding principal and interest at the conversion
date. - 15 -




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The Company incurred initial loan acquisition fees of $201,765. These fees were amortized to
interest expense in 2004 and into 2005. Amortization was complete as of March 31, 2005. The
initial proceeds of $2.0 million from the issuance of the note payable, the beneficial
conversion ratio effective six months after the conversion date, and the warrants associated
with the beneficial conversion rights were allocated to each instrument based on their fair
values. The sum of the relative fair value of the beneficial conversion ratio and the
warrants associated with the beneficial conversion rights was determined to be in excess of
the total proceeds received by the Company; therefore, the entire amount of proceeds was
considered non-cash discount. The debt discount was amortized as interest expense over the
period from the date of issuance to the date of earliest conversion, six months from the
date of issuance. The debt discount was recorded at the date of issuance and the
amortization of the debt discount in the amount of $1,300,000 was included in the
determination of net loss as interest expense in the six months ended March 31, 2005.
Amortization is complete as of March 31, 2005. $440,000 notes payable issued in connection with the purchase of Lernerville Speedway due in
$110,000 installments on May 30, 2005, October 30, 2005, May 30, 2006 and May 30, 2006.
These notes are secured by a mortgage on the Lernerville Speedway Facility. $2,300,000 notes payable issued in connection with the purchase of Lernerville Speedway,
bearing interest at 7% payable annually. The balance is due upon maturity on March 15, 2009.
This note is secured by a mortgage on the Lernerville Speedway Facility. $200,000 in 8% notes payable to existing shareholders, classified as current. $60,000, 6% note payable to an individual, dated August 6, 2004, due August 6, 2005.
Principal of $10,000 plus interest is payable monthly. $85,627 in vehicle notes payable, bearing interest at 6.25% and due in monthly installments
of principal and interest through February 2011. The aggregate amounts of maturities of debt during each of the years ending September 30, 2005
through 2009 are: 2005
    
    $
    380,7032006
    
    
    234,2712007
    
    
    1,124,2712008
    
    
    14,2712009 +
    
    
    2,332,111Total
    
    $
    4,085,627
 NOTE 11  STOCKHOLDERS EQUITY On November 30, 2004, the Company issued 164,384 shares of unregistered common stock and
warrants to purchase 40,000 shares of the Companys common stock in connection with the UMP
acquisition as described in Note 4 above. The stock was valued at $600,000 and the warrants were
valued at $132,187. Preferred Stock The Company issued 4,790.37 shares of its Series A Convertible Preferred Stock, par value
$0.01 per share (Series A Stock) and warrants to purchase 3,832,297 shares of its common stock,
$0.0001 par value per share (the Series A Warrants) as filed in the 8-K dated August 4, 2004. The Series A Warrants expire on July 29, 2011 and are exercisable at an exercise price of
$3.00 per share. Subject to an effective registration statement covering the resale of the shares
of common stock issuable upon exercise of the Series A Warrants, the Company may redeem the Series
A Warrants for $0.0001 per warrant at any time after July 29 2006, if (a) the closing bid price of
our common stock is equal to or greater than $6.00 per share for ten consecutive trading days, and
(b) the dollar trading volume for each of the ten trading days exceeds $500,000. On February 25, 2005, the Company entered into a Series B Convertible Stock Purchase Agreement
pursuant to which the Company issued and sold 1,333.33 shares of its newly designated Series B
Convertible Preferred Stock, par value $0.01 per share (Series B Stock) and warrants to purchase
666,667 shares of our common stock, $0.0001 par value per share (the Series B Warrants), for an
aggregate purchase price of $4,000,000, which consisted of $3,300,000 in new investment and the
conversion of $700,000 of outstanding debt into Series B Stock. In March 2005, the Company sold an
additional 333.33 shares of Series B Convertible Preferred Stock and issued warrants to purchase
333,333 shares of our common - 16 -




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stock for an aggregate purchase price of $1,000,000. The proceeds from issuance of the Series
B Convertible Preferred Stock and Warrant issued and the fair value of the warrants issued to the
holders of the Series B Stock has been allocated to each instrument based on their relative fair
values. Additionally, the Series B Convertible Preferred Stock includes a beneficial conversion
ratio at the issuance date. The fair value of the Warrants and the intrinsic value of the
beneficial conversion ratio has been deemed a dividend to holders of the Series B Preferred Stock and
considered a non-cash dividend recorded during the quarter and has been included in the determination of net loss applicable to common
stock for the three and six months ended March 31, 2005. In connection with the Series B financing, the Company entered into an exchange letter
agreement, pursuant to which the Company converted approximately $1,045,000 in outstanding debt
into 425.786 shares of Series A Convertible Preferred Stock, which and Series A Warrants to
purchase 340,629 shares of common stock. This conversion was completed in accordance with the
conversion terms contained within the note. The note provided for the conversion of the note into
Series A Preferred stock with a value equal to 110% of the note and accrued interest exchanged. The
increased conversion preference of $102,955 was recorded as additional interest expense for the
three and six months ended March 31, 2005. On March 30, 2005, the Company entered into an Exchange Agreement with the holders of the
Series A Stock pursuant to which the holders of the Series A Stock exchanged each outstanding share
of Series A Stock for one share of Series B Convertible Preferred Stock. The Series A Stock was
convertible into an aggregate of 5,216,151 shares of common stock, representing a conversion price
of $2.70 per share. The Series B Convertible Stock converted into 5,216,151 shares of the
Companys common stock representing a conversion price of $3.00. The increase in the face value
from the Series A to Series B Convertible Preferred Stock of $1,564,846 is a deemed dividend to the
holders of the Series B Convertible Preferred Stock and has been included in the determination of
net loss applicable to common stock for the three and six months ended March 31, 2005. On February 25, 2005, the Company entered into a Series C Convertible Stock Purchase Agreement
pursuant to which the Company converted common stock purchase warrants to purchase 4,000,000 shares
of common stock at $0.001 per share into 2,125 shares of a newly designated Series C Convertible
Preferred Stock with a stated value of $6,250,000, which shares are convertible into 2,125,000
shares of common stock, and Series C Warrants to purchase an additional 1,500,000 shares of common
stock at an exercise price of $5.00 per share. The Company recorded the issuance of the Series C
Convertible Preferred Stock as a dividend to the holders of the Series C Convertible Preferred
Stock equal to the stated value of the preferred stock. A portion of the stated value was recorded
as a decrease to additional paid in capital for the retirement of the warrants to purchase
4,000,000 shares of common stock at $0.001 The new issuance of $5.0 of Series B Stock is convertible into an aggregate of 1,666,667
shares of common stock, representing a conversion price of $3.00 per share. The Series B Stock will
automatically convert into shares into shares of common stock on the date at least one hundred
eighty (180) days following the effective date of a registration statement covering the shares of
common stock into which the Series B Stock is convertible, if (a) the closing bid price of our
common stock is equal to or greater than $6.00 per share for ten consecutive trading days, and (b)
the dollar trading volume for each of the ten trading days exceeds $500,000. The Series B Warrants have a term of seven years and are exercisable at an exercise price of
$4.00 per share. The Series C Warrants have a term of seven years and are exercisable at an
exercise price of $5.00 per share. The Company incurred $545,000 in placement agent and legal fees in connection with the
issuance of the Series B Convertible Preferred Stock and is included as a reduction of additional
paid in capital for the periods ending March 31, 2005. NOTE 12  RELATED PARTY TRANSACTIONS The Companys Chief Executive Officer, Paul A. Kruger leases an aircraft to Business Jet,
another company that the Company utilizes for travel services. The Company has spent approximately
$43,000 and $42,000 with Business Jet for aircraft charter services during the six months ended
March 31, 2005 and 2004, respectively. The Company rents office space for its corporate offices in Norman, Oklahoma, on a
month-to-month basis, from an entity controlled by Mr. Kruger. During the six months ended March
31, 2005 and 2004, respectively, the Company incurred $29,640 and $25,140 of rent expense for the
Companys corporate offices. NOTE 13  INCOME TAXES The Company accounts for income taxes under Financial Accounting Standards Number 109 (SFAS
109), Accounting for Income Taxes. Deferred income tax assets and liabilities are determined
based upon differences between financial reporting and tax basis of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the differences are
expected to be reversed. -17-




