##### 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 March 31, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the transition period from  to
 0-18045
 
 Commission File Number
 DIRT Motor Sports, Inc.
 
  Delaware
    
    84-0953839(State of incorporation)
    
    (IRS Employer Identification No.)
 3600 W. Main St., Suite 150, Norman, OK 73072
 
  (877) 5-RACING
 
  þ o
 Yes
o No o
 APPLICABLE ONLY TO CORPORATE ISSUERS
  There were 11,720,555 shares of common stock outstanding as of May 12, 2006.
 o þ




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##### 



TABLE OF CONTENTS
 PAGEPART I  FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial StatementsCondensed Consolidated Balance Sheets  March 31, 2006 and
December 31, 2005
    
    
    3Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 2006 and 2005
    
    
    4Condensed Consolidated Statements of Stockholders Equity for the Three
Months Ended March 31, 2006
    
    
    5Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2006 and 2005
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    21Item 3. Controls and Procedures
    
    
    33PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    33Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    33Item 4. Submission of Matters to a Vote of Security Holders
    
    
    33Item 6. Exhibits
    
    
    34Signatures
    
    
    35Certification Pursuant to Rule 13a-14(a)/15d-14(a) - Paul A. KrugerCertification Pursuant to Rule 13a-14(a)/15d-14(a) - Brian CarterCertification Pursuant to Section 1350 - Paul A. Kruger and Brian Carter
  
 2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 DIRT MOTOR SPORTS, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31, 2006
and December 31, 2005
(Unaudited)
 March 31,
    
    
    December 31,2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    320,427
    
    
    $
    18,645Accounts receivable  trade
    
    
    35,920
    
    
    
    180,628Inventory
    
    
    288,941
    
    
    
    132,056Prepaid expenses and other current assets
    
    
    638,999
    
    
    
    476,303Total current assets
    
    
    1,284,287
    
    
    
    807,632Land, buildings and equipment, net
    
    
    10,800,753
    
    
    
    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
    
    
    296,296
    
    
    
    333,333Other assets, net of amortization of $123,301 in 2006 and $106,487 in 2005
    
    
    219,137
    
    
    
    230,562Total assets
    
    $
    14,208,913
    
    
    $
    13,775,326LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Cash overdraft
    
    $
    
    
    
    $
    253,232Accounts payable
    
    
    1,325,814
    
    
    
    1,189,171Accrued liabilities
    
    
    1,688,711
    
    
    
    1,009,181Deferred revenues
    
    
    732,621
    
    
    
    178,784Notes payable  net of discount of $4,030,977 in 2006 and $3,622,406 in 2005
    
    
    9,004,248
    
    
    
    7,140,915Total current liabilities
    
    
    12,751,394
    
    
    
    9,771,283Notes payable  long term
    
    
    5,252,948
    
    
    
    5,293,874Total liabilities
    
    
    18,004,342
    
    
    
    15,065,157Stockholders equity:Series B Preferred stock, $0.01 par value; 8,000 shares authorized;
6,883 shares issued and outstanding at March 31, 2006 and
December 31, 2005 respectively
    
    
    20,648,456
    
    
    
    20,648,456Series C Preferred stock, $0.01 par value; 2,500 shares authorized;
2,500 shares issued and outstanding at March 31, 2006 and
December 31, 2005 respectively
    
    
    6,250,000
    
    
    
    6,250,000Common stock, $0.0001 par value; 100,000,000 shares authorized; 11,720,555
and 11,720,555 shares issued and outstanding at March 31, 2006 and
December 31, 2005 respectively
    
    
    1,172
    
    
    
    1,172Additional paid-in capital
    
    
    12,088,953
    
    
    
    9,727,830Accumulated deficit
    
    
    (42,784,010
    )
    
    
    (37,917,289
    )Total stockholders deficit
    
    
    (3,795,429
    )
    
    
    (1,289,831
    )Total liabilities and stockholders equity
    
    $
    14,208,913
    
    
    $
    13,775,326
  3




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DIRT MOTOR SPORTS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
 Three months endedMarch 31,2006
    
