UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC  20549



FORM 10-QSB



(Mark one)



xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended March 31, 2007



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



For the transition period from ______ to ______



Commission file number 000-50048



MOTIVNATION, INC.

(Exact name of small business issuer as specified in its charter)



Nevada
        82-6008492(State or other jurisdiction of incorporation or organization)
        (I.R.S. Employer I.D. No.)




18101 Von Karman Avenue, Suite 330

Irvine, California  92612

(Address of Principal Executive Offices)

(888) 258-6458

(Registrants telephone number)

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.



(1)YesxNo o  (2) YesxNo o




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

Yes  _____
        No
        X




Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of May 21, 2007.

Common Stock, Par Value $0.001
        7,240,158Title of Class
        Number of Shares Outstanding as of May 21, 2007




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TABLE OF CONTENTS





Part I
        1Financial Statement Item
        1Financial Statements
        1Balance Sheet
        1Income Statement
        2Cashflow Statement
        3Financial Footnotes
        4Management Discussion & Analysis or Plan of Operations
        14Controls and Procedures
        24Part II
        25Legal Proceedings
        25Changes in Securities
        25Defaults Upon Securities
        25Submission to a Vote
        26Other Information
        26Exhibits and Reports
        26Signatures
        27






Exhibits





Index to Exhibits
        28Exhibits
        29






Except as otherwise noted in this report, MotivNation, the Company, we, us and our collectively refer to MotivNation, Inc.







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MOTIVNATION, INC.



CONSOLIATED BALANCE SHEET (Unaudited)

March 31, 2007






ASSETSCurrent AssetsCash
        $        142,580Accounts receivable
        51,370Prepaid expenses and other current assets
        61,560Inventory
        286,999Total Current Assets
        542,509Property and equipment, net
        151,924Goodwill
        166,621Debt issuance cost, net
        42,930Other assets
        110,146TOTAL ASSETS
        $     1,014,130LIABILITIES AND STOCKHOLDERS' DEFICITCurrent LiabilitiesAccounts payable
        $        231,572Accrued liabilities
        545,709Unearned revenue
        47,272Short-term notes payable to related parties
        272,101Current portion of long-term notes payable
        4,723Current portion of capital lease obligations
        4,339Total Current Liabilities
        1,105,716Long-term debtLong-term notes payable, excluding current portion
        2,175Convertible notes payable, net of unamortized discount of $1,648,408
        295,159Derivative liabilities
        3,912,493Total Long-Term Debt
        4,209,827Total Liabilities
        5,315,543Stockholders' DeficitPreferred Stock, $0.001 par value; 100,000,000 shares authorized;none issued and outstanding
        -Common Stock, $0.001 par value; 300,000,000 shares authorized;7,045,464 shares issued and outstanding
        7,046Paid-in Capital
        2,499,132Accumulated deficit
        (6,807,591)Total Stockholders' Deficit
        (4,301,413)TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
        $     1,014,130




1

See notes to interim unaudited consolidated financial statements



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MOTIVNATION, INC.



CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)





For Three Months ended March 31,
        2007
        2006Sales:
        
        (Restated)Sales - products
        $      212,394
        $              588Sales - services
        435,918
        491,315Total sales
        648,312
        491,903Cost of salesCost of products
        205,846
        4,182Cost of services
        427,482
        501,110Total costs of sales
        633,328
        505,292Gross margins
        14,984
        (13,389)Operating expensesSelling, general and administrative Expenses
        274,013
        312,778Loss on disposal of assets
        3,690
        2,459Total operating expenses
        277,703
        315,237Operating loss
        (262,719)
        (328,626)Other income(expenses)Interest and other income
        476
        133Change in derivative liabilities
        5,803
        1,899,113Interest and other expense
        (44,656)
        (64,030)Financing costs
        (93,403)
        (3,409,466)Total other income(expenses)
        (131,780)
        (1,574,250)Net loss before state franchise tax
        (394,499)
        (1,902,876)State franchise tax
        2,400
        2,400Net loss
        $    (396,899)
        $    (1,905,276)Net loss per share-Basic and Diluted
        $          (0.06)
        $           (0.70)Weighted Average Number of Shares
        7,045,464
        2,704,880




2

See notes to interim unaudited consolidated financial statements



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MOTIVNATION, INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)





For Three Months ended March 31,
        2007
        2006CASH FLOW FROM OPERATING ACTIVITIES
        
        (Restated)Net loss
        $         (396,899)
        $    (1,905,276)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation
        10,448
        10,523Loss on disposal of assets
        3,690
        2,459Compensation recognized on vested shares
        -
        48,735Noncash interest expense and financing costs
        93,403
        3,409,466Change in derivative liabilities
        (5,803)
        (1,899,113)(Increase) Decrease in:Accounts receivable
        (4,019)
        (19,390)Inventory
        167,330
        (61,791)Prepaids and others
        (37,268)
        (41,069)Increase (Decrease) in:Accounts payable and accrued liabilities
        136,062
        26,324Unearned revenue
        11,662
        (117,807)Net cash flows used in operating activities
        (21,394)
        (546,939)CASH FLOW FROM INVESTING ACTIVITIESProceeds received from sale of property and equipment
        -
        200Purchase of property and equipment
        (1,985)
        -Net cash flows provided by (used in) investing activities
        (1,985)
        200CASH FLOW FROM FINANCING ACTIVITIESRepayment on long-term debt
        (11,826)
        (8,439)Net repayments to related parties
        (3,000)
        (28,804)Net proceeds from convertible notes payable
        -
        1,678,500Net cash flows provided by (used in )financing activities
        (14,826)
        1,641,257NET INCREASE (DECREASE) IN CASH
        (38,205)
        1,094,518CASH AT BEGINNING OF PERIOD
        180,785
        96,586CASH AT END OF PERIOD
        $           142,580
        $      1,191,104Supplemental Disclosure of Cash Flow Information:Interest Paid
        $               1,474
        $             1,287Noncash Investing and Financing  Activities:Issuance of common shares for:Reduction of accrued liabilities
        $                        -
        $         150,000Convertible notes payable
        -
        24,310$                        -
        $         174,310Issuance of warrants in connection with convertible debt
        $                         -
        $      1,678,507Recorded a beneficial conversion feature
        $                         -
        $      3,393,635Transfer unamortized discount to paid in capital due to debt conversion
        $                         -
        $           23,847Transfer derivative liabilities to paid in capital due to debt conversion
        $                         -
        $           48,530




3

See notes to interim unaudited consolidated financial statements



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MOTIVNATION, INC.



NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1  NATURE OF BUSINESS



MotivNation, Inc. (the Company) provides a full range of services through its business divisions that cater to the automotive, motorcycle, and armor protecting market. These services include the sale, manufacture, converting, customization, restoration, painting, repair and installation of accessories and parts. The business divisions of MotivNation are comprised of Damons, and TrixMotive. Damons is in the business of customizing motorcycles and automobiles. TrixMotive is in the business of converting automobile chassis into stretched limousines and other specialized automotives.



MotivNation was incorporated on April 26, 1946, under the laws of the State of Idaho. The Company was organized to explore for, acquire and develop mineral properties in the State of Idaho. The initial and subsequent efforts in the acquisition, exploration and development of potentially viable and commercial mineral properties were unsuccessful. The Company has since ceased its mining business.



In 2003, the Company merged into its wholly-owned Nevada subsidiary, and changed its corporate domicile from the State of Idaho to the State of Nevada. The Company also changed its name from Aberdeen Idaho Mining Company to Aberdeen Mining Company.



On May 11, 2004, the Company completed a reverse acquisition transaction with Damons Motorcycle Creations, Inc. (DAMON), from which the Company acquired substantially all the assets and assumed substantially all the liabilities of DAMON, in consideration for the issuance of a majority of the Companys shares of common stock. The reverse acquisition was completed pursuant to the Asset Purchase Agreement, dated as of May 11, 2004. Concurrent with the closing of the reverse acquisition, DAMON agreed to transfer 45,000 of the 888,799 shares it acquired from the Company to a creditor in exchange for the cancellation of the trade debt and as payment for ongoing consultant services by such creditor. For accounting purposes, DAMON is the acquirer in the reverse acquisition transaction, and consequently the assets and liabilities and the historical operations reflected in the
financial statements are those of DAMON and are recorded at the historical cost basis of DAMON. All shares and per share data prior to the acquisition have been restated to reflect the stock issuance as a recapitalization of DAMON. Since the reverse acquisition transaction is in substance a recapitalization of the Company and is not a business combination, pro forma information is not presented. Such pro forma statements of operations would be substantially identical to the historical statements of operations of the Company, which are presented in the accompanying consolidated statements of operations.



