##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2006
  o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  0-18045
 
  DIRT Motor Sports, Inc.
 
  Delaware
    
    84-0953839(State of incorporation)
    
    (IRS Employer Identification No.)
 3600 W. Main St., Suite 150, Norman, OK 73072
 
  (877) 5-RACING
 
  þ o
 o o
 APPLICABLE ONLY TO CORPORATE ISSUERS
  There were 13,905,479 shares of common stock outstanding as of August 11, 2006.
 o þ




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##### 



TABLE OF CONTENTS
 PAGEPART I  FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial StatementsCondensed Consolidated Balance Sheets  June 30, 2006 and December 31, 2005
    
    
    3Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2006 and 2005
    
    
    4Condensed Consolidated Statements of Stockholders Equity for the Six Months Ended June 30, 2006
    
    
    5Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2006 and 2005
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3. Controls and Procedures
    
    
    28PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    28Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 4. Submission of Matters to a Vote of Security Holders
    
    
    28Item 6. Exhibits
    
    
    29Signatures
    
    
    31Rule 13a-14(a)/15d-14(a) Certification of Tom DeeryRule 13a-14(a)/15d-14(a) Certification of Brian CarterSection 1350 Certification of Tom Deery and Brian Carter
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 DIRT MOTOR SPORTS, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2006 and December 31, 2005
(Unaudited)
 June 30,
    
    
    December 31,2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    6,207,746
    
    
    $
    18,645Accounts receivable  trade
    
    
    501,216
    
    
    
    180,628Inventory
    
    
    230,570
    
    
    
    132,056Prepaid expenses and other current assets
    
    
    734,386
    
    
    
    476,303Total current assets
    
    
    7,673,918
    
    
    
    807,632Land, buildings and equipment, net
    
    
    10,726,914
    
    
    
    10,795,359Trademarks
    
    
    100,000
    
    
    
    100,000Goodwill, net of impairment of $8,812,097 in 2006 and 2005
    
    
    1,508,440
    
    
    
    1,508,440Prepaid Expenses  long term
    
    
    277,778
    
    
    
    333,333Other assets, net of amortization of $47,294 in 2006 and $106,487 in 2005
    
    
    140,230
    
    
    
    230,562Total assets
    
    $
    20,427,280
    
    
    $
    13,775,326LIABILITIES
AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Cash overdraft
    
    $
    
    
    
    $
    253,232Accounts payable
    
    
    778,614
    
    
    
    1,189,171Accrued liabilities
    
    
    1,843,702
    
    
    
    1,009,181Deferred revenues
    
    
    1,049,690
    
    
    
    178,784Notes payable  net of discount of $3,622,406 in 2005
    
    
    826,526
    
    
    
    7,140,915Total current liabilities
    
    
    4,498,532
    
    
    
    9,771,283Notes payable  long term
    
    
    3,987,553
    
    
    
    5,293,874Total liabilities
    
    
    8,486,085
    
    
    
    15,065,157Stockholders
equity (deficit):Series B Preferred stock, $0.01 par value; 8,000 shares authorized;
6,883 shares issued and outstanding at December 31, 2005
    
    
    
    
    
    
    20,648,456Series C Preferred stock, $0.01 par value; 2,500 shares authorized;
2,500 shares issued and outstanding at December 31, 2005
    
    
    
    
    
    
    6,250,000Series D Preferred Stock, $0.01 par value; 18,244 shares issued and
Outstanding at June 30, 2006
    
    
    54,731,589
    
    
    
    Common stock, $0.0001 par value; 100,000,000 shares authorized; 13,905,479
and 11,720,555 shares issued and outstanding at June 30, 2006 and
December 31, 2005 respectively
    
    
    1,391
    
    
    
    1,172Additional paid-in capital
    
    
    (10,419,838)
    
    
    
    9,727,830Accumulated deficit
    
    
    (53,211,623
    )
    
    
    (37,917,289
    )Total
stockholders equity (deficit)
    
    
    11,941,195
    
    
    
    (1,289,831
    )Total
liabilities and stockholders equity (deficit)
    
    $
    20,427,280
    
    
    $
    13,775,326
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DIRT MOTOR SPORTS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2006 and 2005
(Unaudited)
 Three months ended
    
    
    Six months ended2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues:Race sanctioning and event fees
    