    
    2005Revenues:Race sanctioning and event fees
    
    $
    310,048
    
    
    $
    750,074Track operations, ticket and concession sales
    
    
    1,351,552
    
    
    
    Sponsorship and advertising
    
    
    217,526
    
    
    
    243,953Merchandise sales
    
    
    94,031
    
    
    
    265,980Other revenue
    
    
    46,910
    
    
    
    31,022Total revenues
    
    $
    2,020,067
    
    
    $
    1,291,029Operating expenses:Track and event operations
    
    
    3,182,325
    
    
    
    1,630,685Sales and marketing
    
    
    220,156
    
    
    
    279,126Merchandise operations and cost of sales
    
    
    190,700
    
    
    
    201,417General and administrative
    
    
    790,977
    
    
    
    689,528Non-cash stock option compensation
    
    
    646,010
    
    
    
    Depreciation and amortization
    
    
    190,688
    
    
    
    66,986Total operating expenses
    
    
    5,220,856
    
    
    
    2,867,742Loss from operations
    
    
    (3,200,789
    )
    
    
    (1,576,713
    )Interest expense, net
    
    
    (1,665,932
    )
    
    
    (413,977
    )Net (loss)
    
    $
    (4,866,721
    )
    
    $
    (1,990,690
    )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
    )Net loss applicable to common stock
    
    $
    (4,866,721
    )
    
    $
    (14,908,491
    )Net loss applicable to common stock
per common share Basic and diluted
    
    $
    (0.42
    )
    
    $
    (1.03
    )Weighted average common shares outstandingBasic and diluted
    
    
    11,720,555
    
    
    
    14,439,554
  4




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DIRT MOTOR SPORTS, INC.
 
 CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS DEFICIT
 For the Three Months Ended March 31, 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 $2.3 million notes
payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,715,113
    
    
    
    
    
    
    
    1,715,113Value assigned to stock options issued in
conjunction with employment agreements
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    632,710
    
    
    
    
    
    
    
    632,710Value assigned to stock options issued to advisory
board consultants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,300
    
    
    
    
    
    
    
    13,300Net (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,866,721
    )
    
    
    (4,866,721
    )Balance, March 31, 2006
    
    
    9,383
    
    
    $
    26,898,456
    
    
    
    11,720,555
    
    
    $
    1,172
    
    
    $
    12,088,953
    
    
    $
    (42,784,010
    )
    
    $
    (3,795,429
    )
  -5-




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DIRT MOTOR SPORTS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Three Months Ended March 31, 2006 and 2005
 (Unaudited)
 2006
    
    
    2005Cash flows from operating activities:Net (loss)
    
    $
    (4,866,721
    )
    
    $
    (1,990,690
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization
    
    
    190,688
    
    
    
    66,987Non-cash interest expense, notes payable
    
    
    1,306,580
    
    
    
    482,949Non-cash stock option compensation
    
    
    646,010
    
    
    
    Increase (decrease) in cash for changes in:Accounts receivable
    
    
    144,708
    
    
    
    (118,370
    )Inventory
    
    
    (156,885
    )
    
    
    (176,182
    )Prepaid expenses and other current assets
    
    
    (125,659
    )
    
    
    (26,952
    )Other non-current assets
    
    
    (12,222
    )
    
    
    Accounts payable
    
    
    136,643
    
    
    
    (47,213
    )Accrued liabilities
    
    
    672,032
    
    
    
    (219,124
    )Deferred revenue
    
    
    553,837
    
    
    
    606,143Net cash (used in) operating activities
    
    
    (1,510,989
    )
    
    
    (1,422,452
    )Cash flows from investing activities:Purchase of property, contract rights, trademarks and goodwill
    
    
    (164,936
    )
    
    
    (1,043,225
    )Net cash (used in) investing activities
    
    
    (164,936
    )
    
    
    (1,043,225
    )Cash flows from financing activities:Cash overdraft
    
    
    (253,232
    )
    
    
    (55,279
    )Payments on notes payable
    
    
    (44,061
    )
    