Following the reverse acquisition, the Company changed its name to MotivNation, Inc.



On October 11, 2004, the Company and its wholly owned subsidiary, TrixMotive Inc. (TrixMotive), a Nevada corporation, entered into an Asset Purchase Agreement with Moonlight Industries, Inc., a California corporation (MOONLIGHT), to acquire certain assets and liabilities of MOONLIGHT in exchange for 140,000 shares of the Companys common stock. The president of MOONLIGHT became the Secretary of TrixMotive. The Companys president and secretary agreed to return, in the aggregate, 140,000 shares of the Companys common stock held by them to the Company prior to the closing of this acquisition.



NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Presentation of Interim Information:The financial information at March 31, 2007 and for the three months ended March 31, 2007 and 2006 are unaudited but includes all adjustments (consisting only of normal recurring adjustments) that the Company considers necessary for a fair presentation of the financial information set forth herein, in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information, and with the instructions to Form 10-QSB. Accordingly, such information does not include all of the information and footnotes required by U.S. GAAP for annual financial statements. For further information refer to the Financial Statements and footnotes thereto included in the Companys Annual Report on Form 10-KSB for the year ended December 31, 2006.



The results for the three months ended March 31, 2007 may not be indicative of results for the year ending December 31, 2007 or any future periods.



Principle of Consolidation and Presentation:The accompanying consolidated financial statements include the accounts of MotivNation, Inc. and its subsidiaries after elimination of all intercompany accounts and transactions.  Certain prior period balances have been reclassified to conform to the current period presentation.





4





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MOTIVNATION, INC.



NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



Use of Estimates:The preparation of the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the United States (U.S. GAAP) requires management to make certain estimates and assumptions that directly affect the results of reported assets, liabilities, revenue, and expenses. Actual results may differ from these estimates.



Convertible Notes Payable and Derivative Liabilities:The Company accounts for convertible notes payable and warrants in accordance with Statement of Financial Accounting Standards (SFAS) No. 133,"Accounting for Derivative Instruments and Hedging Activities."This standard requires the conversion feature of convertible debt be separated from the host contract and presented as a derivative instrument if certain conditions are met. Emerging Issue Task Force (EITF) 00-19,"Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in a Company's Own Stock"and EITF 05-2,"The Meaning of "Conventional Convertible Debt Instrument" in Issue No. 00-19"were also analyzed to determine whether the debt instrument is to be
considered a conventional convertible debt instrument and classified in stockholders' equity. The convertible notes payable issued on November 30, 2005 and in January 2006 were evaluated and determined not conventional convertible and, therefore, because of certain terms and provisions including liquidating damages under the associated registration rights agreement the embedded conversion option was bifurcated and has been accounted for as a derivative liability instrument. The stock warrants issued in conjunction with the convertible notes payable were also evaluated and determined to be a derivative instrument and, therefore, classified as a liability on the balance sheet. The accounting guidance also requires that the conversion feature and warrants be recorded at fair value for each reporting period with changes in fair value recorded in the consolidated statements of operations.



A Black-Scholes valuation calculation was applied to both the conversion features and warrants at issuance dates and report dates. The issuance date valuation was used for the effective debt discount that these instruments represent. The debt discount is amortized over the three-year life of the debts using the effective interest method. The March 31, 2007 and 2006 valuations were used to record the fair value of these instruments at the end of the reporting period with any difference from prior period calculations reflected in the consolidated statement of operations.



Goodwill:Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired in a business combination. Goodwill amounts are not amortized, but rather are tested for impairment at least annually. No impairment of goodwill was recorded for three months ended March 31, 2007 and 2006.



Net Income (Loss) Per Share:Basic net income per share includes no dilution and is computed by dividing net income available to common stockholders by the weighted average number of common stock outstanding for the period. Diluted net income per share is computed by dividing net income by the weighted average number of common shares and the dilutive potential common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common shares and excludes dilutive potential common shares outstanding, as their effective is anti-dilutive. Dilutive potential common shares primarily consist of stock warrants, unvested common stocks and shares issuable under convertible debt.



Stock-Based Compensation:The Company accounts for stock issued to non-employees in accordance with the provisions of SFAS No. 123 and the EITF Issue No. 00-18,Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.SFAS No. 123 states that equity instruments that are issued in exchange for the receipt of goods or services should be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. Under the guidance in Issue 00-18, the measurement date occurs as of the earlier of (a) the date at which a performance commitment is reached or (b) absent a performance commitment, the date at which the performance necessary to earn the equity instruments is
complete (that is, the vesting date).



New Accounting Pronouncements:In February 2007, the Financial Accounting Standards Board (FASB) issued Financial Accounting Standards (FAS) No. 159,The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115, which permits entities to choose to measure many financial instruments and certain other items at fair value at specified election dates. A business entity is required to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. This statement is expected to



5





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MOTIVNATION, INC.



NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



expand the use of fair value measurement. FAS No.159 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.



In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 157,"Fair Value Measurements."SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement addresses how to calculate fair value measurements required or permitted under other accounting pronouncements. Accordingly, this statement does not require any new fair value measurements. However, for some entities, the application of the statement will change current practice. SFAS No. 157 is effective for the Company beginning January 1, 2008. The Company is currently evaluating the impact of this standard.



Restatement:The March 31, 2006 consolidated financial statements have been restated to record a beneficial conversion feature related to convertible notes payable issued by the Company in the amount of $3,393,635. The Company has also recorded an amount of $1,678,507 related to the fair value of warrants issued with the debt, which was recorded as a liability due to a registration rights agreement. The result is to record an aggregate discount on debt of $5,072,142 with any excess or $3,372,142 charged to operations. Also, the fair values of the warrants and conversion feature have been recorded at $4,019,594 at March 31, 2006, and an income for the three months ended March 31, 2006 of $1,899,133 has been recorded. In addition, the original accounting treatment for restricted stock based compensation was based upon a subjective determination of the most appropriate value of the
Companys common shares. Specifically, the Company elected to use $0.25 per share for such calculations, representing about a 75% discount of the quoted market price of $1.10 on the date of grant. Upon subsequent re-examination of the circumstances, it was determined that the use of the quoted market price was required by the EITF Issue No. 96-18,Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.Consequently, the calculations were revised and additional stock based compensation expense was recorded.  The weighted average number of common shares used to calculate the net loss per share was also revised to exclude all unvested shares. As a result of these corrections, net loss for the three months ended March 31, 2006 has increased by $1,541,891 to $1,905,276, and net loss per share increased to $0.70 from $0.13.



Changes to the balance sheet at March 31, 2006 resulting from these corrections are as follows:



As reported
        RestatedUnamortized debt discount
        $                  -
        $       1,942,735Derivative liabilities
        $                  -
        $       4,019,594Paid-in Capital
        $    1,414,268
        $       2,357,451Deferred compensation and expenses
        $     (282,228)
        $          375,486Accumulated deficit
        $  (1,706,008)
        $      (4,632,792)




NOTE 3  GOING CONCERN



The Company's consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company incurred operating losses totaling $396,899 and $1,905,276 for three months ended March 31, 2007 and 2006, respectively. In addition, the Company has an accumulated deficit of $6,807,591 and its total liabilities exceed its total assets by $4,301,413 as of March 31, 2007.  In the near term, the Company expects operating costs to continue to exceed funds generated from operations. As a result, the Company expects to continue to incur operating losses and may not have enough money to grow its business in the future. The Company can give no assurance that it will achieve profitability or be capable of sustaining profitable operations.  As a result, operations in the near future
are expected to continue to use working capital.



Management's plans include raising additional working capital through debt or equity financing and increasing marketing efforts to increase revenues. On January 30, 2006, the Company completed the sale of $2 million aggregate principal amount of 8% callable secured convertible notes due in 2009, and issued stock warrants purchasing up to 2.5 million shares of the Companys common stock pursuant to a Security Purchase Agreement dated on November 30, 2005 (See Note 5  Convertible Notes Payable and Derivative Liabilities).  The ability of the Company to continue as a going concern is dependent its ability to meet its financing arrangement and the success of its future operations. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.