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At September 30, 2004, the Company had net operating loss carry forwards of approximately
$5,500,000 for federal income tax purposes. The statutory income tax benefit calculated at 34% of income before tax resulting from the
Companys net operating loss carry forwards has been fully reserved. The valuation allowance has
been provided due to the uncertainty that the Company will generate future profitable operations to
utilize this net operating loss carry forward. NOTE 14  COMMITMENTS The Company leases a truck for use in transporting merchandise and equipment to the tracks in
connection with the Companys weekly racing series. The lease agreement continues through
November, 2005 at a monthly rate of $1,316. A wholly-owned subsidiary of the Company has a lease agreement for the Canandaigua Track
through July 1, 2006 at a yearly rate of $22,000. A wholly-owned subsidiary of the Company has a lease agreement for an office copier at $334
per month through February 7, 2005. Total scheduled future minimum lease payments, under these operating leases are as follows: Payment Due by PeriodLess than
    
    
    2 to 3
    
    
    4 to 5
    
    
    After 5Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    YearsOperating leases
    
    $
    54,528
    
    
    $
    32,528
    
    
    $
    22,000
    
    
    $
    
    
    
    $
    
 Operating lease expense for the three and six months ended March 31, 2005 were $4,950 and
$9,900, respectively. Operating lease expense for the three and six months ended March 31, 2004
were $3,948 and $7,896, respectively. The Company has employment agreements with its executive officers and other employees, the
terms of which expire at various times over the next three years. The aggregate commitment for
future salaries at March 31, 2005 was $1.9 million. NOTE 15  LITIGATION AND CONTINGENCIES We are from time to time involved in various legal proceedings incidental to the conduct of
our business. We believe that the outcome of all such pending legal proceedings will not, in the
aggregate, have a material adverse effect on our business, financial condition, results of
operations or liquidity. 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD LOOKING STATEMENTS This Form 10-QSB includes certain statements that may be deemed to be forward-looking
statements within the meaning of Section 27A of the Securities Act. All statements, other than
statements of historical fact, included in this Form 10-QSB that addresses activities, events or
developments that the Company expects, projects, believes, or anticipates will or may occur in the
future, including matters having to do with expected and future revenues, the Companys ability to
fund its operations and repay debt, business strategies, expansion and growth of operations and
other such matters, are forward-looking statements. These statements are based on certain
assumptions and analyses made by our management in light of its experience and its perception of
historical trends, current conditions, expected future developments, and other factors it believes
are appropriate in the circumstances. These statements are subject to a number of assumptions,
risks and uncertainties, including general economic and business conditions, the business
opportunities (or lack thereof) that may be presented to and pursued by the Company, the Companys
performance on its current contracts and its success in obtaining new contracts, the Companys
ability to attract and retain qualified employees, and other factors, many of which are beyond the
Companys control. You are cautioned that these forward-looking statements are not guarantees of
future performance and that actual results or developments may differ materially from those
projected in such statements. The Company was a development stage company until February 4, 2004. Thus, no ongoing
operations were conducted and no revenues were generated during the period ended September 30,
2003. Operating expenses incurred were general and administrative expenses associated with
maintaining the Company while the aforementioned acquisitions were pursued. -18-




