**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**








**FORM
      10-QSB**








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


For
      the
      quarterly period ended September 30, 2007





or





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


For
      the
      transition period from _____________ to _______________








**0-18045**


Commission
      File Number





**DIRT
        Motor Sports, Inc. d/b/a World Racing Group**





(Exact
      name of registrant as specified in its charter)





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





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





(Address
      of principal executive offices)





**(704)
        795-7223**


(Issuer’s
      telephone number, including area code)








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











**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:





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





There
      were 16,498,990 shares of common stock outstanding as of November 10,
      2007.








Transitional
      Small Business Disclosure Format (Check
      one):           
Yes o          No
x









**TABLE
      OF CONTENTS**








PAGE**PART
                I - FINANCIAL INFORMATION**Item
                1.  Condensed Consolidated Financial
                StatementsCondensed
                Consolidated Balance Sheets – September 30, 2007 and
                December 31, 2006
            
            3Condensed
                Consolidated Statements of Operations for the Three
                Months and Nine Months Ended September 30, 2007 and
                2006
            
            4Condensed
                Consolidated Statement of Stockholders' Equity for
                the Nine Months Ended September 30, 2007
            
            5Condensed
                Consolidated Statements of Cash Flows for the Nine
                Months Ended September 30, 2007 and 2006
            
            6Notes
                to Condensed Consolidated Financial
                Statements
            
            7Item
                2.   Management’s Discussion and
                Analysis of Financial Condition and Results of
                Operations
            
            17Item
                3.  Controls and
                Procedures
            
            28**PART
                II - OTHER INFORMATION**Item
                1.  Legal Proceedings
            
            29Item
                2.  Unregistered Sales of Equity Securities
                and Use of Proceeds
            
            29Item
                4.  Submission of Matters to a Vote of
                Security Holders
            
            29Item
                6.  Exhibits
            
            29Signatures
            
            31


Rule
      13a-14(a)/15d-14(a) Certification of Tom Deery


Rule
      13a-14(a)/15d-14(a) Certification of Brian Carter


Section
      1350 Certification of Tom Deery and Brian Carter





-
            2 -
 *Table
            of Contents*





**PART
      I – FINANCIAL INFORMATION**





**ITEM
      1.  FINANCIAL STATEMENTS**


**DIRT
      MOTOR SPORTS, INC.**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**September
      30, 2007 and December 31, 2006**


**(Unaudited)**




**September
                30,**
              **2007**
            
            
            **December
                31,**
              **2006****ASSETS****Current
                assets**Cash
                and cash equivalents
            
            $
            6,180,476
            
            
            $
            532,230Accounts
                receivable — trade
            
            
            930,728
            
            
            
            223,065Inventory
            
            
            61,391
            
            
            
            110,077Prepaid
                expenses and other current assets
            
            
            1,839,267
            
            
            
            330,943Total
                current assets
            
            
            9,011,862
            
            
            
            1,196,315Land,
                buildings and equipment, net
            
            
            10,398,392
            
            
            
            10,447,633Trademarks
            
            
            100,000
            
            
            
            100,000Goodwill,
                net of impairment of $10,320,537
            
            
            —
            
            
            
            —Prepaid
                Expenses –  long term
            
            
            41,666
            
            
            
            166,667Other
                assets, net of amortization of $69,002 in 2007 and $55,331 in
                2006
            
            
            645,727
            
            
            
            140,122Total
                assets
            
            $
            20,197,647
            
            
            $
            12,050,737**LIABILITIES
                AND STOCKHOLDERS' EQUITY****Current
                liabilities**Accounts
                payable
            
            $
            1,170,250
            
            
            $
            474,781Accrued
                liabilities
            
            
            3,085,269
            
            
            
            1,147,749Deferred
                revenues
            
            
            532,206
            
            
            
            129,424Notes
                payable
            
            
            185,368
            
            
            
            713,008Total
                current liabilities
            
            
            4,973,093
            
            
            
            2,464,962Notes
                payable, long-term, net of discount of $2,795,517 at September 30,
                2007
            
            
            13,357,506
            
            
            
            4,001,711Total
                liabilities
            
            
            18,330,599
            
            
            
            6,466,673**Stockholders'
                Equity**Series
                D Preferred stock, $0.01 par value; 20,000 shares
                authorized;   17,684 and  17,875 shares issued
                and outstanding at September 30, 2007 and December 31,
                2006,  respectively
            
            
            53,844,452
            
            
            
            53,624,538Series
                E Preferred stock, $0.01 par value; 50,000 shares authorized; 3,374
                shares
                issued and outstanding at September 30, 2007
            
            
            34
            
            
            
            —Common
                stock, $0.0001 par value; 100,000,000 shares authorized; 16,498,990
                and
                14,374,496 shares issued and outstanding at September 30, 2007
                and  December 31, 2006, respectively
            
            
            1,650
            
            
            
            1,438Additional
                paid-in capital
            
            
            17,364,500
            
            
            
            12,684,051Accumulated
                deficit
            
            
            (69,343,588
            )
            
            
            (60,725,963
            )Total
                stockholders' equity
            
            
            1,867,048
            
            
            
            5,584,064Total
                liabilities and stockholders' equity
            
            $
            20,197,647
            
            
            $
            12,050,737








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





-
            3 -
 *Table
            of Contents*





**DIRT
      MOTOR SPORTS, INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**For
      the Three and Nine Months Ended September 30, 2007 and
      2006**


(Unaudited)





**Three
                Months Ended:**
            
            
            **Nine
                Months Ended:****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**RevenuesRace
                sanctioning and event fees
            
            $
            3,764,432
            
            
            $
            2,470,954
            
            
            $
            7,395,722
            
            
            $
            4,242,586Admission
                fees and ticket sales
            
            
            2,259,395
            
            
            
            2,601,057
            
            
            
            5,814,994
            
            
            
            5,671,771Sponsorship
                and advertising revenue
            
            
            1,844,047
            
            
            
            694,370
            
            
            
            3,043,977
            
            
            
            1,646,940Merchandise
                sales
            
            
            237,730
            
            
            
            240,632
            
            
            
            422,517
            
            
            
            506,835Other
                revenue
            
            
            11,810
            
            
            
            126,386
            
            
            
            69,586
            
            
            
            215,299Total
                revenues
            
            
            8,117,414
            
            
            
            6,133,399
            
            
            
            16,746,796
            
            
            
            12,283,431Operating
                expensesTrack
                and event operations
            
            
            8,589,833
            
            
            
            7,592,261
            
            
            
            18,860,886
            
            
            
            16,446,929Sales
                and marketing
            
            
            405,860
            
            
            
            446,737
            
            
            
            1,284,036
            
            
            
            945,926Merchandise
                operations and cost of sales
            
            
            98,958
            
            
            
            257,835
            
            
            
            235,848
            
            
            
            724,317General
                and administrative
            
            
            473,948
            
            
            
            431,731
            
            
            
            1,749,351
            
            
            
            2,246,878Non-cash
                stock compensation
            
            
            553,924
            
            
            
            627,840
            
            
            
            1,493,796
            
            
            
            2,112,322Depreciation
                and amortization
            
            
            206,932
            
            
            
            187,521
            
            
            
            615,675
            
            
            
            579,867Total
                operating expenses
            
            
            10,329,455
            
            
            
            9,543,925
            
            
            
            24,239,592
            
            
            
            23,056,239Loss
                from operations
            
            
            (2,212,041
            )
            
            
            (3,410,526
            )
            
            
            (7,492,796
            )
            
            
            (10,772,808
            )Other
                (Expenses) IncomeInterest
                expense, net
            
            
            (180,652
            )
            
            
            (47,653
            )
            
            
            (1,124,829
            )
            
            
            (7,979,706
            )Total
                Other Expense
            
            
            (180,652
            )
            
            
            (47,653
            )
            
            
            (1,124,829
            )
            
            
            (7,979,706
            )Net
                (Loss)
            
            $
            (2,392,693
            )
            
            $
            (3,458,179
            )
            
            $
            (8,617,625
            )
            
            $
            (18,752,514
            )Dividends
                on preferred stock:Stated
                dividends, Series D
            
            
            (530,520
            )
            
            
            -
            
            
            
            (792,146
            )
            
            
            -Issuance
                costs, Series D Preferred Stock
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,326,335
            )Exchange
                of Series C Preferred Stock
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,250,000
            )Net
                loss applicable to common stock
            
            $
            (2,923,213
            )
            
            $
            (3,458,179
            )
            
            $
            (9,409,771
            )
            
            $
            (21,328,849
            )Net
                loss applicable to common stock per common share — Basic and
                diluted
            
            $
            (0.20
            )
            
            $
            (0.25
            )
            
            $
            (0.64
            )
            
            $
            (1.65
            )Weighted
                average common shares outstanding — Basic and diluted
            
            
            14,729,873
            
            
            
            14,042,408
            
            
            
            14,619,777
            
            
            
            12,890,746








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





-
            4 -
 *Table
            of Contents*





**DIRT
      MOTOR SPORTS, INC.**


**CONDENSED
      CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY**


**For
      the Nine Months Ended September 30, 2007**


**(Unaudited)**




**Additional****Preferred
                Stock**
            
            
            **Common
                Stock**
            
            
            **Paid-in**
            
            
            **Accumulated****Shares**
            
            
            **Amounts**
            
            
            **Shares**
            
            
            **Amounts**
            
            
            **Capital**
            
            
            **(Deficit)**
            
            
            **Total**Balance,
                December 31, 2006
            
            
            17,875
            
            
            $
            53,624,538
            
            
            
            14,374,496
            
            
            $
            1,438
            
            
            $
            12,684,051
            
            
            $
            (60,725,963
            )
            
            $
            5,584,064Value
                assigned to stock options, non-cash stock  compensation
                expense
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            1,462,745
            
            
            
            —
            
            
            
            1,462,745Restricted
                stock issued in exchange for professional services
            
            
            —
            
            
            
            —
            
            
            
            105,000
            
            
            
            10
            
            
            
            31,041
            
            
            
            —
            
            
            
            31,051Series
                D conversions to common stock
            
            
            (191
            )
            
            
            (572,232
            )
            