6





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MOTIVNATION, INC.



NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 4  BALANCE SHEET DETAILS



The following tables provide details of selected balance sheet items at March 31, 2007:



Accounts Receivable, netBilled -Completed jobs
        
        $    25,769Unbilled -Completed jobs
        
        25,601Jobs in progress
        
        -Subtotal
        
        25,601Accounts receivable, net
        
        $    51,370InventoryPainted materials
        
        $    65,533Mechanical materials
        
        30,459Body shop materials
        
        15,548Vehicles
        
        79,685Work-in Process
        
        95,774Total inventory
        
        $  286,999Property and Equipment, netAutomobiles
        
        $    19,026Furniture and fixtures
        
        7,114Machinery and equipment
        
        221,969Office equipment
        
        700248,809Less: accumulated depreciation
        
        (96,885)Property and Equipment, net
        
        $  151,924Accrued LiabilitiesAccrued payroll and related taxes
        
        $  231,966Credit cards payable
        
        11,216Accrued vacation
        
        14,876Accrued interest
        
        219,806Others
        
        67,845Total accrued liabilities
        
        $  545,709




NOTE 5  CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES



On January 30, 2006, the Company completed the sale of $2 million aggregate principal amount of 8% callable secured convertible notes due in 2009, and issued stock warrants purchasing up to 2.5 million shares of the Companys common stock.  Proceeds from the notes amounted to $1,903,500 after issuance costs, of which the first traunch of $300,000 (less issuance costs of $55,000 and $20,000 for prepaid officers life insurance) was received on November 30, 2005, the second traunch of $500,000 (less issuance costs of $6,000) was received on January 5, 2006, and the third and final traunch of $1,200,000 (less issuance costs of $15,500) was received on January 30, 2006. During the first quarter of 2006, the Company has converted $24,310 principal amount into 600,000 shares of the Companys common stock at the request of the note holders. There was no conversion during the first quarter of 2007.



The Company filed a registration statement with the SEC on December 15, 2005 and amended the registration statement on December 30, 2005, with respect to the sale of the notes and common stock issuable upon the conversion of the notes. The



7





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MOTIVNATION, INC.



NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



issuance costs incurred in connection with the convertible notes are deferred and being amortized to interest expense over the life of each debenture traunch.



The Company is accounting for the conversion option in the debentures and the associated warrants as derivative liabilities in accordance with SFAS 133, Accounting for Derivative Instruments and Hedging Activities,EITF 00-19, Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in a Companys Own Stockand EITF No. 05-2, The Meaning of Conventional Convertible Debt Instrument in Issue No. 00-19.  The Company attributed beneficial conversion features to the convertible debt using the Black-Scholes Option Pricing Model. The fair value of the conversion feature has been included as a discount to debt in the accompanying balance sheet up to the proceeds received from each traunch,
with any excess charged to operations. The discount is being amortized over the life of each debenture traunch using the interest method.



The following tables describe the valuation of the conversion feature of each traunch of the convertible debenture, using the Black Scholes pricing model:



11/30/05
Traunch
        1/4/06
Traunch
        1/30/06
TraunchApproximate risk free rate
        4.41%
        4.28%
        4.47%Average expected life
        3 years
        3 years
        3 yearsDividend yield
        0%
        0%
        0%Volatility
        356.33%
        348.92%
        342.77%Estimated fair value of conversion feature
        $599,200
        $998,346
        $2,395,289




The Company recorded the fair value of the conversion feature, aggregate of $3,992,835, as a discount to the convertible debt in the accompanying balance sheet up to the proceeds received from each traunch, with any excess or $1,992,835 charged to expense. Amortization expense related to the conversion feature discount for the three months ended March 31, 2007 and 2006 was $87,028 and $31,380, respectively. Remaining unamortized discount as of March 31, 2007 was $1,648,408.



The Company also granted warrants to purchase 2,500,000 shares of common stock in connection with the financing. The warrants are exercisable at $1.50 per share for a period of five years, and were fully vested. The warrants have been valued at $1,978,482 using the Black-Scholes Option Pricing Model with the following weighted-average assumptions used.



11/30/05
Traunch
        1/4/06
Traunch
        1/30/06
TraunchApproximate risk free rate
        4.42%
        4.28%
        4.46%Average expected life
        5 years
        5 years
        5 yearsDividend yield
        0%
        0%
        0%Volatility
        356.33%
        348.92%
        342.77%Number of warrants granted
        375,000
        625,000
        1,500,000Estimated fair value of total warrants granted
        $299,975
        $493,692
        $1,184,815




In accordance with the EITF 00-19, the conversion feature of each convertible debenture and the stock warrants issued in conjunction with convertible debentures have been included as long-term liabilities and were originally valued at fair value at the date of issuance. As a liability, the convertible features and the stock warrants are revalued each period until and unless the debt is converted. As of March 31, 2007, the fair values of the conversion feature and the stock warrants aggregated to $3,912,493.  The Company recorded a gain of $5,803 and $1,899,113 related to the change in fair value in these derivatives during the first three months ended March 31, 2007 and 2006, respectively. This amount is recorded as Change in Derivative Liabilities a component of other income in the accompanying consolidated statement of operations.  If the debt is converted prior to maturity, the carrying value
will be transferred to equity.











8





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MOTIVNATION, INC.



NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 6  STOCKHOLDERS EQUITY



Shares for Debt Agreement



On February 2, 2006 the Board of Directors approved the issuance of 217,000 unregistered shares of common stock to the Chief Financial Officer and Secretary of the Company, and the Company entered into Shares for Debt Agreement with the CFO on the same date. The consideration received by the Company consisted of $50,000 in services rendered by the CFO during the period from January 1, 2005 through December 31, 2005, and a full release from any other claims for compensation relating to such period. The services had been accrued in prior year.

The Board has also approved the issuance of 435,000 unregistered shares of common stock to the Chief Executive Officer and Chairman of the Board of the Company, and the Company entered into Shares for Debt Agreement with the CEO on the same date. The consideration received by the Registrant consisted of $100,000 in services rendered by the CEO during the period from January 1, 2005 through December 31, 2005, and a full release from any other claims for compensation relating to such period.  The services had been accrued in prior year.

The value of the shares was based on the lowest price of the last trading day from February 2, 2006 (date of grant) which was $0.23 per share as there was limited trading volume.  Therefore, no gain or loss on debt settlement was recorded.

Restricted Stock Agreements



The Company recognized $48,735 in compensation during the three months ended March 31, 2006 based on the vesting conditions provided by the Restricted Stock Agreements dated February 15, 2005.



As of March 31, 2006, the remaining unvested shares under the Agreements amounted to 109,714 shares or $120,686.



NOTE 7  NET LOSS PER SHARE



The following table sets forth the computation of basic and diluted net loss per share for the periods:



For the three months ended
March 31,2007
        2006Numerator:Net Loss
        $     (396,899)
        $   (1,905,276)Denominator:Weighted Average Number of Shares
        7,045,464
        2,704,880Net loss per share-Basic and Diluted
        $           (0.06)
        $         (0.70)




As of March 31, 2007, the Company has 2.5 million out-of money stock warrants excluded from diluted net loss per share computations as their exercise prices are greater than the average quarterly market price. In accordance with SFAS No. 128,Earnings Per Share,the Company has excluded from the calculation of diluted net loss per share approximately 3,896 shares relating to its 10% related party convertible debt that are anti-dilutive.  As of March 31, 2007, depending on the stock price on the conversion date, up to maximum of 231,260,284 shares, subject to certain adjustments, may be issued upon conversion of the 8% Callable Secured Convertible Notes. For additional information, see Note5  Convertible Notes Payable and Derivative Liabilities.



As the Company incurred net losses for the three months ended March 31, 2007, potential dilutive securities from stock warrants and unvested common stocks totalling 139,251 equivalent shares have been excluded from diluted net loss per share computations as their effect was deemed anti-dilutive. In accordance with SFAS No. 128,Earnings Per Share,the Company also has excluded from the calculation of diluted net loss per share approximately 3,587 shares relating to its 10% related party convertible debt that are anti-dilutive.  As of March 31, 2007, depending on the stock price on the conversion date, up to



9





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MOTIVNATION, INC.



NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



maximum of 50,216,202 shares, subject to certain adjustments, may be issued upon conversion of the 8% Callable Secured Convertible Notes. For additional information, see Note 5  Convertible Notes Payable and Derivative Liabilities.