    $
    1,461,584
    
    
    $
    2,634,549
    
    
    $
    1,771,632
    
    
    $
    3,384,623Track operations, ticket and concession sales
    
    
    1,719,162
    
    
    
    797,900
    
    
    
    3,070,714
    
    
    
    797,900Sponsorship and advertising
    
    
    735,044
    
    
    
    453,273
    
    
    
    952,570
    
    
    
    697,225Merchandise sales
    
    
    172,172
    
    
    
    237,219
    
    
    
    266,203
    
    
    
    503,199Other revenue
    
    
    42,005
    
    
    
    91,104
    
    
    
    88,913
    
    
    
    122,125Total revenues
    
    $
    4,129,967
    
    
    $
    4,214,045
    
    
    $
    6,150,032
    
    
    $
    5,505,072Operating expenses:Track and event operations
    
    
    5,672,343
    
    
    
    4,599,753
    
    
    
    8,854,668
    
    
    
    6,717,998Sales and marketing
    
    
    279,033
    
    
    
    580,030
    
    
    
    499,189
    
    
    
    573,512Merchandise operations and cost of sales
    
    
    275,782
    
    
    
    223,385
    
    
    
    466,482
    
    
    
    383,060General and administrative
    
    
    1,027,320
    
    
    
    1,151,570
    
    
    
    1,815,147
    
    
    
    1,680,924Non-cash stock option compensation
    
    
    838,472
    
    
    
    
    
    
    
    1,484,482
    
    
    
    Depreciation and amortization
    
    
    201,658
    
    
    
    195,915
    
    
    
    392,346
    
    
    
    262,901Total operating expenses
    
    
    8,294,608
    
    
    
    6,750,653
    
    
    
    13,512,314
    
    
    
    9,618,395Loss from operations
    
    
    (4,164,641
    )
    
    
    (2,536,608
    )
    
    
    (7,362,282
    )
    
    
    (4,113,323
    )Other (Expenses) Income:Interest income
    
    
    24,707
    
    
    
    
    
    
    
    24,717Interest expense
    
    
    (6,287,680
    )
    
    
    (119,902
    )
    
    
    (7,953,619
    )
    
    
    (533,877
    )Other expense
    
    
    
    
    
    
    
    
    
    
    (3,150
    )
    
    
    Total Other (Expense) Income:
    
    
    (6,262,973
    )
    
    
    (119,902
    )
    
    
    (7,932,052
    )
    
    
    (533,877
    )Net (loss)
    
    $
    (10,427,614
    )
    
    $
    (2,656,510
    )
    
    $
    (15,294,334
    )
    
    $
    (4,647,200
    )Dividends on preferred stock:Warrants and beneficial conversion, Series B
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,000,000
    )Beneficial conversion, Series C
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (800,000
    )Exchange of Series A for Series B Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,667,801
    )Exchange of warrants for Series C Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,450,000
    )Exchange of
Series C Preferred Stock
    
    
    (1,250,000
    )
    
    
    
    
    
    
    (1,250,000
    )
    
    
    Net loss applicable to common stock
    
    $
    (11,677,614
    )
    
    $
    (2,656,510
    )
    
    $
    (16,544,334
    )
    
    $
    (17,565,001
    )Net loss applicable to common stock
per common share Basic and diluted
    
    $
    (0.92
    )
    
    $
    (0.18
    )
    
    $
    (1.35
    )
    
    $
    (1.22
    )Weighted average common shares outstandingBasic and diluted
    
    
    12,751,853
    
    
    
    14,439,554
    
    
    
    12,296,482
    
    
    
    14,389,326
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DIRT MOTOR SPORTS, INC.
 
 CONDENSED CONSOLIDATED
STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT)
For the Six Months Ended June 30, 2006
(Unaudited)
 AdditionalPreferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    AccumulatedShares
    
    
    Amounts
    
    
    Shares
    
    
    Amounts
    
    
    Capital
    
    
    (Deficit)
    
    
    TotalBalance, December 31, 2005
    
    
    9,383
    
    
    $
    26,898,456
    
    
    
    11,720,555
    
    
    $
    1,172
    
    
    $
    9,727,830
    
    
    $
    (37,917,289
    )
    
    $
    (1,289,831
    )Value assigned to warrants issued in connection
with the issuance of notes payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,715,113
    
    
    
    
    
    
    
    1,715,113Value assigned to stock options issued in
conjunction with employment agreements
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    907,359
    
    
    