    
    (41,373
    )Payments of placement agent fees and other issuance costs
    
    
    
    
    
    
    (545,000
    )Proceeds from issuance of preferred stock
    
    
    
    
    
    
    5,000,000Proceeds from issuance of notes payable
    
    
    2,275,000
    
    
    
    287,000Net cash provided by financing activities
    
    
    1,977,707
    
    
    
    4,645,348Net increase (decrease) in cash and cash equivalents
    
    
    301,782
    
    
    
    2,179,671Cash and cash equivalents, beginning of period
    
    
    18,645
    
    
    
    Cash and cash equivalents, end of period
    
    $
    320,427
    
    
    $
    2,179,671Supplemental schedule of non-cash activities:Conversion of Convertible Preferred Stock: Series A to Series B
    
    $
    
    
    
    $
    15,648,456Cash payments for interest
    
    $
    359,359
    
    
    $
    Issuance 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
    
    $
    
    
    
    $
    Non-cash revenues and expenses, barter agreements
    
    $
    67,000
    
    
    $
    25,000
  -6-




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DIRT MOTOR SPORTS, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2006
 NOTE 1  DESCRIPTION OF BUSINESS
          NOTE 2  GOING CONCERN
    NOTE 3  BASIS OF PRESENTATION
 -7-




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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
   Net loss Per Share
 -8-




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
    
    Series A warrants to purchase 4,172,925 shares of common stock at an exercise price of $3.00
    
    Series B warrants to purchase 933,334 shares of common stock at an exercise price of $4.00
    
    Series C warrants to purchase 2,200,000 shares of common stock at an exercise price of $5.00
    
    Placement Agent Warrants to purchase 1,186,266 shares of common stock at exercise prices
ranging from $2.70 to $5.00
    
    Warrants to purchase 40,000 shares of common stock issued in connection with the UMP
acquisition at an exercise price of $3.65
    
    Warrants issued to purchase 750,000 shares at an exercise price of $5.00 in exchange for
the surrender of common stock
    
    Promissory note warrants to purchase 1,831,250 shares at an exercise price of $4.50 per share.
    
    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.
    
    Stock options issued to consultants totaling 50,000 shares at an exercise price of $4.00 per share.
    
    Stock options issued to consultants totaling 90,000 shares at an exercise price of $4.50 per share.
  Cash and Cash Equivalents
  Inventories
  Property and Equipment
   Purchase Accounting
  -9-




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Intangible Assets
   Income Taxes
  Concentration of Credit Risk
  New Accounting Pronouncements
     Stock-Based Compensation
 Share-Based Payment
 -10-




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Accounting for Stock Issued to Employees,
      Options outstanding at December 31, 2005
    
    
    650,000
    
    
    $
    3.65Granted
    
    
    740,000
    
    
    
    3.86Exercised
    
    
    
    
    
    
    Forfeited/expired
    
    
    
    
    
    
    Options outstanding at March 31, 2006
    
    
    1,390,000
    
    
    $
    3.76
  NOTE 5  ACQUISITIONS
 World of Outlaws, Inc.
  
    
    Cash and acquisition costs of $2,419,319
    
    Forgiveness of $1,450,000 plus accrued interest of $21,815 promissory note payable to the Company
    
    Assumptions of obligations for $612,500 in deposits World of Outlaws had received for
sanctioning of future sprint car racing events
    
    Assumption of $777,677 of other obligations of World of Outlaws
  Transportation equipment
    
    $
    184,926Other equipment
    
    
    8,875Trade-marks and Trade-names
    
    
    142,452
 -11-




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Goodwill
    
    
    4,945,058Total assets acquired
    
    
    5,281,311Advances from promoters
    
    
    612,500Other current obligations
    
    
    777,677Total liabilities assumed
    
    
    1,390,177Net consideration paid in cash and debt forgiveness
    
    $
    3,891,134
  Dirt Motorsports, Inc.
          Dirt Motorsports
    
    
    Rolling Wheels
    
    
    Cayuga CountyCurrent Assets
    
    $
    459,217
    
    
    $
    
    
    