NOTE 8  BUSINESS AND CREDIT CONCENTRATIONS



Three customers accounted approximately $308,452 or 48.2% of the Customized Automotive segment revenues for the three months ended March 31, 2007. Two customers accounted for approximately $117,015 or 24.2% of the Customized Automotive segment revenues for the three months ended March 31, 2006. The Company has no major customer in Customized Motorcycle segment for three months ended March 31, 2007 and 2006.



The Company maintains its cash deposit accounts at commercial banks. At times, account balances may exceed federally insured limits.  The Company has not experienced any losses on these accounts, and management believes the Company is not exposed to any significant risk on cash accounts.



NOTE 9  GUARANTEES AND PRODUCT WARRANTIES



The Company from time to time enters into certain types of contracts that contingently require the Company to indemnify parties against third party claims. These contracts primarily relate to: (i) divestiture agreements, under which the Company may provide customary indemnifications to purchasers of the Companys businesses or assets; (ii) certain real estate leases, under which the Company may be required to indemnify property owners for environmental and other liabilities, and other claims arising from the Companys use of the applicable premises; and (iii) certain agreements with the Company's officers, directors and employees, under which the Company may be required to indemnify such persons for liabilities arising out of their employment relationship.



The terms of such obligations vary. Generally, a maximum obligation is not explicitly stated. Because the obligated amounts of these types of agreements often are not explicitly stated, the overall maximum amount of the obligations cannot be reasonably estimated. Historically, the Company has not been obligated to make significant payments for these obligations, and no liabilities have been recorded for these obligations on its balance sheet as of March 31, 2007.



In general, Damons offers a five-year warranty on workmanship to original purchaser and a manufacturers warranty from 90 days to one year for most of its products sold.  TrixMotive warrants to the first registered owner for a period of one year or twelve thousand miles from the date of original purchase, whichever comes first, that this conversion shall be free from defects in materials and workmanship, under normal use and service. The Companys liability under this warranty is limited solely to the repair or replacement of defective parts and/or workmanship.



The following table summarizes the activity related to the product warranty liability during 2007 and 2006:



For Three Months ended March 31,
        
        2007
        
        2006Beginning Balance
        
        $              8,994
        
        $            12,350Provision of warranties
        
        2,887
        
        3,184Payments
        
        (2,887)
        
        (3,184)Ending Balance
        
        $              8,994
        
        $            12,350




NOTE 10  LEGAL PROCEEDINGS



A former employee of Moonlight Industries filed a workers compensation claim against the Company. The former employee is alleging that he was injured during the course of his employment with Moonlight Industries. The damages claimed by the former employee do not appear to be covered by insurance. Management is responding to the case vigorously defending it as they believe the claim is frivolous and potentially fraudulent. In the opinion of the Companys legal counsel, the likelihood of an unfavourable outcome is low.



Damons historically leased four (4) units space in city of Brea, California under four separate non-cancelable operating lease agreements, which expires through November 30, 2007. Damons currently does not occupy the spaces. In July, the landlord filed claims against Damons for the past due rent and charges of all units, aggregate of $19,657, and the additional amounts due pursuant to the remaining terms of the lease agreements. The obligations under the remaining terms of the lease



10





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MOTIVNATION, INC.



NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



agreements are estimated at a total of $89,086. Subsequently, Damons and the landlord entered into a Surrender Agreement for one unit, providing that Damons agreed to forfeit a security deposit of $1,568 and to pay a sum of $3,822, representing the unpaid charges and rent through the date of agreement. In return, the landlord agreed to discharge and release Damons from all obligations under the lease agreement of that unit.

No provision for any contingent liabilities has been made in the accompanying consolidated financial statements since management cannot predict the outcome of the claims or estimate the amount of any loss that may result. In addition, the Company has received an outside legal opinion from an attorney that states the outstanding liability is not the Companys as the original lease was signed by the previous owners of Damons. However, the Company will continue to accrue the past due rent of $19,657 in the accompanying financial statements until this matter is resolved.

On December 7, 2005, a customer of TrixMotive filed a lawsuit in the Superior Court of Santa Clara County of California against TrixMotive claiming for breach of contract and warranty, intentional and negligence misrepresentation for a customized vehicle. The plaintiff seeks $98,827 in compensatory damages and other unspecified damages plus interest, attorneys fees and costs. The arbitrator after a hearing held on September 22, 2006 awarded that the plaintiff shall recover from the Company the price of the refrigerator and microwave which were ordered and paid for by the plaintiff but not installed in the vehicle, and that all other claims of plaintiff are denied as to the Company. The Plaintiff rejected the arbitration award on October 19, 2006.  Subsequent to March 31, 2007, there was a settlement court appearance by which the Company and the Plaintiff agreed to settle the claim in the amount
approximately of $2,000. Final settlement agreement is being processed. No liability was accrued as of March 31, 2007 as the settlement amount was considered insignificant.



The Company may be party to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. While the outcome of these matters cannot be predicted with certainty, management do not believe that the outcome of any of these claims or any of the above mentioned legal matters will have a material adverse effect on the Companys consolidated financial position, results of operations, or cash flows.



While the outcome of these matters is not determinable, the Company does not expect that the ultimate costs to resolve these matters will have a material adverse effect on the Companys financial position, results of operations, or cash flows.



NOTE 11  RELATED PARTY TRANSACTIONS



The Company also has short-term notes payable to the officers and a related party, aggregate of $272,101 plus related accrued interest of $30,765 as of March 31, 2007. The notes carry interest at range of 8% to 10% per annum and are unsecured.



NOTE 12  SEGMENT INFORMATION



The Company evaluates its reporting segments in accordance with SFAS No. 131,Disclosures about Segments of an Enterprise and Related Information.The Chief Executive Officer has been identified as the Chief Operating Decision Maker as defined by SFAS No. 131. The Chief Executive Officer allocates resources to each segment based on their business prospects, competitive factors, net sales and operating results.



The Company currently reported two principal operating segments: (i) custom motorcycle, and (ii) custom automotive. The custom motorcycle segment provides a full range of services that cater to motorcycle enthusiast, including the sale, manufacture and installation of custom-built parts and accessories, the restoration, repair and servicing and the custom painting work.  The custom automotive segment specializes in creating customized limousines to suit the tastes and needs of each individual customer.



The Company does not track its assets by operating segments. Consequently, it is not practical to show assets by operating segments.











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MOTIVNATION, INC.



NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



Summarized financial information of the Companys results by operating segment is as follows:



For Three Months ended March 31,
        
        2007
        2006Custom Motorcycle:Net revenue to external customers
        
        $            8,810
        $            8,159Cost of revenue
        
        29,269
        11,537Margin
        
        $         (20,459)
        $           (3,378)Custom Automotive:Net revenue to external customers
        
        $        639,502
        $        483,744Cost of revenue
        
        604,059
        493,755Margin
        
        $          35,443
        $         (10,011)Total Net Revenue to External Customers
        
        $        648,312
        $        491,903Total Cost of Revenue
        
        633,328
        505,292Total Margin
        
        14,984
        (13,389)Intersegment Revenues:Custom Motorcycles
        
        $                    -
        $                    -Custom Automotive
        
        -
        -Total Intersegment Revenues
        
        $                    -
        $                    -




Intersegment transactions are recorded at cost. The margins reported reflect only the direct controllable expenses of each line of business and do no represent the actual margins for each operating segment because they do not contain corporate and general and administrative expenses, reduction of goodwill as well as stock-based compensation incurred in support of the lines of business.



Reconciliation of operating segment margin to net loss before income taxesFor Three Months ended March 31,
        
        2007
        2006Total margin for reportable segments
        
        $          14,984
        $         (13,389)Corporate and general and administrative expenses
        
        (274,013)
        (312,778)Loss on disposal of assets
        
        (3,690)
        (2,459)Interest and Other Expense
        
        (44,656)
        (64,030)Financing costs
        
        (93,403)
        (3,409,466)Change in Derivative Liabilities
        
        5,803
        1,899,113Interest and Other Income
        
        476
        133Net loss before income taxes
        
        $       (394,499)
        $    (1,902,876)






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ITEM 2



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION



Disclaimer Regarding Forward Looking Statements

Certain statements contained in the following description of the business of MotivNation which are not statements of historical fact are what are known as "forward-looking statements," which are basically statements about the future, and which for that reason involve risk and uncertainty, since no one can accurately predict the future. Words such as "plans," "intends," "seeks," "anticipates," "expects," "goal, "hopes" and "objective" often identify such forward-looking statements, but are not the only indication that a statement is a forward-looking statement. Such forward-looking statements include statements of the plans and objectives of the Companys management with respect to its present and future operations, and statements which express or imply that such present and future operations will or may produce revenues, income or profits. Numerous factors and future events could cause
the Company to change such plans and objectives, or to fail to successfully implement such plans or achieve such objectives, or to cause such present and future operations to fail to produce revenues, income or profits.