            
            190,744
            
            
            
            19
            
            
            
            572,213
            
            
            
            —
            
            
            
            —Placement
                agent fees paid through the issuance of preferred stock
            
            
            1,270
            
            
            
            13
            
            
            
            —
            
            
            
            —
            
            
            
            761,987
            
            
            
            —
            
            
            
            762,000Value
                assigned to common stock issued in connection  with the issuance
                of notes payable
            
            
            —
            
            
            
            —
            
            
            
            1,828,750
            
            
            
            183
            
            
            
            1,382,380
            
            
            
            —
            
            
            
            1,382,563Value
                assigned to Series E Preferred Stock issued in  connection with
                the issuance of notes payable
            
            
            2,104
            
            
            
            21
            
            
            
            —
            
            
            
            —
            
            
            
            1,262,229
            
            
            
            —
            
            
            
            1,262,250Dividends,
                accrued but unpaid
            
            
            —
            
            
            
            792,146
            
            
            
            —
            
            
            
            —
            
            
            
            (792,146
            )
            
            
            —
            
            
            
            —Net
                loss
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (8,617,625
            )
            
            
            (8,617,625
            )Balance,
                September 30, 2007
            
            
            21,058
            
            
            $
            53,844,486
            
            
            
            16,498,990
            
            
            $
            1,650
            
            
            $
            17,364,500
            
            
            $
            (69,343,588
            )
            
            $
            1,867,048








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





-
            5 -
 *Table
            of Contents*





**DIRT
      MOTOR SPORTS, INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**For
      the Nine Months Ended September 30, 2007 and 2006**


(Unaudited)





**2007**
            
            
            **2006****Cash
                flows from operating activities:**Net
                (loss)
            
            $
            (8,617,625
            )
            
            $
            (18,752,514
            )**Adjustments
                to reconcile net loss to net cash used in operating
                activities:**Depreciation
                and amortization
            
            
            615,675
            
            
            
            579,867Non-cash
                interest expense, notes payable
            
            
            664,813
            
            
            
            7,930,582Non-cash
                stock compensation
            
            
            1,493,796
            
            
            
            2,112,322**Increase
                (decrease) in cash for changes in:**Accounts
                receivable
            
            
            (707,663
            )
            
            
            (68,048
            )Inventory
            
            
            48,686
            
            
            
            58,001Prepaid
                expenses and other current assets
            
            
            (1,136,121
            )
            
            
            (147,424
            )Other
                non-current assets and long term prepaid expenses
            
            
            119,186
            
            
            
            124,999Accounts
                payable
            
            
            695,469
            
            
            
            (481,760
            )Accrued
                liabilities
            
            
            1,937,520
            
            
            
            2,578,116Deferred
                revenue
            
            
            402,782
            
            
            
            445,554Net
                cash (used in) operating activities
            
            
            (4,483,482
            )
            
            
            (5,620,305
            )**Cash
                flows from investing activities:**Purchase
                of property, contract rights, trademarks and goodwill
            
            
            (291,127
            )
            
            
            (322,439
            )Net
                cash (used in) investing activities
            
            
            (291,127
            )
            
            
            (322,439
            )**Cash
                flows from financing activities:**Payments
                on notes payable
            
            
            (608,628
            )
            
            
            (1,863,493
            )Payments
                of placement agent fees and other issuance costs
            
            
            (968,517
            )
            
            
            (1,326,335
            )Proceeds
                from issuance of preferred stock
            
            
            -
            
            
            
            12,000,000Repayment
                of cash overdraft
            
            
            -
            
            
            
            (253,232
            )Proceeds
                from issuance of notes payable
            
            
            12,000,000
            
            
            
            1,943,211Net
                cash provided by financing activities
            
            
            10,422,855
            
            
            
            10,500,151Net
                increase (decrease) in cash and cash equivalents
            
            
            5,648,246
            
            
            
            4,557,407Cash
                and cash equivalents, beginning of period
            
            
            532,230
            
            
            
            18,645Cash
                and cash equivalents, end of period
            
            $
            6,180,476
            
            
            $
            4,576,052Supplemental
                schedule of non-cash activities:Purchase
                of vehicles and equipment through the issuance of notes
            
            $
            232,300
            
            
            $
            —Cash
                payments for interest
            
            $
            357,223
            
            
            $
            360,869Non-cash
                revenues and expenses, barter agreements
            
            $
            240,234
            
            
            $
            165,500Stated
                dividends, Series D Preferred Stock, payable in common
                shares
            
            $
            792,146
            
            
            $
            —Placement
                agent fees paid though the issuance of preferred stock
            
            $
            762,000
            
            
            $
            —Value
                assigned to common stock issued in connection with the the issuance
                of
                notes payable
            
            $
            1,382,563
            
            
            $
            —Value
                assigned to Series E Preferred Stock  issued in connection with
                the issuance of notes payable
            
            $
            1,262,250
            
            
            $
            —Short
                term notes exchanged for Senior Secured Notes
            
            $
            2,350,000
            
            
            $
            —Conversion
                of Preferred stock:  Series A to Series B
            
            $
            —
            
            
            $
            28,279,812Conversion
                of notes payable into Series D Preferred Stock
            
            $
            —
            
            
            $
            13,201,777Issuance
                of warrants with promissory notes
            
            $
            —
            
            
            $
            1,715,113Issuance
                of warrants with promissory notes
            
            $
            —
            
            
            $
            —








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





-
            6 -
 *Table
            of Contents*





**DIRT
      MOTOR SPORTS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**





**NOTE
      1 – DESCRIPTION OF BUSINESS**




References
      in this document to “the Company,” “World Racing Group,” “DIRT,” “we,” “us” and
“our” mean Dirt Motor Sports, Inc. and its wholly owned
      subsidiaries.  Subsequent to the acquisition of DIRT Motorsports, Inc.
      in 2004, the Company began operating under the d/b/a name DIRT MotorSports
      and
      in July 2005, the Company reincorporated in Delaware and changed the Company’s
      name from “Boundless Motor Sports Racing, Inc.” to “Dirt Motor Sports, Inc.” The
      Company has begun doing business as World Racing Group, and management expects
      to seek shareholder approval to change the name of the Company to World Racing
      Group, Inc. at its 2007 meeting of stockholders.





We
      are a
      leading marketer and promoter of motorsports entertainment in the United
      States.  We own and operate the two premier national touring series in
      dirt circle track racing:  the World of Outlaws Sprint Series and the
      World of Outlaws Late Model Series which compete in 140 events per year, a
      number of which are broadcast on national television.  We operate 7
      dirt motorsports tracks (4 are owned and 3 facilities are under short term
      lease
      agreements) in New York, Pennsylvania and Florida hosting a combined 139 events
      in 2007. We own and manage a nationally based sanction body: DIRTcar Racing
      that
      sanctions nearly 4,000 events at 129 facilities and manages 14 regional touring
      series.





**NOTE
      2 - GOING CONCERN**





The
      accompanying consolidated financial statements have been prepared in conformity
      with accounting principles generally accepted in the United States of America,
      which contemplates continuation of the Company as a going concern. The Company
      incurred a net loss of $22.8 million for the year ended December 31, 2006 and
      a
      net loss of $8.6 million for the nine months ended September 30,
      2007.  The Company has an accumulated deficit of $69.3 million as of
      September 30, 2007, 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
      Company is dependent on existing cash resources and external sources of
      financing to meet its working capital needs, and ultimately attain profitable
      operations.  To ultimately achieve profitability, management’s plan is
      to (i) increase the number of sanctioned events; (ii) leverage existing owned
      and leased tracks to generate ancillary revenue streams; (iii) partner with
      existing promoters to create additional marquis events; and
      (iv)  continue to build sponsorship, advertising and related revenue,
      including license fees related to the sale of branded
      merchandise.   If the Company is unsuccessful in its plan, we
      will be required to seek additional equity and/or debt capital to continue
      as a
      going concern.  Such capital may not be available to the Company on
      acceptable terms, if at all.  The financial statements do not include
      any adjustments relating to the recoverability and classification of recorded
      asset amounts or to amounts and classification of liabilities that may be
      necessary if the Company is unable to continue as a going
      concern.  The financial statements do not include any adjustments
      relating to the recoverability and clarification of recorded asset amounts
      or to
      the amounts and classification of liabilities that may be necessary if the
      Company is unable to continue as a going concern.





**NOTE
      3 – BASIS OF PRESENTATION**





The
      accompanying condensed consolidated financial statements have been prepared
      in
      compliance with Rule 10-01 of Regulation S-X and U.S. generally accepted
      accounting principles, but do not include all of the information and disclosures
      required for audited financial statements. These statements should be read
      in
      conjunction with the condensed consolidated financial statements and notes
      thereto included in the Company’s latest Annual Report on Form 10-KSB for the
      year ended December 31, 2006. 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 and nine month periods ended September 30, 2007 are not necessarily
      indicative of the results that may be expected for the year ending December
      31,
      2007 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.





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            7 -
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            of Contents*





**Principles
      of Consolidation**





The
      accompanying consolidated financial statements include the accounts of DIRT
      Motor Sports, Inc. and its wholly-owned subsidiaries. All material intercompany
      accounts and transactions have been eliminated in consolidation.





**Revenue
      Recognition and Deferred Revenue**





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




The
      Company recognizes race sanctioning and event fees upon the successful
      completion of a scheduled race or event. Race sanction and event fees collected
      prior to a scheduled race event are deferred and recognized when earned upon
      the
      occurrence of the scheduled race or event. Track operations, ticket and
      concession sales are recognized as revenues on the day of the
      event.  Income from memberships to our sanctioning bodies is
      recognized on a prorated basis over the term of the membership. The Company
      recognizes revenue from sponsorship and advertising agreements when earned
      in
      the applicable racing season as set forth in the sponsorship or advertising
      agreement either upon completion of events or publication of the advertising.
      Revenue from merchandise sales are recognized at the time of sale less estimated
      returns and allowances, if any. Revenues and related expenses from barter
      transactions in which the Company receives goods or services in exchange for
      sponsorships of motorsports events are recorded at fair value in accordance
      with
      Emerging Issues Task Force (“EITF”) Issue No. 99-17, *Accounting for
      Advertising Barter Transactions*. Barter transactions accounted for $240,000
      and $166,000 of total revenues for the nine month period ended September 30,
      2007 and 2006 respectively.