    $
    Property and Equipment
    
    
    249,635
    
    
    
    1,088,777
    
    
    
    2,293,333Goodwill
    
    
    2,536,700Total assets acquired
    
    
    3,245,552
    
    
    
    1,088,777
    
    
    
    2,293,333Current Liabilities
    
    
    1,130,910
    
    
    
    
    
    
    
    Net assets acquired
    
    $
    2,114,642
    
    
    $
    1,088,777
    
    
    $
    2,293,333
 -12-




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United Midwestern Promoters Motorsports, LLC
    Cash paid for acquisition
    
    $
    1,800,000Value of stock issued
    
    
    600,000Value of warrants issued
    
    
    132,187Accrued points fund
    
    
    443,200Accounts payable assumed
    
    
    355,000Accrued closing costs
    
    
    100,000Closing expenses paid
    
    
    25,443$
    3,455,830Allocation to goodwill
    
    $
    3,056,330Allocation to land, buildings and equipment
    
    
    99,500Allocation to trademarks
    
    
    100,000Allocation to contract rights
    
    
    200,000$
    3,455,830
  Lernerville Speedway
   (a)
    
    $500,000 was paid at the closing of the transactions under the Lernerville Agreement;(b)
    
    $110,000 was paid on May 30, 2005;(c)
    
    $110,000 was paid on October 30, 2005;(d)
    
    $110,000 will be payable on or prior to May 30, 2006;(e)
    
    $110,000 will be payable on or prior to May 30, 2007; and
 -13-




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(f)
    
    the remaining $2,300,000 is payable pursuant to the terms of a four year promissory
note bearing interest at seven percent per year, with accrued interest payable annually.
   Consideration:Cash paid at closing
    
    $
    500,000Notes payable issued
    
    
    2,300,000Mortgage notes payable issued
    
    
    440,000Direct transaction costs
    
    
    138,249Adjusted purchase price
    
    $
    3,378,249Land
    
    
    (1,124,800
    )Buildings and improvements
    
    
    (1,590,000
    )Vehicles and other operating assets
    
    
    (104,000
    )Excess of cost over fair value of net identifiable assets (goodwill)
    
    $
    559,449
 Mid America Racing Series (MARS)
   Vehicles
    
    $
    1,500Communications equipment
    
    
    500Excess of cost over fair value of identifiable assets (goodwill)
    
    
    148,000Total purchase price
    
    $
    150,000
 Volusia Speedway
   Consideration:Cash paid at closing
    
    $
    1,600,000Notes payable issued
    
    
    2,000,000Direct transaction costs
    
    
    26,393Total purchase price
    
    $
    3,626,393Land
    
    
    (2,700,000
    )Buildings & equipment
    
    $
    (926,393
    )
 NOTE 6  PROPERTY AND EQUIPMENT
  -14-




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Cost
    
    
    Depreciable LifeLand
    
    
    6,916,338
    
    
    N/ATransportation equipment
    
    
    1,435,035
    
    
    5 - 7 yearsBuildings and grandstands
    
    
    3,271,825
    
    
    7 - 40 yearsOffice furniture and equipment
    
    
    355,391
    
    
    3 - 7 years11,978,589Less accumulated depreciation
    
    
    (1,177,836
    )Property and equipment, net
    
    $
    10,800,753
  NOTE 7  GOODWILL
  NOTE 8  ACCRUED LIABILITIES
  March 31,
    
    
    December 31,2006
    
    
    2005Points fund
    
    $
    377,472
    
    
    $
    Salaries, wages and other costs in connection with office closing
    
    
    32,745
    
    
    
    199,059Interest
    
    
    814,819
    
    
    
    491,914Acquisition liabilities
    
    
    103,500
    
    
    
    103,500Other accrued liabilities
    
    
    360,176
    
    
    
    214,708Total Accrued Liabilities
    
    $
    1,688,712
    
    
    $
    1,009,181
 NOTE 9  DEFERRED REVENUE
  March 31,
    
    
    December 31,2006
    
    
    2005Sanction fee advances
    
    $
    133,258
    
    
    $
    48,958Sponsorship prepayments
    
    
    307,186
    
    
    