Plan of Operation



General

MotivNation, Inc. provides a full range of services through our business divisions that cater to the automotive, motorcycle, and armor protecting market. These services include the sale, manufacture, converting, customization, restoration, painting, repair and installation of accessories and parts. The business divisions of MotivNation are comprised of Damons, TrixMotive, and MotivSouce. Damon's is in the business of customizing motorcycles and automobiles. TrixMotive is in the business of converting automobile chassis into stretched limousines and other specialized automotives.

Our target clients fall into two categories: the individual custom automotive enthusiast or collectors of the one of a kind custom motorcycle and auto creations, and those of local fabricators, custom shops, and Original Equipment Manufacturers.  Our primary market is the latter of two listed and these customers buy materials, supplies, and finished parts for their work in serving the growing market of custom or modified automobile and motorcycle creations.  In addition to distributing several lines of materials and equipment, we plan to provide training through independent dealers and our own distribution infrastructure to our primary market clientele.

The services we provide vary based on the client type.


        Products and services provided to individual retail clients are sold directly to our retail clients and include restoration work, finish and paint for motorcycles and automobiles as well as signature paint and design applied to non automotive personal property.



        Products and services for independent dealers are sold directly to dealers and include custom and signature finish and design work on a dealers own restoration or manufactured work.  Dealer products and services also include consultative work in the preparation of signature paint blends, techniques and design advice related to the dealers own project.



        Products and services for original equipment manufacturers include signature design and fabrication for manufactured parts and accessories which are part of a designer or signature series of products or design themes.  These products and services are sold directly to the original equipment manufacturer.




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Our manufacturing operations consist of in-house production of components and parts, assembly and finishing of components, painting, conversion and assembly of motorcycles and automobiles, and quality control, which includes performance testing of finished products under running conditions.  The custom design, fabrication, finish and paint processes are moved into and out of each aspect of the manufacturing process.

We offer various products and services depending on which client we are catering to.  For our individual retail clients we offer products and services direct and include restoration work, finish and paint for motorcycles and automobiles as well as signature paint and design applied to non automotive personal property.  For our independent dealers we offer products and services direct to the dealers which include custom and signature finish and design work on a dealers own restoration or manufactured work.  We also offer consultative work in the preparation of signature paints blends, techniques, and design advice related to the dealers own project.  For our original equipment manufacturers we offer services and products that include signature design and fabrication for manufactured parts and accessories, which are a party of a designer or signature series
of products or design themes.  These products and services are also sold direct to the original equipment manufacturers.

Results of Operations

Three Months Ended March 31, 2007 compared to the Three Months Ended March 31, 2006



Revenues and Loss from Operations



Our revenue, cost of revenue, selling, general and administrative expenses, and operating loss for the three months ended March 31, 2007, as compared to the three months ended March 31, 2006 are as follows:



3 Months Ended
March 31,
2007
        
        
        3 Months Ended
March 31,
2006
(restated)
        
        Percentage
Change
Increase
(Decrease)Revenue
        $
        648,312
        
        
        491,903
        
        31.8
        %Cost of revenue
        
        633,328
        
        
        505,292
        
        25.3
        %Gross Profit (loss)
        
        14,984
        
        
        (13,389)
        
        211.9
        %Total Operating expenses
        
        277,703
        
        
        315,237
        
        (11.9)
        %Total Other expenses
        
        131,780
        
        
        1,574,250
        
        (91.6)
        %Provision for income taxes
        
        2,400
        
        
        2,400
        
        0
        %Operating (loss)
        $
        396,899
        
        
        1,905,276
        
        (79.2)
        %




Revenues

We had total revenues of $648,312 and $491,903 for the three month period ended March 31, 2007, and 2006 respectively. The increase in the Companys revenue of 31.8% can be attributed to the upcoming busy prom season and the client need to replenish their fleet with new vehicles.

CostofRevenues

We incurred total costs of $633,328 and $505,292 for the three month period ended March 31, 2007, and 2006, respectively. Our cost of revenues increased 25.3% from the first quarter in 2007 compared to same period in 2006. This is primarily due to the respective increase in revenues.



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OperatingExpenses

Our selling, general and administrative expenses consist primarily of sales, marketing, production and other administrative personnel, cost of facilities and related spending, salaries, and related costs for executive.  The companys major expenses decreased by 14.2% for the first quarter of 2007 versus 2006. This primarily occurred from the decrease in consulting expense of 88.3%. In addition decreases in salary & wages, insurance and accounting expense of approximately 15.9%, 8.0%, and 5.8% respectively. Additional contributions to the decrease were in advertising/promotion, shipping/delivery, and depreciation expense of 5.7%, 6.3%, and 0.7% respectively. The decrease was offset by increases in rent and bad debt expense of 15.9% and 177.2% for the first quarter of 2007 compared to 2006.  Also there were increases in utilities expense, and loss of disposal of assets of 32.1%
and 50.0% respectively for the same time period.  Total expenses were $277,703 for the first quarter of 2007, an 11.9% decrease compared to the first quarter of 2006.  The major expenses incurred during the three months ended March 31, 2007 and 2006 were:



3 Months
Ended
March 31, 2007
        
        
        3 Months
Ended
March 31, 2006
        
        Percentage
Change
Increase
(Decrease)Major Expenses:Rent
        $
        58,146
        
        $
        50,169
        
        15.9
        %Salary & Wages
        
        87,434
        
        
        103,940
        
        (15.9)
        %Insurance
        
        34,290
        
        
        37,285
        
        (8.0)
        %Accounting Fees
        
        11,000
        
        
        11,682
        
        (5.8)
        %Consulting
        
        3,811
        
        
        32,490
        
        (88.3)
        %Advertising/Promotions
        
        2,670
        
        
        2,832
        
        (5.7)
        %Shipping and Delivery
        
        6,418
        
        
        6,852
        
        (6.3)
        %Depreciation
        
        10,448
        
        
        10,522
        
        (0.7)
        %Bad debt expense
        
        2,180
        
        
        786
        
        177.2
        %Impairment of Goodwill
        
        0
        
        
        0
        
        0
        %Loss of disposal of assets
        
        3,690
        
        
        2,459
        
        50.0
        %Utilities
        
        5,807
        
        
        4,397
        
        32.1
        %Total Major Expenses
        
        225,893
        
        
        263,413
        
        (14.2)
        %Total Expenses
        
        277,703
        
        
        315,237
        
        (11.9)
        %




Other Income and Expenses and Net Loss



Our other income and expenses and net loss for the three months ended March 31, 2007 and 2006 are as follows:






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3 Months
Ended
March 31, 2007
        
        
        3 Months
Ended
March 31,2006
        
        Percentage
Change
Increase
(Decrease)Other income (expenses)Interest and other income
        
        476
        
        
        133
        
        257.9
        %Change in derivative liabilities
        
        5,803
        
        
        1,899,113
        
        (99.7)
        %Interest and other expenses
        
        (44,656)
        
        
        (64,030)
        
        (30.3)
        %Financing costs
        
        (93,403)
        
        
        (3,409,466)
        
        (97.3)
        %Total other income (expenses)
        
        (131,780)
        
        
        (1,574,250)
        
        (91.6)
        %Net (loss)
        $
        (396,899)
        
        
        (1,905,276)
        
        (79.2)
        %




During the three months ended March 31, 2007, our total other expenses decreased by 91.6% compared to the three months ended March 31, 2006. This was primarily due to decreases in financing costs and the change in derivative liabilities of approximately 97.3% and 99.7% respectively. In addition interest and other expenses decreased by 30.3%. This decrease was slightly offset by an increase in interest and other income of 257.9% for the first quarter of 2007 compared to the same period in 2006.  Net loss decreased 79.2% primarily due to the 11.9% and 91.6% decrease in total operating expense and total other expenses.