During
      2006, we entered into a multi-year sponsorship and marketing agreement under
      which the Company began delivering services in 2007.  As of the date of
      this filing, the customer has breached its obligations and failed to
      cure such breaches under the agreement, including the failure to make
      scheduled payments. The Company will pursue its rights under the
      agreement, however, no revenue will be recognized under the agreement until
      such time that payments are received, if ever. We have discontinued
      providing services under this agreement and we are currently pursuing our rights
      under the agreement.





**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 and Warrants Outstanding**





Basic
      and
      diluted earnings per share (EPS) are calculated in accordance with FASB
      Statement No. 128, Earnings per Share. For the three and nine month periods
      ended September 30, 2007 and 2006, the net loss per share applicable to common
      stock has been computed by dividing the net loss by the weighted average number
      of common shares outstanding.





**Three
                months ended September 30:**
            
            
            **Nine
                months ended September 30:****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Net
                (Loss)
            
            $
            (2,392,693
            )
            
            $
            (3,458,179
            )
            
            $
            (8,617,625
            )
            
            $
            (18,752,514
            )Dividends
                on Preferred Stock:Stated
                dividends, Series D Preferred
            
            
            (530,520
            )
            
            
            -
            
            
            
            (792,146
            )
            
            
            -Issuance
                costs, Series D Preferred Stock
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,326,335
            )Exchange
                of Series C Preferred stock
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,250,000
            )Net
                loss applicable to common stock
            
            $
            (2,923,213
            )
            
            $
            (3,458,179
            )
            
            $
            (9,409,771
            )
            
            $
            (21,328,849
            )Net
                loss applicable to common stock per common share — Basic and
                diluted
            
            $
            (0.20
            )
            
            $
            (0.25
            )
            
            $
            (0.64
            )
            
            $
            (1.65
            )Weighted
                average common shares outstanding — Basic and diluted
            
            
            14,729,873
            
            
            
            14,042,408
            
            
            
            14,619,777
            
            
            
            12,890,746





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            8 -
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In
      addition, as of September 30, 2007, the Company’s Series D Preferred Stock was
      convertible into 17.9 million shares of common stock , the Company’s Series E
      Preferred Stock was convertible into 3.4 million shares of common stock and
      the
      Company had warrants outstanding to purchase 6.0 million common shares and
      options to purchase 2.2 million shares of common stock. None of these were
      included in the computation of diluted EPS because the Company had a net loss
      and all potential issuance of common stock would have been
      anti-dilutive.





The
      following table summarizes the Company’s common stock purchase warrant and
      certain stock options outstanding at September 30, 2007.  These
      warrants and stock options were not considered in computing diluted earnings
      per
      share as their effect would be anti-dilutive:





Shares
            
            
            Weighted
              Average
              Exercise
                Price
            
            
            Weighted
                Average Contractual Life (years)Promissory
                note warrants
            
            
            1,948,510
            
            
            $
            4.50
            
            
            
            3.6Series
                D warrants
            
            
            2,520,178
            
            
            $
            4.50
            
            
            
            4.2Placement
                agent warrants
            
            
            581,266
            
            
            $
            2.99
            
            
            
            3.7UMP
                acquisition warrants
            
            
            40,000
            
            
            $
            3.65
            
            
            
            1.0Warrants
                issued in exchange for the surrender of common stock
            
            
            542,738
            
            
            $
            0.001
            
            
            
            4.2Other
                warrants
            
            
            375,059
            
            
            $
            3.00
            
            
            
            3.9Stock
                options
            
            
            2,163,000
            
            
            $
            3.45
            
            
            
            3.6Total
                warrants and stock options outstanding
            
            
            8,170,751
            
            
            $
            3.74
            
            
            
            3.8




**Cash
      and Cash Equivalents**





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





**Inventories**





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





**Property
      and Equipment**





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





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





**Purchase
      Accounting**





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





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            9 -
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            of Contents*





**Intangible
      Assets**





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





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





**Income
      Taxes**





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





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





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





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





The
      adoptions of FIN48 on January 1, 2007 did not have a material effect on the
      Company’s financial position.





**Concentration
      of Credit Risk**





Due
      to
      the nature of the Company’s sponsorship agreements, the Company could be subject
      to concentration of accounts receivable within a limited number of
      accounts.  As of September 30, 2007 the Company had bank deposits in
      excess of FDIC insurance of approximately $6.0 million.





**New
      Accounting Pronouncements**





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





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





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            10 -
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            of Contents*





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





In
      September 2006, the FASB issued Statement No. 157,*“Fair Value
      Measurements”* (“SFAS No. 157”). SFAS No. 157 addresses
      how companies should measure fair value when they are required to use a fair
      value measure for recognition or disclosure purposes under GAAP.
      SFAS No. 157 defines fair value, establishes a framework for measuring
      fair value and expands disclosures about fair value measurements.
      SFAS No. 157 is effective for fiscal years beginning after
      November 15, 2007, with earlier adoption permitted. Management is assessing
      the impact of the adoption of this Statement.





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





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





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





**Stock-Based
      Compensation**





The
      Company’s 2004 Long Term Incentive Plan (the “Plan”) provides for the grant of
      share options and shares to its employees for up to 3,950,000 shares of
      common stock. Option awards are generally granted with an exercise price equal
      to the market price of the Company’s stock at the date of grant; those
      option awards generally vest based on 3 years of continuous service and
      have 5 year contractual terms. Share awards generally vest over 3 years.
      Certain option and share awards provide for accelerated vesting if there is
      a
      change in control, as defined in the Plan.





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





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





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            11 -
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            of Contents*





The
      following table provides information relating to outstanding stock options
      for
      the year ended December 31, 2006 and the nine months ended September 30,
      2007:





Expected
                volatility
            
            
            58
            %Expected
                life in years
            
            
            4.0Weighted
                average risk free interest rate
            
            
            4.66
            %





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





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





A
      summary
      of the status of stock options and related activity for the nine months ended
      September 30, 2007 is presented below:





**Shares**
            
            
            **Weighted**
              **Average**
              **Exercise Price**
              **per
                Share**
            
            
            **Weighted**
              **Average**
              **Remaining**
              **Contractual Term**Options
                outstanding at December 31, 2006
            
            
            2,040,000
            
            
            $
            3.54
            
            
            
            4.2Granted
            
            
            123,000
            
            
            
            1.83Exercised
            
            
            -
            
            
            
            -Forfeited/expired
            
            
            -
            
            
            
            -Options
                outstanding at September 30, 2007
            
            
            2,163,000
            
            
            $
            3.45
            
            
            
            3.5Options
                exercisable at September 30, 2007
            
            
            998,333
            
            
            $
            3.65
            
            
            
            3.0





Unrecognized
      compensation expense as of December 31, 2006 related to outstanding stock
      options and restricted stock grants was $3.7 million.  Unrecognized
      compensation expense as of September 30, 2007 related to outstanding stock
      options and restricted stock grants was $2.6 million.




**NOTE
      5 – PROPERTY AND EQUIPMENT**




Property
      and equipment consisted of the following at September 30, 2007 and December
      31,
      2006:





2007
            
            
            2006
            
            Depreciable
                LifeLand
            
            $
            6,916,338
            
            
            $
            6,916,338
            
            N/ABuildings
                and grandstands
            
            
            3,444,624
            
            
            
            3,288,759
            
            7
                - 40 yearsTransportation
                equipment
            
            
            1,655,227
            
            
            
            1,491,179
            
            5
                - 7 yearsOffice
                furniture and equipment
            
            
            671,333
            
            
            
            467,819
            
            3
                - 7 years12,687,522
            
            
            
            12,164,095Less
                accumulated depreciation
            
            
            (2,289,130
            )
            
            
            (1,716,462
            )Property
                and equipment, net
            
            $
            10,398,392
            
            
            $
            10,447,633




Depreciation
      is computed on a straight-line basis. Depreciation expense for the nine months
      ended September 30, 2007 and 2006 was $572,668 and $525,800,
      respectively.  Depreciation expense for the three months ended
      September 30, 2007 and 2006 was $192,597 and $180,748,
      respectively.





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            12 -
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            of Contents*





**NOTE
      6 – GOODWILL AND OTHER INTANGIBLE ASSETS**





As
      discussed in Note 4, the Company conducts an annual impairment test as required
      by SFAS No. 142. Under SFAS 142, goodwill impairment is deemed to exist if
      the
      carrying value of a reporting unit exceeds its estimated fair value. In
      calculating the impairment charge, the fair values of the reporting units were
      estimated using the expected present value of future cash flows from those
      units. The World of Outlaws acquisition, the DIRT acquisition, the UMP
      acquisition, the MARS acquisition, and the Lernerville acquisition were treated
      as separate reporting units for purposes of making these impairment
      calculations.  During the year ended September 30, 2004 an impairment
      of $2,954,978 was recorded related to 2004 acquisitions.  During the
      year ended December 31, 2005, impairments related to the goodwill associated
      with the acquisition of the World of Outlaws, UMP and Dirt was determined to
      be
      impaired by $2,027,248, $2,218,171 and $1,611,700 respectively.  In
      addition, the trademark associated with the World of Outlaws was determined
      to
      be impaired by $142,452.  These amounts were charged to current
      earnings for the quarter ended September 30, 2005.  The Company
      evaluated again in 2006 and it was determined that the remaining goodwill for
      each reporting unit was fully impaired and the remaining amounts recorded as
      goodwill were impaired and during the year ended December 31, 2006, an
      impairment of $1,508,440 was recorded related to the goodwill associated with
      the acquisitions of the UMP, MARS and Lernerville was determined to be impaired
      by $812,715, $148,000 and $547,725, respectively.








