SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





**FORM
      10-KSB**





(Mark
      One)




o
            Annual
                report pursuant to section 13 or 15(d) of the Securities Exchange
                Act of
                1934 [*Fee
                Required*]
                for the fiscal year ended December 31, 2006 oro
            Transition
                report pursuant to section 13 or 15(d) of the Securities Exchange
                Act of
                1934[*No
                Fee Required*]
                for the transition period from _________ to
                _________.





Commission
      File No. 333-125868





**EXECUTE
      SPORTS, INC.**


(Exact
      name of registrant as specified in its charter)


Nevada
              30-0038070(State
                  or other jurisdiction of
              (I.R.S.
                  Employer Identification Number)incorporation
                  or organization)




21143
      Hawthorne BL #425


Torrence,
      CA 90503


**** (Address,
      Including Zip Code, Including Area Code, Of Registrant's mailing
      address)





**Registrant’s
      telephone number, including area code:**


**(949)
      498-5990**





**SECURITIES
      REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:**


None





**SECURITIES
      REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:**


Common
      Stock, par value $.001 per share




Indicate
      by check mark whether the Registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. YES x NO o




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Act).    Yes o No x




Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of registrant's knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-KSB or any amendment
      to
      this Form 10-KSB. o




The
      Registrant’s revenues for the year ended December 31, 2006 were $2,018,468.




The
      aggregate market value of the Registrant's common stock held by non-affiliates
      (38,172,273) of the Registrant on April 09, 2007 (based on the closing sale
      price of US $0.035 per share of the Registrant's common stock, as reported
      on
      Over-The-Counter Bulletin Board on that date) was approximately U.S. $1,336,030.
      Common stock held by each officer and director and by each person known to
      the
      Registrant to own 5% or more of the outstanding common stock has been excluded
      in that those persons may be deemed to be affiliates. This determination of
      affiliate status is not necessarily a conclusive determination for other
      purposes.




The
      number of shares of the Registrant's common stock outstanding on April 9, 2007
      was 52,234,633.




Documents
      incorporated by reference: None





Transitional
      Small Business Disclosure Format (Check one): YES o NO x








TABLE
      OF
      CONTENTS


ITEM
                  NUMBER AND CAPTION
              
              PAGEPART
                  I1.
                  Description of Business
              
              12.
                  Description of Property
              
              133.
                  Legal Proceedings
              
              144.
                  Submission of Matters to a Vote of Security Holders
              
              14PART
                  II5.
                  Market for Common Equity and Related Stockholder Matters
              
              156.
                  Management's Discussion and Analysis of Financial Condition and
                  Results of Operations
              
              187.
                  Financial Statements
              
              258.
                  Changes in and Disagreements with Accountants on Accounting and
                  Financial Disclosure
              
              258A.
                  Controls and Procedures
              
              25PART
                  III9.
                  Directors, Executive Officers, Promoters and Control Persons; Compliance
                  with Section 16(a) of the Exchange Act
              
              2610.
                  Executive Compensation
              
              2911.
                  Security Ownership of Certain Beneficial Owners and Management
and
                  Related Stockholder Matters
              
              3212.
                  Certain Relationships and Related Transactions
              
              3313.
                  Exhibits and Reports on Form 8-K
              
              3414.
                  Principal Accountant Fees and Services
              
              35









**PART
      I**





**ITEM
      1. DESCRIPTION OF BUSINESS**





During
      2006, we had three lines of business including water sports, snow sports and
      licensed as well as branded apparel.





Our
      snow
      sports products included snowboards, related accessories and apparel marketed
      under the “Academy” brand. The Company’s “Academy” snowboard brand was marketed
      to the specialty retail and pro shop markets throughout North America and in
      15
      countries worldwide. During 2006, we experienced significant difficulties
      related to product quality and manufacturer delivery times which rendered the
      business unprofitable and in the opinion of management irreparably damaged
      the
      credibility of the Academy brand with our customers and end users of our
      product. Therefore, in November of 2006, the decision was made by the Board
      and
      management to divest the snow sports business, which was accomplished on January
      31, 2007.





Our
      water
      sports products include US Coast Guard Approved Vests, wetsuits, rash guards,
      accessories and wake skates. Our products are marketed under the “Execute” brand
      name as well as various other OEM brand names.





The
      company markets its Execute branded product line through a network of
      independent dealers located throughout the United States and through a multitude
      of distributors through out the world. The company also has a major presence
      with many different on-line retailers. The “Execute” brand has existed since
      2002 and is vastly becoming one of the most respected names in the water sports
      market - especially amongst wakeboard and Wakeskate consumers.





The
      company continued an exclusive worldwide license to produce, market and
      distribute apparel under the “Eagle Rider” brand name. As it became clear that
      the market for this type of apparel was not increasing, the company decided
      to
      severe ties with “Eagle Rider” and discontinue manufacturing and distributing
      their branded apparel.





Key
      to
      the extension of its brands, and the acceptance of its products in the
      marketplace is the Company’s aggressive marketing strategy which consists in
      aligning its brand with leading wakeboard and wake skate athletes. In doing
      so,
      the Company establishes brand credibility amongst its target consumer base
      and
      provides its distributors with a greater ability to push its products through
      their channels.




**SUMMARY
      OF CORPORATE HISTORY**





Execute
      Sports, Inc. (the “Company”) was founded in 2002 as Padova International USA,
      Inc. to produce graphics kits and ancillary soft goods for the motocross, enduro
      and ATV markets.





In
      2003,
      the Company launched its water sports division under the “Execute” brand to
      provide wetsuits, vests, rash guards and ancillary products to the wake board
      and ski markets.




1




Over
      the
      past few years, we have established distribution for its products throughout
      North America, Europe, Australia, South Africa and into Asia with customers
      including GI Joe’s, Big 5, Boater’s World, Bass Pro and Overton’s.





In
      2006,
      we expanded our commitment to the action sports industry by acquiring Pacific
      Sports Group, Inc., (“PSG”) which owned and operated Academy Snowboards, Kampus
      Wakesk8s, Kampus Wake Shoes and Collective Development Bags and Bindings. During
      2006, the Company found the return on investment of the previous PSG brands
      was
      insufficient to justify spending additional resources on these brands moving
      into 2007.





The
      Company was headquartered in Laguna Niguel, California (with previous offices
      in
      San Clemente and Oceanside, California) but recently moved to Torrence, CA.
      The
      company now maintains a distribution warehouse in Gardena, California with
      sales
      offices in Redondo Beach, Burbank and Torrence, CA.




**WATERSPORTS
      BUSINESS**





Execute
      Sports produces a line of US Coast Guard approved vests, wetsuits and rash
      guards that are designed specifically for action water sports. We continue
      to
      introduce leading technologies into our designs which include glide skin and
      segmented panels that provide for heightened water resistance and a more
      comfortable, flexible fit. In addition, our designs for 2006 feature
      women-specific and children-specific branding.





The
      entire line of “Execute” branded products is available at leading sporting goods
      stores, marine dealers and independently owned pro shops. Our line is also
      available on line at leading sporting goods outlets. Our primary focus has
      been
      to establish the “Execute” branded line in the wakeboard, wake skate, water ski
      and PWC markets. We have made an effort to market our product to the mass market
      and not limit ourselves to smaller shops which are traditionally owned by the
      surf brands.





*Business
      Model*





The
      Company's products are currently sold through an extensive network of
      independent dealers located throughout the United States, and through
      distributors representing dealers in Asia, Europe, South America, Australia
      and
      other international markets. To promote new dealerships and to service its
      existing dealer network, the Company also contracts on an independent basis
      with
      sales representatives throughout the United States to represent the Company
      and
      its products.





Through
      its direct efforts, as well as through independent sales representatives,
      Execute has established distribution to more than 200 retail stores in the
      United States, including Big 5, G.I. Joe’s, Boater’s World, Marine Max, Bass Pro
      and a slew of major on-line retailers including Amazon.com, The Sports
      Authority.com and Dicks Sporting Goods.com. Worldwide, Execute relies on
      strategic distribution partnerships to establish retail channels. Management
      believes the Company’s relationship with its distributors will be a major
      strength.




2




The
      Company utilizes exclusive distributors outside the United States to take
      advantage of their knowledge and experience in their respective markets and
      to
      increase market penetration of the Company's products. Each distributor is
      subject to a distribution agreement that stipulates an exclusive territory
      for a
      term ranging from one to three years with specified minimum sales and service
      requirements for their territory.




**APPAREL
      BUSINESS**





*Business
      Model*





Execute
      Sports Inc. is a premier, branded consumer products company which targets its
      “Execute” branded water sports line to the Power Sports and Action Sports
      markets.





The
      Company derives its revenue primarily from the design, manufacture and wholesale
      sales of its “Execute” branded products along with several OEM products, into
      the waters sports market. In the water sports market, the majority of our
      revenue is from the sales of wetsuits, rash guards, life jackets and ancillary
      products to the wakeboarding and water skiing consumers. We also private label
      these products to select customers.





Execute
      Sports intends to continue to leverage its existing operations and to complement
      and diversify its product offerings within the sporting goods and recreational
      products industries. As our cashflow and capital resources permit, we intend
      to
      expand our product lines in water sports and also to continue to respond to
      what
      we believe our customers want through the introduction of and diversification
      into new product lines. Our customer relationships are important to providing
      us
      with feedback in terms of how their end customer are responding to our products
      and also as to where they see demand increasing and decreasing in our markets.
      We intend to continue to leverage our customer’s feedback to better position our
      product development strategies going forward.





In
      addition, through our sponsorship of leading athletes and high-profile events,
      and our participation in the target markets, we intend to identify and
      understand what the market trends are and we will also use that understanding
      to
      influence our product development strategies.





We
      intend
      to implement our internal growth strategy by continuing to improve operating
      efficiencies. For example, we will seek out distribution relationships that
      enable us to sell both water sports and motor sports products into their
      channels, as opposed to one or the other. We will also work to establish
“private label” wholesale distribution relationships with customers whose
      products are complimentary to our own that will, in turn, allow us to sell
      our
      branded products into their channels. As noted above, we intend to extend our
      product offerings through new product launches and maximizing our extensive
      distribution channels. In addition, we will seek strategic acquisitions of
      other
      power sports and action sports companies with well-established brands and with
      complementary distribution channels.





Our
      ability to service and expand existing distribution channels both domestic
      and
      internationally, as well as open new distribution channels is key to our revenue
      growth. General economic and industry conditions could also affect our revenue
      performance.





3





**COMPETITION**





Execute’s
      competition varies along its product lines. The sporting goods products,
      recreational products, footwear and apparel markets are generally highly
      competitive, with competition centering on product innovation, performance
      and
      styling, price, marketing and delivery. Competition in these products (other
      than for active wear) consists of a relatively small number of large producers,
      some of whom have greater financial and other resources than Execute. A
      relatively large number of companies compete for sales of active wear. While
      Execute believes its increasingly well-recognized brand names, low cost China
      manufacturing and sourcing base, established distribution channels and
      reputation for developing and introducing innovative products have been key
      factors in the successful introduction and growth of its sporting goods and
      other recreational products, there are no significant technological or capital
      barriers to entry into the markets for many sporting goods, recreational
      products, footwear and apparel. These markets face competition from other
      leisure activities, and sales of leisure products are affected by economic
      conditions, weather patterns and changes in consumer tastes, which are difficult
      to accurately predict.





**Employees**





As
      of
      April 9, 2007, we had a total of 2 full-time employees. None of our employees
      are covered by collective bargaining agreements. We believe that our relations
      with our employees are good.




**RISK
      FACTORS**





An
      investment in our shares involves a high degree of risk. Before making an
      investment decision, you should carefully consider all of the risks described
      herein. If any of the risks discussed herein actually occur, our business,
      financial condition and results of operations could be materially and adversely
      affected. If this were to happen, the price of our shares could decline
      significantly and you may lose all or a part of your investment. The risk
      factors described below are not the only ones that may affect us. Our
      forward-looking statements in this 10-KSB are subject to the following risks
      and
      uncertainties. Our actual results could differ materially from those anticipated
      by our forward-looking statements as a result of the risk factors below. See
      "Forward-Looking Statements."





Our
      continued operations will depend on whether we are able to raise additional
      funds through various potential sources, such as equity and debt financing,
      other collaborative agreements, strategic alliances, and our ability to increase
      sales. Such additional funds may not become available on acceptable terms and
      there can be no assurance that any additional funding that the combined Company
      does obtain will be sufficient to meet the combined Company's needs in the
      long
      term. Through December 31, 2006, a significant portion of our financing has
      been
      through debt financing and private placements of common stock and warrants.
      Unless our operations continue to generate significant revenues, we will
      continue to fund operations from cash on hand and through similar sources of
      capital previously described. We can give no assurances that any additional
      capital that we are able to obtain will be sufficient to meet our needs.
      Management believes that we will continue to incur net losses through for the
      foreseeable future. Based on our current resources, we will need additional
      equity or debt financing or we will need to generate revenues through sales
      of
      our products or entering into strategic alliances to be able to sustain our
      operations until we achieve profitability, if ever.




4




We
      have
      very limited assets upon which to rely for adjusting to business variations
      and
      for growing new businesses. While we are likely to look for new funding to
      assist in the acquisition of other profitable businesses, it is uncertain
      whether such funds will be available. If we are to grow and expand our
      operations, we will need to raise significant amounts of additional capital.
      There can be no assurance that we will be successful in raising a sufficient
      amount of additional capital, or if we are successful, that we will be able
      to
      raise capital on reasonable terms. If we do raise additional capital, our
      existing shareholders may incur substantial and immediate dilution.




**Risks
      Related To Our Business:**





**We
      have historically incurred losses and may continue to incur losses in the
      future, which may impact our ability to implement our business strategy and
      adversely affect our financial condition.**





In
      the
      audit of our financial statements, our auditors, Bedinger & Company, have
      questioned our ability to continue as a going concern. This is based on our
      Company’s history of reported losses. We have a history of losses. We had a net
      loss of $5,608,910 for the fiscal year ended December 31, 2006 and a net loss
      of
      $3,566,580 for the fiscal year ended December 31, 2005.





The
      majority of net loss for the year ended December 31, 2006 was incurred due
      to
      amortization expenses of $2,016,967, salaries and related payroll taxes and
      expenses of $916,287, and Investor Relations expenses of $625,869.





We
      expect
      to decrease our operating expenses by refocusing on our core businesses and
      trimming our non core business related expenses. However, we cannot assure
      you
      that we will be profitable or generate sufficient profits from operations in
      the
      future. If our revenue growth does not continue, we may experience a loss in
      one
      or more future periods. We may not be able to reduce or maintain our expenses
      in
      response to any decrease in our revenue, which may impact our ability to
      implement our business strategy and adversely affect our financial condition.
      This would also have a negative impact on our share price.





**Our
      business is subject to “seasonal” or “cyclical” factors.**





***Watersports***





There
      is
      a cyclical component of our waters sports business wherein we receive a
      relatively larger portion of revenue because our water sports customers submit
      the majority of their purchase orders for product in the months of September
      through November for the coming sales year and are shipped in January through
      May. Currently, the majority of our water sports business is driven by the
      wakeboarding/waterski industry, which historically is the most active in the
      spring and summer months. We anticipate this cyclical aspect of our water sports
      business to continue for the foreseeable future but can make no assurances
      that
      will be the case.




5




**Our
      industry is highly competitive and we may not be able to compete effectively,
      which could reduce demand for our services.**





The
      markets in which we cater to are intensely competitive. Our primary competitors
      for wetsuits include Jet Pilot, Body Glove, O’neil, Rip Curl and Quicksilver.
      The market for the Company’s products is characterized by competing businesses
      introducing products similar to those offered by the Company. There are
      relatively low barriers to entry into the business. Many of the Company’s
      competitors or potential competitors have longer operating histories, longer
      customer relationships and significantly greater financial, managerial, sale
      and
      marketing and other resources than does the Company. The Company is vulnerable
      to a competitor making a late, but well-funded, run at the Company if it is
      not
      aggressive in quickly attaining a consumer base sufficient for the Company
      to
      rely on for sustainable cash flow, and strategic partners as well as
      establishing a strong brand identity.