    
    
    
    
    907,359Value assigned to other stock options issued
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    156,056
    
    
    
    
    
    
    
    156,056Exchange of Notes payable and accrued interest
into Series B preferred stock
    
    
    460
    
    
    
    1,381,356
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,381,356Exchange of
Series B and C preferred stock for
Series D preferred stock:Retirement
of Series B and C preferred stock
    
    
    (9,843
    )
    
    
    (28,279,812
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,279,812
    )Issuance of Series D preferred stock
    
    
    9,843
    
    
    
    28,279,812
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,279,812Dividends on Series D Preferred Stock:Increase in liquidation preference upon conversion
    
    
    
    
    
    
    1,250,000
    
    
    
    
    
    
    
    
    
    
    
    (1,250,000
    )
    
    
    
    
    
    
    Series D
Preferred Stock Issuance Cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,257,368
    )
    
    
    
    
    
    
    (1,257,368
    )Exchange of Notes payable and accrued interest
into Series D preferred stock
    
    
    4,401
    
    
    
    13,201,777
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,201,777Issuance of Series D preferred stock
    
    
    4,000
    
    
    
    12,000,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,000,000Issuance of restricted stock
    
    
    
    
    
    
    
    
    
    
    725,000
    
    
    
    73
    
    
    
    420,994
    
    
    
    
    
    
    
    421,067Common Stock issued in warrant exchange
    
    
    
    
    
    
    
    
    
    
    1,459,924
    
    
    
    146
    
    
    
    (146
    )
    
    
    
    
    
    
    Net (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,294,334
    )
    
    
    (15,294,334
    )Balance, June 30, 2006
    
    
    18,244
    
    
    $
    54,731,589
    
    
    
    13,905,479
    
    
    $
    1,391
    
    
    $
    10,419,838
    
    
    $
    (53,211,623
    )
    
    $
    11,941,195
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DIRT MOTOR SPORTS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2006 and 2005
(Unaudited)
 2006
    
    
    2005Cash flows from operating activities:Net (loss)
    
    $
    (15,294,334
    )
    
    $
    (4,647,200
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization
    
    
    392,346
    
    
    
    262,901Stock issued for expenses
    
    
    
    
    
    
    9,000Non-cash interest expense, notes payable
    
    
    7,930,582
    
    
    
    482,949Non-cash stock option compensation
    
    
    1,484,482
    
    
    
    Increase (decrease) in cash for changes in:Accounts receivable
    
    
    (320,588
    )
    
    
    (565,671
    )Inventory
    
    
    (98,514
    )
    
    
    (311,961
    )Prepaid expenses and other current assets
    
    
    (202,528
    )
    
    
    23,727Other non-current assets
    
    
    35,539
    
    
    
    (22,004
    )Accounts payable
    
    
    (663,789
    )
    
    
    (1,213
    )Accrued liabilities
    
    
    1,449,831
    
    
    
    818,752Deferred revenue
    
    
    870,906
    
    
    
    (101,577
    )Net cash (used in) operating activities
    
    
    (4,416,067
    )
    
    
    (4,052,297
    )Cash flows from investing activities:Purchase of property, contract rights, trademarks and goodwill
    
    
    (269,108
    )
    
    
    (4,018,438
    )Additions to other assets
    
    
    
    
    
    
    Net cash (used in) investing activities
    
    
    (269,108
    )
    
    
    (4,018,438
    )Cash flows from financing activities:Payments on notes payable
    
    
    (1,811,567
    )
    
    
    (1,088,195
    )Payments of placement agent fees and other issuance costs
    
    
    (1,257,368
    )
    
    
    (545,000
    )Proceeds from issuance notes payable
    
    
    1,943,211
    
    
    
    6,987,000Proceeds from issuance of preferred stock
    
    
    12,000,000
    
    
    
    5,000,000Net cash provided by financing activities
    
    
    10,874,276
    
    
    
    10,353,805Net increase (decrease) in cash and cash equivalents
    
    
    6,189,101
    
    
    
    2,283,070Cash and cash equivalents, beginning of period
    
    
    18,645
    
    
    
    (55,279
    )Cash and cash equivalents, end of period
    
    $
    6,207,746
    
    
    $
    2,227,791Supplemental schedule of non-cash activities:Conversion of Preferred Stock: Series A to Series B
    
    $
    
    
    