**NOTE
      7 – ACCRUED LIABILITIES**





Accrued
      liabilities at September 30, 2007 and December 31, 2006 consisted of the
      following:





September
                30,
            
            
            December
                31,2007
            
            
            2006Points
                fund
            
            $
            2,026,710
            
            
            $
            453,150Television
                production and programming
            
            
            321,312
            
            
            
            -Interest
            
            
            205,238
            
            
            
            74,913Salaries,
                wages and other compensation and benefits
            
            
            208,458
            
            
            
            195,770Sales
                taxes
            
            
            120,990
            
            
            
            158,728Office
                closure and relocation
            
            
            36,305
            
            
            
            114,611Acquisition
                liabilities
            
            
            15,000
            
            
            
            42,532Other
                accrued liabilities
            
            
            151,256
            
            
            
            108,045Total
                accrued liabilities
            
            $
            3,085,269
            
            
            $
            1,147,749





**NOTE
      8 – DEFERRED REVENUE**





Deferred
      revenues at September 30, 2007 and December 31, 2006 consisted of the
      following:





September
                30,
            
            
            December
                31,2007
            
            
            2006Sponsorship
                prepayments
            
            $
            212,566
            
            
            $
            8,650Sanction
                fee advances
            
            
            8,958
            
            
            
            12,958Season
                ticket  sales, advance ticket sales
            
            
            287,924
            
            
            
            107,816Membership
                fees
            
            
            22,758
            
            
            
            -Total
                deferred revenue
            
            $
            532,206
            
            
            $
            129,424





**NOTE
      9 – NOTES PAYABLE**





From
      May
      2005 through April 2006 we issued $12.4 million in promissory notes payable
      to
      existing shareholders.  These notes were classified as current, due
      and payable on the first to occur of:  (i) October 27, 2006 (ii) the
      completion of an equity or equity linked financing with gross proceeds of
      $9,000,000 or (iii) the acceleration of the obligations under the promissory
      notes.  These promissory notes bear interest at 8% for the first 6
      months from the date of issuance and 12% for the next 6 months and was payable
      on a quarterly basis.  The Company issued warrants to purchase
      1,948,510 shares of our common stock at an exercise price of $4.50 in connection
      with these notes.  The warrants were valued based on the Black-Scholes
      fair value method and the value was recorded as a non-cash debt discount and
      was
      being amortized over the life of the notes.  In connection with the
      Series D Preferred Stock financing in May 2006, we repaid $867,506 of these
      notes plus accrued interest and we exchanged the remaining $11.6 million in
      notes plus accrued interest into 4,401 shares of our Series D Preferred stock
      and issued Series D warrants to purchase 1,320,178 shares of our common stock
      at
      an exercise price of $4.50.  At the time of conversion, the company
      recognized the remaining unamortized debt discount as interest expense in
      2006.  Additionally, the Company recognized interest expense for the
      conversion of the notes at 110% into Series D preferred stock (Note
      10).





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            13 -
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During
      the first quarter of 2007, the Company entered into a line of credit agreement
      with one of its principal shareholders to provide the Company with working
      capital advances.  Amounts outstanding bear interest at 8%, no amounts
      are outstanding under the line of credit as of September 30, 2007.





Beginning
      in March 2007, the Company issued to several of its principal shareholders
      $2.3
      million in short-term secured promissory notes payable. The short-term notes
      bear interest at 8% per year and were secured by the assets of the
      Company.  The proceeds from these notes were used to fund the working
      capital needs of the Company.   An estimate of the fair value of
      the common shares expected to be issued upon the completion of a secured note
      financing has been recorded as an increase in additional paid in capital and
      is
      recorded as a discount to these notes payable and was recognized as interest
      expense in the second quarter of 2007 in the amount of $0.7 million. In
      September 2007, the Company completed the initial closing of a secured note
      financing ("Note Financing"). At the closing, we issued $12.0 million principal
      amount of our senior secured promissory notes (the "Secured Notes") to a limited
      number of accredited investors pursuant to a Note Purchase Agreement by and
      among us and the investors (the "Note Purchase Agreement"). The purchase price
      consisted of $10,150,000 of cash proceeds and cancellation of $1,850,000
      principal amount of outstanding short-term notes (the "Short-Term Notes").
      We
      used approximately $470,000 of the proceeds to repay certain unsecured
      indebtedness, approximately $450,000 to repay the Short-Term Notes, and have
      allocated up to $2.4 million to repay outstanding amounts due on mortgages
      on
      Volusia Speedway Park and/or Lernerville Speedway. Under the terms of
      the Note Purchase Agreement, we may issue up to an additional $3.0 million
      principal amount of Secured Notes.




The
      Secured Notes are due March 15, 2010 and accrue interest at the rate of 12.5%
      per annum payable quarterly on each of December 15, March 15, June 15 and
      September 15. Upon issuance, we prepaid $1,167,347 of interest, representing
      the
      first three (3) interest payments. Commencing September 15, 2008, interest
      due
      under the Secured Notes is payable at our option in cash or additional Secured
      Notes that will accrue interest at 13.5% per annum. The Secured Notes are
      secured by substantially all of the assets of the Company and our subsidiaries,
      including our four race tracks, pursuant to a Security Agreement (the "Security
      Agreement") and mortgages (the "Mortgages") by and among us, certain of our
      subsidiaries, and the lenders. The Secured Notes contain various standard and
      customary covenants, including prohibitions on incurring additional
      indebtedness, except under certain limited circumstances, or granting a security
      interest in any of our properties. Our obligations under the Secured Notes
      are
      guaranteed by our principal operating subsidiaries pursuant to a Subsidiary
      Guarantee (the "Guarantee") by and among us, our principal operating
      subsidiaries, and the lenders.




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




Notes
      payable at September 30, 2007 consisted of the following:





·
            $2,340,000
                notes payable issued in connection with the purchase of Lernerville
                Speedway, bearing interest at 7% payable annually each November.
                The
                balance is due upon maturity on November 7, 2008.  This note is
                secured by a mortgage on the Lernerville Speedway
                Facility.





·
            $2,000,000
                note payable issued in connection with the purchase of Volusia Speedway,
                bearing interest at one percent over prime and payable in fifty-nine
                equal
                monthly installments commencing at $24,000 per month and adjusted
                quarterly for changes in interest rates with the balance of the
                outstanding principal and accrued interest due on June 30,
                2010.  The outstanding principal balance on this note was
                $1,714,529 as of September 30, 2007.  This note is secured by a
                mortgage on the real property, and security agreement covering the
                other
                assets acquired from Volusia
                Speedway.





·
            $283,863
                in various vehicle and equipment notes payable, bearing interest
                at an
                average rate of 6.25% and due in monthly installments of principal
                and
                interest through February 2011.





·
            $12,000,000
                in Secured Notes issued in September 2007 bearing interest at 12.5%
                per
                year and due on March 15, 2010.  These promissory notes are
                secured by the assets of the Company subject to existing mortgages
                at the
                date of issuance.





The
      aggregate amounts of debt payments (principal and interest) during each of
      the
      years ending December 31, 2007 through 2011 and thereafter are:





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            14 -
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            of Contents*





Remainder
                of 2007
            
            $
            42,2292008
            
            
            2,529,2162009
            
            
            206,7382010
            
            
            13,421,3802011
                and thereafter
            
            
            138,828$
            16,338,391Less,
                discount on notes payable
            
            
            2,795,517Notes
                payable, net of discount
            
            $
            13,542,874





**NOTE
      10 – STOCKHOLDERS’ EQUITY**





Effective
      September 22, 2005, the Company and Glenn Donnelly (Consultant) entered into
      a
      Business Relationship Termination Agreement (the “Termination
      Agreement”).  The Termination Agreement provided for, among other
      things, the payment by the Company to Mr. Donnelly of $1,000,000 cash, a note
      payable in the amount of $500,000, the cancellation of 768,999 issued shares
      of
      common stock of the Company owned by Mr. Donnelly, and 500,000 shares currently
      held by Donnelly to be re-issued.  In addition, as part of the
      Termination Agreement, Mr. Donnelly agreed for a period of two-years not to
      compete against the Company in the business of dirt track motor sports racing
      or
      the promotion and/or sanctioning of dirt track motor sports
      racing.  As of September 30, 2005 the cash payment due to Mr. Donnelly
      remained unpaid.  Subsequent to year end this settlement amount was
      reduced to $1,290,000.  The Company has retroactively reflected the
      $210,000 reduction in the termination agreement as of September 30,
      2005.  The entire $1,290,000 settlement was treated as the cost of
      retiring the 768,999 shares of stock returned by Glenn Donnelly and cancelled.
      During 2006, the Company amended the Business Relationship Termination Agreement
      to provide for a cash payment of $1.0 million and the issuance of a note payable
      of $423,000 which is payable on demand as of June 30, 2007.  The cash
      payment of $1.0 million was made in May 2006.  The note for $423,000
      was repaid in September 2007.





**Preferred
      Stock**





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





The
      Series D Stock is convertible into an aggregate of 4,000,000 shares of
      common stock, representing a conversion price of $3.00 per share. The
      Series D Stock will automatically convert 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 D Stock is convertible (“Registration Statement”), if
      (a) the closing bid price of our common stock is equal to or greater than
      $7.50 per share for ten consecutive trading days, (b) the dollar trading
      volume for each of the ten trading days exceeds $1,000,000, and (c) the
      Registration Statement is and has been effective without lapse or suspension
      of
      any kind, for a period of sixty consecutive calendar days or the shares of
      common stock into which the Series D Stock is convertible may be sold to
      the public pursuant to Rule 144(k) under the Securities Act of 1933, as
      amended.





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





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





The
      Series D Warrants have a term of five years and are exercisable at an
      exercise price of $4.50 per share. The Company may call the Series D
      Warrants at any time following the effective date of the Registration Statement
      covering the shares of common stock issuable upon exercise of the Series D
      Warrants, at a price of $0.001 per warrant, if (a) the per share market
      value our common stock is equal to or greater than $10.00 per share for ten
      consecutive trading days, (b) the dollar trading volume for each of the ten
      trading days exceeds $500,000, and (c) the Registration Statement is and
      has effective been, without lapse or suspension of any kind, for a period of
      sixty consecutive calendar days.