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Nature of Business References in this document to the Company, Boundless, DIRT, we, us and our mean
Boundless Motor Sports Racing, Inc. and its wholly owned subsidiaries. Subsequent to the
acquisition of DIRT Motorsports, Inc. in 2004, the Company began operating under the d/b/a name
DIRT MotorSports and management plans to change the Company name to DIRT MotorSports, Inc. in the
near future. We are a leading marketer and promoter of motorsports entertainment in the United States. Our
motorsports subsidiaries operate 5 dirt motorsports tracks (3 are owned and 2 facilities are under
short term lease agreements) in New York and Pennsylvania. We own and operate four of the premier
sanctioning bodies in dirt motorsports: the World of Outlaws, DIRT Motorsports, United MidWestern
Promoters (UMP) and the Mid-America Racing Series (MARS). Through these sanctioning bodies we
organize and promote 16 national and regional racing series including the World of Outlaw Sprint
Series and the World of Outlaws Stacker 2 Late Model Series. Additionally in 2005 we expect to
sanction races at nearly 200 tracks across the United States and Canada. On February 4, 2004, the Company finalized the acquisition of substantially all the assets of
the World of Outlaws, Inc. Prior to this event, the Company was devoting substantially all of its
efforts to establishing the business and was therefore in the development stage enterprise until
February 4, 2004. During the fiscal year ended September 30, 2004, the Company entered into a series of related
transactions resulting in the acquisition of 100% of the outstanding stock of DIRT Motorsports,
Inc. and two affiliated race tracks. On December 5, 2004, the Company entered into and consummated a Membership Interests Purchase
Agreement by and among United Midwestern Promoters Motorsports, LLC, hereafter UMP. On November 7, 2004, the Company entered into an Asset Purchase Agreement with Lernerville
Speedway, Inc. The total consideration given for the assets acquired was $3,240,000 and the
purchase of Lernerville Speedway closed in March 2005. On March 10, 2005, the Company entered into and consummated an Asset Purchase Agreement
pursuant to which the Company acquired all of the assets related to the business of sanctioning and
conducting the dirt track racing events known as the Mid America Racing Series (MARS). The assets
were acquired in exchange for an aggregate cash purchase price of $150,000. World of Outlaws, Inc. On February 4, 2004 the Company completed the acquisition of substantially all the assets of
World of Outlaws, Inc. (World of Outlaws). World of Outlaws is one of the premier sanctioning
bodies and touring racing series for dirt track racing across the United States. The acquisition
allowed the Company to pursue its business plan to create a racing and sports entertainment
company. The purchase price consisted of:  
    Cash and acquisition costs of $2,421,389
    Forgiveness of $1,450,000 plus accrued interest of $21,815 promissory note payable to the Company
    Assumptions of obligations for $612,500 in deposits World of Outlaws had received for
sanctioning of future sprint car racing events
    Assumption of $777,677 of other obligations of World of Outlaws The following table summarizes the estimated fair value of the assets acquired and liabilities
assumed at the date of acquisition: Transportation equipment
    
    $
    184,926Other equipment
    
    
    8,875Trade-marks and Trade-names
    
    
    142,452Goodwill
    
    
    4,945,058Total assets acquired
    
    
    5,281,311Advances from promoters
    
    
    612,500Other current obligations
    
    
    777,677Total liabilities assumed
    
    
    1,390,177Net consideration paid in cash and debt forgiveness
    
    $
    3,891,134
 -19-




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With the purchase of World of Outlaws, the Company acquired the corporate name World of
Outlaws, Inc. and all associated trade-names, trade-marks, and trade-mark registrations. This
allows the Company to sanction World of Outlaws sprint-car racing events and expand into other
series, such as a World of Outlaws late-model series, without restrictions. Dirt Motorsports, Inc. In October 2003, the Company made a cash deposit of $1,000,000 and issued 1,558,334 shares of
its common stock to the owners of Dirt Motorsports, Inc. (DIRT) and two affiliated tracks known
as Rolling Wheels Dirt Race Track and Cayuga County Dirt Track towards the acquisition of these
properties. This series of transactions is referred to as the Dirt Acquisitions. Effective May 24, 2004, the Company, through its wholly owned subsidiary, Boundless Racing,
Inc., a Texas corporation, consummated the acquisition of substantially all of the assets of Finger
Lake International, Inc., a New York corporation (FLI), pursuant to an Asset Purchase Agreement.
The Company, through a separate wholly-owned subsidiary, had previously entered into an agreement
to purchase the FLI assets (the First Asset Purchase Agreement), but the previous arrangement was
mutually terminated in favor of the Asset Purchase Agreement. In exchange for the assets and real property acquired, which consisted of the Rolling Wheels
motor sports racing track located in Elbridge, New York, the Company paid $1,088,777 to FLI
consisting of (a) cash in an aggregate of $1,000,000, and (b) 300,000 shares of the Companys
common stock, $0.0001 par value per share. The Company also incurred $28,777 of costs relating to
the acquisition. The Shares issued to FLI in connection with this acquisition were issued by the Company
pursuant to an exemption (Section 4(2)) from the registration requirements of the Securities Act of
1933, as amended and are restricted shares. Effective August 6, 2004, the Company, through its wholly owned subsidiary, Boundless Racing,
Inc., a Texas corporation (as the assignee of Boundless Track), consummated the acquisition of all
of the outstanding shares of capital stock of DIRT, pursuant to a Stock Purchase Agreement, dated
August 13, 2003, as amended and extended. In exchange for the outstanding capital stock of DIRT, the Company paid to Mr. Glenn Donnelly,
the sole shareholder of DIRT, $2,107,180 consisting of (a) cash in an aggregate amount of
$1,775,000, of which $925,000 remains unpaid and based upon the final accounting is expected to
ultimately reduce the purchase price, and (b) 591,667 shares of the Companys common stock, paid to
Mr. Donnelly in October 2003. The Company also incurred $221,308 of costs relating to the
acquisition. At this time, Mr. Donnelly has been retained by the Company in a consultative
capacity to assist the Company with its Super Dirt Week racing events pursuant to the terms of a
Consulting Agreement. The Shares issued to Mr. Donnelly in connection with the acquisition of DIRT were issued by
the Company pursuant to an exemption (Section 4(2)) from the registration requirements of the
Securities Act of 1933, as amended and are restricted shares. On August 31, 2004 the Company consummated the acquisition of the Cayuga County race track. In
exchange for the assets and real property acquired, which consisted of the Cayuga County motor
sports racing track located in Cayuga County, New York, the Company paid $2,293,333 consisting of
(a) cash in of $2,150,000, and (b) 716,667 shares of the Companys common stock which were
previously paid and credited toward the purchase price. The following table summarizes the estimated fair value of the assets acquired and liabilities
assumed at the date of acquisitions for the DIRT transactions: DIRT
    