Liquidity and Capital Resources

Our cash, accounts receivable, prepaid expenses, total current assets, total assets, total current liabilities, and total liabilities as of March 31, 2007, as compared to March 31, 2006 were as follows:



March 31,
        
        
        March 31,2007
        
        
        2006Cash
        $
        142,580
        
        $
        1,191,104Accounts receivable
        
        51,370
        
        
        111,795Prepaid expenses/other current assets
        
        61,560
        
        
        70,803Inventory
        
        286,999
        
        
        227,645Total current assets
        
        542,509
        
        
        1,601,347Total assets
        
        1,014,130
        
        
        2,207,220Total current liabilities
        
        1,105,716
        
        
        792,657Total liabilities
        
        5,315,543
        
        
        4,854,501




Cash Requirements



Our cash obligations are anticipated to increase substantially over the next 12 months.  The cash would be utilized for operational expenses and general working capital as a result of continued sales growth, continued legal and professional fees as a result of continuing litigation and reserve or deposit requirements which are a result of sales growth of the business.  We intend for these funding requirements to be fulfilled through either equity or debt financing.



Historically, we have financed our operations through cash generated from the sale of equity securities and debt financing, as well as increased in timing of payments for accounts payable.  At March 31, 2007, we had working capital of $563,207.



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Operating activities:



Net cash provided by operating activities was a negative $21,394 for the three months ended March 31, 2007. This resulted primarily from a net loss of $396,899, as well as a change in derivative liabilities of $5,803. In addition the increase in prepaid of $37,268 and an increase in accounts receivable of $4,019. An offset to this was noncash interest expense and financing costs of $93,403 and a decrease in inventory of $167,330. An additional offset was an increase in unearned revenue and accounts payable/accrued liabilities of $11,662 and 136,062, respectfully.  Other offsets were in depreciation expense and loss on disposal of assets of $10,448 and $3,690 respectfully.



Investing activities:




Net cash provided in investing activities was a negative $1,985 which was primarily due to the purchase of property and equipment of $1,985.



Financing activities:



Net cash from financing activities was $14,826 for the three months ended March 31, 2007, and resulted primarily from repayment on long-term debt of $11,826. In addition the company made net repayments to related parties of $3,000.



Our liquidity is dependent on our ability to continue to meet our obligations, to obtain additional financing as may be required and to obtain and maintain profitability.  Our management continues to look for ways to reduce operating expenses and secure an infusion of capital through either public or private investment in order to maintain our liquidity.  These steps include increasing operating revenues over last year through the growth of the business by expanding our product line to offer complete customized vehicles by financing our own chassis through our credit line and equity financing. In addition the company has been looking into, reducing costs by bringing certain projects in-house through possible acquisitions, and constantly testing the market for better pricing on our costs of goods sold. As well as making timely payments of our obligations, building our stock and debt sources
to provide additional working capital, and continuing to review our business plan to assure we are moving the business forward in a cost-effective manner. The company will and continuing continue to examine the segments of our business that offer the most profitable opportunity for success and eliminating operations and practices which detract from our profitability. During the first quarter of 2007 the company has held back production on our in-house line of custom vehicles and refocused on selling client end custom automotive conversions.



There can be no assurance that we will be successful in executing our plans to improve operations or obtain additional debt or equity financing. If the company is unable to have adequate cash from operations and is unsuccessful in obtaining financing, the company would have to cut back on operations. In addition there would be substantial doubt as mentioned in our financial footnotes about our ability to continue due to a decrease in our working capital and inability to obtain financing.



Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses for each period. The following represents a summary of our critical accounting policies, defined as those policies that we believe are: (a) the most important to the portrayal of our financial condition and results of operations, and (b) that require managements most difficult, subjective or complex judgments, often as a result of the need to make
estimates about the effects of matters that are inherently uncertain.

Impairment or Disposal of Long-Lived Assets.The Company reviews long-lived assets for impairment annually, and whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. At March 31, 2007, the Company had a loss on disposal of assets of $3,690.



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Use of estimates:  The preparation of the accompanying financial statements in conformity with accounting principles generally accepted in the United States (U.S. GAAP) requires our management to make certain estimates and assumptions that directly affect the results of reported assets, liabilities, revenue, and expenses.  Actual results may differ from these estimates.



Revenue Recognition:The Companys primary source of revenue comes from the sales of customized automotive conversions. We recognize revenue based on the completed-contact method, whereas customer deposits and partial payments of the conversion are deferred and treated as current liabilities, until the vehicle is completed and recognized as revenue. Other services such as repairs minor alterations are recorded when the service is performed.



Allowance for Doubtful Accounts:   We provide an allowance for doubtful accounts that is based upon our review of outstanding receivables, historical collection information, and existing economic conditions.



Cash Equivalents:For purposes of the statements of cash flows, we consider all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents.



Fair Value of Financial Instruments:The carrying amounts of the financial instruments have been estimated by our management to approximate fair value.



Inventories:Inventory includes parts and materials related to the vehicles in the process of being modified and converted. In addition the company will include the cost of the unmodified vehicle chassis if purchased in house. Shipping and handling costs are included in inventory. All inventories are valued at the lower of cost or market.



The Company performs periodic inventory procedures and at times identifies supply inventory that is considered excess inventory or obsolete. The Company writes the obsolete and excessive inventory down to the lower of cost or market and the amount is included in general and administrative expenses for the period.



Property and Equipment: Property and Equipment are valued at cost.   Maintenance and repair costs are charged to expenses as incurred. Depreciation is computed on the straight-line method based on the following estimated useful lives of the assets: 3 to 7 years for office equipment, and 7 years for furniture and fixtures, and 10 years for machinery and tools.



Income Taxes.The Companys income tax expense involves using the deferred tax assets and liabilities included on the balance sheet. These tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Management judgment is required in determining the Companys provision for income taxes, deferred tax assets and liabilities.



Net Loss Per Common Share:   The Company accounts for income (loss) per share in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). SFAS No. 128 requires that presentation of basic and diluted earnings per share for entities with complex capital structures. Basic earnings per share includes no dilution and is computed by dividing net income (loss) available to common stockholders by the weighted average number of common stock outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. Diluted net loss per common share does not differ from basic net loss per common share due to the lack of dilutive items in the Company.



Risks and Uncertainties

Our business, and the value of our common stock, is affected by certain risks and uncertainties, some of which include the following:

We Have Historically Lost Money And Losses May Continue In The Future, Which May Cause Us To Curtail Operations.



Since our inception, we have not been profitable and we may not be profitable in the future. We may continue to incur losses on a quarterly or annual basis for a number of reasons, some within and others outside our control. (See Our Limited Operating History Makes It Difficult To Forecast Our Future Resultsand We Are Subject to Price Volatility Due to Our Operations Materially Fluctuating.)   No assurances can be given that we will be successful in reaching or maintaining profitable operations. Accordingly, we may experience liquidity and cash flow problems. If our losses continue, our ability to operate may be severely impacted.



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If We Are Unable To Secure Future Capital, We Will Be Unable To Continue Our Operations.




The growth of our business will require the commitment of substantial capital resources.  We have not been profitable in our operations.  If funds are not available from operations, we will need additional funds. We may seek such additional funding through public and private financing, including debt or equity financing.  Adequate funds for these purposes, whether through financial markets or from other sources, may not be available when we need them. Even if funds are available, the terms under which the funds are available to us may not be acceptable to us.  Insufficient funds may require us to delay, reduce or eliminate some or all of our planned activities.



Our Independent Auditors Have Noted In Their Opinion That We Have Suffered Recurring Losses, Which Raises Substantial Doubt About Our Ability To Continue As A Going Concern.



To successfully execute our current strategy, we will need to improve our working capital position.  The report of our independent auditors accompanying our financial statements for the year ended December 31, 2006 and the notes to our unaudited financial statements for the three months ended March 31, 2007, however it includes an explanatory paragraph indicating there is a substantial doubt about the Companys ability to continue as a going concern due to recurring losses.  We plan to overcome the circumstances that impact our ability to remain a going concern through a combination of increased revenues and decreased costs, with interim cash flow deficiencies being addressed through additional debt and/or equity financing.  There can be no assurances that these plans will be successful.



Our Limited Operating History Renders Makes It Difficult To Forecast Our Future Results.