**Our
      Success is Tied to Dependence on Key Personnel** .





The
      Company’s success depends to a significant extent upon efforts and abilities of
      its key personnel, as well as other key creative and strategic marketing
      personnel. Competition for highly qualified personnel is intense. The loss
      of
      any executive officer, manager or other key employee could have a material
      adverse effect upon the Company’s business, operating results and financial
      condition. If the Company is not able to efficiently replace its key personnel
      with qualified individuals, its business and operational activities could
      suffer. In turn, if the Company’s operational activities decline, its financial
      performance and overall financial condition will also suffer. This would have
      an
      adverse affect on our share price. No assurances can be given that a replacement
      for any of our key personnel could be located if their services were no longer
      available. At present, we do not have key man insurance .





**We
      Are a High Risk Early Stage Company.**





The
      Company is a high-risk early stage company with limited operating history in
      a
      competitive industry. In addition, the Company’s limited operating history
      provides a limited basis on which to base an evaluation of its business and
      prospects. In addition, the Company’s revenue model relies substantially on the
      assumption that the Company will be able to successfully expand its sales and
      distribution channels in key markets. The Company’s prospects must be considered
      in light of the risks, uncertainties, expenses and difficulties frequently
      encountered by companies in the earliest stages of development. To be successful
      in this market, the Company must, among other things:





·
            Continue
                to expand distribution and sales channels for its products;





·
            Attract
                and maintain customer loyalty;





·
            Continue
                to establish and increase awareness of the Company’s brand and develop
                customer loyalty;





·
            Provide
                desirable products to customers at attractive prices;





·
            Establish
                and maintain strategic relationships with strategic partners and
                affiliates;







6




·
            Rapidly
                respond to competitive developments;





·
            Build
                an operations and customer service structure to support the Company’s
                business; and





·
            Attract,
                retain and motivate qualified personnel.





The
      Company cannot guarantee that it will be able to achieve these goals, and its
      failure to do so could have a material adverse effect on the Company’s business.
      If the Company’s business suffers as a result of failing to meet any one or all
      of the above listed goals, its financial performance and financial condition
      will suffer. This will also have an adverse affect on the price of the Company’s
      shares.





Moreover,
      there can be no assurance that the Company’s financial resources will be
      sufficient to enable it to operate for the length of time that management
      expects, or that the Company will be able to obtain additional funding when
      the
      Company’s current financial resources are exhausted. The Company expects that
      its revenues and operating results will fluctuate significantly in the future.





There
      can
      be no assurance that any or all of the Company’s efforts will be successful or
      that the Company will ever be profitable. If the Company’s efforts are
      unsuccessful or other unexpected events occur, purchasers of the Shares offered
      hereby could lose their entire investment.




**We
      may need additional financing to support business growth, and this capital
      might
      not be available on acceptable terms, or at all, which could adversely affect
      our financial condition.**





The
      Company’s financial resources are limited and the amount of funding that it will
      require to develop and commercialize its products is highly uncertain. Adequate
      funds may not be available when needed or on terms satisfactory to the Company.
      Lack of funds may cause the Company to delay, reduce and/or abandon certain
      of
      all aspects of its product development programs.





There
      are
      a number of factors that we cannot control that could require us to seek
      additional financing to support further demand for those products in the market
      both through existing distribution channels and potentially through new ones,
      and to finance the development, production and distribution of new products,
      as
      well as the development of new distribution channels and new markets.





The
      Company plans to seek additional financing which may include the issuance of
      equity securities. If additional funds are raised through the issuance of equity
      or convertible debt securities, the percentage ownership of the stockholders
      of
      the Company will be reduced, stockholders may experience additional dilution
      and
      such securities may have rights, preferences and privileges senior to those
      of
      the Company’s Common Stock. There can be no assurance that additional financing
      will be available on terms favorable to the Company or at all. If adequate
      funds
      are not available or are not available on acceptable terms, the Company may
      not
      be able to fund its expansion, take advantage of unanticipated acquisition
      opportunities, develop or enhance products or respond to competitive pressures.
      Such inability could have a material adverse effect on the Company’s business,
      and ability finance its operations. If the Company cannot finance its
      operations, the affect on our stock price will be adverse.




7




**Our
      quarterly operating results may fluctuate in future periods and, as a result,
      we
      may fail to meet investor expectations, which could cause the price of our
      common stock to decline.**





As
      a
      result of our history of incurring net losses, the relatively short-term nature
      of our licensing, distribution and partner agreements, we may not be able to
      accurately predict our operating results on a quarterly basis, if at all. We
      expect to experience significant fluctuations in our future quarterly operating
      results due to a variety of factors, many of which are outside of our control,
      including:





·
            the
                Company’s ability to establish and strengthen brand awareness;





·
            the
                Company’s success, and the success of its strategic partners, in promoting
                the Company’s products;





·
            the
                overall market demand for water sports products of the type offered
                by the
                Company and in general;





·
            pricing
                changes for our products as a result of competition or otherwise;





·
            the
                amount and timing of the costs relating to the Company’s marketing efforts
                or other initiatives;





·
            the
                timing of contracts with strategic partners and other parties;





·
            fees
                the Company may pay for distribution and promotional arrangements
                or other
                costs it incurs as it expands its operations;





·
            the
                Company’s ability to compete in a highly competitive market, and the
                introduction of new products by the Company;
                and





·
            economic
                conditions specific to the water sports industries and general economic
                conditions.





We
      believe period-to-period comparisons of our operating results are not
      necessarily meaningful, and you should not rely upon them as indicators of
      future performance. It is also possible that in the future, our operating
      results will be below the expectations of public market analysts and investors
      due to quarterly fluctuations rather than our overall performance. In that
      event, the trading price of our common stock may decline.





**Our
      Watersports Business Relies Heavily on Four Major Customers for
      Revenue**





Historically,
      four primary customers have accounted for more than 90% of our business. The
      three primary customers account for more than 80% of our water sports revenue.
      If any of these customers decides to exit the water sports market, or to select
      one of our competitor’s products over our own, our business would be materially
      adversely impacted. Other larger, better capitalized competitors could offer
      these customers preferable price points or other incentives that we might not
      be
      able to compete with. If we were to lose any one of these customers our business
      and financial condition would likely be negatively impacted. In turn our
      financial results would decline and our share price would also likely
      decline.




8




**We
      Rely on Two Major Manufacturers of our Wetsuit and Vest
      Products**





Sheico
      and Hydro Dynamics, Montana and Spoturn manufacture 100% of our products. All
      manufacturing is based in mainland China, Thailand and Taiwan. If these
      facilities were inaccessible to us for political reasons or in the event of
      a
      natural disaster, our business would be materially adversely affected. We might
      not be able to transition our manufacturing business to another manufacturer
      in
      a timely manner and the costs of changing facilities as well as the costs of
      manufacturing elsewhere could be prohibitively high. In addition, each of these
      manufacturers are “contract” manufacturers and consequently are not solely
      obligated to service our account. In which case, other larger customers might
      demand more of these manufacturers’ resources, which in turn, could cause delays
      in their ability to provide us with timely delivery of product. If, for any
      of
      the reasons stated above, we are not able to timely respond to purchase orders
      through our existing contract manufacturing partners, we would likely see a
      negative impact in our business and operations. In turn, this would have a
      material adverse impact on our financial results and our share price would
      likely decline.




**We
      Could Have Difficulty in the Management of Potential
      Growth.**





The
      Company anticipates that a period of expansion will be required to address
      potential growth in its customer base, market opportunities and personnel.
      This
      expansion will place a significant strain on the Company’s management,
      operational and financial resources. To manage the expected growth of its
      operations and personnel, the Company will be required to implement new
      operational and financial systems, procedures and controls, and to expand,
      train
      and manage its growing employee base. The Company also will be required to
      expand its finance, administrative and operations staff. Further, the Company
      anticipates entering into relationships with various strategic partners and
      third parties necessary to the Company’s business. There can be no assurance
      that the Company’s current and planned personnel, systems, procedures and
      controls will be adequate to support the Company’s future operations, that
      management will be able to hire, train, retain, motivate and manage required
      personnel for planned operations, or that Company management will be able to
      identify, manage and exploit existing and potential strategic relationship
      and
      market opportunities. The failure of the Company to manage growth effectively
      could have a material adverse effect on the Company’s business because it might
      be unable to meet purchase order demands from its customers, or maintain a
      level
      of inventory sufficient to support demand. This could cause the Company to
      lose
      customer and distribution relationship that would, in turn have an adverse
      affect on the Company’s results of operations and financial condition. In which
      case, the Company’s share price could be adversely affected.





**If
      we chose to acquire new or complementary businesses, services or technologies,
      we may not be able to complete those acquisitions or successfully integrate
      them.**





In
      addition to organic growth to expand our operations and market presence, we
      intend to pursue a growth strategy driven by acquisitions and business
      combinations of complementary business, services or technologies or engage
      in
      other strategic alliances with third parties. Any such transactions would be
      accompanied by the risks commonly encountered in such transactions, including,
      among others, the difficulty of assimilating operations, technology and
      personnel of the combined companies, the potential disruption of our ongoing
      business, the inability to retain key technical and managerial personnel, the
      inability of management to maximize our financial and strategic position through
      the successful integration of acquired businesses, additional expenses
      associated with amortization of acquired intangible assets, the maintenance
      of
      uniform standards, controls and policies and the impairment of relationships
      with existing employees and customers. We may not be successful in overcoming
      these risks or any other potential problems. Any acquisition may have a material
      adverse effect on our business if it any of the risks stated above materialize,
      and each of the risks stated above could bring about adverse operating results,
      which in turn, would negatively impact the Company’s financial condition. In
      turn, the price of our stock would be negatively affected.




9




**We
      will incur increased costs as a result of being a public company and this may
      adversely affect our operating results.**





As
      a
      public company, we incur significant legal, accounting and other expenses that
      we did not incur as a private company. We also anticipate that we will incur
      costs associated with recently adopted corporate governance requirements,
      including requirements under the Sarbanes-Oxley Act of 2002, as well as new
      rules implemented by the SEC and the OTCBB. We expect these rules and
      regulations will increase our legal and financial compliance costs and make
      some
      activities more time consuming and costly. We are currently evaluating and
      monitoring developments with respect to these new rules, and we cannot predict
      or estimate the amount of additional costs we may incur or the timing of such
      costs.





**New
      rules, including those contained in and issued under the Sarbanes-Oxley Act
      of
      2002, may make it difficult for us to retain or attract qualified officers
      and
      directors, which could adversely affect the management of our business and
      our
      ability to obtain or retain the trading status of our common stock on the Over
      the Counter Bulletin Board Market.**





We
      may be
      unable to attract and retain qualified officers, directors and members of board
      committees required for our effective management as a result of the recent
      and
      currently proposed changes in the rules and regulations which govern
      publicly-held companies, including, but not limited to, certifications from
      executive officers and requirements regarding audit committee financial experts.
      The perceived increased personal risk associated with these recent changes
      may
      deter qualified individuals from accepting these roles. The enactment of the
      Sarbanes-Oxley Act of 2002 has resulted in the issuance of a series of new
      rules
      and regulations and the strengthening of existing rules and regulations by
      the
      SEC, as well as the adoption of new and more stringent rules by OTCBB.
      Furthermore, certain aspects of these recent and proposed changes heighten
      the
      requirements for board and committee membership, particularly with respect
      to an
      individual’s independence from the corporation and level of experience in
      finance and accounting matters. We may have difficulty attracting and retaining
      directors with the requisite qualifications. If we are unable to attract and
      retain qualified officers and directors, we may be unable to maintain the
      trading status of our common stock on the OTCBB Market.




10


**If
        we fail to maintain an effective system of internal controls, we may not
        be able
        to accurately report our financial results or prevent fraud. As a result,
        current and potential stockholders could lose confidence in our financial
        reporting, which would harm our business and the trading price of our stock.**


Effective
      internal controls are necessary for us to provide reliable financial reports
      and
      effectively prevent fraud. If we cannot provide reliable financial reports
      or
      prevent fraud, our operating results could be harmed. Any failure to implement
      required new or improved controls, or difficulties encountered in their
      implementation, could harm our operating results or cause us to fail to meet
      our
      reporting obligations. Inferior internal controls could also cause investors
      to
      lose confidence in our reported financial information, which could have a
      negative effect on the trading price of our stock.





**As
      of the date of this 10KSB, we have made loans in the form of promissory notes
      to
      a strategic partner amounting to $396,128, and have created a$250,000 allowance
      for the estimated unrecoverable portion. The net balance of $146,128 represents
      approximately_19% of our total assets. The promissory notes bear an annual
      interest rate of 2% and began coming to maturity on April 7, 2006. If these
      loans are not repaid by maturity date, our business will be adversely
      affected.**





We
      have
      established a strategic relationship with WDHQ, Inc. and 449, Inc. (the “Debt
      Holders”), which are both owned and operated by the same individual, Don Swedo,
      who is an unrelated party to our business. The Debt Holders own and operate
      five
      retail franchises of EagleRider Corporation (the “Parent Company”) located in
      Miami, St. Louis, Phoenix, Palm Springs and San Diego. In conjunction with,
      but
      not as a condition of, our loan to the Debt Holders, we have secured an
      exclusive license and wholesale distribution agreement with the Parent Company
      that we believe will substantially expand our addressable customer base for
      our
      products as well as increase our sales by fulfilling purchase orders on a
      wholesale distribution basis. However, if the Debt Holders fail to repay the
      principal and interest on the note in a timely fashion, our cash flow from
      existing operations could be further negatively impacted. In turn, this would
      negatively impact our financial performance and results, as well as our ability
      to respond efficiently to purchase orders from other distributors.





**Risks
      Relating To Our Common Stock:**





**The
      market price of our common stock is likely to be highly volatile, which could
      cause investment losses for our stockholders and result in stockholder
      litigation with substantial costs, economic loss and diversion of our resources.**





The
      trading price of our common stock is highly volatile and could be subject to
      wide fluctuations as a result of various factors, many of which are beyond
      our
      control, including:





·
            developments
                concerning licenses and trademarks by us or a competitor;





·
            announcements
                by us or our competitors of significant contracts, acquisitions,
                commercial relationships, joint ventures or capital commitments;





·
            actual
                or anticipated fluctuations in our operating results;





·
            introductions
                of new products by us or our competitors;





·
            changes
                in the number of our distribution partners;





·
            loss
                of key employees;





·
            changes
                in the market valuations of similar companies; and





·
            changes
                in our industry and the overall economic environment.




11




In
      addition, the stock market in general, and the OTCBB have experienced extreme
      price and volume fluctuations that have often been unrelated or disproportionate
      to the operating performance of the listed companies. These broad market and
      industry factors may seriously harm the market price of our common stock,
      regardless of our operating performance. In the past, following periods of
      volatility in the market, securities class action litigation has often been
      instituted against these companies. Litigation against us, whether or not a
      judgment is entered against us, could result in substantial costs, and
      potentially, economic loss, and a diversion of our management’s attention and
      resources.





**We
      plan to continue to pay for consulting and professional services fees with
      our
      stock and this would be dilutive to investors.**





In
      the
      past we have issued shares to consultants and professional services providers
      as
      a means of paying certain professional service fees and consulting agreements.
      We plan to continue to use our stock in the future as a means of paying for
      these kind of services, and believe that doing so will enable us to retain
      a
      greater percentage of our operating capital to pay for operations, product
      development and purchase of additional inventory.





Price
      and
      volume fluctuations in our stock might negatively impact our ability to
      effectively use our stock to pay for services, or it could cause us to offer
      stock as compensation for services on terms that are not favorable to the
      Company and its shareholders. If we did resort to granting stock in lieu of
      cash
      for consulting and professional services fees under unfavorable circumstances,
      it would result in increased dilution to investors.





**Management
      has broad discretion to use the proceeds from financing activities for business
      activities that may not be successful, which could affect the trading price
      of
      our common stock.**





We
      intend
      to use the net proceeds from financing activities to pay certain outstanding
      obligations, increase working capital, fund capital expenditures, finance our
      international expansion and fund marketing activities. Accordingly, management
      will have significant flexibility in applying the net proceeds of this offering.
      The failure of management to apply such funds effectively could have a material
      adverse effect on our business, results of operations and financial condition.