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            15 -
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We
      agreed
      to file the Registration Statement covering the resale of the shares of common
      stock to be issued upon conversion of the Series D Stock and the
      Series D Warrants. In the event the Registration Statement was not
      (a) filed on or before the fifteenth (15th) day following
      the
      filing of the Company’s Form 10-QSB for the fiscal quarter ended March 31,
      2006, but in no event later than May 30, 2006, or (b) declared
      effective on the date that is the earlier of (i) the ninetieth (90th) day following
      the
      filing date or the date which is within three (3) business days of the date
      on which the Commission informs the Company (A) that the Commission will
      not review the Registration Statement, or (B) that the Company may request
      the acceleration of the effectiveness of the Registration Statement and the
      Company makes such request, then, in either event, the Company will be obligated
      to pay liquidated damages to the holders of the Series D Stock in the
      amount equal to two percent (2%) for the first calendar month (prorated for
      shorter periods) and one percent (1%) per calendar month there after (prorated
      for shorter periods) of the holder’s initial investment in the preferred shares,
      until such time as the Registration Statement is filed or declared effective,
      as
      the case may be; provided, however, that in no event shall
      liquidated damages payable to any holder resulting from any event that is within
      the control of the Company exceed ten percent (10%) of the holder’s initial
      investment.   The registration statement was effective in
      accordance with the requirements of the purchase agreement.





As
      of
      September 30, 2007, the Registration Statement on Form SB-2, which was declared
      effective on July 11, 2006 has not been updated due to the Company’s capital
      raising activities and therefore is not currently effective.  The
      shares registered under the Registration Statement are currently transferable
      under Rule 144 of the Securities Act of 1933.  Management plans to
      re-register the shares under a new registration statement following the
      completion of our annual meeting we anticipate will be held in the fourth
      quarter.  The Company has in the past received the necessary waivers
      to avoid the payment of liquidated damages and at this time management does
      not
      anticipate nor has any investor indicated any intention to pursue liquidated
      damages under the May 2006 Registration Rights agreement and no liability has
      been recorded on the Company’s financial statements related to penalties that
      might be incurred as a result of the Company’s election not to keep the
      registration statement effective.





Beginning
      on May 16, 2007, shares of the Series D preferred stock are entitled
      to receive a dividend of four percent of the liquidation preference of the
      shares. This dividend increases to six percent beginning May 16, 2008. The
      dividend is payable semi-annually in cash or, if certain requirements are met,
      we can chose to pay the dividend in shares of our common stock. Dividends on
      the
      Series D preferred stock will accrue, whether or not the dividend is
      declared by our board of directors. So long as shares of our Series D
      preferred stock are outstanding, we may not pay any dividend on our common
      stock
      unless we have first paid all accrued and unpaid dividends on the outstanding
      shares of Series D preferred stock.





On
      September 28, 2007, we amended our Certificate of Incorporation to designate
      50,000 shares of our preferred stock, $.01 par value per share, as Series E
      Shares.   Upon liquidation of the Company, holders of our Series
      E Shares share ratably with holders of our Common Stock with respect to the
      assets available for distribution to such holders, are paid dividends when
      as
      and if declared on our Common Stock, have no redemption rights, and other than
      as provided by applicable Delaware law, have no voting rights. Each Series
      E
      Share is convertible at the option of the holder thereof into 1,000 shares
      of
      Common Stock, subject to adjustment for certain organizational changes including
      stock splits, stock dividends and recapitalizations. The Series E Shares contain
      a blocker provision prohibiting conversion if conversion would result in the
      holder beneficially owning more than 4.99% of our outstanding Common
      Stock.  As of September 30, 2007 we had 3,374 shares of our Series E
      Preferred Stock Outstanding.





**NOTE
      11 – INCOME TAXES**





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





At
      December 31, 2006, the Company had net operating loss carry forwards of
      approximately $34.9 million for federal income tax purposes.





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





**NOTE
      12 – COMMITMENTS**





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





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





The
      Syracuse Fairgrounds Race Track is leased for the Super Dirt Week series of
      races held annually during October.  The track is located in Syracuse,
      New York.  The track is leased on a year-to-year basis for one week
      per year at a rental rate of $100,000.





The
      Orange County Fair Speedway is leased on an annual basis at a rate of $115,000
      per year.  The track is located in Middletown, New York.





Our
      corporate office was located in Norman, Oklahoma until March 2007.  It
      was leased on a month-to-month basis, $4,664 per month for approximately 3,855
      square feet of office space.  Our new corporate facility in Concord,
      North Carolina contains  approximately 9,000 square feet of office and
      7,000 square feet of warehouse space.  It is leased under a 62 month
      lease for $9,492 per month for the first year escalating annually to $10,275
      in
      year five.





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            16 -
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            of Contents*





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





Payment
                Due by PeriodRemainder
                ofTotal
            
            
            2007
            
            
            2008
            
            
            2009
            
            
            2010
            
            
            ThereafterOperating
                leases
            
            $
            784,885
            
            
            $
            48,984
            
            
            $
            257,616
            
            
            $
            139,931
            
            
            $
            142,285
            
            
            $
            196,069





Rent
      expense, including track, equipment and office rental, for the nine months
      ended
      September 30, 2007 and 2006 was $296,394 and $564,422,
      respectively.  Rent expense for the three months ended September 30,
      2007 and 2006 was $132,577 and $253,841, 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 September 30, 2007 was $0.8
      million.





**NOTE
      13 – 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.





**Nature
      of Business**





We
      are a
      leading marketer and promoter of motorsports entertainment in the United
      States.  We own and operate the two premier national touring series in
      dirt circle track racing:  the World of Outlaws Sprint Series and the
      World of Outlaws Late Model Series which compete in 140 events per year, a
      number of which are broadcast on national television.  We operate 7
      dirt motorsports tracks (4 are owned and 3 facilities are under short term
      lease
      agreements) in New York, Pennsylvania and Florida hosting a combined 139 events
      in 2007. We own and manage a nationally based sanction body: DIRTcar Racing
      that
      sanctions nearly 4,000 events at 129 facilities and manages 14 regional touring
      series.





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





During
      the quarter ended December 31, 2004, the Company entered into a series of
      related transactions resulting in the acquisition of 100% of the outstanding
      stock of DIRT Motorsports, Inc. (“DIRT”) and two affiliated race
      tracks.





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





-
            17 -
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            of Contents*





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





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





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





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





In
      2006,
      we scheduled 79 World of Outlaw Sprint Series races, 40 World of Outlaw Late
      Model Series races, 32 Advance Auto Parts Big Block Modified events, and over
      200 other major racing events in our other regional and touring racing
      series.   In 2007, we scheduled 84 World of Outlaw Sprint Series
      races, 56 World of Outlaw Late Model Series races, 27 Advance Auto Parts Big
      Block Modified events, and over 200 other major racing events in our other
      regional and touring racing series.  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, reduces operating
      income in quarters outside of our peak operating months.  Our racing
      schedules from year to year may change from time to time which can lessen the
      comparability of operating results between quarters of successive years and
      increase or decrease the seasonal nature of our motorsports
      business.





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





**Results
      of Operations – Comparison of Nine Months Ended September 30, 2007 (“2007”) and
      2006 (“2006”)**





*Revenues*–
      Our total revenues increased to $16.7 million in 2007 from $12.3 million in
      2006.





Race
      sanctioning and event fees revenue increased to $7.4 million in 2007 from $4.2
      million in 2006.  This increase is due to an increase in the number of
      sanctioned events and fees per event in 2007 compared to 2006.  In
      2007 we completed 67 World of Outlaw Sprint Series sanctioned events at
      non-owned facilities and 8 events at our facilities. In 2006 we completed 59
      World of Outlaws Sprint Series sanctioned events at non-affiliated facilities
      and 6 events at our facilities.   In 2007 we completed 51 World
      of Outlaw Late Model Series events and in 2006 we completed 32.  We
      expect sanction fees through the remainder of 2007 to increase relative to
      2006
      due to the  increase in the number of sanctioned events at
      non-affiliated facilities.





During
      2007 we generated $5.8 million in track operations, ticket and concession sales
      as compared to $5.7 million in 2006. These revenues are generated at events
      held
      at our owned or operated racetracks. The increase is due to the addition of
      several multi-day events at our owned racetracks during June 2007 and an
      increase in attendance at our weekly events, offset in part by a decrease in
      the
      number of events that we held at facilities that we leased on a nightly basis
      for events in 2006 that did not occur in 2007.  Our racing season at
      our race track in Florida begins in February each year and the season in New
      York and Pennsylvania typically begins in late March or early April each year
      but is dependent upon the weather in each region.  We expect our track
      operations, ticket and concession sales to remain higher for the remainder
      of
      2007 compared to 2006 as a result of an increase in the number
      of  events scheduled during the remainder of the year.





Our
      sponsorship and advertising revenues increased to $3.0 million in 2007 from
      $1.6
      in 2006.  The increase is due to sponsorship and advertising revenues
      for advertising within our television broadcasts which began to air in May
      2007
      and will air through November 2007. Sales of merchandise decreased to $422,517
      in 2007 from $506,835 in 2006.  The decrease is principally due to new
      arrangements entered into with third parties to outsource our product sales
      at
      events other than at our World of Outlaw Sprint Series races.  We
      expect that our net operating cash generated from these new arrangements to
      increase due to the substantially lower costs associated with these
      arrangements;  however these arrangements will result in decreased
      gross revenues recorded.





*Operating
      expenses*– Our total operating expenses increased to $24.2 million in 2007
      from $23.1 million in 2006.  The increases are due to the increase in
      the number of events held during the year as well as increased expenditures
      incurred to produce and air our television broadcasts.  These
      increases have been offset in part to efforts across all aspects of the Company
      to reduce operating costs while focusing on increasing our sponsorship and
      advertising revenue.





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            18 -
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Track
      and event operations - Our track and event operations expenses include purses
      and other attendance fees paid to our drivers, personnel costs and other
      operating costs for the organization of our events and the operation of our
      tracks.  Track and event operations expense increased to $18.9 million
      in 2007 from $16.4 million in 2006.  This increase is due to increases
      in television programming and production costs of $2.6 million and increased
      prizes and awards at our additional events in 2007 as compared to
      2006.  These increases were offset in part by decreases in personnel,
      contract labor cost and other costs at our events at Volusia Speedway and
      certain of our racing series and decreases in certain of prize and purse fund
      amounts for 2007 as compared to 2006.  We expect operating expenses in
      2007 to continue at levels above those incurred in 2006 primarily due to the
      cost of television programming and production.