    
    Rolling Wheels
    
    
    Cayuga CountyCurrent Assets
    
    $
    459,217
    
    
    $
    
    
    
    $
    Property and Equipment
    
    
    249,635
    
    
    
    1,088,777
    
    
    
    2,293,333Goodwill
    
    
    2,536,700Total assets acquired
    
    
    3,245,552
    
    
    
    1,088,777
    
    
    
    2,293,333Current Liabilities
    
    
    1,130,910
    
    
    
    
    
    
    
    Net assets acquired
    
    $
    2,114,642
    
    
    $
    1,088,777
    
    
    $
    2,293,333
 United Midwestern Promoters Motorsports, LLC Effective November 30, 2004, the Company, entered into and consummated a Membership Interests
Purchase Agreement by and among United Midwestern Promoters Motorsports, LLC, hereafter (UMP),
National Speedways of Iowa, Inc., Track Enterprises, Inc., Ken Schrader Racing, Inc., and Lebanon
Valley Auto Racing Corp. (the Purchase Agreement), pursuant to which the Company acquired all of
the outstanding membership interests in UMP, in exchange for an aggregate -20-




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purchase price of $2,400,000, of which, $200,000 was previously paid under the terms of a
letter of intent among the parties, $1,600,000 was paid in cash at closing, and the remaining
$600,000 was satisfied through the issuance of 164,384 shares of the Companys common stock. In
addition, at closing the Company has provided warrants to purchase an aggregate of 40,000 shares of
the Companys common stock for $3.65 per share. These warrants were valued at an aggregate amount
of $132,187 based on Black-Scholes modeling and the fair market value of the warrants at the time
of issuance. UMP is a dirt track race sanctioning body, and as such, sanctions races for both late model
and open wheel modified cars. UMP assets include its agreements with drivers competing in its
races, and sponsorship agreements with racing event sponsors. Under the terms of the Purchase
Agreement, if the average closing price of the Companys common stock for the ten-trading days
immediately preceding the one-year anniversary of the date of the closing of the acquisition (the
Average Anniversary Price) is less than $3.65 per share, then the Company shall, at its sole
election, either (a) issue additional shares of its common stock equal to the difference between:
(i) $600,000 divided by the Average Anniversary Price, less (ii) 164,384, or (b) purchase, at a purchase price of $3.65 a share, the Shares. The UMP acquisition amount was allocated as follows based on the preliminary determination of
fair values: Cash paid for acquisition
    
    $
    1,800,000Value of stock issued
    
    
    600,000Value of warrants issued
    
    
    132,187Accrued points fund assumed
    
    
    443,200Accounts payable assumed
    
    
    355,000Accrued closing costs
    
    
    100,000Closing expenses paid
    
    
    25,443$
    3,455,830Allocation to goodwill
    
    $
    3,056,330Allocation to land, buildings and equipment
    
    
    99,500Allocation to trademarks
    
    
    100,000Allocation to contract rights
    
    
    200,000$
    3,455,830
 As part of the UMP acquisition, the Company acquired the contractual rights to the NVE
Pharmaceuticals, Inc sponsorship agreement. The original sponsorship agreement commenced in 2004
and has been amended in 2005. Future sponsorship commitments under the amended agreement by year
are as follows: SponsorshipYear
    
    Commitment2005
    
    $
    750,0002006
    
    
    950,000Total
    
    $
    1,700,000
 In addition, sponsorship revenues will include 10% of gross revenues for sales of NVE
Pharmaceuticals, Inc. products sold at tracks and additional retail outlets established by the
Company. The NVE contract contains various performance criteria on the part of the Company for which
the failure to comply would result in the termination of this agreement. During 2004 NVE
Pharmaceuticals, Inc. paid $990,000 in sponsorship fees to the Extreme Dirt Car, Inc., the previous
party to this agreement. UMP also had sponsorship agreements in place with a tire company, which call for payments of
sponsorship fees based solely on the number of tires sold at each of the Companys races. During
the year ended November 30, 2004, UMP received $532,417 in sponsorship revenues from this tire
company. These tire sponsorship agreements expire in 2007. Lernerville Speedway On November 7, 2004, the Company, through its wholly owned subsidiary, Boundless Racing, Inc.,
a Texas corporation (BRI), entered into an Asset Purchase Agreement (the Lernerville Agreement)
with Lernerville Speedway, Inc., a corporation organized under the Commonwealth of Pennsylvania
(the LSI), and Helen W. Martin, Donny Martin-Roenigk, and Patty Martin-Roenigk (the Purchase
Agreement), pursuant to which the Company purchased substantially all of the assets of LSI and
certain real estate owned by Ms. Martin and comprising the racing facility used by LSI and known as
the Lernerville Speedway (the Assets). This purchase was consummated on March 15, 2005. -21-




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The terms of the Lernerville Agreement require BRI to pay a total purchase price of $3,240,000
for the Assets. The purchase price is payable by BRI as follows:  (g)
    $500,000 was paid at the closing of the transactions under the Lernerville Agreement;(h)
    $110,000 will be payable on or prior to May 30, 2005;(i)
    $110,000 will be payable on or prior to October 30, 2005;(j)
    $110,000 will be payable on or prior to May 30, 2006;(k)
    $110,000 will be payable on or prior to May 30, 2007; and(l)
    the remaining $2,300,000 is payable pursuant to the terms of a four year promissory
note bearing interest at seven percent per year, with accrued interest payable annually. The four $110,000 payments described above, as well as the promissory note, is secured by a
mortgage on the Lernerville Speedway facility, and is guaranteed by the Company. The Lernerville acquisition amount was allocated based on the preliminary estimated fair value
as follows: Consideration:Cash paid at closing
    
    $
    500,000Notes payable issued
    
    
    2,300,000Mortgage notes payable issued
    
    
    440,000Direct transaction costs
    
    
    126,525Adjusted purchase price
    
    $
    3,366,525Land
    
    
    (1,124,800
    )Buildings and improvements
    
    
    (1,590,000
    )Vehicles and other operating assets
    
    
    (104,000
    )Excess of cost over fair value of net identifiable assets (goodwill)
    