**There
      is a limited market for our common stock.**





Our
      common stock is traded in the Over-the-Counter Bulletin Board market. This
      may
      cause delays in the timing of transactions, reductions in the number and quality
      of securities analysts' reporting on us, and the extent of our coverage in
      the
      media. Trading in our common stock has been sporadic, and at present, there
      is a
      limited market for it. There can be no assurance that a stronger market will
      develop. Even if such a market does develop, it may not be sustained.




12


**Future
        sales of our common stock by existing shareholders under Rule 144 could decrease
        the trading price of our common stock.**


As
      of
      April 9, 2007, a total of 26,700,896 shares of our outstanding common stock
      were
      "restricted securities" and could be sold in the public markets only in
      compliance with Rule 144  adopted
      under the Securities Act of 1933 or other applicable exemptions from
      registration. Rule 144 provides that a person holding restricted securities
      for
      a period of one year may thereafter sell, in brokerage transactions, an amount
      not exceeding in any three-month period the greater of either (i) 1% of the
      issuer's outstanding common stock or (ii) the average weekly trading volume
      in
      the securities during a period of four calendar weeks immediately preceding
      the
      sale. Persons who are not affiliated with the issuer and who have held their
      restricted securities for at least two years are not subject to the volume
      limitation. Possible or actual sales of our common stock by present shareholders
      under Rule 144 could have a depressive effect on the price of our common stock.





**Our
      common stock is subject to "penny stock" rules.**





Our
      common stock is classified as a penny stock by the Securities and Exchange
      Commission. This classification severely and adversely affects the market
      liquidity for our common stock. The Commission has adopted Rule 15g-9, which
      establishes the definition of a "penny stock," for the purposes relevant to
      us,
      as any equity security that has a market price of less than $5.00 per share
      or
      with an exercise price of less than $5.00 per share, subject to certain
      exceptions. For any transaction involving a penny stock, unless exempt, the
      rules require: (i) that a broker or dealer approve a person's account for
      transactions in penny stocks; and (ii) the broker or dealer receive from the
      investor a written agreement to the transaction, setting forth the identity
      and
      quantity of the penny stock to be purchased. In order to approve a person's
      account for transactions in penny stocks, the broker or dealer must (i) obtain
      financial information and investment experience objectives of the person; and
      (ii) make a reasonable determination that the transactions in penny stocks
      are
      suitable for that person and the person has sufficient knowledge and experience
      in financial matters to be capable of evaluating the risks of transactions
      in
      penny stocks. The broker or dealer must also deliver, prior to any transaction
      in a penny stock, a disclosure schedule prepared by the Commission relating
      to
      the penny stock market, which, in highlight form, sets forth (i) the basis
      on
      which the broker or dealer made the suitability determination and (ii) that
      the
      broker or dealer received a signed, written agreement from the investor prior
      to
      the transaction. Disclosure also has to be made about the risks of investing
      in
      penny stocks in public offerings and secondary trading and about the commissions
      payable to the broker-dealer and registered representative, current quotations
      for the securities and the rights and remedies available to an investor in
      cases
      of fraud in penny stock transactions. Finally, monthly statements have to be
      sent disclosing recent price information for the penny stock held in the account
      and information on the limited market in penny stocks.




**ITEM
      2. DESCRIPTION OF PROPERTY**




The
      Company recently moved its headquarters from Laguna Niguel, California (with
      previous offices in San Clemente and Oceanside, California) to Torrence,
      California. The company now maintains a distribution warehouse in Gardena,
      California with sales offices in Redondo Beach, Burbank and Torrence, CA. The
      Company does not currently lease office space.





13





**ITEM
      3. LEGAL PROCEEDINGS**





During
      2006 two claims were filed against Execute Sports and one claim was filed by
      Execute Sports for repayment of past due loans receivable.





A
      former
      employee of the company filed a complaint on August 14, 2006 against the Company
      and two of its officers for breach of contract, breach of the implied covenant
      of good faith and fair dealing, libel, and interference with contract. The
      Company answered on behalf of all named defendants. Through law and motion
      hearings, the Company was able to obtain a dismissal of the libel claim. During
      the first quarter of 2007 the parties were able to reach a tentative agreement.
      If the settlement is not consummated the Company will defend the action. Legal
      representatives for the Company, at this stage of the litigation, believe it
      is
      impracticable to render an opinion about whether the likelihood of an
      unfavorable outcome is either “probable” or “remote”, however, the Company
      believes it has meritorious defenses. Therefore, no liability has been
      recognized by the Organization as of the date of this report. While the outcome
      of this claim cannot be predicted with certainty, management does not believe
      that the outcome of any pending legal matters will have a material adverse
      effect on the financial position, although results of operations or cash flows
      could be affected in a particular period.





A
      former
      consultant filed a complaint on April 11, 2006 for breach of contract. The
      consultant seeks compensatory damages and issuance of unrestricted stock and
      attorneys fees. Legal representatives for the Company, at this stage of the
      litigation, believe it is impracticable to render an opinion about whether
      the
      likelihood of an unfavorable outcome is either “probable” or “remote”, however,
      the Company believes it has meritorious defenses. Therefore, no liability has
      been recognized by the Organization as of the date of this report. While the
      outcome of this claim cannot be predicted with certainty, management does not
      believe that the outcome of any pending legal matters will have a material
      adverse effect on the financial position, although results of operations or
      cash
      flows could be affected in a particular period.





On
      December 6, 2006, the Company filed a claim against two corporations and two
      individuals claiming breach of promissory notes, breach of contracts, and
      recovery under common counts. The Company seeks repayment of money loaned to
      the
      defendants in the aggregate sum of approximately $500,000.




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





No
      matters were submitted to a vote of security holders during the fourth quarter
      of the fiscal year covered by this report.





14





**PART
      II.**





**ITEM
      5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**





Our
      common stock was first cleared for trading on the NASD OTC bulletin board on
      February 17, 2006 under the ticker symbol “EXCS” and has been trading since that
      time. The following table sets forth the range of high and low sales prices
      for
      the Company's common stock for the periods indicated:




HIGH
              
              LOWFiscal
                  20071st
                  Quarter
              
              $
              0.02
              
              $
              0.08Thru
                  April 2007
              
              
              .04
              
              
              .03Fiscal
                  2006:1st
                  Quarter
              
              $
              0.53
              
              $
              0.382nd
                  Quarter
              
              
              .50
              
              
              .243rd
                  Quarter
              
              
              .26
              
              
              .094th
                  Quarter
              
              
              .10
              
              
              .02




Such
      prices represent quotations between dealers, without dealer markup, markdown
      or
      commissions, and may not represent actual transactions.





**Holders**





As
      of
      April 9, 2007, there were 52,234,633 shares of common stock outstanding and
      approximately seventy nine (79) record holders of common equity. The number
      of
      shareholders of record does not include beneficial owners of common stock whose
      shares are held in the names of various dealers, clearing agencies, banks,
      brokers and other fiduciaries.





**Dividends**





We
      have
      not declared any dividends on our common stock and we do not expect to declare
      dividends in the foreseeable future since we intend to utilize our earnings,
      if
      any, to finance our future growth, including possible acquisitions.





**Transfer
      Agent**





The
      Transfer Agent and Registrar for the Company's common stock is First American
      Stock Transfer. Its address is 706 East Bell Road, Suite 202, Phoenix, AZ,
      85022
      and its telephone number at that location is 602-485-1346.




15




**Equity
      Compensation Plans**





Effective
      January 1, 2006, the Board of Directors of the Company adopted the 2006 Execute
      Sports, Inc. Non-Employee Directors’ Stock Incentive Plan (the “Plan”). The Plan
      generally provides for the grant of either nonqualified option, restricted
      stock
      and/or deferred stock to directors at not less than the fair market value of
      our
      common stock as of the grant date. No nonqualified option, restricted stock
      and/or deferred stock shall be granted pursuant to the Plan ten years after
      the
      Effective Date. In the event of our change in control (including our merger
      with
      or into another corporation, or sale of substantially all our assets), the
      Plan
      provides that each outstanding option will fully vest and become exercisable.
      The maximum number of options that can be granted under the Plan is 1,500,000.
      As of December 31, 2006, no options or deferred stock was issued and
      outstanding. From inception through December 31, 2006, the Company issued
      1,073,808 shares of restricted stock leaving 426,192 common shares available
      for
      future grant.




**Use
      of Proceeds from Registered Securities**





*SB-2/A
      Effective October 12, 2005*





As
      required by 230.463 of Reg SB and pursuant to sections 13(a) and 15(d) of the
      Exchange Act (15 U.S.C. 78m(a) and 78o(d)) after effectiveness of our Securities
      Act registration statement, declared effective by the Securities and Exchange
      Commission on October 12, 2005, Commission File No. 33-125868, we commenced
      a
      self underwritten offering of up to 3,571,428 “new distribution” shares of the
      Company’s common stock at $0.35 per share (the “Offering”), and 6,679,350
      previously issued shares by the Company to shareholders pursuant to a private
      placement, professional services and debt related matters. The aggregate price
      of the Offering was $3,587,771.





The
      Offering commenced on October 26, 2005, which was terminated on January 3,
      2006.
      At the termination date of the offering, or January 3, 2006, we had received
      gross, or “aggregate” proceeds of $1,246,550 from sales of the “new distribution
      shares”. No proceeds were received by the Company for sales of any of the
      6,679,350 previously issued shares.





The
      total
      amount of common shares registered, pursuant to the Offering, were 10,250,778.





*Other
      Expenses Of Issuance And Distribution*





The
      following table sets forth a reasonable estimate by the Company of costs and
      expenses payable by us in connection with the Offering of the common stock
      being
      registered.


SEC
                  registration fee
              
              $
              422.28Accounting
                  fees and expenses
              
              $
              45,000.00Legal
                  fees and expenses
              
              $
              20,000.00Transfer
                  agent and registrar fees and expenses
              
              $
              1,500.00Miscellaneous
              
              $
              10,000.00Total
              
              $
              76,422.28
  16





All
      payments made by the Company in relation to costs and expenses incurred by
      the
      Company in connection with the Offering were direct payments.





After
      deducting all costs incurred by the Company in connection with the Offering,
      the
      net proceeds to the Company were $1,169,127.80.





From
      the
      effective date of the Securities Act registration statement to the ending date
      of the reporting period, a reasonable estimate of the amount of net offering
      proceeds to the Company used for acquisition of other business(es); repayment
      of
      indebtedness; working capital; temporary investments (which should be
      specified); and any other purposes for which at least five (5) percent of the
      issuer's total offering proceeds or $100,000 (whichever is less) has been used
      (which should be specified) is:


*
                  Acquisition of Pacific Sports Group, Inc.
              
              $
              150,000.00*
                  Repayment of indebtedness
              
              $
              174,517.00*
                  Working Capital
              
              $
              844,610.80





All
      payments made for the purposes stated above were direct payments by the Company.




*SB-2/A
      Effective June 15, 2006*





As
      required by 230.463 of Reg SB and pursuant to sections 13(a) and 15(d) of the
      Exchange Act (15 U.S.C. 78m(a) and 78o(d)) after effectiveness of our Securities
      Act registration statement, declared effective by the Securities and Exchange
      Commission on June 15, 2006, Commission File No. 333-134418, we set aside a
      self
      underwritten offering of up to 3,166,667,”warrant shares”, 12,666,667
“convertible debenture shares”, and 35,000,000 “investment agreement shares” of
      the Company’s common stock at $0.15 per share, and 940,000 previously issued
      shares by the Company in exchange for convertible debt. The aggregate price
      of
      the Offering was $7,860,000.





We
      will
      not receive any proceeds from the sale of the common stock. However, we will
      receive up to $475,000 upon the exercise of the warrant shares issued to
      Dutchess and up to $10,000,000 pursuant to the terms of the Investment Agreement
      with Dutchess. No proceeds were received by the Company for sales of any of
      the
      940,000 previously issued shares.





The
      total
      amount of common shares registered, pursuant to the Offering, were 51,773,334.





*Other
      Expenses Of Issuance And Distribution*





The
      following table sets forth a reasonable estimate by the Company of costs and
      expenses payable by us in connection with the Offering of the common stock
      being
      registered.


SEC
                  registration fee
              
              $
              841.01Accounting
                  fees and expenses
              
              $
              16,000.00Legal
                  fees and expenses
              
              $
              10,000.00Transfer
                  agent and registrar fees and expenses
              
              $
              500.00Miscellaneous
              
              $
              2,000.00Total
              
              $
              29,341.01
  17





All
      payments made by the Company in relation to costs and expenses incurred by
      the
      Company in connection with the Offering were direct payments.





From
      the
      effective date of the Securities Act registration statement to the ending date
      of the reporting period we received $38,250 for warrants exercised into common
      stock and $164,097 for shares issued pursuant to the investment agreement.
      All
      proceeds from the issuance of these shares was used to repay principle and
      interest of our convertible debenture and notes payable.




**ITEM
      6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF
      OPERATIONS**




**CAUTIONARY
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**





Our
      representatives and we may from time to time make written or oral statements
      that are "forward-looking," including statements contained in this 10-KSB and
      other filings with the Securities and Exchange Commission, reports to our
      stockholders and news releases. All statements that express expectations,
      estimates, forecasts or projections are forward-looking statements within the
      meaning of the Act. In addition, other written or oral statements which
      constitute forward-looking statements may be made by us or on our behalf. Words
      such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
      "estimates," "projects," "forecasts," "may," "should," variations of such words
      and similar expressions are intended to identify such forward-looking
      statements. These statements are not guarantees of future performance and
      involve risks, uncertainties and assumptions which are difficult to predict.
      Therefore, actual outcomes and results may differ materially from what is
      expressed or forecasted in or suggested by such forward-looking statements.
      We
      undertake no obligation to update publicly any forward-looking statements,
      whether as a result of new information, future events or otherwise. Important
      factors on which such statements are based are assumptions concerning
      uncertainties, including but not limited to uncertainties associated with the
      following:





(a)
      volatility or decline of our stock price;





(b)
      potential fluctuation in quarterly results;





(c)
      our
      failure to earn revenues or profits;





(d)
      inadequate capital and barriers to raising the additional capital or to
      obtaining the financing needed to implement its business plans;





(e)
      inadequate capital to continue business;





(f)
      changes in demand for our products and services;




18




(g)
      rapid
      and significant changes in markets;





(h)
      litigation with or legal claims and allegations by outside parties;
      or





(i)
      insufficient revenues to cover operating costs.




There
      is
      no assurance that we will be profitable, we may not be able to successfully
      develop, manage or market our products and services, we may not be able to
      attract or retain qualified executives and technology personnel, our products
      and services may become obsolete, government regulation may hinder our business,
      additional dilution in outstanding stock ownership may be incurred due to the
      issuance of more shares, warrants and stock options, or the exercise of warrants
      and stock options, and other risks inherent in the our businesses.




The
      following discussion should be read in conjunction with the Company's
      Consolidated Financial Statements and the notes thereto and the other
      information included in this Annual Report on Form 10-KSB.




**Overview**





At
      the
      beginning of 2006, we had three lines of business which included watersports,
      snow sports and licensed apparel. 2006 proved a watershed year due to
      difficulties encountered with respect to production, sales and growth related
      to
      the snow sports and branded apparel businesses. Moving into 2007 we decided
      to
      concentrate corporate resources on our water sports business where the Company
      has a proven track record of success and future success is most probable.





Our
      water
      sports products include wetsuits, vests, rash guards accessories and wake
      skates. Our wetsuits, vests, rash guards, accessories and wake skates are
      marketed under the “Execute” brand, as well as through private label
      relationships.





The
      Company markets its Execute branded product line through a network of
      independent dealers located throughout the United States and through a multitude
      of distributors through out the world. The company also has a major presence
      with many different on-line retailers. The “Execute” brand has existed since
      2002 and is vastly becoming one of the most respected names in the water sports
      market - especially amongst wakeboard and Wakeskate consumers.