    129,826Memberships
    
    
    112,962
    
    
    
    Season Passes / Prepaid Tickets
    
    
    179,215
    
    
    
    $
    732,621
    
    
    $
    178,784
 NOTE 10  NOTES PAYABLE
 -15-




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-16-




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2007
    
    $
    13,053,1852008
    
    
    1,293,5742009
    
    
    196,3592010
    
    
    2,520,0332011 +
    
    
    1,224,982$
    18,288,133
 NOTE 11  STOCKHOLDERS EQUITY
     -17-




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Preferred Stock
     -18-




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-19-




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NOTE 12  RELATED PARTY TRANSACTIONS
   NOTE 13  INCOME TAXES
    NOTE 14  COMMITMENTS
    Payment Due by PeriodLess than
    
    2 to 3
    
    4 to 5
    
    After 5Contractual obligations
    
    Total
    
    1 Year
    
    Years
    
    Years
    
    YearsOperating leases
    
    $
    138,548
    
    
    $
    135,287
    
    
    $
    3,261
    
    
    $
    
    
    
    $
    
 -20-




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NOTE 15  LITIGATION AND CONTINGENCIES
    NOTE 16  CONSOLIDATION OF OPERATIONS
  NOTE 17  SUBSEQUENT EVENTS
  
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 FORWARD LOOKING STATEMENTS
  Nature of Business
   -21-




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World of Outlaws, Inc.
  
    
    Cash and acquisition costs of $2,419,319
    
    Forgiveness of $1,450,000 plus accrued interest of $21,815 promissory note payable to the Company
    
    Assumptions of obligations for $612,500 in deposits World of Outlaws had received for
sanctioning of future sprint car racing events
    
    Assumption of $777,677 of other obligations of World of Outlaws
  Transportation equipment
    
    $
    184,926Other equipment
    
    
    8,875Trade-marks and Trade-names
    
    
    142,452Goodwill
    
    
    4,945,058Total assets acquired
    
    
    5,281,311Advances from promoters
    
    
    612,500Other current obligations
    
    
    777,677Total liabilities assumed
    
    
    1,390,177Net consideration paid in cash and debt forgiveness
    
    $
    3,891,134
  Dirt Motorsports, Inc.
   -22-




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Dirt Motorsports
    
    
    Rolling Wheels
    
    
    Cayuga CountyCurrent Assets
    
    $
    459,217
    
    
    $
    
    
    
    $
    Property and Equipment
    
    
    249,635
    
    
    
    1,088,777
    
    
    
    2,293,333Goodwill
    
    
    2,536,700Total assets acquired
    
    
    3,245,552
    
    
    
    1,088,777
    
    
    
    2,293,333Current Liabilities
    
    
    1,130,910
    
    
    
    
    
    
    
    Net assets acquired
    
    $
    2,114,642
    
    
    $
    1,088,777
    
    
    $
    2,293,333
 United Midwestern Promoters Motorsports, LLC
    Cash paid for acquisition
    
    $
    1,800,000Value of stock issued
    
    
    600,000Value of warrants issued
    
    
    132,187
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Accrued points fund
    
    
    443,200Accounts payable assumed
    
    
    355,000Accrued closing costs
    
    
    100,000Closing expenses paid
    
    
    25,443$
    3,455,830Allocation to goodwill
    
    $
    3,056,330Allocation to land, buildings and equipment
    
    
    99,500Allocation to trademarks
    
    
    100,000Allocation to contract rights
    
    
    200,000$
    3,455,830
  Lernerville Speedway
   (a)
    
    $500,000 was paid at the closing of the transactions under the Lernerville Agreement;(b)
    
    $110,000 was paid on May 30, 2005;(c)
    
    $110,000 was paid on October 30, 2005;(d)
    
    $110,000 will be payable on or prior to May 30, 2006;(e)
    