    $
    547,725
 Mid America Racing Series (MARS) On March 10, 2005, entered into and consummated an Asset Purchase Agreement (the MARS
Agreement) by and among Mid America Racing Series and Mr. R. Mooney Starr pursuant to which the
Company acquired all of the assets, free and clear of any and all liabilities and encumbrances,
related to the business of sanctioning and conducting the dirt track racing events known as the Mid
America Racing Series (MARS). The assets were acquired in exchange for an aggregate purchase price
of $150,000. The purchase price was allocated based on the preliminary estimated fair value as
follows: Vehicles
    
    $
    1,500Communications equipment
    
    
    500Excess of cost over fair value of identifiable assets (goodwill)
    
    
    148,000Total purchase price
    
    $
    150,000
 Results of Operations  Impact of Seasonality and Weather on Quarterly Results In 2005, we plan to conduct 98 World of Outlaw Sprint Series races, 48 World of Outlaw Stacker
2 Late Model Series Races, 28 Advance Auto Parts Big Block Modified Events, and over 200 other
major racing events in our other regional and touring racing series. Most of these events are
scheduled in the period from March to November each year. As a result, our business has been, and
is expected to remain, highly seasonal. The concentration of racing events in any particular quarter, and the growth in our operations
with attendant increases in overhead expenses, may tend to reduce operating income in quarters
outside of our peak operating months. Our racing schedules from year to year may change from time
to time which can lessen the comparability of operating results between quarters of successive
years and increase or decrease the seasonal nature of our motorsports business. The results of
operations for the three and six months ended March 31, 2005 are not indicative of results that may
be expected for the entire year because of such seasonality. We market and promote outdoor motorsports events. Weather conditions surrounding these events
affect the completion of scheduled racing, the sale of tickets and the sale of merchandise and
concessions. Poor weather conditions can have a negative effect on our results of operations.
Additionally, our owned and operated tracks are geographically concentrated in -22-




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New York and Pennsylvania and adverse weather conditions in this region could have a greater
negative effect on our results of operations. Results of Operations  Comparison of Three Months Ended March 31, 2005 (2005) and 2004 (2004) The overall increase in our revenues and expenses from 2004 to 2005 is due to our emerging
from development stage and the commencement of operations on February 4, 2004. At March 31, 2004
we had 12 employees and at March 31, 2005 we had 59 employees. Revenues Our total revenues increased from $0.3 million in 2004 to $1.3 million in 2005. Race sanctioning and event fees revenues increased from $191,000 in 2004 to $750,000 in 2005.
This increase is due primarily to an increase in the number of events that we co-promoted during
the period and is expected to increase in the coming quarters as our scheduled races increase. The
increase was due in part to an increase in the number of scheduled events in our primary touring
series from 17 in 2004 to 18 in 2005 and an increase in the sanctioning fees obtained for each
event in 2005 as compared to 2004; The increase in the number of events and increased sales per
event resulted in increased merchandise and race equipment sales and other revenues. Our
sponsorship and advertising revenues increased from $20,000 in 2004 to $244,000 in 2005. This
increase is due primarily to our sponsorship agreement with NVE Pharmaceuticals, Inc. We expect to
generate $750,000 in sponsorship revenue during the fiscal year ended September 30, 2005 from this
agreement. Operating expenses Our total operating expenses increased from $1.1 million in 2004 to $2.9
million in 2005. Track and event operations  Our track and event operations expenses include purses and other
attendance fees paid to our drivers, personnel costs and other operating costs for the organization
of our events and the operation of our tracks. Track and event operations expense increased from
$544,000 in 2004 to $1,631,000 in 2005. During 2005 we incurred $593,000 in fees paid to drivers
as purse/prizes or attendance fees, and we incurred $112,000 for the accumulation of the year-end
2005 drivers points funds. 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 from $18,000 in 2004 to $279,000 in 2005. Merchandise operations and cost of sales  Merchandise operations and cost of sales includes
all operating expenses related to the distribution of our merchandise which includes mobile store
fronts that are present at each major touring series event and the cost of goods sold during the
period. Cost of goods sold increased from $43,800 in 2004 to $58,000 in 2005. Increases in these
expenses correspond with the increased number of events and merchandise sales. General and administrative  Our general and administrative expenses increased from $426,000
in 2004 to $690,000. This increase is due to the addition of administrative staff and increased
professional fees during the period. Depreciation and amortization  Depreciation and amortization expense increased from $14,000
in 2004 to $67,000 in 2005 due to an increase in assets as a result of the acquisitions described
herein. Interest expense, net  Interest expense increased from $60,000 to $414,000 due entirely to
the non-cash amortization of the discount recorded in connection with the beneficial conversion
rights in the $2 million note payable issued in 2004. The discount is fully amortized at March 31,
2005 and interest expense in future quarters will represent the interest on the Companys notes
payable. Results of Operations  Comparison of Six Months Ended March 31, 2005 (2005) and 2004 (2004) The overall increase in our revenues and expenses from 2004 to 2005 is due to our emerging
from development stage and the commencement of operations on February 4, 2004. At March 31, 2004
we had 12 employees and at March 31, 2005 we had 59 employees. Revenues Our total revenues increased from $0.3 million in 2004 to $3.1 million in 2005. Race sanctioning and event fees revenue increased from $191,000 in 2004 to $971,000 in 2005.
This increase is due primarily to an increase in the number of events that we co-promoted during
the period and is expected to increase in the coming quarters as the number of scheduled races
increases. The increase was due in part to an increase in the number of scheduled events in our
primary touring series from 17 in 2004 to 26 in 2005 and an increase in the sanctioning fees
obtained for each event in 2005 as compared to 2004; The increase in the number of events and
increased sales per event resulted in increased merchandise and race equipment sales and other
revenues. During 2005 we generated $1,093,000 in admission fees and ticket sales, primarily from
our Super Dirt Week events held in October 2004. We expect these -23-