Key
      to
      the extension of its brands, and the acceptance of its products in the
      marketplace is the Company’s aggressive marketing strategy which consists in
      aligning its brand with leading wakeboard and wake skate athletes. In doing
      so,
      the Company establishes brand credibility amongst its target consumer base
      and
      provides its distributors with a greater ability to push its products through
      their channels.




19




We
      received proceeds of $70,000 on January 3, 2006, through the sale of 200,000
      shares of common stock at $0.35 that were included in our SB-2 registration
      statement, which was declared effective by the Securities and Exchange
      Commission on October 12, 2005. We received $565,000 in 2006 for secured
      promissory notes. We received $100,000 through the sale of warrants to purchase
      400,000 shares of restricted common stock to a strategic investor and business
      partner to the Company. We exchanged 20,177,369 registered and unregistered
      common stock for our acquisition of Pacific Sports Group, services, product,
      interest expense and debt repayments totaling $1,771,029.





We
      need
      additional capital to fund our operations through December 31, 2007, at which
      time we may seek to raise additional financing. We are required, under the
      terms
      of the promissory notes issued in February through March 2006 to pay annual
      interest of 9% to 12%. The promissory notes are secured by 1,720,000 shares
      of
      our common stock.





**** ***Critical
      Accounting Policies***





The
      Company's discussion and analysis of its results of operations, financial
      condition and liquidity are based upon the Company's financial statements,
      which
      have been prepared in accordance with accounting principles generally accepted
      in the United States.  The preparation of these financial statements
      requires the Company to make estimates and judgments that affect the reported
      amounts of assets and liabilities and disclosure of contingent assets and
      liabilities at the date of the financial statements and the reported amounts
      of
      revenues and expenses during the period.  The Company bases its
      estimates on historical experience and on various other assumptions that it
      believes to be reasonable under the circumstances.  Actual results may
      materially differ from these estimates under different assumptions or
      conditions.  On an on-going basis, the Company reviews its estimates
      to ensure that the estimates appropriately reflect changes in its business.





***Inventories***





Inventories
      are valued at the lower of cost or market and primarily consist of wetsuits,
      sticker kits and related accessories.  Cost is determined using the
      average cost method.  The inventory balance reflects management’s
      estimate of net realizable value. Management performs periodic assessments
      based
      on our understanding of market conditions and forecasts of future product demand
      to determine the existence of obsolete, slow moving and non-salable inventories,
      and records the necessary adjustment at the time of assessment directly to
      the
      statement of operations to reduce such inventories to their net realizable
      value. If the actual amount of obsolete inventory significantly exceeds the
      inventory balance, the Company's costs of goods sold and gross profit and
      resulting net income or loss would be significantly adversely
      affected.





***Revenue
      recognition***





The
      Company recognizes revenue when the product is shipped.  At that time,
      the title and risk of loss transfer to the customer, and collectability is
      reasonably assured.  Collectability is evaluated on an individual
      customer basis taking into consideration historical payment trends, current
      financial position, results of independent credit evaluations and payment terms.
      Additionally, an estimate of product returns are recorded when revenue is
      recognized.  Estimates are based on historical trends taking into
      consideration current market conditions, customer demands and product sell
      through.  If actual sales returns significantly exceed the recorded
      estimated expense, the Company's sales would be adversely affected.




20




***Allowance
      for doubtful accounts***





The
      Company maintains an allowance for doubtful accounts for estimated losses
      resulting from the inability of its customers to make required
      payments.  An estimate of uncollectible amounts is made by management
      based upon historical bad debts, current customer receivable balances and aging,
      the customer's financial condition and current economic
      conditions.  If a significant number of customers with significant
      receivable balances in excess of the allowance fail to make required payments,
      the Company's operating results would be significantly adversely
      affected.  Based on management's assessment, the Company provides for
      estimated uncollectible amounts through a charge to earnings and a credit to
      the
      valuation allowance.  Balances that remain outstanding after the
      Company has used reasonable collection efforts are written off through a charge
      to the valuation allowance and a credit to accounts receivable.  The
      Company generally does not require collateral.





***Product
      Warranty***





The
      Company's Watersports products, which carry a ninety-day warranty. Warranty
      costs are charged against sales in the period products are sold as a reduction
      in the selling price.  Historically, warranty costs have been less
      than 1% of sales. In estimating its warranty obligations, the Company considers
      various relevant factors, including the Company's stated warranty policies,
      the
      historical frequency of claims, and the cost to replace or repair the
      product.  If the actual amount of warranty claims significantly
      exceeds the estimated expense, the Company's costs of goods sold and gross
      profit and resulting net income or loss would be significantly adversely
      affected.





***Income
      taxes***





On
      November 1, 2004, the Company legally amended its Articles of Incorporation
      to
      make the transition from an S-Corporation to a C-Corporation. Prior to that
      the
      S Corporation was not a tax paying entity for federal or state income tax
      purposes and thus no provision for income taxes was recognized. The Company
      accounts for income taxes using the asset and liability
      method.  Deferred tax assets and liabilities are recognized for the
      future tax consequences attributable to the differences between the financial
      statement carrying amounts of existing assets and liabilities and their
      respective tax bases and operating loss and tax credit
      carryforwards.  Deferred tax assets and liabilities are measured using
      enacted rates recovered or settled.  The effect on deferred tax assets
      and liabilities of a change in tax rates is recognized in income in the period
      that includes the enactment date.  In assessing the realizability of
      deferred income tax assets, the Company considers whether it is more likely
      than
      not that some portion or all of the deferred income tax assets will be
      realized.  The ultimate realization of deferred income tax assets is
      dependent upon the generation of future taxable income during the periods in
      which those temporary differences become deductible.  SFAS No. 109 requires
      a valuation allowance to be recorded when it is more likely than not that some
      or all of the deferred tax assets will not be realized. The Company has recorded
      a valuation allowance for the full amount of the net deferred tax asset because
      of uncertainties as to the amount of taxable income that would be generated
      in
      future years.





21





**Results
      of Operations**





**Twelve
      Months Ended December 31, 2006 And 2005**





***Revenue***




During
      the year ended December 31, 2006 and 2005 the Company had revenue of $2,018,468
      and $1,389,163, respectively. The $629,305, or 45% increase in net sales is
      due
      primarily to sale of snowboards, which were not included in the previous
      period’s sales, and online sales of water sports products.




***Gross
      Margin***




Gross
      margin for the year ended December 31, 2006 and 2005 was $195,965 or 10% and
      $332,722 or 24%, respectively. The $136,757 or 41% decline in annual gross
      margin was primarily due to the increase in costs of goods for snowboard and
      water sports products offset by a reduction in freight and duty for the water
      sports products.




***Operating
      Expenses***




For
      the
      year ended December 31, 2006 and 2005, total operating expenses were $3,322,109
      and $3,828,921, respectively. The year-over-year decrease of $506,812 or 13%
      was
      primarily the result of reductions in professional services fees and stock
      compensation expenses offset by higher personnel, marketing and advertising
      related costs.





***Net
      Loss***




Net
      loss
      for the year ended December 31, 2006 and 2005 was $5,608,910 and $3,566,580,
      respectively, representing an increase in net loss of $2,042,330, or 57%. The
      year-over-year net loss increased primarily due to non cash costs related to
      the
      impairment of goodwill of $1,288,577, amortization of our debenture warrants
      of
      $205,788, amortization of our beneficial conversion feature of $435,577, loan
      interest of $196,422, the reserve created for strategic loans made to an
      unaffiliated company of $250,000 and increases in selling and advertising
      expenses offset by lower stock based compensation for professional services
      and
      key employees.




**FINANCIAL
      CONDITION**





From
      inception to December 31, 2006, we incurred an accumulated deficit of
      $10,154,999, and we expect to incur additional losses for the foreseeable
      future. This loss has been incurred through a combination of convertible
      debenture amortization, selling and operating expenses related to expensing
      of
      stock, support of our plans to expand sales and distribution channels,
      development of new products and higher than anticipated cost of sales relative
      to sales.





We
      have
      financed our operations since inception primarily through a combination of
      debt
      and equity financing. During the year ended December 31, 2006 we had a net
      decrease in cash of $296,749. Total cash resources as of December 31, 2006
      were
      $74,386, compared with $371,135 at December 31, 2005.




22




Our
      available working capital and capital requirements will depend on numerous
      factors, including progress in our distribution and sales of our products,
      the
      timing and cost of expanding into new markets, the cost of developing new
      products, changes in our existing collaborative and licensing relationships,
      the
      resources that we devote to developing new products and commercializing
      capabilities, the status of our competitors, our ability to establish
      collaborative arrangements with other organizations, our ability to attract
      and
      retain key employees, our management of inventory and our need to purchase
      additional capital equipment.




***The
      Company's Liquidity Plan***





Recent
      operating results give rise to concerns about the Company’s ability to generate
      cash flow from operations sufficient to sustain ongoing viability. During 2006
      and the latter half of 2005, the Company’s cost control strategies focused on
      managing general and administrative expenses through keeping headcount to a
      minimum, amongst other things, and maintaining a focused marketing and sales
      strategy that leverages existing channel partnerships.





The
      Company’s need to raise additional equity or debt financing and the Company’s
      ability to generate cash flow from operations will depend on its future
      performance and the Company’s ability to successfully implement business and
      growth strategies. The Company’s performance will also be affected by prevailing
      economic conditions. Many of these factors are beyond the Company’s control. If
      future cash flows and capital resources are insufficient to meet the Company’s
      commitments, the Company may be forced to reduce or delay activities and capital
      expenditures or obtain additional equity capital. In the event that the Company
      is unable to do so, the Company may be left without sufficient liquidity.





In
      September, 2004 we commenced a private placement to sell up to 7,000,000 shares
      at a per share cost of $.25. We closed the financing on May 27, 2005 accepting
      no further subscription agreements pursuant to the September 2004 private
      placement offering, and have received proceeds of $729,500 in connection with
      the financing.





On
      December 26, 2005, the Company began offering stock pursuant to its SB-2
      registration statement declared effective by the Securities and Exchange
      Commission on December 11, 2005. Pursuant to the terms of the Offering, the
      Company offered to certain investors up to 3,571,428 shares of the Company’s
      common stock for consideration of $0.35 per share. As of December 31, 2005,
      the
      Company has received $1,246,550 in proceeds $70,000 of which was received on
      January 3, 2006.





In
      May,
      2006 we commenced a private placement to sell up to $1,900,000 of convertible
      debentures with a $10,000,000 equity line of credit (the “Investment Agreement”)
      following an effective registration statement. The Company closed the private
      placement by issuing a convertible debenture for $1,900,000 and subsequently
      filing an SB-2 registration statement, which became effective on June 15, 2006.
      The Company now has access to funds under the Investment Agreement.


Management
        is currently in the process of seeking additional equity financing with
        potential investors. Management is also working with the holders of our
        convertible debentures to finance production and provide working capital
        when
        needed. There can be no assurance that such additional financing will be
        obtained. The financial statements do not include any adjustments that might
        result from the outcome of this uncertainty.


23




***Outlook
      for our Business***




Due
      to
      strong secular trends in the action sports and power sports markets, we have
      experienced significant revenue growth since 2002 and anticipate continued
      strength in revenue growth during 2007 for our water sports products. However,
      due to the Company’s recent restructuring and transfer of its Academy brand and
      snowsports business, we anticipate lower overall revenues in 2007 compared
      to
      2006. In the future due to our planned expansion of products, distribution
      channels and our acquisition strategy we intend to grow our product lines going
      forward primarily through the use of existing cash flow. In addition, we
      anticipate that we will raise additional capital through equity financing,
      and
      intend to use proceeds from these additional financing rounds to expand out
      product lines. We do not anticipate that significant capital resources will
      be
      required to expand our distribution channels. We believe that our existing
      relationships with athletes, vendors and manufacturers will be sufficient to
      provide opportunities to enter into new markets and add new distributors. We
      do
      however, intend to finance our acquisition strategy going forward through
      additional rounds of equity financing as well as through the use of our stock.
      If we fail to raise additional capital, our ability to implement additional
      businesses that are a strategic fit to our own will be negatively impacted.





Our
      revenue has grown from $337,258 in 2002 to $1,389,163 in 2005 and $2,018,468
      in
      2006. Our revenue growth has been and will continue to be dependent, in part,
      on
      our ability to increase production and respond efficiently to market demand
      for
      our products. In addition, we believe that continued revenue growth is
      dependent, in part, on growing our distribution channels and retail points
      of
      presence overseas.





We
      have
      increased our operating expenses to support the growth in our business and
      to
      develop and market our products. Our wetsuit products are our largest expenses
      and have increased as our revenue has increased. Our personnel expenses are
      our
      next largest expense and consist of salaries, commissions, benefit plans and
      other payroll costs. We intend to hire additional personnel primarily in the
      areas of sales and marketing to support our anticipated growth.





***Off-Balance
      Sheet Arrangements***





At
      December 31, 2006 the Company had no obligations that would qualify to be
      disclosed as off-balance sheet arrangements.





***Contractual
      Obligations***





At
      December 31, 2006 the Company had no obligations that would qualify to be
      disclosed as operating lease obligations.




24




***Inflation***





Although
      the operations of the Company are influenced by general economic conditions,
      the
      Company does not believe inflation had a material effect on the results of
      operations during the year ended December 31, 2006. However, there can be no
      assurance the Company's business will not be affected by inflation in the
      future.




**ITEM
      7. FINANCIAL STATEMENTS**





The
      information required by this Item is submitted as a separate section of this
      Form 10-KSB. See CONSOLIDATED FINANCIAL STATEMENTS AND NOTES on page
      38.




**ITEM
      8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE.**





There
      were no reportable events of the type described in Item 304(a)(1)(iv) of
      Regulation S-B.




**ITEM
      8A. CONTROLS AND PROCEDURES**





(a)
      As of
      December 31, 2006, we conducted an evaluation, under the supervision and
      participation of our management, including the Company’s President and Chief
      Financial Officer (who is the principal accounting officer) to evaluate the
      effectiveness of the Company’s disclosure controls and procedures and manage the
      Company’s operations as of the end of the period covered by this report, as
      required by Rule 13a-15(b) under the Exchange Act,.





In
      connection with the audit of our Consolidated Financial Statements for the
      fiscal year ended December 31, 2006, our independent registered public
      accounting firm informed us that we had significant deficiency constituting
      material weaknesses as defined by the standards of the Public Company Accounting
      Oversight Board, which had been identified in connection with the audit of
      our
      Consolidated Financial Statements for the fiscal year ended December 31,
      2006





The
      significant deficiency in internal control identified consisted of inadequate
      segregation of duties affecting initiating, recording and processing financial
      data.





Based
      on
      the evaluation, which disclosed a deficiency in the segregation of financial
      duties, the Company’s President and Chief Financial Officer (who is the
      principal accounting officer) concluded that the Company’s disclosure controls
      and procedures are were effective as of the end of the period covered by this
      report.




The
      Company has taken, and will continue to take, steps to address the specific
      problems identified by the auditors including, but not limited to, emphasizing
      enhancement of the segregation of duties based on the limited resources the
      Company has, and, where practical, the Company will continue to assess the
      cost
      versus benefit of adding additional resources that would mitigate the situation.
      Our President and Chief Executive Officer will monitor our accounting policies
      to assure proper accounting on an ongoing basis.





25





(b)
      Changes in Internal Control Over Financial Reporting. Our President and Chief
      Financial Officer have indicated that there were no significant changes in
      our
      internal controls or other factors that could significantly affect such controls
      subsequent to the date of their evaluation, and there were no such control
      actions with regard to significant deficiencies and material
      weaknesses.




**PART
      III**




**ITEM
      9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS** **AND
      ALL CONTROL PERSONS**





The
      following table sets forth the name, age and position of each of the members
      of
      our board of directors, executive officers and promoters as of April 9,
      2007:




Our
      Board
      of Directors consists of only one class. All of the directors will serve until
      the next annual meeting of stockholders and until their successors are elected
      and qualified, or until their earlier death, retirement, resignation or removal.
      There are no family relationships among directors and executive officers. We
      also have provided a brief description of the business experience of each
      director and executive officer during the past five years and an indication
      of
      directorships held by each director in other companies subject to the reporting
      requirements under the Federal securities laws.