    $
    15,648,456Conversion
of Preferred Stock: Series B and C to Series D
    
    $
    28,279,812
    
    
    $
    Conversion of notes payable into Series D Preferred stock
    
    $
    13,201,777
    
    
    $
    Cash payments for interest
    
    $
    327,854
    
    
    $
    50,090Issuance of warrants with promissory notes
    
    $
    1,715,113
    
    
    $
    Issuance of warrants for property and contract rights
    
    $
    
    
    
    $
    132,187Issuance of common stock for property and contract rights
    
    $
    
    
    
    $
    600,000Non-cash revenues and expenses, barter agreements
    
    $
    134,000
    
    
    $
    52,000
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DIRT MOTOR SPORTS, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2006
 NOTE 1  DESCRIPTION OF BUSINESS
          NOTE 2  GOING CONCERN
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NOTE 3  BASIS OF PRESENTATION
   NOTE 4  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Reclassifications
  Use of Estimates
  Principles of Consolidation
  Revenue Recognition and Deferred Revenue
  Accounting for Advertising Barter Transactions
 Expense Recognition and Deferral
   - 8 -




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Net loss Per Share
   
    
    Series 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 1,186,266 shares of common stock at exercise prices
ranging from $2.70 to $5.00
    
    Other warrants to purchase 40,000 shares of common stock issued at an exercise price of $3.65
    
    Employee stock options to purchase 650,000 shares at an exercise price of $3.63 per share
    
    Employee stock options to purchase 600,000 shares at an exercise price of $3.75 per share
    
    Other stock options totaling 440,000 shares at exercise prices ranging from $3.00 to $4.50 per share
  Cash and Cash Equivalents
  Inventories
  Property and Equipment
   Purchase Accounting
  Intangible Assets
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Income Taxes
  Concentration of Credit Risk
  New Accounting Pronouncements
     Stock-Based Compensation
 Share-Based Payment
 Accounting for Stock Issued to Employees,
  - 10 -




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Options outstanding at December 31, 2005
    
    
    650,000
    
    
    $
    3.65Granted
    
    
    1,040,000
    
    
    
    3.80Exercised
    
    
    
    
    
    
    Forfeited/expired
    
    
    
    
    
    
    Options outstanding at June 30, 2006
    
    
    1,690,000
    
    
    $
    3.74
 NOTE 5  ACQUISITIONS
 Mid America Racing Series (MARS)
   Vehicles
    
    $
    1,500Communications equipment
    
    
    500Excess of cost over fair value of identifiable assets (goodwill)
    
    
    148,000Total purchase price
    
    $
    150,000
 Volusia Speedway
  - 11 -




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Consideration:Cash paid at closing
    
    $
    1,600,000Notes payable issued
    
    
    2,000,000Direct transaction costs
    
    
    26,393Total purchase price
    
    $
    3,626,393Land
    
    
    (2,700,000
    )Buildings & equipment
    
    
    (926,393
    )
 NOTE 6  PROPERTY AND EQUIPMENT
  Cost
    
    
    Depreciable LifeLand
    
    
    6,916,338
    
    
    
    N/ATransportation equipment
    
    
    1,482,898
    
    
    5 - 7 yearsBuildings and grandstands
    
    
    3,277,841
    
    
    7 - 40 yearsOffice furniture and equipment
    
    
    405,685
    
    
    3 - 7 years12,082,762Less accumulated depreciation
    
    
    (1,355,848
    )Property and equipment, net
    
    $
    10,726,914
  NOTE 7  GOODWILL
  NOTE 8  ACCRUED LIABILITIES
  June 30,
    
    
    December 31,2006
    
    
    2005Points fund
    
    $
    973,801
    
    
    $
    Salaries, wages and other costs in connection with office closing
    
    
    6,568
    
    
    
    199,059Interest
    
    
    178,745
    
    
    
    491,914Acquisition liabilities
    
    
    103,500
    
    
    
    103,500Other accrued liabilities
    
    
    581,088
    
    
    
    214,708Total Accrued Liabilities
    
    $
    1,843,702
    
    
    $
    1,009,181
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NOTE 9  DEFERRED REVENUE
  June 30,
    
    
    December 31,2006
    
    

2005Sanction fee advances
    
    $
    120,558
    
    
    $
    48,958Sponsorship prepayments
    
    
    544,803
    
    
    
    129,826Memberships
    
    
    150,531
    
    
    