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revenues to increase in the coming quarters as racing begins at our owned and operated tracks.
We did not own or operate any tracks during the same period in 2004.Our sponsorship and
advertising revenues increased from $20,000 in 2004 to $471,000 in 2005. This increase is due to
our sponsorship agreement with NVE Pharmaceuticals, Inc. and sponsorship revenues associated with
our Super Dirt Week event in October 2004. Operating expenses Our total operating expenses increased from $1.3 million in 2004 to $6.1
million in 2005. Track and event operations  Our track and event operations expenses include purses and other
attendance fees paid to our drivers, personnel costs and other operating costs for the organization
of our events and the operation of our tracks. Track and event operations expense increased from
$759,000 in 2004 to $3,932,000 in 2005. During 2005 we incurred $1.4 million in fees paid to
drivers as purse/prizes or attendance fees, and we incurred expenses of $348,000 for the
accumulation of the year-end 2005 drivers points funds. 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 from nothing in 2004 to $397,000 in 2005. Merchandise operations and cost of sales  Merchandise operations and cost of sales includes
all operating expenses related to the distribution of our merchandise which includes mobile store
fronts that are present at each major touring series event and the cost of goods sold during the
period. Cost of goods sold increased from $43,800 in 2004 to $117,000 in 2005. Increases in these
expenses correspond with the increased number of events and merchandise sales. General and administrative  Our general and administrative expenses increased from $451,000
in 2004 to $1,391,000. This increase is due to the addition of administrative staff and increased
professional fees during the period. Depreciation and amortization  Depreciation and amortization expense increased from $19,000
in 2004 to $114,000 in 2005 due to an increase in assets as a result of the acquisitions described
herein. Interest expense, net  Interest expense increased from $70,000 to $1,468,000 due entirely to
the non-cash amortization of the discount recorded in connection with the beneficial conversion
rights in the $2 million note payable issued in 2004. The discount is fully amortized at March 31,
2005 and interest expense in future quarters will represent the interest on the Companys notes
payable. Liquidity and Capital Resources At March 31, 2005, the Companys had negative working capital of $1.2 million. The Company
generated $1.3 million in revenues during the three months ended March 31, 2005; however, we have
not yet achieved a profitable level of operations. Our primary source of funding for acquisitions
and operating deficits during the six months ended March 31, 2005 has been from issuance of
preferred stock and notes payable. During the six months ended March 31, 2005, the Company used $3.6 million in operating
activities primarily the result of a net loss of $4.5 million and a net use of cash of $0.7 million
in working capital changes partially offset by non-cash interest of $1.5 million and depreciation
of $0.1 million. During the six months ended March 31, 2005, the Company used $3.8 million in investing
activities primarily in connection with the acquisition of UMP, MARS and Lernerville. During the six months ended March 31, 2005, financing activities provided $4.6 million,
primarily through the issuance of $5.0 million of Series B Convertible Preferred Stock reduced by
placement agent fees and other issuance costs of $0.5 million. The Company incurred a net loss of $2.0 million for the three month period ended March 31,
2005 and $4.5 million for the six month period ended March 31, 2005. The company has an
accumulated deficit of $19.0 million and negative working capital of $1.2 million as of March 31,
2005, which raises substantial doubt about the Companys ability to continue as a going concern.
The financial statements do not include any adjustments that might result from the outcome of this
uncertainty. The future success of the Company is dependent on its ability to attain profitable operations
and upon its ability to obtain additional capital if necessary. There can be no assurance that the
Company will attain positive cash flows from operations or be successful in obtaining such
financing. As the future success of the Company is dependent on our ability to fund operations,
the Companys ability to continue as a going concern is at a high degree of risk. -24-




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We anticipate raising funds through additional private placements of preferred stock and
additional sources of long-term financing. We believe the Companys operations and sponsorship
revenues will also provide additional cash flows as the Company progresses toward attaining
increased profitability through operations. The following table summarizes our contractual obligations as of March 31, 2005: Payment Due by PeriodLess than
    
    
    2 to 3
    
    
    4 to 5
    
    
    After 5Contractual obligations
    
    Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    YearsOperating leases
    
    $
    54,528
    
    
    $
    32,528
    
    
    $
    22,000
    
    
    $
    
    
    
    $
    Notes payable and accrued interest
    
    $
    4,085,627
    
    
    $
    494,271
    
    
    $
    1,138,542
    
    
    $
    138,542
    
    
    $
    2,314,271
 Operating lease expense for the three and six months ended March 31, 2005 were $4,950 and
$9,900, respectively. Operating lease expense for the three and six months ended March 31, 2004
were $3,948 and $7,896, respectively. The Companys significant accounting policies include: Reclassifications Certain amounts in prior periods presented have been reclassified to conform to the current
financial statement presentation. These reclassifications have no effect on previously reported
net income or loss. Use of Estimates The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Boundless Motor
Sports Racing, Inc. and its wholly-owned subsidiaries. All material intercompany accounts and
transactions have been eliminated in consolidation. Revenue Recognition and Deferred Revenue The Company classifies its revenues as 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 and purses received.
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. Admission
fees and ticket 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 $25,000 of total revenues for the three and six months ended March 31,
2005. There were no barter transactions recorded as revenues for the three and six months ended
March 31, 2004. 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. -25-