DIRECTORS
      AND EXECUTIVE OFFICERS


Name
              
              Age
              
              PositionGeno
                  M. Apicella
              
              44
              
              CEO
                  and Principal Accounting OfficerSheryl
                  Gardner*
              
              48
              
              CFOCeleste
                  Berouty
              
              40
              
              President
                  and SecretaryCraig
                  Washington
              
              44
              
              DirectorBenedict
                  Amendolara
              
              46
              
              Director




*
      Currently on medical leave




**EXECUTIVE
      OFFICERS AND DIRECTORS**





**Geno
      M. Apicella** is the
      founder of the Company and has been its CEO since December 2006. Mr. Apicella
      was the Executive Vice President of Sales from February 2003 to December 2006.
      He was graduated from San Francisco State University in 1983 was the Executive
      Vice President of Zak Sports from 1994 through 2001 and founded the water sports
      line in 2001. He has been employed by Execute Sports (formerly Padova
      International USA, Inc.) since 2001. Geno’s innovative designs in wetsuits and
      ski vests are currently present in the marketplace today. He is responsible
      for
      the marketing, design and production for all watersports products at the
      company.




26




**Celeste
      Berouty** has been
      the President and Secretary of the Company since December 2006. In October
      2006,
      Ms. Berouty was hired by the Company to lead its sales initiative. Ms. Berouty
      brings 19 years of experience in the watersports market as the former Director
      of Sales for Body Glove Wetsuit, Co. She has experience and success in selling
      and developing products for all avenues of watersports, including surf, dive,
      waterski, wakeboarding, paddling and fishing. ****





**Craig
      Washington** is a
      licensed CPA and Real Estate Broker. Prior to founding the real estate firm
      where he is currently a principal, Washington Realty Group, in 2000, Mr.
      Washington served as an accountant at Arthur Anderson. Mr. Washington was
      graduated from San Francisco State University in 1984.





**Ben
      Amendolara** has been
      serving as a board member of Execute Sports since May of 2006. From 2002 to
      the present, Mr. Amendolara has been teaching part time at the Fashion Institute
      of Design and Merchandising in Los Angeles. From 1992 thru 2002 Mr. Amendolara
      served as Vice President and then President of a privately held textile
      manufacturing facility. Mr. Amendolara graduated from the Fashion Institute
      of
      Technology in New York with a degree in Textile Technology in
      1983.  He has been involved in the manufacturing of textile products for
      the last 24 years.




**Sheryl
      Gardner** completed her education at the University of Alabama, Tuscaloosa. Sheryl brings
      more than two decades experience and expertise in contract and forensic
      accounting and has been employed by Execute Sports since 2003.




**Board
      of Directors Committees**





We
      do not
      currently have a standing audit, nominating or compensation committee of the
      Board of Directors, or any committee performing similar functions. Our directors
      perform the functions of audit, nominating and compensation committees. Since
      the Board of Directors currently consists of three members, it does not believe
      that establishing a separate nominating committee is necessary for effective
      governance. When additional members of the Board of Directors are appointed
      or
      elected, we will consider creating a nominating committee.




**16(A)
      BENEFICIAL OWNERSHIP REPORTING COMPLIANCE**





To
      our
      knowledge, no officers, directors, beneficial owners of more than ten percent
      of
      any class of our equity securities registered pursuant to section 12 of the
      Exchange Act or any other person subject to Section 16 of the Exchange Act
      with
      respect to us, failed to file on a timely basis reports required by Section
      16(a) of the Exchange Act during the most recent fiscal year, which ended
      December 31, 2006, except that Mr. Apicella and Ms. Berouty failed to timely
      file their respective Form 3.





27


**Indebtedness
      of Executive Officers and Directors**





No
      executive officer, director or any member of these individuals' immediate
      families or any corporation or organization with whom any of these individuals
      is an affiliate is or has been indebted to us since the beginning of our last
      fiscal year .




**Family
      Relationships**





There
      are
      no family relationships among our executive officers and directors.




**Legal
      Proceedings**





As
      of the
      date of this 10-KSB, there are no material proceedings to which any of our
      directors, executive officers, affiliates or stockholders is a party adverse
      to
      us.





**Code
      of Ethics**





We
      have
      not adopted a Code of Ethics within the meaning of Item 406(b) of Regulation
      S-B
      of the Securities Exchange Act of 1934. We intend on adopting a Code of Ethics
      which applies to our chief executive officer and our senior financial officers
      in the near future.




28


**ITEM
        10. EXECUTIVE COMPENSATION**
 
 The
        following table sets forth, for the last three fiscal years, the compensation
        earned for services rendered in all capacities by our chief executive officer,
        chief financial officer and the other highest-paid executive officers serving
        as
        such at the end of 2006 whose compensation for that fiscal year was in excess
        of
        $100,000. The individuals named in the table will be hereinafter referred
        to as
        the "Named Officers." No other executive officer of Execute Sports, Inc.
        received compensation in excess of $100,000 during fiscal year
        2006.




**SUMMARY
                COMPENSATION TABLE**Long
                Term CompensationAnnual
                Compensation
            
            Awards
            
            Payouts(a)
            
            (b)
            
            (c)
            
            (d)
            
            (e)
            
            (f)
            
            (g)
            
            (h)
            
            (i)Name
                and Principle Position
            
            Year
            
            Salary
                ($)
            
            Bonus
                ($)
            
            Other
                Annual Compen-sation ($)
            
            Restricted
                Stock Award(s) ($)
            
            Securities
                Underlying Options/ SARs (#)
            
            LTIP
                Payouts ($)
            
            All
                Other Compen-sation ($)Geno
            
            
            2006
            
            $
            96,000
            
            
            —
            
            
            —
            
            $
            54,428
            
            
            —
            
            
            —
            
            
            —Apicella,
            
            
            2005
            
            $
            72,000
            
            
            —
            
            
            —
            
            $
            550,000
            
            
            —
            
            
            —
            
            
            —CEO
            
            
            2004
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Celeste
            
            
            2006
            
            $
            35,417
            
            
            —
            
            
            —
            
            $
            25,000
            
            
            —
            
            
            —
            
            
            —Berouty
            
            
            2005
            
            
            —-
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —President
            
            
            2004
            
            
            —-
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Sheryl
            
            
            2006
            
            $
            91,200
            
            
            —
            
            
            —
            
            $
            20,000
            
            
            —
            
            
            —
            
            
            —Gardner,
            
            
            2005
            
            $
            72,000
            
            
            —
            
            
            —
            
            
            **
            
            
            —
            
            
            —
            
            
            —CFO(1)
            
            
            2004
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Scott
            
            
            2006
            
            $
            36,836
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Swendener,
            
            
            2005
            
            $
            72,000
            
            
            —
            
            
            —
            
            $
            550,000
            
            
            —
            
            
            —
            
            
            —VP*
            
            
            2004
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Don
            
            
            2006
            
            $
            84,577
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Dallape,
            
            
            2005
            
            $
            132,000
            
            
            —
            
            
            —
            
            $
            550,000
            
            
            —
            
            
            —
            
            
            —CEO*
            
            
            2004
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Todd
            
            
            2006
            
            $
            69,000
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Pitcher
            
            
            2005
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Pres*
            
            
            2004
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Jeff
            
            
            2006
            
            $
            80,500
            
            
            —
            
            
            —
            
            $
            302,357
            
            
            —
            
            
            —
            
            
            —Baughn
            
            
            2005
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —VP
                Mktg*
            
            
            2004
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Todd
            
            
            2006
            
            $
            68,750
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Hahn
            
            
            2005
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —CEO*
            
            
            2004
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Duane
            
            
            2006
            
            $
            80,500
            
            
            —
            
            
            —
            
            $
            302,357
            
            
            —
            
            
            —
            
            
            —Pacha
            
            
            2005
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —VP
                Prod *
            
            
            2004
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —





Notes:
            *
                No longer employed by the Company**
                2005 $100K incorrectly stated as granted award: was actually conversion
                of
                debt to stock.(1)
            On
                medical leave of absence.




**OPTIONS
      AND STOCK APPRECIATION RIGHTS**





We
      currently do not have any stock option plan for executive officers in
      place.





**LONG
      TERM INCENTIVE PLAN AWARDS**





No
      long-term incentive plan awards were made to any of our executive officers
      during the last fiscal year.




29





**COMPENSATION
      OF DIRECTORS**





**Director
      Compensation**





The
      following table sets forth with respect to the named director, compensation
      information inclusive of equity awards and payments made in the year end
      December 31, 2006.





Name
              (a)
            
            Fees
                Earned or Paid in Cash
              ($)
              (b)
            
            Stock
                Awards
              ($)
              (c)
            
            Option
              Awards
                ($)
              (d)
            
            Non-Equity
                Incentive Plan Compensation ($)
              (e)
            
            Change
                in Pension Value and Nonqualified Deferred Compensation
                Earnings
              (f)
            
            All
                Other Compensation
              ($)
              (g)
            
            Total
              ($)
              (h)Craig
                Washington
            
            
            
            
            $
            17,607Benedict
                Amendolara
            
            
            
            
            $
            12,500




On
      January 2, 2006, the Company’s board of directors approved the 2006 Non-Employee
      Director’s Stock Incentive Plan subject to shareholder approval. The Stock
      Incentive Plan provides for the issuance of Options, Restricted Stock, and/or
      Deferred Stock to an Awardee. The total number of shares of Common Stock, which
      may be awarded under the Plan is 1,500,000. If any awarded shares are forfeited,
      they become available for future issuance. An annual aggregate limit of 300,000
      shares (including Options, Restricted Stock, and Deferred Stock) is set for
      any
      individual Director.





The
      Stock
      Incentive Plan shall have a duration of ten years commencing on January 1,
      2006.
      Awardees are defined as director to whom an award is made. An eligible director
      is any person who on the date of grant is a member of the Board of Directors
      of
      the Company and is not an employee of the Company or of any Subsidiary. Stock
      Options are non-qualified right-to-buy Options for the purchase of Common Stock
      of the Company. The term of each Option shall be ten years from the Date of
      Grant. The Option Price shall be the Fair Market Value of Execute Sports, Inc.
      Common Stock on the date the Option is granted. Under no circumstances shall
      any
      Option vest in less than one year from the date of grant. Shares purchased
      upon
      exercise of an Option must be paid for in full at the time of exercise either
      in
      cash *or
      with currently owned shares* .
      Neither
      the Committee on Directors and Governance nor the Board of Directors may
      re-price any Option that is less than the option exercise price. Restricted
      Stock is Common Stock of the Company restricted as to sale in such fashion
      as
      the Committee on Directors and Governance shall determine. Prior to the lifting
      of the restrictions, the Awardee will be entitled to receive dividends from
      and
      to vote the shares of Restricted Stock.


30





**Executives'
      Compensation Policies**





Compensation
      of our executives is intended to attract, retain and award persons who are
      essential to the corporate enterprise. The fundamental policy of our executive
      compensation program is to offer competitive compensation to executives that
      appropriately rewards the individual executive's contribution to corporate
      performance. The board of directors utilizes subjective criteria for evaluation
      of individual performance and relies substantially on our executives in doing
      so. The Board focuses on two primary components of our executives’ compensation
      program, each of which is intended to reflect individual and corporate
      performance: base salary and long-term incentive compensation.





Executives'
      base salaries are determined primarily by reference to compensation packages
      for
      similarly situated executives of companies of similar size or in comparable
      lines of business with whom we expect to compete for executive talent and with
      reference to revenues, gross profits and other financial criteria. The Board
      also assesses subjective qualitative factors to discern a particular executive's
      relative value to the corporate enterprise in establishing base salaries.





It
      is the
      Board's philosophy that significant stock ownership by management creates a
      powerful incentive for executives to build long-term shareholder value.
      Accordingly, the board believes that an integral component of executive
      compensation is the award of equity-based compensation, which is intended to
      align executives' long-term interests with those of our shareholders. The board
      believes that option grants should be considered on an annual
      basis.





*Employment
      Agreements with Executive Officers*





Execute
      Sports, Inc. has executed employment agreements with its top executive officers.
      Below is a summary of the major terms of these employment agreements.




**EMPLOYMENT
      AGREEMENTS**





Geno
      M.
      Apicella, Founder and CEO. Mr. Apicella’s employment with us is governed by an
      employment agreement which provides for a base salary at the rate of ninety
      six
      thousand ($96,000.00) per year under employment. In addition to his base salary,
      Mr. Apicella has been granted 2,000,000 shares of the Company’s restricted
      common stock and an additional 500,000 shares upon ascension to the role of
      CEO.
      The Company may also provide Mr. Apicella with bonuses in cash or other
      compensation.





Celeste
      Berouty, President/Secretary. Ms Berouty’s employments with us is governed by an
      employment agreement which provides for a base salary at the rate of one hundred
      seventy five thousand ($175,000) per year under employment. In addition to
      her
      base salary, Ms. Berouty was granted 500,000 shares upon ascension to the role
      of President. The company may also provide Ms. Berouty with bonuses in cash
      or
      other compensation.





Sheryl
      Gardner, CFO. Ms. Gardner’s employment with us is governed by the laws of the
      State of California which provides for a base salary at the rate of seventy
      two
      thousand ($72,000.00) per year under employment. In addition to her base salary,
      Mrs. Gardner has been granted 500,000 shares of the Company’s restricted common
      stock. The Company may also provide Ms. Gardner with bonuses in cash or other
      compensation. Ms. Garnder is on medical leave of absence and the Company does
      not currently know when, or if, Ms. Gardner will return.




31





**ITEM
      11. Security Ownership Of Certain Beneficial Owners And
      Management**





The
      following table sets forth certain information regarding beneficial ownership
      of
      our common stock as of December 31, 2006, by (i) each person known by us to
      be
      the beneficial ownership of more than 5 percent of the outstanding common stock,
      (ii) each director, (iii) each executive officer, and (iv) all executive
      officers and directors as a group. The number of shares beneficially owned
      is
      determined under the rules promulgated by the SEC, and the information is not
      necessarily indicative of beneficial ownership for any other purpose. Under
      those rules, beneficial ownership includes any shares as to which the individual
      has sole or shared voting power or investment power and also any shares which
      the individual has the right to acquire within 60 days of the date hereof,
      through the exercise or conversion of any stock option, convertible security,
      warrant or other right. Including those shares in the tables does not, however,
      constitute an admission that the named stockholder is a direct or indirect
      beneficial owner of those shares. Unless otherwise indicated, each person or
      entity named in the table has sole voting power and investment power (or shares
      that power with that person's spouse) with respect to all shares of capital
      stock listed as owned by that person or entity.




Name
                  and Address of Beneficial Owner
              
              Shares
                  Beneficially Owned
              
              Percent
                  of ClassLeon
                  Monfort
              
              
              2,500,000
              
              
              6.4
              %2258
                  Rutherford RoadCarlsbad,
                  CA 92008Directors
                  and Executive Officers (1):c/o
                  Execute Sports, Inc.21143
                  Hawthorne BL #425Torrence,
                  CA 90503Geno
                  Apicella
              
              
              4,893,845
              
              
              12.6
              %Celeste
                  Berouty
              
              
              1,942,308
              
              
              5.0
              %Sheryl
                  Gardner*
              
              
              1,056,000
              
              
              2.7
              %Craig
                  Washington
              
              
              1,394,450
              
              
              3.6
              %Benedict
                  Amendolar
              
              
              1,333,974
              
              
              3.4
              %All
                  Officers and Directors as a Group
              
              
              10,620,577
              
              
              27.4
              %






*Ms.
          Gardner is on medical leave of absence.
 
 (1)
          Includes only shares of common stock issued. None of the persons listed
          have
          been granted stock options, warrants or any other security that is exercisable
          or convertible into common stock.


32





**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**





We
      have
      described below transactions in the last two years between Execute Sports and
      an
      officer, director, 5% stockholder or any of their immediate family members
      that
      have been entered. For information about compensation paid in connection with
      employment or Board service for Named Officers and directors, see “Executive
      Compensation” beginning on page 25.