We had been a non-operating company for many years prior to the acquisition of Damons and Moonlight Industries.   Therefore, we have a limited operating history and our business and prospects must be considered in light of the risks and uncertainties inherent in a development-stage venture, many of which are beyond our control, including:


        our ability to distribute, sell and market our services and products;



        our ability to develop and offer new services and products;



        the performance of our motorcycle and automotive products and accessories;



        the significant and ongoing funds needed to achieve our production, marketing and sales objectives;



        the appeal of our services and products to consumers;



        our ability to generate adequate revenue to support our operations;



        our ability to maintain positive cash flow resulting from extended periods of monetary responsibility in the form of labor for extensive custom works in progress;



        the loss or injury of our principal design or technical staff; and



        changes in environmental regulation and enforcement relating to our operations, including those governing VOC emissions.




We cannot provide assurances that our business strategy will be successful or that we will successfully address those risks and the risks described herein.



In addition, as a result of our limited operating history, our historical financial and operating information is of limited value in predicting our future operating results. We may not accurately forecast customer behavior and recognize or respond to emerging trends, changing preferences or competitive factors facing us, and, therefore, we may fail to make accurate financial forecasts. Our current and future expense levels are based largely on our investment plans and estimates of future revenue. As a result, we may be unable to adjust our spending in a timely manner to compensate for any unexpected revenue shortfall, which could force us to curtail or cease our business operations.



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We Are Subject to Price Volatility Due to Our Operations Materially Fluctuating



As a result of the evolving nature of the markets in which we compete, as well as the current nature of the public markets and our current financial condition, we believe that our operating results may fluctuate materially, as a result of which quarter-to-quarter comparisons of our results of operations may not be meaningful. If in some future quarter, whether as a result of such a fluctuation or otherwise, our results of operations fall below the expectations of investors, the trading price of our common stock would likely be materially and adversely affected. You should not rely on our results of any interim period as an indication of our future performance. Additionally, our quarterly results of operations may fluctuate significantly in the future as a result of a variety of factors, many of which are outside our control. Factors that may cause our quarterly results to fluctuate include,
among others:




        our ability to retain existing customers;



        our ability to attract new customers at a steady rate;



        our ability to maintain customer satisfaction;



        the extent to which our products and services gain market acceptance;



        introductions of products and services by competitors;



        price competition in the markets in which we compete;



        our ability to attract, train, and retain skilled management,



        the amount and timing of operating costs and capital expenditures relating to the expansion of our business, operations, and infrastructure; and



        general economic conditions and economic conditions specific to the aftermarket motorcycle and automotive parts, service and accessories industry.




We May Not Be Able To Compete Effectively In Markets Where Our Competitors Have More Resources



The motorcycle and automobile customization and accessories market is competitive and there are no substantial barriers to entry.  We expect that competition will intensify and that new competitors may enter the market in the future.  Increased competition may result in reduce profit margins on our products and services.  In addition, many of our competitors have longer operating histories, larger customer bases, longer relationships with clients, and significantly greater financial, technical, marketing, and public relations resources than us.  We may not successfully compete in any market in which we conduct currently or in the future. The fact that we compete with established competitors who have substantially greater financial resources and longer operating histories than us, enables them to engage in substantial advertising and promotion and attract a greater number of customers and
business than we currently attract. While this competition is already intense, if it increases, it could have an even greater adverse impact on our revenues and profitability.



We Could Fail To Attract Or Retain Key Personnel, Which Could Be Detrimental To Our Operations



Our success is heavily dependent on the efforts, abilities and continued active participation of George Lefevre, Jay Isco, and Leslie McPhail, our CEO, CFO, and Chief Operating Officer respectively. In addition we are dependent on Richard Perez the co-founder of Damons Motorcycle Creation.  The loss of the services of these individuals, and other principal design or technical staff, would diminish our ability to deliver signature work that our clients desire and otherwise severely harm our business because of their irreplaceable skills and experience.  We maintain key person life insurance on Mr. Lefevre and Mr. Isco, however we do not retain insurance on Mrs. McPhail, or Mr. Perez.  We also have other key employees who manage our



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operations and if we were to lose their services, senior management would be required to expend time and energy to replace and train their replacements. To the extent that we are smaller than our competitors and have fewer resources we may not be able to attract the sufficient number and quality of staff.  There can be no assurance that we will be able to recruit    or retain other qualified personnel, should it be necessary to do so.



We are subject to federal, state and local government regulations affecting motorcycle and automotive customization and restoration that may affect our operations.



Our business is subject to certain federal, state and local government regulations, including those of the Environmental Protection Agency ("EPA") and comparable state agencies that regulate emissions of Volatile Organic Compounds ("VOC") and other air contaminants, the Occupational Safety and Health Administration ("OSHA"), and regulations governing the disposal of oil, grease, tires, batteries and the prevention of pollution, and State tax authorities where vehicle sales may be affected as well as State motor vehicle regulators with an interest in our manufacturing, sales and distribution of finished products . Any changes in the laws or regulations imposed on us by these agencies could significantly increase our costs of doing business and could have a very negative effect on our business.



State tax and motor vehicle regulations are migratory and in some cases regulating bodies may decide that a code or regulation may apply to our business when there was no history of such application.  We may in the process of conducting our business or yielding to a customer request have inadvertently or in ignorance created a possible infraction of these regulations.  We may encounter a situation in which a regulator from a State tax authority or motor vehicle regulator would decide that we have not been in compliance and insist on a material change in the way we have done business that could seriously impact our ability to continue to market our products to our customers.  We may further encounter a corrective measure by a similar regulator that would take action more aggressive that a correction of our process or practice that could include a back payment, a fine or termination of our
ability to do business within a particular state.  These applications of regulations that our business has not historically been subject to by any of these state regulators would have a serious negative impact on our business.



In the event our business operations and facilities are subject to a number of federal, state and local environmental laws and regulations, such application of these laws, regulations to our operations may require us to make significant additional capital expenditures to ensure compliance in the future. Our failure to comply with environmental laws could result in the termination of our operations, impositions of fines, or liabilities in excess of our capital resources.



Our painting operations are subject to air quality management standards and enforcement by The South Coast Air Quality Management District (AQMD).  AQMD requires licensing and conducts inspections from time to time relative to vapor as a result of our paint operations.  If we were found to require adjustment or replacement of our paint and ventilation equipment as a result of an unfavorable AQMD inspection or suspension or change of our license with AQMD we could risk experiencing an interruption in production that would have a negative impact on revenue and profits.



Product liability claims could severely damage our business and we may have insufficient insurance coverage.




Given the nature of our products and services, we expect that we will be subject to potential product liability claims that could, in the absence of sufficient insurance coverage, have a material adverse impact on our business.  There can be no assurance that our liability insurance coverage is adequate to cover all product liability claims.  If such coverage is found to be insufficient, our business operations could be adversely affected.



Our Success Is Dependent Upon The Popularity Of Harley-Davidson Motorcycles and Customized Automotives.




Although our products and services are not limited to Harley-Davidson motorcycles, the success of our business is depended upon the popularity of Harley-Davidson motorcycles, and custom automotives. There can be no assurance, however, that the current popularity of Harley-Davidson motorcycles and custom automotives will continue. If such popularity declines, our business operations may be adversely affected.

We do not own any patents or registered trademarks or trade names. Protecting our proprietary technology and other intellectual property may be costly and ineffective, and if we are unable to protect our intellectual property, we may not be able to compete effectively in our market.



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Our business success will depend materially on our ability to protect our trademarks and trade names, to preserve our trade secrets, and to avoid infringing the proprietary rights of third parties. In general, our proprietary rights will be protected only to the extent that protection is available and to the extent we have the financial and other resources to enforce any rights we hold.

We do not own any patents or registered trademarks or trade names.  We may apply for federal and other governmental trademark registrations in the future, but we cannot assure you that any of our trademark applications will result in a registered and protectable trademark.  Any registered or unregistered trademarks held or asserted by us may be canceled, infringed, circumvented or declared generic, or determined to be infringing on other marks owned by third parties. We intend to rely upon trade secrets, proprietary know-how and continuing technological innovation to become competitive in our market. We cannot assure you that others may not independently develop the same or similar technologies or otherwise obtain access to our technology and trade secrets.