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The cost of non-event related advertising, promotion and marketing programs are expensed as
incurred. Net loss Per Share Basic and diluted earnings per share (EPS) are calculated in accordance with FASB Statement
No. 128, Earnings per Share. For the three months ended March 31, 2005, the net loss per share
applicable to common stock has been computed by dividing the net loss by the weighted average
number of common shares outstanding. For the three months ended March 31, 2005 the Company had the following warrants outstanding:  
    Series A warrants to purchase 4,172,925 shares of common stock at an exercise price of $3.00
    Series B warrants to purchase 933,334 shares of common stock at an exercise price of $4.00
    Series C warrants to purchase 1,500,000 shares of common stock at an exercise price of $5.00
    Placement Agent Warrants to purchase 1,188,915 shares of common stock at exercise prices
ranging from $2.70 to $4.00
    Warrants to purchase 40,000 shares of common stock issued in connection with the UMP
acquisition at an exercise price of $3.65 In addition, as of March 31, 2005, the Companys Series B Preferred Stock was convertible into
6,882,819 shares of common stock and the Companys Series C Preferred Stock was convertible into
2,500,000 shares of common stock. None of these were included in the computation of diluted EPS
because the Company had a net loss and all potential issuance of common stock would have been
anti-dilutive. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all highly liquid
investments with original maturities of three months or less to be cash equivalents. Inventories Inventories of retail merchandise are stated at the lower of cost or market on the first in,
first out method. Shipping, handling and freight costs related to merchandise inventories are
charged to cost of merchandise. Property and Equipment Property and equipment are stated at cost. Depreciation is provided for financial reporting
purposes using the straight-line method over the estimated useful lives of the related assets
ranging from 3 to 40 years. Expenditures for maintenance, repairs and minor renewals are expensed
as incurred; major renewals and betterments are capitalized. At the time depreciable assets are
retired or otherwise disposed of, the cost and the accumulated depreciation of the assets are
eliminated from the accounts and any profit or loss is recognized. The carrying values of property and equipment are evaluated for impairment based upon expected
future undiscounted cash flows. If events or circumstances indicate that the carrying value of an
asset may not be recoverable, an impairment loss would be recognized equal to the difference
between the carrying value of the asset and its fair value. As of March 31, 2005, the Company
believes there is no impairment of property and equipment. Purchase Accounting The Company accounted for its acquisitions of assets in accordance with Statement of Financial
Accounting Standards No. 141 (SFAS No. 141), Business Combinations and Statement of Financial
Accounting Standards No. 142, Goodwill and Intangible Assets (SFAS No. 142). SFAS no. 141
requires that all business combinations entered into subsequent to June 30, 2001 be accounted for
under the purchase method of accounting and that certain acquired intangible assets in a business
combination be recognized and reported as assets apart from goodwill. Intangible Assets Upon its inception, the Company adopted Statement of Financial Accounting Standard (SFAS)
No. 142, Goodwill and Other Intangible Assets. Under SFAS No. 142 goodwill and intangible assets
with indefinite lives are not to be amortized but are tested for impairment at least annually.
Intangible assets with definite useful lives are to be amortized over the respective estimated
useful lives or anticipated future cash flow streams when appropriate. At least annually the Company tests for possible impairment of all intangible assets and more
often whenever events or changes in circumstances, such as a reduction in operating cash flow or a
dramatic change in the manner that the asset is -26-




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intended to be used indicate that the carrying amount of the asset is not recoverable. If
indicators exist, the Company compares the discounted cash flows related to the asset to the
carrying value of the asset. If the carrying value is greater than the discounted cash flow amount,
an impairment charge is recorded in the operating expense section in the statement of operations
for amounts necessary to reduce the carrying value of the asset to fair value. The Company has
chosen the fourth quarter of its fiscal year to conduct its annual impairment test. Income Taxes The Company accounts for income taxes under Financial Accounting Standards Number 109 (SFAS
109), Accounting for Income Taxes. Deferred income tax assets and liabilities are determined
based upon differences between financial reporting and tax basis of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the differences are
expected to be reversed. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of the deferred tax
assets will not be realized. Concentration of Credit Risk As of March 31, 2005 the Company does not believe it has any material concentration of credit
risks. New Accounting Pronouncements In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities (SFAS 149). SFAS 149 amends and clarifies accounting for
certain derivative instruments embedded in other contracts, and for hedging activities under SFAS
133. SFAS 149 is effective for certain contracts entered into or modified by the Company after June
30, 2003. The adoption of SFAS 149 had no impact on the Companys financial position, results of
operations, or cash flows. In May 2003, the FASB issued SFAS No. 150, Accounting for Instruments with Characteristics of
Both Debt and Equity (SFAS 150). Statement 150 requires liability classification for three types
of instruments: 1) Mandatory redeemable shares that obligate the company to deliver cash or other
assets to shareholders on fixed or determinable dates; 2) Freestanding written put options and
forward purchase contracts on a companys own shares that obligate the company to deliver cash or
other assets, and 3) Contracts that obligate a company to issue its own shares in amounts that are
unrelated to, or inversely related to, the value of the shares. The adoption of SFAS 150 had no
impact on the Companys financial position, results of operations, or cash flows. In November 2004, the FASB issued SFAS No. 151 Inventory Costs  an amendment of ARB No. 43,
Chapter 4. Statement No. 151 requires that certain abnormal costs associated with the
manufacturing, freight, and handling costs associated with inventory be charged to current
operations in the period in which they are incurred. The adoption of SFAS 151 had no impact on the
Companys financial position, results of operations, or cash flows. In December 2004, the FASB issued a revision of SFAS No. 123 Share-Based Payment. The
statement establishes standards for the accounting for transactions in which an entity exchanges
its equity investments for goods and services. It also addresses transactions in which an entity
incurs liabilities in exchange for goods or services that are based on the fair value of the
entitys equity instruments or that may be settled by the issuance of those equity instruments. The
statement does not change the accounting guidance for share-based payments with parties other than
employees. The statement requires a public entity to measure the cost of employee service received in
exchange for an award of equity instruments based on the grant date fair value of the award (with
limited exception). That cost will be recognized over the period during which an employee is
required to provide service in exchange for the award (usually the vesting period). A public entity
will initially measure the cost of employee services received in exchange for an award of liability
instrument based on its current fair value; the fair value of that award will be re-measured
subsequently at each reporting date through the settlement date. Changes in fair value during the
requisite service period will be recognized as compensation over that period. The grant-date for
fair value of employee share options and similar instruments will be estimated using option-pricing
models adjusted for the unique characteristics of these instruments. The statement is effective
for the quarter beginning January 1, 2006. In December 2004, the FASB issued SFAS No. 153 Exchanges of Non-monetary Assets-amendment of
APB Opinion No. 29. Statement 153 eliminates the exception to fair value for exchanges of similar
productive assets and replaces it with a general exception for exchange transaction that do not
have commercial substance, defined as transaction that are not expected to result in significant
changes in the cash flows of the reporting entity. This statement is effective for exchanges of
non-monetary assets occurring after June 15, 2005. 
 ITEM 3. CONTROLS AND PROCEDURES The Companys Chief Executive Officer and the Companys principal financial officer, after
evaluating the effectiveness of the Companys disclosure controls and procedures (as defined in the
Securities Exchange Act of 1934 Rule 13a-14(c) and -27-