*Related
      Party Transactions.*





In
      2003,
      the Company issued unsecured promissory Notes (the “Notes”) bearing 2% interest
      per month to Don Dallape and Scott Swendener, two of our executive officers,
      each of whom was also one of our directors, who provided financing to our
      Company in the aggregate principle amount of $585,762.





In
      2005,
      the Company issued additional unsecured promissory Notes (the “Notes”) bearing
      2% interest per month to Don Dallape and Scott Swendener who provided financing
      to our Company in the aggregate principle amount of $92,353.





Later
      in
      2005, all of the Notes issued to Don Dallape and Scott Swendener were converted
      to outside, non-affiliated individuals to the Company. In February 2006, the
      Notes were renegotiated by the Company to bear 2% annual interest, and all
      unpaid back interest totaling $104,232 was converted to the Company’s common
      stock at $.25 per share, or 4 shares for each unpaid $1.00 of interest.





In
      2005,
      the Company entered into a Consulting Agreement with Todd M. Pitcher to provide
      business consulting services on an ongoing basis to the Company. Such services
      included the maintaining of corporate minutes and related administrative
      documentation, shareholder recordkeeping, debt restructuring and distribution
      of
      shareholder reports. Under the terms of the Agreement the Company paid Mr.
      Pitcher at a rate of $2,000.00 per month and a grant of 400,000 shares of the
      Company’s restricted Common Stock.





During
      the year ended December 31, 2006, 1,000,000 shares of common stock previously
      issued to the founders and president (300,000 Don Dallape, 300,000 Scott
      Swedener, 300,000 Geno Apicella and 100,000 Todd Pitcher) were voluntarily
      returned to the Company and cancelled by each shareholder in an effort to
      improve the Company’s capital structure. The shares were originally expensed as
      stock compensation expense for $0.25 per share, or $250,000 on April 1, 2005.
      The Company reclassified the par value, or $1,000 out of Common Stock and
      increased Additional-Paid-in-Capital in order to reflect the reduction in the
      legal value of the canceled shares.





During
      the year ended December 31, 2006, the Company incurred $35,622 of expenses
      paid
      on its behalf by Comprehensive Communications LLC, a company wholly owned by
      the
      Company’s former President, Todd Pitcher.





During
      the year ended December 31, 2006, the Company incurred $25,856 of expenses
      paid
      on its behalf by Geno Apicella, CEO. In addition, Geno made loans to the company
      totaling $103,636 of which the Company has repaid $57,577 as of December 31,
      2006. As of December 31, 2006, the Company was indebted to Mr. Apicella for
      $54,700.


33


**ITEM
      13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K.**




(a)
      Exhibits





Financial
      Statements





INDEPENDENT
                AUDITORS REPORT
            
            
            F-1-2CONSOLIDATED
                FINANCIAL STATEMENTSConsolidated
                Balance Sheet
            
            
            F-3Consolidated
                Statements of Operations
            
            
            F-4Consolidated
                Statements of Stockholders' Equity
            
            
            F-5Consolidated
                Statements of Cash Flow
            
            
            F-6Notes
                to Consolidated Financial Statements
            
            
            F-7-26




The
      following exhibits filed as part of this Form 10-KSB include both exhibits
      submitted with this Report and those incorporated by reference to other
      filings:




**Exhibit
                Number**
            
            **Description**
            
            **By
                Reference from Document**2.1
            
            Acquisition
                Agreement, dated as of January 16, 2006 by and between Execute Sports,
                Inc. and Pacific Sports Group, Inc. (Incorporated by reference with
                the
                Company's Form 8-K filed on January 19, 2006)2.2
            
            Financial
                statements of acquired company, Pacific Sports Group, Inc. dated
                as of
                December 31, 2006 and 2005 (Incorporated by reference with the Company's
                Form 8-K filed on March 20, 2006).2.3
            
            Trademark
                Transfer and Assignment Agreement between the Company and Duane Pacha
                and
                Jeff Baughn, dated January 31, 2007 (Incorporated by reference to
                Exhibit
                10.1 of the Company’s Current Report on Form 8-K, filed on February 5,
                2007)10.1
            
            Entry
                into binding letter of intent between Execute Sports, Inc. and Pacific
                Sports Group, Inc. (Incorporated by reference with the Company’s Form 8-K
                filed on January 3, 2006).10.2
            
            Non-Employee
                Directors Stock Incentive Plan (Incorporated by reference with the
                Company’s Form 8-K filed on January 4, 2006).




34




10.3
            
            Private
                Equity Credit Agreement with Skiva Graphics and Screen Printing
                (Incorporated by reference with the Company’s Form 8-K filed on March 8,
                2006).10.4
            
            10.4
                Secured Notes (Incorporated by reference with the Company’s Form 8-K filed
                on March 27, 2006).17.1
            
            Resignation
                of Donald Dallape as President of Execute Sports, Inc. and appointment
                of
                Todd M. Pitcher as President and Secretary of Execute Sports, Inc.
                (Incorporated by reference with the Company’s Form 8-K filed on December
                21, 2005).17.2
            
            Resignation
                of Todd Hahn as Chief Executive Officer and Todd M. Pitcher as President,
                Secretary and director and appointment of Geno Apicella as the company’s
                Chief Executive Officer and Celeste Berouty as the company’s President
                (Incorporated by reference with the Company’s Form 8-K filed on December
                26, 2006).23.1
            
            Consent
                of Independent Public Accountant, dated April 13, 200631.1
            
            Certification
                of Chief Executive Officer Pursuant to Rules 13a-14 and 15d-14 of
                the
                Securities Exchange Act of 1934
            
            *31.2
            
            Certification
                of Chief Financial Officer Pursuant to Rules 13a-14 and 15d-14 of
                the
                Securities Exchange Act of 1934
            
            *32.1
            
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002
            
            *32.2
            
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002
            
            *





*
            Filed
                herewith




**ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.**





(1)
            Audit
                Fees





The
      aggregate fees billed for professional services rendered by Bedinger &
Company for the audit of the Registrant's annual financial statements and review
      of the financial statements included in the Registrant's Forms 10-QSB or
      services that are normally provided by the accountant
      in connection with statutory and regulatory filings or engagements for fiscal
      year 2006 were $45,860. Additionally, Bedinger & Company has charged
      $5,500or tax preparation services for fiscal year 2006.





(2)
            Audit
                Committee Policies and Procedures





The
      Registrant does not have an audit committee. The Board of Directors of the
      Registrant approved all of the services rendered to the Registrant by Bedinger
      & Company for fiscal years 2006 and 2005.




(3)
            Audit
                Work Attributed to Persons Other than Bedinger & Company’s Full-time,
                Permanent Employees.





Not
      applicable.


35


**SIGNATURES**





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




Date:
              April 13, 2007
            Execute
              Sports,
              Inc.By:
            /s/
              Geno
              M. ApicellaGeno
              M. ApicellaChief
              Executive Officer




In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.




SIGNATURE
            
            TITLE
            
            DATE/s/
                Geno M. Apicella
            
            Chief
                Executive Officer
            
            April
                13, 2007Geno
                M. Apicella
            
            and
                Principle Accounting OfficerBOARD
                OF DIRECTORS/s/
                Celeste Berouty
            
            President,
                Secretary
            
            April
                13, 2007Celeste
                Berouty
            
            and
                Director/s/
                Craig Washington
            
            Director
            
            April
                13, 2007Craig
                Washington/s/
                Benedict Amendolara
            
            Director
            
            April
                13, 2007Benedict
                Amendolara




36







**EXECUTE
      SPORTS, INC.**





**REPORT
      ON AUDIT OF CONSOLIDATED FINANCIAL STATEMENTS**





**YEARS
      ENDED DECEMBER 31, 2006 AND 2005**





37




CONTENTS




PAGEReport
                of Independent Registered Public Accounting Firm
            
            
            F-1-2FINANCIAL
                STATEMENTSConsolidated
                Balance Sheet
            
            
            F-3Consolidated
                Statements of Operations
            
            
            F-4Consolidated
                Statement of Stockholders’ Equity
            
            
            F-5Consolidated
                Statements of Cash Flows
            
            
            F-6Notes
                to the Financial Statements
            
            
            F-7-26




38




REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




Board
      of
      Directors


Execute
      Sports, Inc.





We
      have
      audited the accompanying consolidated balance sheet of Execute Sports, Inc.
      (the
“Company”), as of December 31, 2006 and the related consolidated statements of
      operations, stockholders’ equity (deficit), and cash flows for the years ended
      December 31, 2006 and December 31, 2005. These financial statements are the
      responsibility of the Company's management. Our responsibility is to express
      an
      opinion on these financial statements based on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, based on our audits, the consolidated financial statements referred
      to
      above present fairly, in all material respects, the financial position of
      Execute Sports, Inc. as of December 31, 2006 and the related consolidated
      statements of operations, stockholders’ equity (deficit), and cash flows for the
      years ended December 31, 2006 and December 31, 2005, in conformity with
      accounting principles generally accepted in the United States of
      America.




F-1







Board
      of
      Directors


Execute
      Sports, Inc.


Page
      Two




The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. However, the Company has suffered recurring
      losses from operations that raises substantial doubt about its ability to
      continue as a going concern. Management plans in regards to these matters are
      also described in Note N. The financial statements do not include any
      adjustments that might result from the outcome of this uncertainty.




/s/
                Bedinger & CompanyCertified
                Public AccountantsConcord,
                California
                April
                  12, 2007  F-2




**EXECUTE
                  SPORTS, INC.**Consolidated
                  Balance SheetDecember
                  31, 2006
 
  December
                  31,2006ASSETSCURRENT
                  ASSETSCash
              
              $
              74,386Accounts
                  receivable, net (Note B)
              
              
              252,937Inventory
                  (Note C)
              
              
              28,355Prepaid
                  expenses
              
              
              49,494Deferred
                  financing costs (Note H)
              
              
              103,975Loan
                  receivable and accrued interest, net of reserve (Note D)
              
              
              146,128Employee
                  advance
              
              
              1,000TOTAL
                  CURRENT ASSETS
              
              
              656,275Fixed
                  assets (Note E)Cost
              
              
              140,230Accumulated
                  Depreciation
              
              
              (42,653
              )Net
              
              
              97,577TOTAL
                  ASSETS
              
              $
              753,852LIABILITIES
                  AND STOCKHOLDERS' EQUITYCURRENT
                  LIABILITIESAccounts
                  payable and accrued expenses (Note G)
              
              $
              740,283Secured
                  borrowings (Note B)
              
              
              42,501Convertible
                  debenture, net (Note H)
              
              
              634,075Notes
                  Payable (Note I)
              
              
              231,892Related
                  party notes payable (Note I)
              
              
              247,606TOTAL
                  CURRENT LIABILITIES
              
              
              1,896,357COMMITMENT
              
              
              -STOCKHOLDERS'
                  EQUITY (Note J)Common
                  stock, par value $.001, 75,000,000 shares authorized;issued
                  and outstanding 38,783,870 at December 31, 2006
              
              
              38,779Additional
                  paid-in capital
              
              
              8,973,715Retained
                    earnings <Deficit>
              
              
              (10,154,999
              )TOTAL
                  STOCKHOLDERS' DEFICIT
              
              
              (1,142,505
              )TOTAL
                  LIABILITIES ANDSTOCKHOLDERS'
                  EQUITY
              
              $
              753,852
  SEE
                  NOTES TO FINANCIAL STATEMENTS  F-3


**EXECUTE
                  SPORTS, INC.**Consolidated
                  Statement of OperationsFor
                  the Years Ended December 31, 2006 and
                  2005
 
  Year
                  EndedDecember
                  31,2006
              
              2005REVENUESSales
              
              $
              2,018,468
              
              $
              1,389,163Cost
                  of sales
              
              
              1,822,503
              
              
              1,056,441Gross
                  profit
              
              
              195,965
              
              
              332,722EXPENSESGeneral
                  and administrative
              
              
              2,858,223
              
              
              3,582,721Selling
                  and advertising
              
              
              456,939
              
              
              240,247Depreciation
              
              
              6,947
              
              
              5,953Total
                  expense
              
              
              3,322,109
              
              
              3,828,921Loss
                  from operations
              
              
              (3,126,144
              )
              
              (3,496,199
              )OTHER
                  INCOME AND EXPENSEInterest
                  income
              
              
              6,740
              
              
              11Other
                  income
              
              
              6,705
              
              
              -Interest
                  expense
              
              
              (196,422
              )
              
              (70,389
              )Other
                  expense
              
              
              -
              
              
              (3
              )Loss
                  due to loan reserve
              
              
              (250,000
              )
              
              -Loss
                  due to discount on conversion to stock
              
              
              (32,822
              )
              
              -Amortization
                  of beneficial conversion feature of convertible debenture
              
              
              (435,577
              )
              
              -Amortization
                  of warrant discount related to convertible debenture
              
              
              (205,788
              )
              
              -Amortization
                  of deferred financing costs
              
              
              (87,025
              )
              
              -Impairment
                  of goodwill
              
              
              (1,288,577
              )
              
              -Total
                  other income and expenses
              
              
              (2,482,766
              )
              
              (70,381
              )NET
                  LOSS
              
              $
              (5,608,910
              )
              $
              (3,566,580
              )Weighted
                  average shares outstanding
              
              
              22,973,747
              
              
              11,982,506Earnings
                  per share
              
              $
              (0.24
              )
              $
              (0.30
              )The
                  average shares listed below were not included in the
                  computationof
                  diluted losses per share because to do so would have beenantidilutive
                  for the periods presented:Stock
                  options
              
              
              900,000
              
              
              900,000Warrants
              
              
              2,222,158
              
              
              -Debt
                  collateralized with common stock
              
              
              8,402,389
              
              
              -
  SEE
                  NOTES TO FINANCIAL STATEMENTS




F-4





**EXECUTE
                  SPORTS, INC.**Consolidated
                  Statement of Stockholder's EquityFor
                  the Years Ended December 31, 2006 and 2005
 
  Common
                  Stock
              
              Additional
              
              Retained
              
              TotalNumber
                  of
              
              
              
              Payable/
              
              Paid-in
              
              Earnings
              
              Stockholder'sShares
              
              Amount
              
              Subscribed
              
              Capital
              
              <Deficit>
              
              EquityDecember
                  31, 2004
              
              
              -
              
              $
              -
              
              $
              169,500
              
              $
              -
              
              $
              (979,509
              )
              $
              (810,009
              )Share
                  subscriptions receivable
              
              
              
              
              
              
              
              
              
              
              
              (5,130
              )
              
              
              
              
              (5,130
              )Shares
                  subscribed for cash
              
              
              2,918,000
              
              
              2,918
              
              
              (69,500
              )
              
              726,582
              
              
              
              
              
              660,000Shares
                  issued in connection with SB-2
              
              
              3,061,570
              
              
              3,057
              
              
              105,000
              
              
              1,068,494
              
              
              
              
              
              1,176,551Shares
                  payable for services
              
              
              12,310,000
              
              
              12,310
              
              
              (100,000
              )
              
              3,065,190
              
              
              
              
              
              2,977,500Shares
                  payable for accrued interest
              
              
              416,931
              
              
              417
              
              
              
              
              
              103,815
              
              
              
              
              
              104,232Shares
                  issued for acquisition
              
              
              
              
              
              
              
              
              676,400
              
              
              
              
              
              
              
              
              676,400Shares
                  to be issued fordirector
                  compensation
              
              
              
              
              
              
              
              
              7,500
              
              
              
              
              
              
              
              
              7,500Net
                  Loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (3,566,580
              )
              
              (3,566,580
              )December
                  31, 2005
              
              
              18,706,501
              
              $
              18,702
              
              $
              788,900
              
              $
              4,958,951
              
              $
              (4,546,089
              )
              $
              1,220,464Shares
                  subscriptions received
              
              
              
              
              
              
              
              
              
              
              
              5,130
              
              
              
              
              
              5,130Shares
                  issued for acquisition
              
              
              1,932,569
              
              
              1,933
              
              
              (676,400
              )
              