    Season Passes / Prepaid Tickets
    
    
    233,798
    
    
    
    Total
Deferred Revenue
    
    $
    1,049,690
    
    
    $
    178,784
 NOTE 10  NOTES PAYABLE
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2006
    
    $
    103,6392007
    
    
    713,5112008
    
    
    193,0812009
    
    
    2,516,5272010 +
    
    
    1,287,321$
    4,814,079
 NOTE 11  STOCKHOLDERS EQUITY
      Preferred Stock
  - 14 -




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th th provided however
   NOTE 12  RELATED PARTY TRANSACTIONS
   - 16 -




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NOTE 13  INCOME TAXES
    NOTE 14  COMMITMENTS
    Payment Due by PeriodLess than
    
    
    2 to 3
    
    
    4 to 5
    
    
    After 5Contractual obligations
    
    Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    YearsOperating leases
    
    $
    159,617
    
    
    $
    159,617
    
    
    $
    0
    
    
    $
    
    
    
    $
    
   NOTE 15  LITIGATION AND CONTINGENCIES
  NOTE 16  CONSOLIDATION OF OPERATIONS
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 FORWARD LOOKING STATEMENTS
  Nature of Business
        Mid America Racing Series (MARS)
   Vehicles
    
    $
    1,500Communications equipment
    
    
    500Excess of cost over fair value of identifiable assets (goodwill)
    
    
    148,000Total purchase price
    
    $
    150,000
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Volusia Speedway
   Consideration:Cash paid at closing
    
    $
    1,600,000Notes payable issued
    
    
    2,000,000Direct transaction costs
    
    
    26,393Total purchase price
    
    $
    3,626,393Land
    
    
    (2,700,000
    )Buildings & equipment
    
    
    (926,393
    )
 Results of Operations  Impact of Seasonality and Weather on Quarterly Results
    Results of Operations  Comparison of Three Months Ended June 30, 2006 (2006) and 2005 (2005)
  Revenues
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Operating expenses
        Results of Operations  Comparison of Six Months Ended June 30, 2006 (2006) and 2005 (2005)
  Revenues
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Operating expenses
        Liquidity and Capital Resources
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Payment Due by PeriodLess than
    
    
    2 to 3
    
    
    4 to 5
    
    
    After 5Contractual obligations
    
    Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    YearsOperating leases
    
    $
    159,617
    
    
    $
    159,617
    
    
    $
    
    
    
    $
    
    
    
    $
    Employment agreements
    
    $
    2,352,500
    
    
    $
    787,500
    
    
    $
    1,565,000
    
    
    $
    
    
    
    $
    Notes payable and accrued interest
    
    $
    5,008,127
    
    
    $
    1,267,047
    
    
    $
    683,259
    
    
    $
    3,057,821
    
    
    $
    
  The Companys significant accounting policies include:
 Reclassifications
  Use of Estimates
  Principles of Consolidation
  Revenue Recognition and Deferred Revenue
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Accounting for Advertising Barter Transactions
 Expense Recognition and Deferral
   Net loss Per Share
   
    
    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 1,186,266 shares of common stock at exercise prices
ranging from $2.70 to $5.00
    
    Other warrants to purchase 40,000 shares of common stock issued at an exercise price of $3.65
    
    Employee stock options totaling 650,000 shares at an exercise price of $3.63 per share
    
    Employee stock options totaling 600,000 shares at an exercise price of $3.75 per share
    
    Other stock options totaling 440,000 shares at exercise prices ranging from $3.00 to $4.50 per share
  Cash and Cash Equivalents
  Inventories
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Property and Equipment
   Purchase Accounting
  Intangible Assets
   Income Taxes
  Concentration of Credit Risk
  New Accounting Pronouncements
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Stock-Based Compensation
 Share-Based Payment
 Accounting for Stock Issued to Employees,
      Options outstanding at December 31, 2005
    
    
    650,000
    
    
    $
    3.65Granted
    
    
    1,040,000
    
    
    
    3.80Exercised
    
    
    
    
    
    
    Forfeited/expired
    
    
    
    
    
    
    Options outstanding at June 30, 2006
    
    
    1,690,000
    
    
    $
    3.74
 Certain Risks
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We may not have sufficient capital to successfully affect our business strategy.
  We have a limited operating history. As a result, evaluating our current business model and
prospects may be difficult.
  Speculative nature of our proposed operations.
  Our failure to achieve or maintain profitability could force us to cease our operations.
  Possible impairment of goodwill.
  Our success depends in part upon sales of our racing series and racing events.
    Our executive officers, directors and principal stockholders have substantial influence over us.
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Our quarterly operating results may fluctuate significantly
   Acquisitions of companies or joint venture investments may disrupt our business or dilute
shareholder value.
  Dependence on qualified and key personnel.
  Illiquidity of our common stock.
  Our common stock price has been volatile, which could result in substantial losses for
stockholders
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Our stock price may decline if additional shares are sold in the market.
  Our certificate of incorporation and bylaws may delay or prevent a potential takeover of us.
  