    $110,000 will be payable on or prior to May 30, 2007; and(f)
    
    the remaining $2,300,000 is payable pursuant to the terms of a four year promissory
note bearing interest at seven percent per year, with accrued interest payable annually.
   Consideration:Cash paid at closing
    
    $
    500,000Notes payable issued
    
    
    2,300,000Mortgage notes payable issued
    
    
    440,000Direct transaction costs
    
    
    138,249Adjusted purchase price
    
    $
    3,378,249Land
    
    
    (1,124,800
    )Buildings and improvements
    
    
    (1,590,000
    )Vehicles and other operating assets
    
    
    (104,000
    )Excess of cost over fair value of net identifiable assets (goodwill)
    
    $
    559,449
 Mid America Racing Series (MARS)
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Vehicles
    
    $
    1,500Communications equipment
    
    
    500Excess of cost over fair value of identifiable assets (goodwill)
    
    
    148,000Total purchase price
    
    $
    150,000
 Volusia Speedway
   Consideration:Cash paid at closing
    
    $
    1,600,000Notes payable issued
    
    
    2,000,000Direct transaction costs
    
    
    26,393Total purchase price
    
    $
    3,626,393Land
    
    
    (2,700,000
    )Buildings & equipment
    
    $
    (926,393
    )
 Results of Operations  Impact of Seasonality and Weather on Quarterly Results
    Results of Operations  Comparison of Three Months Ended March 31, 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
    
    $
    138,548
    
    
    $
    135,287
    
    
    $
    3,261
    
    
    $
    
    
    
    $
    Employment agreements
    
    $
    2,352,500
    
    
    $
    787,500
    
    
    $
    1,565,000
    
    
    $
    
    
    
    $
    Notes payable and accrued interest
    
    $
    19,102,952
    
    
    $
    13,850,004
    
    
    $
    1,517,932
    
    
    $
    3,735,016
    
    
    $
    
  The Companys significant accounting policies include:
 Reclassifications
  Use of Estimates
  Principles of Consolidation
  Revenue Recognition and Deferred Revenue
  -27-




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Accounting for Advertising Barter Transactions
 Expense Recognition and Deferral
   Net loss Per Share
   
    
    Series A warrants to purchase 4,172,925 shares of common stock at an exercise price of $3.00
    
    Series B warrants to purchase 933,334 shares of common stock at an exercise price of $4.00
    
    Series C warrants to purchase 2,200,000 shares of common stock at an exercise price of $5.00
    
    Placement Agent Warrants to purchase 1,186,266 shares of common stock at exercise prices
ranging from $2.70 to $5.00
    
    Warrants to purchase 40,000 shares of common stock issued in connection with the UMP
acquisition at an exercise price of $3.65
    
    Warrants issued to purchase 750,000 shares at an exercise price of $5.00 in exchange for
the surrender of common stock
    
    Promissory note warrants to purchase 1,831,250 shares at an exercise price of $4.50 per share.
    
    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.
    
    Stock options issued to consultants totaling 50,000 shares at an exercise price of $4.00 per share.
    
    Stock options issued to consultants totaling 90,000 shares at an exercise price of $4.50 per share.
  -28-




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Cash and Cash Equivalents
  Inventories
  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
    
    
    740,000
    
    
    
    3.86Exercised
    
    
    
    
    
    
    Forfeited/expired
    
    
    
    
    
    
    Options outstanding at March 31, 2006
    
    
    1,390,000
    
    
    $
    3.76
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Certain Risks
  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.
  -31-




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Our executive officers, directors and principal stockholders have substantial influence over us.
   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.
  -32-




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Our common stock price has been volatile, which could result in substantial losses for
stockholders
  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).31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Paul A. Kruger *31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Brian Carter *32
    
    Section 1350 Certification of Paul A. Kruger and Brian Carter *
 
 *
    
    Filed herewith -34-




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SIGNATURES
  DIRT MOTOR SPORTS, INC.
(Registrant)Date: May 12, 2006
    /s/ Paul A. KrugerPaul A Kruger, Chief Executive OfficerDate: May 12, 2006
    /s/ Brian CarterBrian Carter, Chief Financial Officer -35-