              674,467
              
              
              
              
              
              -Shares
                  issued for director compensation
              
              
              1,073,808
              
              
              1,073
              
              
              (7,500
              )
              
              36,533
              
              
              
              
              
              30,106Shares
                  issued for cash in connection withthe
                  SB-2 filed 6/16/05
              
              
              300,000
              
              
              300
              
              
              (105,000
              )
              
              104,700
              
              
              
              
              
              -Founders
                  shares voluntarily canceled
              
              
              (1,000,000
              )
              
              (1,000
              )
              
              
              
              
              1,000
              
              
              
              
              
              -Shares
                  issued pursuant to warrant exercises
              
              
              655,000
              
              
              655
              
              
              
              
              
              137,595
              
              
              
              
              
              138,250Shares
                  issued for cash
              
              
              200,000
              
              
              200
              
              
              
              
              
              69,800
              
              
              
              
              
              70,000Shares
                  issued for services
              
              
              12,303,816
              
              
              12,304
              
              
              
              
              
              470,399
              
              
              
              
              
              482,703Shares
                  issued for notes payable
              
              
              1,862,127
              
              
              1,862
              
              
              
              
              
              368,480
              
              
              
              
              
              370,342Shares
                  issued pursuant to PUT agreement
              
              
              2,750,049
              
              
              2,750
              
              
              
              
              
              161,347
              
              
              
              
              
              164,097Stock
                  options granted
              
              
              
              
              
              
              
              
              
              
              
              85,313
              
              
              
              
              
              85,313Beneficial
                  conversion feature ofconvertible
                  debenture
              
              
              
              
              
              
              
              
              
              
              
              1,425,000
              
              
              
              
              
              1,425,000Warrant
                  discount to convertible debenture
              
              
              
              
              
              
              
              
              
              
              
              475,000
              
              
              
              
              
              475,000Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (5,608,910
              )
              
              (5,608,910
              )December
                  31, 2006
              
              
              38,783,870
              
              
              38,779
              
              
              -
              
              
              8,973,715
              
              
              (10,154,999
              )
              
              (1,142,505
              )SEE
                  NOTES TO FINANCIAL STATEMENTS





F-5




**EXECUTE
                  SPORTS, INC.**Consolidated
                  Statements of Cash FlowsFor
                  the Years Ended December 31, 2006 and
                  2005
 
 Year
                    Ended December 31,2006
              
              2005CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  income (loss)
              
              $
              (5,608,910
              )
              $
              (3,566,580
              )Adjustments
                  to reconcile net losstonet
                  cash used by operating activities:Depreciation
                  and amortization
              
              
              6,947
              
              
              18,510Common
                  stock payable for services
              
              
              512,798
              
              
              2,985,000Compensation
                  expense on options granted
              
              
              85,313
              
              
              -Common
                  stock payable for accrued interest
              
              
              -
              
              
              104,232Loss
                  on the conversion of convertible debt
              
              
              32,822
              
              
              -Amortization
                  of beneficial conversion feature
              
              
              435,577
              
              
              -Amortization
                  of warrant discount related to convertible debenture
              
              
              205,788
              
              
              -Increase
                  in loan receivable loss reserve
              
              
              250,000
              
              
              -CHANGES
                  IN ASSETS AND LIABILITIES:(Increase)
                  decrease in assets:Accounts
                  receivable
              
              
              (109,599
              )
              
              (35,630
              )Inventory
              
              
              223,433
              
              
              (140,047
              )Prepaid
                  expenses
              
              
              315,235
              
              
              (283,222
              )Deferred
                  financing costs
              
              
              (103,975
              )
              
              -Employee
                  advance
              
              
              (1,000
              )
              
              -Other
                  assets
              
              
              -
              
              
              -Increase
                  (decrease) in current liabilities:Accounts
                  payable and accrued expenses
              
              
              105,913
              
              
              168,663Customer
                  deposits
              
              
              (25,262
              )
              
              25,262NET
                  CASH USED FOR OPERATING ACTIVITIES
              
              
              (3,674,920
              )
              
              (723,812
              )CASH
                  FLOWS FROM INVESTING ACTIVITIES:Change
                  in goodwill
              
              
              1,288,577
              
              
              (1,288,577
              )Loan
                  proceeds to unaffiliated company
              
              
              (158,874
              )
              
              (237,253
              )Acquisition
                  of furniture and equipment
              
              
              (92,231
              )
              
              (12,556
              )NET
                  CASH PROVIDED (USED) FOR INVESTING ACTIVITIES
              
              
              1,037,472
              
              
              (1,538,386
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Increase
                  in deposits
              
              
              5,760
              
              
              (2,200
              )Common
                  stock payable for acqusition
              
              
              -
              
              
              676,400Common
                  stock subscribedIssuance
                  of common stock for cash
              
              
              213,380
              
              
              1,831,421Proceeds
                  from convertible debenture
              
              
              1,900,000
              
              
              -Issuance
                  of common stock in payment of convertible debenture
              
              
              131,284
              
              
              -Proceeds
                  from notes payable
              
              
              30,000
              
              
              105,376Repayment
                  of notes payable
              
              
              (239,907
              )
              
              (178,376
              )Issuance
                  of common stock for notes payable
              
              
              370,342
              
              
              -Proceeds
                  from related party notes payable
              
              
              638,636
              
              
              28,016Repayment
                  of related party notes payable
              
              
              (466,496
              )
              
              (52,551
              )Secured
                  borrowings
              
              
              (242,300
              )
              
              220,093NET
                  CASH PROVIDED BY FINANCING ACTIVITIES
              
              
              2,340,699
              
              
              2,628,179NET
                  INCREASE <DECREASE> IN CASH
              
              
              (296,749
              )
              
              365,981CASH,
                  beginning of period
              
              
              371,135
              
              
              5,154CASH,
                  end of period
              
              $
              74,386
              
              $
              371,135SUPPLEMENTAL
                  DISCLOSURE:Taxes
                  paid
              
              $
              13,268
              
              $
              2,570Interest
                  paid
              
              $
              25,329
              
              $
              21,572Other
                  non-cash investing and financing activities:Shares
                  issued for services
              
              $
              512,798
              
              $
              2,985,000Shares
                  issued for debt retirement
              
              $
              534,439
              
              $
              104,232SEE
                  NOTES TO FINANCIAL STATEMENTS
  F-6





EXECUTE
      SPORTS, INC.


NOTES
      TO
      THE CONSOLIDATED FINANCIAL STATEMENTS


FOR
      THE
      YEARS ENDED DECEMBER 31, 2006 AND 2005




NOTE
      A
      - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Organization





Execute
      Sports, Inc. (the "Company") was founded in 2002 as Padova International USA,
      Inc. to produce graphics kits and ancillary soft goods for the motocross, enduro
      and ATV markets.





In
      2003,
      the Company launched its water sports division under the "Execute Sports" brand
      to provide wetsuits, vests, rash guards and ancillary products to the wake
      board
      and ski markets.





On
      March
      3, 2005 the Company changed its name from Padova International U.S.A., Inc.
      (DBA
      Execute Sports) to Execute Sports, Inc.





Summary
      of Significant Accounting Principles





Basis
      of Presentation





The
      financial statements include the accounts of Execute Sports, Inc. and its wholly
      owned subsidiary PSG under the accrual basis of accounting.





Accounting
      estimates





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





Principles
      of consolidation





The
      consolidated financial statements include the accounts of Execute Sports, Inc.
      and its subsidiary, which is 100% consolidated in the financial statements.
      All
      material inter-company accounts and transactions have been
      eliminated.





Cash
      and cash equivalents





For
      purposes of the statement of cash flows, the Company considers all highly liquid
      debt instruments purchased with an original maturity of three months or less
      to
      be cash equivalents.





Accounts
      receivable





Accounts
      receivable are reported at the customers' outstanding balances less any
      allowance for doubtful accounts. Interest is not accrued on overdue accounts
      receivable. The Company evaluates receivables on a regular basis for potential
      reserve. During year ended December 31, 2006, the allowance for doubtful
      accounts increased from $4,000 at December 31, 2005 to $49,000 at December
      31,
      2006.




F-7


EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE
      A
      - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Accounts
      Receivable (Continued)





The
      Company has entered into a factoring agreement with JD Factors. In the agreement
      JD Factors will provide account receivable financing and factoring to the
      Company. JD Factors will purchase from the Company the accounts receivable
      and
      may pay a portion of the purchase price, or lend money to the Company based
      upon
      accounts receivable of the Company.





Inventories





Inventories
      are valued at the lower of cost or market. Cost is determined using the average
      costing method. Management performs periodic assessments to determine the
      existence of obsolete, slow moving and non-salable inventories, and records
      necessary provisions to reduce such inventories to net realizable
      value.





Property
      and equipment





Property
      and equipment are stated at cost. Major renewals and improvements are charged
      to
      the asset accounts while replacements, maintenance and repairs, which do not
      improve or extend the lives of the respective assets, are expensed. At the
      time
      property and equipment are retired or otherwise disposed of, the asset and
      related accumulated depreciation accounts are relieved of the applicable
      amounts. Gains or losses from retirements or sales are credited or charged
      to
      income.





Depreciation
      is provided using the 200% declining balance method. It is calculated over
      recovery periods as prescribed by management that range from 5 years for
      equipment to 7 years for furniture.





Goodwill





The
      Company accounts for goodwill in accordance with SFAS No. 142, Goodwill and
      Other Intangible Assets. This statement requires that goodwill arising from
      an
      acquisition of a business be periodically assessed for impairment rather than
      amortized on a straight-line basis. Accordingly, the Company annually reviews
      the carrying value of this goodwill to determine whether impairment, as measured
      by fair market value, may exist. SFAS No. 142 requires that goodwill assets
      be
      assessed for impairment using fair value measurement techniques. Specifically,
      goodwill impairment is determined using a two-step process. The first step
      of
      the goodwill impairment test is used to identify potential impairment by
      comparing the fair value of a reporting unit with its carrying amount, including
      goodwill. If the fair value of a reporting unit exceeds its carrying amount,
      goodwill of the reporting unit is not considered to be impaired and the second
      step of the impairment test is unnecessary. If the carrying amount of a
      reporting unit exceeds its fair value, the second step of the goodwill
      impairment test is performed to measure the amount of impairment loss, if any.
      The second step of the goodwill impairment test compares the implied fair value
      of the reporting unit's goodwill with the carrying amount of that goodwill.




F-8


EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE
      A
      - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Goodwill
      (Continued)





If
      the
      carrying amount of the reporting unit's goodwill exceeds the implied fair value
      of that goodwill, an impairment loss is recognized in an amount equal to that
      excess.





Long-lived
      assets





The
      Company has adopted Statement of Financial Accounting Standards No. 144 (SFAS
      144). The Statement requires that long-lived assets be reviewed for impairment
      whenever events or changes in circumstances indicate that the historical
      cost-carrying value of an asset may no longer be appropriate. The Company
      assesses recoverability of the carrying value of an asset by estimating the
      future net cash flows expected to result from the asset, including eventual
      disposition. If the future net cash flows are less than the carrying value
      of
      the asset, an impairment loss is recorded equal to the difference between the
      asset's carrying value and fair value.





Revenue
      recognition policy





Revenue
      from the sale of goods is recognized when the earning process is complete and
      the risk and rewards of ownership have transferred to the customer, which is
      generally considered to have occurred upon the shipment to the
      customer.





Shipping
      and handling costs





The
      Company's policy is to classify shipping and handling costs as selling, general
      and administrative expenses.





Advertising





The
      Company expenses all advertising costs as incurred. For the year ended December
      31, 2006 and 2005 the Company incurred approximately $91,538 and $50,212 in
      advertising expenses, respectively.





Loss
      per common share





The
      Company adopted Statement of Financial Accounting Standards No. 128 that
      requires the reporting of both basic and diluted earnings (loss) per share.
      Basic loss per share is calculated using the weighted average number of common
      shares outstanding in the period. Diluted loss per share includes potentially
      dilutive securities such as outstanding options and warrants, using the
“treasury stock” method and convertible securities using the "if-converted"
      method. There were no adjustments required to net loss for the period presented
      in the computation of diluted earnings per share.




F-9


EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        YEARS ENDED DECEMBER 31, 2006 AND 2005





NOTE
      A
      - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Issuance
      of common stock




The
      issuance of common stock for other than cash is recorded by the Company at
      management’s estimate of the fair value of the assets acquired or services
      rendered.





Comprehensive
      loss





The
      Company adopted Financial Accounting Standards Board Statement of Financial
      Standards No. 130, “Reporting Comprehensive Income”, which establishes standards
      for the reporting and display of comprehensive income and its components in
      the
      financial statements. There were no items of comprehensive income (loss)
      applicable to the Company during the periods covered in the financial
      statements.





Income
      taxes





On
      November 1, 2004, the Company legally amended its Articles of Incorporation
      to
      make the transition from an S-Corporation to a C-Corporation. Prior to that
      the
      S Corporation was not a tax paying entity for federal or state income tax
      purposes and thus no provision for income taxes was recognized. Subsequent
      to
      the change the Company began recognizing the full valuation for deferred tax
      assets (See NOTE N).





Impact
      of accounting standards





In
      May
      2005,  the FASB issued FASB Statement No. 154,  "Accounting 
Changes and
      Error  Corrections" ("SFAS  154") which  replaces  APB
      Opinion No. 20, Accounting Changes, and FASB Statement No. 3, "Reporting
      Accounting Changes in Interim Financial  Statements".  Among other
      changes,  SFAS 154 requires that voluntary change in accounting principle
      or a change required by a new accounting   pronouncement 
that  does  not  include  specific   transition
      provisions  be  applied  retrospectively  with all
      prior  period  financial statements 
      presented  on  the  new  accounting  principle, 
unless  it  is impracticable  to do so. SFAS 154 also provides
      that (1) a change in method of depreciating or amortizing a long-lived
      non-financial asset be accounted for as a change in estimate 
(prospectively)  that was effected by a change in accounting
      principle,  and (2) correction of errors in previously issued
      financial  statements  should  be  termed  a 
"restatement."  SF AS 154 is effective for accounting changes
      and correction of errors made in fiscal years beginning after June 15,
      2005.  Accordingly, the Company is required to adopt the provisions of
      SF AS 154 in the first quarter of fiscal 2006, beginning on January 1,
      2006.  The Company does not believe that this recent accounting
      pronouncement will have a material impact on their financial position or results
      of operations.





In
      February 2006, the FASB issued SFAS 155 "Accounting for Certain Hybrid Financial
      Instruments, an amendment of FASB Statements No. 133 and in February 2006,
      the
      FASB issued SFAS 155 "Accounting for Certain Hybrid Financial Instruments,
      an
      amendment of FASB Statements No. 133 and 140". This Statement amends FASB
      Statements No. 133, Accounting for Derivative Instruments and Hedging
      Activities, and No. 140, Accounting for Transfers
      and Servicing of Financial Assets and Extinguishments of Liabilities. This
      Statement resolves issues addressed in Statement 133 Implementation Issue No.
      D1, Application of statement 133 to Beneficial Interests in Securitized
      Financial Assets. This Statement:


a.
        Permits fair value re-measurement for any hybrid financial instrument that
        contains an embedded derivative that otherwise would require
        bifurcation;




F-10


EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE
      A
      - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Impact
      of accounting standards (Continued)




b.
      Clarifies which interest-only strips and principal-only strips are not subject
      to the requirements of Statement 133;





c.
      Establishes a requirement to evaluate interests in securitized financial assets
      to identify interests that are freestanding derivatives or that are hybrid
      financial instruments that contain an embedded derivative requiring
      bifurcation;





d.
      Clarifies that concentrations of credit risk in the form of subordination are
      not embedded derivatives; and





e.
      Amends
      Statement 140 to eliminate the prohibition on a qualifying special-purpose
      entity from holding a derivative financial instrument that pertains to a
      beneficial interest other than another derivative financial
      instrument.