Sales
      and marketing – Sales and marketing expenses includes expenses incurred by our
      sales, marketing and public relations departments.  The expenses are
      primarily personnel related to the pursuit of corporate and event sponsors
      along
      with professional fees and printing for our advertising publications and
      fulfillment under our sponsorship agreements.  Sales and marketing
      expense increased to $1.3 million in 2007 from $0.9 million in 2006, principally
      due to increased professional fees, promotion and advertising
      expenses.





Merchandise
      operations and cost of sales – Merchandise operations and cost of sales includes
      all operating expenses related to the distribution of our merchandise which
      includes mobile store fronts that are present at our World of Outlaws sprint
      touring series events and the cost of goods sold during
      2007.  Merchandise operations and cost of sales in 2006 included all
      operating expenses related to the distribution of our merchandise, including
      mobile store fronts that are present at all of our touring series events and
      the
      cost of goods sold. Beginning in 2007, we entered into arrangements to outsource
      the sale of branded merchandise at each of our touring series events other
      than
      at our World of Outlaws Sprint Series events.  These arrangements
      generally include the payment to the Company of a one-time rights fee and a
      percentage of sales over certain volume thresholds. These fees are recorded
      as
      sponsorship and advertising sales.





General
      and administrative – Our general and administrative expenses decreased to $1.7
      million in 2007 from $2.2 million in 2006. The decrease from 2006 represents
      decreases in the number of administrative personnel and decreased legal and
      professional fees offset in part by costs incurred in connection with the
      relocation of our corporate office from Oklahoma to North Carolina.
      Additionally, 2006 includes $0.1 million in severance and other employee
      termination costs not incurred in 2007.





Non-cash
      stock Compensation – Non-cash stock compensation of $1.5 million in 2007 and
      $2.1 million in 2006 represents the fair value of warrants and options issued
      to
      employees and non-employees now recognized as an expense due to the
      implementation of SFAS 123R effective January 1, 2006 and the fair value of
      restricted stock issued to employees.





Depreciation
      and amortization  – Depreciation and amortization expense increased
      slightly to 2007 from 2006 due to the addition of equipment and leasehold and
      track improvements during 2007.





Interest
      expense, net – Interest expense decreased to $1.1 million in 2007 from $8.0
      million in 2006.  2006 includes the non-cash amortization of the
      discounts recorded for the value assigned to warrants granted in connection
      with
      the promissory notes issued during the fourth quarter of 2005 and in 2006
      through the closing of our Series D financing. At the time of the note
      conversions in May 2006, any unamortized note discount was recorded as an
      increase in interest expense during 2006.  Interest expense for 2007
      reflects the interest incurred on our notes and mortgages payable on our two
      tracks and various vehicle notes and any non cash interest expense for the
      amortization of the discounts recorded for the value assigned to the shares
      of
      common stock that were issued in connection with the secured promissory notes
      issued during late March through September 30, 2007.





**Results
      of Operations – Comparison of Three Months Ended September 30, 2007 (“2007”) and
      2006 (“2006”)**





*Revenues*–
      Our total revenues increased to $8.1 million in 2007 from $6.1 million in
      2006.





Race
      sanctioning and event fees revenue increased to $3.8 million in 2007 from $2.5
      million in 2006.  This increase is due an increase in the number of
      sanctioned events in 2007 compared to  2006.  In 2007 we
      completed 32 World of Outlaw Sprint Series sanctioned events at non-owned
      facilities and 2 events at our facilities. In 2006 we completed 31 World of
      Outlaws Sprint Series sanctioned events at non-affiliated facilities and 3
      events at our facilities.   In 2007 we completed 21 World of
      Outlaw Late Model events compared to 17 in 2006.  We expect sanction
      fees through the remainder of 2007 to increase relative to 2006 due to the
      increase in the number of sanctioned events at non-affiliated
      facilities.





During
      2007 we generated $2.3 million in track operations, ticket and concession sales
      as compared to $2.6 million in 2006. These revenues are generated at events
      held
      at our owned or operated racetracks. The decrease is due to the reduction of
      leased events held in 2007 as compared to 2006, primarily World of Outlaw Late
      Model Series events.  In 2006 we leased tracks for single World of
      Outlaw Late Model Series events whereas in 2007 we sanctioned each of those
      events.  These decreases were offset by increased attendance at our
      weekly events at our owned tracks, primarily Lernerville Speedway. Our racing
      season at our race track in Florida begins in February each year and the season
      in New York and Pennsylvania typically begins in late March or early April
      each
      year but is dependent upon the weather in each region.  We expect our
      track operations, ticket and concession sales to remain higher for the remainder
      of 2007 compared to 2006 as a result of an increase in the number
      of  events scheduled during the remainder of the year.





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            19 -
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Our
      sponsorship and advertising revenues increased to $1.8 million in 2007 from
      $0.7
      million in 2006.  The increase is due to sponsorship and advertising
      revenues for advertising within our television broadcasts which began to air
      in
      May 2007 and will air through November 2007. Additionally, sponsorship revenues
      increased for new sponsorship agreements for our sprint series and for our
      sanctioning bodies.  Sales of merchandise decreased slightly in 2007
      from 2006, due principally to new arrangements entered into with third parties
      to outsource our product sales at events other than at our World of Outlaw
      Sprint Series races.  We expect that our net operating cash generated
      from these new arrangements to increase due to the substantially lower costs
      associated with these arrangements; however these arrangements will result
      in
      decreased gross revenues recorded.





*Operating
      expenses*– Our total operating expenses increased to $10.3 million in 2007
      from $9.5 million in 2006.  The increases are due to the increase in
      the number of events held during the year and our cost to produce and air our
      television broadcasts.  These increases have been offset in part to
      efforts across all aspects of the Company to reduce operating costs while
      focusing on increasing our sponsorship and advertising revenue.





Track
      and event operations - Our track and event operations expenses include purses
      and other attendance fees paid to our drivers, personnel costs and other
      operating costs for the organization of our events and the operation of our
      tracks.  Track and event operations expense increased to $8.6 million
      in 2007 from $7.6 million in 2006.  This increase is due to increases
      in television programming and production costs of $1.4 million and increased
      prizes and awards at our additional events in 2007 as compared to
      2006.  These increases were offset in part by decreases in personnel,
      contract labor cost and other costs at our events and certain of our racing
      series and decreases in certain of prize and purse fund amounts for 2007 as
      compared to 2006.  We expect operating expenses in 2007 to continue at
      levels above those incurred in 2006 primarily due to the cost of television
      programming and production.





Sales
      and marketing – Sales and marketing expenses include 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
      expenses were $0.4 million in 2007 and 2006.





Merchandise
      operations and cost of sales – Merchandise operations and cost of sales includes
      all operating expenses related to the distribution of our merchandise which
      includes mobile store fronts that are present at our World of Outlaws sprint
      touring series event and the cost of goods sold during
      2007.  Merchandise operations and cost of sales in 2006 included all
      operating expenses related to the distribution of our merchandise, including
      mobile store fronts that are present at all of our touring series event and
      the
      cost of goods sold. Beginning in 2007, we entered into arrangements to outsource
      the sale of  branded merchandise at each of our touring series events
      other than at our World of Outlaws Sprint Series events.  These
      arrangements generally include the payment to the Company of a one-time rights
      fee and a percentage of sales over certain volume thresholds. These fees are
      recorded as sponsorship and advertising sales.





General
      and administrative – Our general and administrative expenses increased to $0.5
      million in 2007 from $0.4 million in 2006. The increase from 2006 represents
      increased legal and professional fees offset in part by decreases in the number
      of administrative personnel.





Non-cash
      stock Compensation – Non-cash stock compensation of $0.6 million in 2007 and
      2006 represents the fair value of warrants and options issued to employees
      and
      non-employees now recognized as an expense due to the implementation of SFAS
      123R effective January 1, 2006 and the fair value of restricted stock issued
      to
      employees.





Depreciation
      and amortization – Depreciation and amortization expense increased slightly to
      2007 from 2006 due to the addition of equipment and leasehold and track
      improvements during 2007.





Interest
      expense, net – Interest expense increased to $0.2 million in 2007 from $0.05
      million in 2006.  Interest expense reflects the interest incurred on
      our notes and mortgages payable on our two tracks and various vehicle
      notes.   We will begin in incur non cash interest expense related
      to the amortization of the debt discount recorded for the value assigned to
      the
      common stock and Series E Preferred Stock issued in connection with the secured
      promissory notes issued during late March through June 30, 2007.





**Liquidity
      and Capital Resources**





The
      Company generated $16.7 million in revenues during the nine months ended
      September 30, 2007; however, we have not yet achieved a profitable level of
      operations. Our primary source of funding for our operating deficits during
      the
      quarter ended September 30, 2007 has been from the issuance of notes
      payable.





During
      the nine months ended September 30, 2007, the Company used $4.5 million in
      operating activities primarily the result of a net loss of $8.6 million,
      depreciation and amortization of $0.6 million, non-cash stock compensation
      of
      $1.5 million, non-cash interest expense of $0.7 million and other working
      capital changes, primarily accounts payable, accrued liabilities and deferred
      revenue.





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





During
      the nine months ended September 30, 2007, financing activities provided $10.4
      million primarily through the issuance of $12.0 million in notes payable offset
      by repayment of $0.6 million in notes payable and payments of placement agent
      fees of $1.0 million.