 ITEM 3. CONTROLS AND PROCEDURES
   
 PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
   
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
   2.1
    
    Membership Interests Purchase Agreement, dated as of November 30, 2004, by and among United
Midwestern Promoters Motorsports, LLC, National Speedways of Iowa, Inc., Track Enterprises,
Inc., Ken Schrader Racing, Inc., Lebanon Valley Auto Racing Corp., and Boundless Motor Sports
Racing, Inc. (Incorporated by reference to Exhibit 2.1 of the Companys Current Report on Form
8-K filed with the Commission on December 6, 2004).4.1
    
    Series B Convertible Preferred Stock Purchase Agreement, dated as of February 25, 2005, by
and among Boundless Motor Sports Racing, Inc., a Colorado corporation, and the purchasers set
forth therein. (Incorporated by reference to Exhibit 4.1 of the Companys Current Report on
Firm 8-K filed with the Commission on March 2, 2005)4.2
    
    Certificate of Designation of the Relative Rights and Preferences of the Series B Convertible
Preferred Stock. (Incorporated by reference to Exhibit 4.2 of the Companys Current Report on
Firm 8-K filed with the Commission on March 2, 2005)4.3
    
    Form of Series B Warrant. (Incorporated by reference to Exhibit 4.3 of the Companys Current
Report on Firm 8-K filed with the Commission on March 2, 2005)4.4
    
    Registration Rights Agreement dated as of February 25, 2005, by and among Boundless Motor
Sports Racing, Inc., a Colorado corporation, and the purchasers set forth therein.
(Incorporated by reference to Exhibit 4.4 of the Companys Current Report on Firm 8-K filed
with the Commission on March 2, 2005)4.5
    
    Series C Convertible Preferred Stock Purchase Agreement, dated as of February 25, 2005, by
and among Boundless Motor Sports Racing, Inc., a Colorado corporation, and the purchasers set
forth therein. (Incorporated by reference to Exhibit 4.5 of the Companys Current Report on
Firm 8-K filed with the Commission on March 2, 2005)4.6
    
    Certificate of Designation of the Relative Rights and Preferences of the Series C Convertible
Preferred Stock. (Incorporated by reference to Exhibit 4.6 of the Companys Current Report on
Firm 8-K filed with the Commission on March 2, 2005)4.7
    
    Form of Series C Warrant. (Incorporated by reference to Exhibit 4.7 of the Companys Current
Report on Firm 8-K filed with the Commission on March 2, 2005)4.8
    
    Registration Rights Agreement dated as of February 25, 2005, by and among Boundless Motor
Sports Racing, Inc., a Colorado corporation, and the purchasers set forth therein.
(Incorporated by reference to Exhibit 4.8 of the Companys Current Report on Firm 8-K filed
with the Commission on March 2, 2005)4.9
    
    Certificate of Designation of the Relative Rights and Preferences of the Series A Convertible
Preferred Stock (filed as Exhibit 4.2 to the Companys Current Report on Form 8-K filed with
the Commission on August 4, 2004).4.10
    
    Form of Series A Warrant (filed as Exhibit 4.3 to the Companys Current Report on Form 8-K
filed with the Commission on August 4, 2004).4.11
    
    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).4.12
    
    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).4.13
    
    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).4.14
    
    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).4.15
    
    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).4.16
    
    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).4.17
    
    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).4.18
    
    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).4.19
    
    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).
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4.20
    
    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).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 *
 
  .
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SIGNATURES
  DIRT MOTOR SPORTS, INC.(Registrant)Date: August 14, 2006
    
    /s/ Tom DeeryTom Deery, Chief Executive OfficerDate: August 14, 2006
    
    /s/ Brian CarterBrian Carter, Chief Financial Officer
 -31-