Costly litigation might be necessary to protect our intellectual property or to determine the scope and validity of third-party proprietary rights. If an adverse outcome in litigation finds that we have infringed on proprietary rights of others, we may be required to pay substantial damages and may have to discontinue use of our products or re-design our products. Any claim of infringement may involve substantial expenditures and divert the time and effort of management.

We Have Never Paid Dividends on Our Common Stock and You May Never Receive Dividends.



We have not paid any cash dividends on our common stock to date and we do not anticipate paying cash dividends in the foreseeable future.  We intend to retain earnings, if any, to finance the development and expansion of our business.  Future dividend policy will be at the discretion of our Board of Directors and will be contingent upon future earnings, if any, our financial condition, capital requirements, general business conditions and other factors.  There can be no assurance that cash dividends of any kind will ever be paid.



Our Common Stock May Be Affected By Limited Trading Volume And May Fluctuate Significantly, Which May Affect Our Shareholders Ability To Sell Shares Of Our Common Stock



There has been a limited public market for our common stock and there can be no assurance that a more active trading market for our common stock will develop. An absence of an active trading market could adversely affect our shareholders ability to sell our common stock in short time periods, or possibly at all. Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. These fluctuations may also cause short sellers to enter the market from time to time in the belief that we will
have poor results in the future. We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our stock will be stable or appreciate over time. These factors may negatively impact shareholders ability to sell shares of our common stock.



Because Our Stock Is Considered A Penny Stock, Any Investment In Our Stock Is Considered To Be A High-Risk Investment And Is Subject To Restrictions On Marketability.



Trading of our common stock is conducted over-the-counter through the NASD Electronic Bulletin Board and covered by Rule 15g-9 under the Securities Exchange Act of 1934.  Under  this  rule,  broker/dealers who recommend these securities  to persons other than established customers and accredited investors must  make  a  special  written  suitability determination for the purchaser and receive  the  purchasers  written  agreement  to  a  transaction prior to sale. Securities are exempt from this rule if the market price is at least $5.00 per share.



The Securities and Exchange Commission adopted regulations that generally define a penny stock as any equity security that has a market price of less than $5.00 per share. Additionally, if the equity security is not registered or authorized on a national securities exchange or the NASDAQ and the issuer has net tangible assets under $2,000,000, the equity security also would constitute a penny stock.  Our common stock does constitute a penny stock because our common stock has a market price less than $5.00 per share and our common stock is not quoted on NASDAQ.  As our common stock falls within the definition of penny stock, these regulations require the delivery, prior to any transaction involving our common stock, of a



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disclosure schedule explaining the penny stock market and the risks associated with it. Furthermore, the ability of broker/dealers to sell our common stock and the ability of shareholders to sell our common stock in the secondary market may be limited.  As a result, the market liquidity for our common stock is adversely affected.  We  can  provide  no  assurance  that trading in our common stock will not be subject to these or other regulations in the future,  which  may  negatively  affect  the  market for our common stock. Furthermore,  this  lack  of  liquidity  also may make it more difficult for us  to  raise  capital  in  the  future.



Future Acquisitions May Disrupt Our Business And Deplete Our Financial Resources



Any future acquisitions we make could disrupt our business and seriously harm our financial condition.  While we have no current agreements to do so, we may consider investments in complementary companies and products.  In the event of any future acquisitions, we may:


        issue stock that would dilute our current stockholders percentage ownership;



        incur debt;



        assume liabilities;



        incur amortization expenses related to goodwill and other intangible assets; or



        incur large and immediate write-offs.




The use of debt or leverage to finance our future acquisitions should allow us to make acquisitions with an amount of cash in excess of what may be currently available to us. If we use debt to leverage up our assets, we may not be able to meet our debt obligations if our internal projections are incorrect or if there is a market downturn. This may result in a default and the loss in foreclosure proceedings of the acquired business or the possible bankruptcy of our business.



Our operation of any acquired business will also involve numerous risks, including:


        integration of the operations of the acquired business and its products;



        unanticipated costs;



        diversion of managements attention from our core business;



        adverse effects on existing business relationships with suppliers and customers;



        risks associated with entering markets in which we have limited prior experience; and



        potential loss of key employees, particularly those of the purchased organizations.




ITEM 3. CONTROLS AND PROCEDURES



(a)           Evaluation of Disclosure Controls and Procedures.  Our Chief Executive Officer and Interim Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this quarterly report (the "Evaluation Date"). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to our Company (including our consolidated subsidiaries) required to be included in our reports filed or submitted under the Exchange Act.



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(b)           Changes in Internal Controls over Financial Reporting.  During the most recent fiscal quarter, there have not been any significant changes in our internal controls over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.



PART II



ITEM 1.
        LEGAL PROCEEDINGS




Damons historically leased four (4) units space in city of Brea, California under four separate non-cancelable operating lease agreements, which expires through November 30, 2007. Damons currently does not occupy the spaces. In July, the landlord filed claims against Damons for the past due rent and charges of all units, aggregate of $19,657, and the additional amounts due pursuant to the remaining terms of the lease agreements. The obligations under the remaining terms of the lease agreements are estimated at a total of $89,086. Subsequently, Damons and the landlord entered into a Surrender Agreement for one unit, providing that Damons agreed to forfeit a security deposit of $1,568 and to pay a sum of $3,822, representing the unpaid charges and rent through the date of agreement. In return, the landlord agreed to discharge and release Damons from all
obligations under the lease agreement of that unit.

No provision for any contingent liabilities has been made in the accompanying consolidated financial statements since management cannot predict the outcome of the claims or estimate the amount of any loss that may result. In addition, the Company has received an outside legal opinion from an attorney that states the outstanding liability is not the Companys as the original lease was signed by the previous owners of Damons. However, the Company will continue to accrue the past due rent of $19,657 in the accompanying financial statements until this matter is resolved.

On December 7, 2005, a customer of TrixMotive filed a lawsuit in the Superior Court of Santa Clara County of California against TrixMotive claiming for breach of contract and warranty, intentional and negligence misrepresentation for a customized vehicle. The plaintiff seeks $98,827 in compensatory damages and other unspecified damages plus interest, attorneys fees and costs. The arbitrator after a hearing held on September 22, 2006 awarded that the plaintiff shall recover from the Company the price of the refrigerator and microwave which were ordered and paid for by the plaintiff but not installed in the vehicle, and that all other claims of plaintiff are denied as to the Company. The Plaintiff rejected the arbitration award on October 19, 2006. Subsequently there was a settlement court appearance by which the Company and the Plaintiff agreed to settle the claim in the amount of
$2,000. A final settlement agreement has been sent to the Plaintiff, and is awaiting final signatures. No liability was accrued as of March 31, 2007 as the settlement amount was considered insignificant.



The Company is also currently party to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. While the outcome of these matters cannot be predicted with certainty, management do not believe that the outcome of any of these claims or any of the above mentioned legal matters will have a material adverse effect on the Companys consolidated financial position, results of operations, or cash flows.



While the outcome of these matters is not determinable, the Company does not expect that the ultimate costs to resolve these matters will have a material adverse effect on the Companys financial position, results of operations, or cash flows.



ITEM 2.
        CHANGES IN SECURITIES




Except as set forth below, there were no unregistered, or any other, sales of equity securities by the Company during the three month period ended March 31, 2007.



On January 19, 2007 the company cancelled 45,000 shares of the Companys common stock issued to Entremetrix Inc., pursuant to a rescission agreement signed May 6, 2004. According to the rescission agreement all shares related to the rescinded transaction were to be cancelled. The certificate shall be returned to the authorized and un-issued stock.



ITEM 3.
        DEFAULTS UPON SENIOR SECURITIES




None.

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ITEM 4.
        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS


None.


ITEM 5.
        OTHER INFORMATION




None.








ITEM 6.
        EXHIBITS AND REPORTS ON FORM 8-K




(a)Exhibits



Exhibit 31.1  Certification by our President required by Rule 13a-14(a) or Rule 15d-14(a).



Exhibit 31.2  Certification by our Interim Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).



Exhibit 32.1  Certification by our President required by Rule 13a-14(b) or Rule 15d-14(b) and section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.



Exhibit 32.2  Certification by our Interim Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.



(b)Reports on Form 8K.



None



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SIGNATURES



Pursuant to the requirements of Section 13 or 15(b) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



Dated:
			May 21, 2007
        MotivNation, Inc.






By:/s/
			Geroge Lefevre


George Lefevre CEO




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