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            20 -
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The
      Company incurred a net loss of $8.6 million for the period ended September
      30,
      2007.  The Company has an accumulated deficit of $69.3 million as of
      September 30, 2007, 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
      Company is dependent on existing cash resources and external sources of
      financing to meet its working capital needs, and ultimately attain profitable
      operations.  To ultimately achieve profitability, management’s plan is
      to (i) increase the number of sanctioned events; (ii) leverage existing owned
      and leased tracks to generate ancillary revenue streams; (iii) partner with
      existing promoters to create additional marquis events; and
      (iv)  continue to build sponsorship, advertising and related revenue,
      including license fees related to the sale of branded
      merchandise.   If the Company is unsuccessful in its plan, we
      will be required to seek additional equity and/or debt capital to continue
      as a
      going concern.  Such capital may not be available to the Company on
      acceptable terms, if at all.  The financial statements do not include
      any adjustments relating to the recoverability and classification of recorded
      asset amounts or to amounts and classification of liabilities that may be
      necessary if the Company is unable to continue as a going
      concern.  The financial statements do not include any adjustments
      relating to the recoverability and clarification of recorded asset amounts
      or to
      the amounts and classification of liabilities that may be necessary if the
      Company is unable to continue as a going concern.





During
      2007, the Company has raised working capital from existing shareholders through
      the issuance of short term promissory notes and Senior Secured Notes. As part
      of
      the Company’s financing plan, the Company is currently negotiating with the
      holders of its Series D Preferred Stock (“Series D”) in connection with a
      proposed exchange of the Series D shares into common stock or common stock
      equivalents. If such an exchange occurs, we will eliminate in excess of $54.0
      million of liquidation preference and accrued and future preferred dividends.
      If
      such exchange is completed, it will result in the issuance of common shares
      or
      common share equivalents in an amount significantly higher than the 17.9 million
      shares that are currently issuable upon conversion of the Series D. Therefore
      such an exchange will, if completed, result in significant additional dilution
      to our existing common shareholders.  No assurances can be given that
      the Company will be successful in the completion of the Series D
      Exchange.





The
      following table summarizes our contractual obligations as of September 30,
      2007:





Payment
                Due by PeriodRemainder
                of
            
            
            
            
            
            
            
            
            
            
            
            2011
                andContractual
                obligations
            
            Total
            
            
            2007
            
            
            2008
            
            
            2009
            
            
            2010
            
            
            thereafterOperating
                leases
            
            $
            784,885
            
            
            $
            48,984
            
            
            $
            257,616
            
            
            $
            139,931
            
            
            $
            142,285
            
            
            $
            196,069Employment
                agreements
            
            
            757,289
            
            
            
            183,188
            
            
            
            514,101
            
            
            
            60,000
            
            
            
            -
            
            
            
            -Notes
                payable and accrued interest
            
            
            16,992,053
            
            
            
            135,069
            
            
            
            2,850,170
            
            
            
            360,129
            
            
            
            13,486,937
            
            
            
            130,184





Operating
      lease expense for the nine months ended September 30, 2007 and 2006 was $168,435
      and $131,576, respectively.





**The
      Company’s significant accounting policies include:**





**Reclassifications**





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





**Use
      of Estimates**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amount of assets and
      liabilities and disclosures of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those
      estimates.





**Principles
      of Consolidation**





The
      accompanying condensed consolidated financial statements include the accounts
      of
      the Company and its wholly-owned subsidiaries. All material intercompany
      accounts and transactions have been eliminated in consolidation.





**Revenue
      Recognition and Deferred Revenue**





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





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            21 -
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The
      Company recognizes race sanctioning and event fees upon the successful
      completion of a scheduled race or event. Race sanction and event fees collected
      prior to a scheduled race event are deferred and recognized when earned upon
      the
      occurrence of the scheduled race or event. Track operations, ticket and
      concession sales are recognized as revenues on the day of the
      event.  Income from memberships to our sanctioning bodies is
      recognized on a prorated basis over the term of the membership. The Company
      recognizes revenue from sponsorship and advertising agreements when earned
      in
      the applicable racing season as set forth in the sponsorship or advertising
      agreement either upon completion of events or publication of the advertising.
      Revenue from merchandise sales are recognized at the time of sale less estimated
      returns and allowances, if any. Revenues and related expenses from barter
      transactions in which the Company receives goods or services in exchange for
      sponsorships of motorsports events are recorded at fair value in accordance
      with
      Emerging Issues Task Force (“EITF”) Issue No. 99-17, *Accounting for
      Advertising Barter Transactions*. Barter transactions accounted for $240,000
      and $166,000 of total revenues for the respective nine month periods ended
      September 30, 2007 and 2006.





**Expense
      Recognition and Deferral**





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




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





**Net
      loss Per Share**





Basic
      and
      diluted earnings per share (EPS) are calculated in accordance with FASB
      Statement No. 128, Earnings per Share. For the nine months ended September
      30,
      2007, the net loss per share applicable to common stock has been computed by
      dividing the net loss by the weighted average number of common shares
      outstanding.





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            22 -
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As
      of
      September 30, 2007 the Company had the following warrants and stock options
      outstanding:





·
            Promissory
                note warrants to purchase 1,948,510 shares of common stock at an
                exercise
                price of $4.50





·
            Series
                D warrants to purchase 2,520,178 shares of common stock at an exercise
                price of $4.50





·
            Other
                warrants to purchase 542,738 shares of common stock at an exercise
                price
                of $0.001





·
            Placement
                Agent Warrants to purchase 581,266 shares of common stock at exercise
                prices ranging from $2.70 to $5.00





·
            Warrants
                to purchase 375,059 shares of common stock at an exercise price of
                $3.00





·
            Other
                warrants to purchase 40,000 shares of common stock issued at an exercise
                price  of $3.65





·
            Employee
                stock options to purchase 300,000 shares at an exercise price of
                $2.49 per
                share





·
            Employee
                stock options to purchase 75,000 shares at an exercise price of $2.50
                per
                share





·
            Employee
                stock options to purchase 69,000 shares at an exercise price of $1.70
                per
                share





·
            Employee
                stock options to purchase 54,000 shares at an exercise price of $2.00
                per
                share





·
            Employee
                stock options to purchase 300,000 shares at an exercise price of
                $3.65 per
                share





·
            Employee
                stock options to purchase 600,000 shares at an exercise price of
                $3.75 per
                share





·
            Director
                stock options to purchase 375,000 shares at exercise prices ranging
                from
                $3.00 to $4.75 per share





·
            Other
                stock options totaling 390,000 shares at exercise prices ranging
                from
                $3.00 to $4.50 per share





In
      addition, as of September 30, 2007, the Company’s Series D Preferred Stock was
      convertible into 17.9 million shares of common stock. None of these were
      included in the computation of diluted EPS because the Company had a net loss
      and all potential issuance of common stock would have been
      anti-dilutive.





-
            23 -
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**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 September  30, 2006, the
      Company believes there is no impairment of property and equipment.





**Purchase
      Accounting**





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





**Intangible
      Assets**





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





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





**Income
      Taxes**





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





**Concentration
      of Credit Risk**





Due
      to
      the nature of the Company’s sponsorship agreements, the Company could be subject
      to concentration of accounts receivable within a limited number of
      accounts.  As of September 30, 2007 the Company had bank deposits in
      excess of FDIC insurance of $6.0 million.





**New
      Accounting Pronouncements**





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





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            24 -
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In
      February 2006, the FASB issued Statement No. 155,*“Accounting for
      Certain Hybrid Financial Instruments”* (“SFAS No. 155”), which
      amends FASB Statements No. 133 and 140. This Statement permits fair value
      remeasurement for any hybrid financial instrument containing an embedded
      derivative that would otherwise require bifurcation, and broadens a Qualified
      Special Purpose Entity’s (“QSPE”) permitted holdings to include passive
      derivative financial instruments that pertain to other derivative financial
      instruments. This Statement is effective for all financial instruments acquired,
      issued or subject to a remeasurement event occurring after the beginning of
      an
      entity’s first fiscal year beginning after September 15, 2006. This
      Statement has no current applicability to the Company’s financial
      statements.  Management adopted this Statement on January 1, 2007
      and the initial adoption of this Statement did not have a material impact on
      the
      Company’s financial position, results of operations, or cash flows.





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





In
      September 2006, the FASB issued Statement No. 157,*“Fair Value
      Measurements”* (“SFAS No. 157”). SFAS No. 157 addresses
      how companies should measure fair value when they are required to use a fair
      value measure for recognition or disclosure purposes under GAAP.
      SFAS No. 157 defines fair value, establishes a framework for measuring
      fair value and expands disclosures about fair value measurements.
      SFAS No. 157 is effective for fiscal years beginning after
      November 15, 2007, with earlier adoption permitted. Management is assessing
      the impact of the adoption of this Statement.




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





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





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




**Stock-Based
      Compensation**





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





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





Unrecognized
      compensation expense as of September 30, 2007 related to outstanding stock
      options was $2.6 million.





The
      fair
      value of each option grant is estimated for disclosure purposes on the date
      of
      grant using the Black-Scholes option-pricing model with the expected lives
      equal
      to the vesting period. The weighted average contractual life of the outstanding
      options at September 30, 2007 was 3.5 years.





A
      summary
      of the status of stock options and related activity for the Nine month period
      ended September 30, 2007 is presented below:




Options
                outstanding at December 31, 2005
            
            
            2,040,000
            
            
            
            3.54Granted
            
            
            123,000
            
            
            
            1.83Exercised
            
            
            —
            
            
            
            —Forfeited/expired
            
            
            —
            
            
            
            —Options
                outstanding at September 30, 2007
            
            
            2,163,000
            
            
            
            3.45





**Certain
      Risks**





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





**We
      may need additional capital to continue as a going concern and successfully
      execute our business plan.**





Revenues
      from operations are still significantly below levels necessary to achieve
      positive cash flow. From inception to September 30, 2007, our aggregate net
      loss
      is approximately $67.0 million. Our cash position is $6.2 million at September
      30, 2007, and we expect the net losses and negative cash flow to continue
      throughout 2007. In the event we are unable to achieve profitable
      operations,  our known and likely short term cash requirements will
      exceed available cash resources. As a result, we will need additional equity
      and/or debt capital to successfully execute our business plan. Our short-term
      liquidity could disrupt our event and production schedule, which would adversely
      affect our results of operations.





Our
      independent accountants' opinion on our 2006 consolidated financial statements
      includes an explanatory paragraph indicating substantial doubt about our ability
      to continue as a going concern. To continue as a going concern, we will have
      to
      immediately obtain additional debt and/or equity capital, increase our sales
      from sponsorships and advertising, decrease costs, and possibly induce creditors
      to forebear or to convert to equity.  We can give no assurance that we
      will be successful in accomplishing these tasks, including obtaining adequate
      financing on favorable terms, if at all.  If our capital needs are met
      through the issuance of equity or convertible debt securities, the percentage
      ownership of our shareholders will be reduced.