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15d-14(c) as of the date of the financial statements included in this report on Form 10-QSB,
have concluded that as of the evaluation date, the Companys disclosure controls and procedures are
adequate and effective to ensure that material information relating to the Company (including
consolidated subsidiaries) required to be included in our periodic SEC filings would be made known
to them by others within those entities. There have been no significant changes in the Companys internal controls or in other factors
that could significantly affect the Companys disclosure controls and procedures subsequent to the
evaluation date, nor any significant deficiencies or material weaknesses in such disclosure
controls and procedures requiring corrective actions. As a result, no corrective actions were
taken. 
 PART II  OTHER INFORMATION 
 ITEM 1. LEGAL PROCEEDINGS We are from time to time involved in various legal proceedings incidental to the conduct of
our business. We believe that the outcome of all such pending legal proceedings will not in the
aggregate have a material adverse effect on our business, financial condition, results of
operations or liquidity. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 
 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K The following documents are filed as part of this report: (a) Exhibits  2.1
    Membership Interests Purchase Agreement, dated as of November 30, 2004, by and among United
Midwestern Promoters Motorsports, LLC, National Speedways of Iowa, Inc., Track Enterprises,
Inc., Ken Schrader Racing, Inc., Lebanon Valley Auto Racing Corp., and Boundless Motor Sports
Racing, Inc. (Incorporated by reference to Exhibit 2.1 of the Companys Current Report on Form
8-K filed with the Commission on December 6, 2004).4.1
    Series B Convertible Preferred Stock Purchase Agreement, dated as of February 25, 2005, by
and among Boundless Motor Sports Racing, Inc., a Colorado corporation, and the purchasers set
forth therein. (Incorporated by reference to Exhibit 4.1 of the Companys Current Report on
Firm 8-K filed with the Commission on March 2, 2005)4.2
    Certificate of Designation of the Relative Rights and Preferences of the Series B Convertible
Preferred Stock. (Incorporated by reference to Exhibit 4.2 of the Companys Current Report on
Firm 8-K filed with the Commission on March 2, 2005)4.3
    Form of Series B Warrant. (Incorporated by reference to Exhibit 4.3 of the Companys Current
Report on Firm 8-K filed with the Commission on March 2, 2005)4.4
    Registration Rights Agreement dated as of February 25, 2005, by and among Boundless Motor
Sports Racing, Inc., a Colorado corporation, and the purchasers set forth therein.
(Incorporated by reference to Exhibit 4.4 of the Companys Current Report on Firm 8-K filed
with the Commission on March 2, 2005)4.5
    Series C Convertible Preferred Stock Purchase Agreement, dated as of February 25, 2005, by
and among Boundless Motor Sports Racing, Inc., a Colorado corporation, and the purchasers set
forth therein. (Incorporated by reference to Exhibit 4.5 of the Companys Current Report on
Firm 8-K filed with the Commission on March 2, 2005)4.6
    Certificate of Designation of the Relative Rights and Preferences of the Series C Convertible
Preferred Stock. (Incorporated by reference to Exhibit 4.6 of the Companys Current Report on
Firm 8-K filed with the Commission on March 2, 2005)4.7
    Form of Series C Warrant. (Incorporated by reference to Exhibit 4.7 of the Companys Current
Report on Firm 8-K filed with the Commission on March 2, 2005)4.8
    Registration Rights Agreement dated as of February 25, 2005, by and among Boundless Motor
Sports Racing, Inc., a Colorado corporation, and the purchasers set forth therein.
(Incorporated by reference to Exhibit 4.8 of the Companys Current Report on Firm 8-K filed
with the Commission on March 2, 2005)4.9
    Certificate of Designation of the Relative Rights and Preferences of the Series A Convertible
Preferred Stock (filed as Exhibit 4.2 to the Companys Current Report on Form 8-K filed with
the Commission on August 4, 2004).4.10
    Form of Series A Warrant (filed as Exhibit 4.3 to the Companys Current Report on Form 8-K
filed with the Commission on August 4, 2004).10.1
    Form of Promissory Note dated January 13, 2005, issued by Boundless Motor Sports Racing, Inc.
(Incorporated by reference to exhibit 10.1 of the Companys current report on 8-K filed with
the Commission on January 19, 2005) - 28 -




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31.1
    Rule 13a-14(a)/15d-14(a) Certification of Paul A. Kruger *31.2
    Rule 13a-14(a)/15d-14(a) Certification of Brian Carter *32
    Section 1350 Certification of Paul A. Kruger and Brian Carter *   *Filed herewith(b)
    
    Reports on Form 8-K:The Company filed the following reports on Form 8-K during the quarter ended March 31, 2005:(1)
    
    Form 8-K/A filed on January 18, 2005 reporting under item 7, the audited financial statements
of World of Outlaws, Inc. and the pro forma financial information related to the acquisition
of World of Outlaws, Inc.(2)
    
    Form 8-K filed on January 19, 2005 reporting under items 1 and 9, the entry into a material
definitive agreement for the creation of a direct financial obligation for an aggregate
principle of $700,000.(3)
    
    Form 8-K filed March 2, 2005 reporting under items 1 and 9, the issue and sale of Series B
and C Convertible Preferred Stock.(4)
    
    Form 8-K/A filed March 3, 2005 reporting under items 1 and 9, the issue and sale of Series B
and C Convertible Preferred Stock.(5)
    
    Form 8-K filed on March 15, 2005 reporting under item 9, the audited financial statements of
United Midwestern Promoters Motorsports, LLC (UMP) and the pro forma financial information
related to the acquisition of UMP. -29-




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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. BOUNDLESS MOTOR SPORTS RACING, INC.(Registrant)Date: May 16, 2005
    
    /s/ Paul A. KrugerPaul A Kruger, Chief Executive OfficerDate: May 16, 2005
    
    /s/ Brian CarterBrian Carter, Chief Financial Officer
 -30-