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





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





**Speculative
      nature of our proposed operations.**





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





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





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





**Our
      success depends upon sponsorship and advertising sales for our racing series
      and
      racing events.**





Our
      business model depends on our ability to attract and maintain sponsorships
      and
      advertisers for our racing series and racing events.  A sponsor’s and
      advertiser’s willingness to enter into and continue their relationship with us
      is subject to many risks beyond our control, including: a) Competition for
      advertising and promotional dollars; b) general market and industry conditions
      that may affect our sponsors; and c) the introduction and success of competition
      for new racing events and racing series.





In
      the
      event we are not able to attract sponsors and advertisers, or retain current
      sponsorships and advertising relationships, we will  experience
      continued net losses, and those losses will be significant.





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





As
      of
      September 30, 2007, our executive officers, directors and principal stockholders
      together beneficially own approximately 25% of the outstanding shares of common
      stock. As a result, these stockholders, acting together, may be able to exercise
      substantial influence over all matters requiring approval by our stockholders,
      including the election of directors and approval of significant corporate
      transactions. The concentration of ownership may also have the effect of
      delaying or preventing a change in our control that may be viewed as beneficial
      by the other stockholders.





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





O**ur
      quarterly operating results may fluctuate significantly**.





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





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





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





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





**Dependence
      on qualified and key personnel.**





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





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**Illiquidity
      of our common stock.**





Although
      there is a public market for our common stock, trading volume has been
      historically low which substantially increases your risk of loss.  We
      can give no assurance that an active and liquid public market for the shares
      of
      the common stock will develop in the future.  Low trading volume in
      our common stock could affect your ability to sell the shares of common stock.
      The development of a public trading market depends upon not only the existence
      of willing buyers and sellers, but also on market makers.  The market
      bid and asked prices for the shares may be significantly influenced by decisions
      of the market makers to buy or sell the shares for their own account, which
      may
      be critical for the establishment and maintenance of a liquid public market
      in
      the shares.  Market makers are not required to maintain a continuous
      two-sided market and are free to withdraw firm quotations at any
      time.  Additionally, in order to maintain our eligibility for
      quotation on the OTC Bulletin Board, we need to have at least one registered
      and
      active market maker. No assurance can be given that any market making activities
      of any additional market makers will commence or that the activities of current
      market makers will be continued.





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





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





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





As
      of
      September 30, 2007, we had 16,498,990 shares of common stock
      outstanding.  In addition, as of September 30, 2007, the Company’s
      Series D Preferred Stock was convertible into 17,948,000 shares of common stock,
      the Company’s Series E Preferred Stock was convertible into 3,374,000 shares of
      common stock and we had warrants exercisable for 6,007,751 shares of common
      stock outstanding.  Future sales of substantial amounts of shares of
      our common stock by our existing stockholders in the public market, or the
      perception that these sales could occur, may cause the market price of our
      common stock to decline. We may be required to issue additional shares upon
      exercise of previously granted options and warrants that are currently
      outstanding.





**Our
      articles and bylaws may delay or prevent a potential takeover of
      us.**





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





**No
      Dividends.**





We
      have
      not paid any dividends on our common stock to date, and have no plans to pay
      any
      dividends on our common stock for the foreseeable future.  Further, so
      long as shares of our Series D Preferred Stock are outstanding, we may not
      pay
      any dividend on our common stock unless we have first paid all accrued and
      unpaid dividends on the outstanding shares of Series D.





We
      can
      give no assurance that we will ever pay any dividends in respect to our common
      stock.





**ITEM
      3. CONTROLS AND PROCEDURES**





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





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





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**PART
      II – OTHER INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS**





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





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





None.





**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





3.1
            Certificate
                of Designation of Series E Convertible Preferred Stock, dated September
                28, 2007 (filed as Exhibit 3.1 to the Company’s Current Report on
                Form 8-K filed with the Commission on October 2,
                2007)4.1
            Form
                of Series D Convertible Preferred Stock Purchase Agreement, dated as
                of May 16, 2006, by and among Dirt Motor Sports, Inc., a Delaware
                corporation, and the purchasers set forth therein. (filed as
                Exhibit 4.1 to the Company’s Current Report on Form 8-K filed
                with the Commission on May 23, 2006).4.2
            Certificate
                of Designation of the Relative Rights and Preferences of the Series
                D
                Convertible Preferred Stock. (filed as Exhibit 4.2 to the Company’s
                Current Report on Form 8-K filed with the Commission on May 23,
                2006).4.3
            Form
                of Series D Warrant. (filed as Exhibit 4.3 to the Company’s
                Current Report on Form 8-K filed with the Commission on May 23,
                2006).4.4
            Form
                of Series B Convertible Preferred Exchange Agreement, dated as of
                May 16, 2006, by and among Dirt Motor Sports, Inc., a Delaware
                corporation, and the holders set forth therein. (filed as Exhibit 4.4
                to the Company’s Current Report on Form 8-K filed with the Commission
                on May 23, 2006).4.5
            Form
                of Series C Convertible Preferred Exchange Agreement, dated as of
                May 16, 2006, by and among Dirt Motor Sports, Inc., a Delaware
                corporation, and the holders set forth therein. (filed as Exhibit 4.5
                to the Company’s Current Report on Form 8-K filed with the Commission
                on May 23, 2006).4.6
            Form
                of Warrant Exchange Agreement dated as of May 16, 2006, by and among
                Dirt Motor Sports, Inc., a Delaware corporation, North Sound Legacy
                Institutional Fund LLC, a Delaware limited liability company, and
                North
                Sound Legacy International Fund Ltd, a British Virgin Islands corporation.
                (filed as Exhibit 4.6 to the Company’s Current Report on
                Form 8-K filed with the Commission on May 23,
                2006).4.7
            Form
                of Warrant Exchange Agreement dated as of May 16, 2006, by and among
                Dirt Motor Sports, Inc., a Delaware corporation, and Royal Bank of
                Canada.
                (filed as Exhibit 4.7 to the Company’s Current Report on
                Form 8-K filed with the Commission on May 23,
                2006).4.8
            Form
                of Registration Rights Agreement dated as of May 16, 2006. (filed as
                Exhibit 4.8 to the Company’s Current Report on Form 8-K filed
                with the Commission on May 23, 2006).4.9
            Form
                of Mutual Release Agreement, dated as of May 19, 2006, by and between
                Dirt Motor Sports, Inc., a Delaware corporation, and Mr. Paul A.
                Kruger. (filed as Exhibit 4.9 to the Company’s Current Report on
                Form 8-K filed with the Commission on May 23,
                2006).4.10
            Form
                of Lock-Up by between Dirt Motor Sports, Inc., a Delaware corporation
                and
                Paul A. Kruger. (filed as Exhibit 4.10 to the Company’s Current
                Report on Form 8-K filed with the Commission on May 23,
                2006).10.1
            Form
                of Secured Promissory Demand Note (filed as Exhibit 10.1 to the
                Company’s Current Report on Form 8-K filed with the Commission on
                April 10, 2007).10.2
            Form
                of Note Purchase Agreement, dated September 28, 2007, by and among
                the
                Company and the Lenders (filed as Exhibit 10.1 to the Company’s
                Current Report on Form 8-K filed with the Commission on October 2,
                2007)10.3
            Form
                of Promissory Note, dated September 28, 2007, made by the Company
                payable
                to the Lenders (filed as Exhibit 10.2 to the Company’s Current Report
                on Form 8-K filed with the Commission on October 2,
                2007)10.4
            Form
                of Security Agreement, dated September 28, 2007, by and among the
                Company,
                Carter & Miracle Concessions, LLC, and the Lenders (filed as
                Exhibit 10.3 to the Company’s Current Report on Form 8-K filed
                with the Commission on October 2, 2007)10.5
            Form
                of Subsidiary Guaranty, dated September 28, 2007, by and among the
                Company, Boundless Racing, Inc., Carter & Miracle Concessions, LLC,
                Volusia Operations, LLC, and the Lenders (filed as Exhibit 10.4 to
                the Company’s Current Report on Form 8-K filed with the Commission on
                October 2, 2007)





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10.6
            Pennsylvania
                Form of Mortgage and Security Agreement, dated September 28, 2007,
                by and
                among the Company and the Lenders (filed as Exhibit 10.5 to the
                Company’s Current Report on Form 8-K filed with the Commission on
                October 2, 2007)10.7
            New
                York Form of Mortgage and Security Agreement, dated September 28,
                2007, by
                and among the Company and the Lenders (filed as Exhibit 10.6 to the
                Company’s Current Report on Form 8-K filed with the Commission on
                October 2, 2007)10.8
            Florida
                Form of Mortgage and Security Agreement, dated September 28, 2007,
                by and
                among the Company and the Lenders (filed as Exhibit 10.7 to the
                Company’s Current Report on Form 8-K filed with the Commission on
                October 2, 2007)31.1
            Rule
                13a-14(a)/15d-14(a) Certification of Tom Deery *31.2
            Rule
                13a-14(a)/15d-14(a) Certification of Brian Carter *32
            Section
                1350 Certification of Tom Deery and Brian
                Carter  *


______________________





*Filed
      herewith


(b) Reports
      on Form 8-K*.*




The
      Company filed a Current Report on Form 8-K, dated November 2, 2007, reporting
      pursuant to Items 1,2,3 and 5 of such Form that the Company hadissued $12.0 million of Secured
      Notes,
      with detachable shares of unregistered Common Stock or Series E Shares, of
      which
      $10,150,000 was paid in cash and the balance paid by cancellation of $1,850,000
      principal amount of outstanding Short-Term Notes.




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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.








**DIRT
                MOTOR SPORTS, INC.**(Registrant)Date:
                November 14, 2007
            /s/
                Tom DeeryTom
                Deery, Chief Executive OfficerDate:
                November 14, 2007
            /s/
                Brian CarterBrian
                Carter, Chief Financial Officer






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