This
      Statement is effective for all financial instruments acquired or issued after
      the beginning of an entity's first fiscal year that begins after September
      15,
      2006. The fair value election provided for in paragraph 4 of this Statement
      may
      also be applied upon adoption of this Statement for hybrid financial instruments
      that had been bifurcated under paragraph 12 of Statement 133 prior to the
      adoption of this Statement. Earlier adoption is permitted as of the beginning
      of
      an entity's fiscal year, provided the entity has not yet issued financial
      statements, including financial statements for any interim period for that
      fiscal year. Provisions of this Statement may be applied to instruments that
      an
      entity holds at the date of adoption on an instrument-by-instrument basis.
      The
      Company is currently evaluating the impact of SFAS 155.





In
      March
      2006, the FASB issued SFAS No. 156 ("FAS 156"), "Accounting for Servicing of
      Financial Assets--An Amendment of FASB Statement No. 140." Among other
      requirements, FAS 156 requires a company to recognize a servicing asset or
      servicing liability when it undertakes an obligation to service a financial
      asset by entering into a servicing contract under certain situations. Under
      FAS
      156 an election can also be made for subsequent fair value measurement of
      servicing assets and servicing liabilities by class, thus simplifying the
      accounting and provide for income statement recognition of potential offsetting
      changes in the fair value of servicing assets, servicing liabilities and related
      derivative instruments. The Statement will be effect beginning the first fiscal
      year that begins after September 15, 2006. The Company is currently evaluating
      the impact of SFAS 156.




F-11




EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE
      A
      - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Impact
      of accounting standards (Continued)





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157, “Fair Value Measurements.” The standard provides guidance for using fair
      value to measure assets and liabilities. Under the standard, fair value refers
      to the price that would be received to sell an asset or paid to transfer a
      liability in an orderly transaction between market participants in the market
      in
      which the reporting entity transacts. The standard clarifies the principle
      that
      fair value should be based on the assumptions market participants would use
      when
      pricing the asset or liability. In support of this principle, the standard
      establishes a fair value hierarchy that prioritizes the information used to
      develop those assumptions. The Statement is effective for financial statements
      issued for fiscal years beginning after November15, 2007, and interim periods
      within those fiscal years. The Company is currently evaluating the Statement
      to
      determine what impact, if any, it will have on the Company.





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement
      Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R)” (“SFAS 158”).
      This statement requires balance sheet recognition of the funded status, which
      is
      the difference between the fair value of plan assets and the benefit obligation,
      of pension and postretirement benefit plans as a net asset or liability, with
      an
      offsetting adjustment to accumulated other comprehensive income in shareholders’
equity. In addition, the measurement date, the date at which plan assets and
      the
      benefit obligation are measured, is required to be the company’s fiscal year
      end. The Company is currently evaluating the Statement to determine what impact,
      if any, it will have on the Company.





Concentrations
      of credit risk





The
      Company performs ongoing credit evaluations of its customers. As of December
      31,
      2006, the Company's largest customers accounted for 25% of accounts receivable.
      As of December 31, 2005, the Company's four largest customers accounted for
      71%
      (41%, 10%, 10% and 10%) of accounts receivable.





For
      the
      year ended December 31, 2006, one customer accounted for approximately 37%
      of
      sales. For the year ended December 31, 2005, two customers individually
      accounted for approximately 64% of sales (51% and 13%).





For
      the
      year ended December 31, 2006 and 2005, approximately 19% and 20%, respectively,
      of the Company’s net sales were made to customers outside the United
      States.





The
      Company is dependent of third-party manufacturers and distributors for all
      of
      its supply of inventory. For the year ended December 31, 2006, the Company's
      four largest suppliers accounted for 85% (32%, 19%, 17% and 17%) of product
      purchases, respectively. For the year ended December 31, 2005, the Company's
      three largest suppliers accounted for 80% of product purchases.




F-12


EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE
      A
      - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Concentrations
      of credit risk (Continued)





The
      Company is dependent on the ability of its suppliers to provide products and
      services on a timely basis and on favorable pricing terms. The loss of certain
      principal suppliers or a significant reduction in product availability from
      principal suppliers could have a material adverse effect on the
      Company.




Disclosure
      about Fair Value of Financial Instruments





The
      Company estimates that the fair value of all financial instruments at December
      31, 2006, as defined in FASB 107, does not differ materially from the aggregate
      carrying values of its financial instruments recorded in the accompanying
      balance sheet. The estimated fair value amounts have been determined by the
      Company using available market information and appropriate valuation
      methodologies. Considerable judgment is required in interpreting market data
      to
      develop the estimates of fair value, and accordingly, the estimates are not
      necessarily indicative of the amounts that the Company could realize in a
      current market exchange.





NOTE
      B
      - ACCOUNTS RECEIVABLE





On
      September 12, 2005, the Company entered into a factoring agreement with JD
      Factor (“Factor”) subsequent to terminating the factoring agreement with
      Benefactor Funding Corp. in August 2005. The Factor purchases certain customer
      accounts receivable on a non-recourse basis with certain broad exceptions.
      The
      Factor initially advances 80% of the amount of the invoice with the remainder,
      less fees, paid to the company once the customer pays the invoice. The Company
      performs substantially all collection efforts. Under certain circumstances
      the
      Factor has the right to charge back to the company for specific invoices. The
      interest rate charged to the Company varies depending on the age of the
      receivable upon customer payment. The factoring agreement is collateralized
      by
      substantially all Company assets.





The
      Company is reporting the factoring agreement as a secured borrowing in
      accordance with FAS 140, “Accounting for Transfers and Servicing of Financial
      Assets and Extinguishments of Liabilities”. As of December 31, 2006, the balance
      due to the Factor was $42,501 collateralized by factored receivables of
      $52,239.





The
      accounts receivable balance as of December 31, 2006 is reported net of an
      allowance for doubtful accounts of $49,000.




F-13


EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE
      C -
      INVENTORY





Inventories
      are comprised of finished goods ready for resale and are stated at the lower
      of
      cost or market, as determined using the average costing method. The following
      table represents the major components of inventory at December 31,
      2006.


2006Finished
                  goods
              
              $
              28,355





NOTE
      D
      - LOANS RECEIVABLE





During
      the year ended December 31, 2006, the Company made additional strategic loans
      totaling $158,874 for potential future association to an unaffiliated company
      that accrues interest at 2% per year and due 12 months from the date of draw.
      The total loans outstanding, including interest receivable, total
      $396,127.





As
      of
      December 31, 2006, $240,000 of the outstanding loans were in default. The
      company has created a reserve in the amount of $250,000 against the loans.





NOTE
      E
      - PROPERTY AND EQUIPMENT





Property
      and equipment at December 31, 2006 consist of the following:


2006Computer
                  and office equipment
              
              $
              126,687Furniture
                  and fixtures
              
              
              2,281Machinery
                  and equipment
              
              
              11,262$
              140,230Less:
                  Accumulated Depreciation
              
              
              (42,653
              )$
              97,577


Depreciation
      expense for the years ended December 31, 2006 and 2005 was $6,947 and $5,953,
      respectively.





NOTE
      F
      - GOODWILL





On
      December 28, 2005, the Company and the stockholders of PSG entered into a
      binding letter of intent providing for the acquisition of PSG by the Company
      in
      a step transaction.





Under
      the
      terms of the purchase agreement, as filed on January 3, 2006, the Company agreed
      to purchase 100% of the issued and outstanding stock of PSG as of March 31,
      2006. Pursuant to the terms of the agreement, PSG received $150,000 and
      1,932,569 shares of the Company’s stock in exchange for their issued and
      outstanding stock of PSG.




F-14


EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE
      F
      - GOODWILL (Continued)





At
      December 31, 2005, the goodwill balance of $1,288,577 is calculated as the
      total
      consideration of $826,400 ($150,000 in cash and 1,932,569 shares valued at
      $0.35, or $676,400) plus assumed liabilities and debt of $623,399 less assets
      acquired of $161,222.





In
      November 2006, after a year of disappointing sales and sub-standard production,
      Execute Sports decided to shut down the Academy division and actively began
      seeking a buyer for the high end snowboard brand. As a result, as of December
      31, 2006, the goodwill balance of $1,288,577 was completely written
      off.





NOTE
      G
      - ACCOUNTS PAYABLE AND ACCRUED EXPENSES





Accounts
      payable and accrued expenses at December 31, 2006 consist of the
      following:


2006Payables
                  to vendors
              
              $
              284,190Payables
                  for inventory
              
              
              305,975Payables
                  for professional services
              
              
              42,036Accrued
                  payroll
              
              
              68,050Accrued
                  interest
              
              
              34,892Accrued
                  taxes
              
              
              5,140$
              740,283




NOTE
      H
      - CONVERTIBLE DEBENTURE





On
      May
      15, 2006, the Company completed a private placement of convertible debentures
      generating gross proceeds of $1.9 million and the issuance of warrants to
      purchase $475,000 worth of the Company’s common stock. Third party fees totaled
      $191,000, which were paid in cash.





The
      terms
      of the warrants and debentures are substantially the same. The exercise price
      of
      the warrants is calculated the same as for the conversion price of the
      convertible debentures. The warrants and debentures are immediately exercisable.
      The debentures bear interest at 12% per annum, interest payable monthly at
      the
      option of the Holder in cash or stock. The debenture agreement payment schedule
      provides for full repayment by September 15, 2007, or sixteen (16) months from
      the closing date. On September 30, 2011, the maturity date of this debenture,
      any remaining principle balance automatically converts to the Company’s common
      stock.





Prior
      to
      maturity, the debentures and warrants are convertible into the Company's common
      stock at a fixed conversion price equal to the lowest closing bid price of
      the
      Common Stock between the issuance date and the date of the filing the
      registration statement covering resale of the shares underlying the Debenture,
      or at a conversion price of fifteen cents ($.15).




F-15


EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        YEARS ENDED DECEMBER 31, 2006 AND 2005





NOTE
      H
      - CONVERTIBLE DEBENTURE (Continued)





Since
      the
      Company’s stock price did not decline below $0.15 prior to the filing of the
      registration statement, $0.15 is the fixed conversion price for this debenture
      and associated warrants.





The
      debentures provide that the holders may only convert the debenture if the number
      of shares held by the lender or its affiliates after conversion would not exceed
      4.99% of the outstanding shares of the Company's common stock following such
      conversion.





In
      connection with the transaction, we entered into a registration rights
      agreement. Pursuant to the terms of the Registration Rights Agreement, within
      twenty-one calendar days following the initial closing date, or June 5, 2006,
      the Company was required to file with the Securities and Exchange Commission
      a
      registration statement under the Securities Act of 1933, as amended, covering
      the resale of all of the common stock the convertible debenture and warrants
      would be converted into based on a conversion price of $0.15 per share and
      the
      common stock underlying the warrants.





The
      Registration Rights Agreement further provides that if a registration statement
      is not filed within 21 days from the initial closing date, then in addition
      to
      any other rights the holder may have, and until the registration statement
      is
      filed, the Company would be required to pay the holder an amount in cash, as
      liquidated damages, equal to an aggregate two percent (2%) of the purchase
      price
      of the debentures. In addition, the conversion price will decrease by 10% of
      the
      fixed conversion price for each fifteen (15) day calendar period that a
      registration statement is not filed. The Registration Rights Agreement further
      provides that if a registration statement is not declared effective within
      80
      days from the initial closing date, then the Company would be required to pay
      the holder an amount in cash, as liquidated damages, equal to an aggregate
      two
      percent (2%) of the purchase price of the debentures until the registration
      statement becomes effective. The Company initially filed the registration
      statement on May 24, 2006 and it was declared effective on June 15, 2006, or
      30
      days from the initial close date.





The
      issuance costs related to the convertible debentures of approximately $191,000
      in cash were capitalized to prepaid expenses on the balance sheet and are being
      amortized over the term of the repayment schedule which is calculated based
      upon
      the effective interest method. For the year ended December 31, 2006, the Company
      recognized $87,025 as other expense related to the amortization of the issuance
      costs with a $103,975 balance remaining in prepaid expenses.





Pursuant
      to Paragraph 9-32 of EITF 00-19, Accounting for Derivative Financial Instruments
      Indexed to, and Potentially Settled in, a Company's Own Stock, the warrants
      issued in connection with the convertible debentures meet the requirements
      of
      and are accounted for as permanent equity since the filing of an effective
      registration statement within the allotted time frames negated any liquidated
      damages, settlement is by delivery of shares only and the exercise price is
      fixed. The initial value of the warrants was treated as a discount to the
      debenture and recorded as additional paid in capital. The Company calculated
      the
      initial value of the warrants on the closing date of the transaction as being
      $633,333 as determined using a Black-Scholes option pricing model with the
      following assumptions: expected term 5 years, exercise price $0.15, volatility
      7.6%, risk free rate 5.15%, and zero dividend yield.




F-16


EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE
      H
      - CONVERTIBLE DEBENTURE (Continued)





The
      total
      value of the warrants and the debenture was $2.53 million of which the warrants
      represented 25%. Thus, the relative value of the warrants to the total value,
      or
      25% was applied to the debenture value of $1.90 million yielding a warrant
      discount of $475,000. The discount to the debenture is being amortized over
      the
      term of the repayment schedule, or sixteen (16) months and calculated based
      upon
      the effective interest method. During the year ended December 31, 2006, the
      Company recognized $205,788 in non-cash amortization expense related to the
      warrant discount.





The
      Company determined that the $1.90 million debenture was issued with a beneficial
      conversion feature (“BCF”) due to the conversion price ($0.15) being less than
      the closing stock price ($.32) on the date of issuance, and the conversion
      feature being in-the-money. Thus, pursuant to EITF 00-27, 27, Application of
      Issue No. 98-5 to Certain Convertible Instruments, the BCF has been determined
      based on the gross debenture amount less the portion attributable to the
      warrants described above, and recorded as a discount to reduce the carry value
      of the debenture and increase additional-paid-in-capital. The Company calculated
      the initial BCF on the closing date of the transaction to be $1,615,000 using
      the intrinsic value method. Since this amount is greater than the $1,425,000
      remaining value of the debenture after deducting for the warrant discount
      described above, the Company reduced the initial carry value of the debenture
      to
      zero effectively recording a BCF of $1,425,000 as additional-paid-in-capital.
      The BCF discount is being amortized over the debenture repayment term of sixteen
      (16) months and calculated based upon the effective interest method. During
      the
      year ended December 31, 2006, the Company recognized $435,577 in non-cash
      amortization expense attributable to the amortization of the beneficial
      conversion feature discount.





In
      connection with the debenture, the Company entered into a separate Investment
      Agreement also on May 15, 2006 with Dutchess Private Equities Fund, L.P.
      ("Dutchess") providing for the sale and issuance from time to time of up to
      $10,000,000 in shares of Common Stock for a period of up to 36 months from
      the
      date the Registration Statement is declared effective. The maximum number of
      shares that the Company may put to Dutchess at any one time shall be equal
      to,
      at the Company's election, either (a) 200% of the average daily volume in the
      U.S. market of the Common Stock for the ten trading days prior to the date
      the
      Company notifies Dutchess of its intent to sell shares to Dutchess multiplied
      by
      the average of the three daily closing bid prices immediately preceding the
      date
      a Put Notice is delivered, or (b) a number of shares having a value of $100,000.
      The Company may not submit a Put Notice until after the completion of a previous
      sale under the Investment Agreement. The purchase price for the Common Stock
      to
      be sold shall be equal to 93% of the lowest closing best bid price of the Common
      Stock during the five-day period following the date the Company delivers a
      Put
      Notice. Since the price of the shares put to the investor is expected to be
      below market price at 93% of the market price, there is no added benefit to
      the
      company. Thus, the Company has not recorded an asset related to this agreement.
      Upon the delivery of shares and receipt of cash related to this Investment
      Agreement, the Company records the increase in cash or decrease in debenture
      interest and principle, and an increase in common stock and additional paid
      in
      capital. During the year ended December 31, 2006, the Company placed puts with
      Dutchess totaling $164,097 resulting in the issuance of 2,750,049 shares of
      common stock.




F-17




EXECUTE
      SPORTS, INC.


NOTES
      TO
      THE CONSOLIDATED FINANCIAL STATEMENTS


FOR
      THE
      YEARS ENDED DECEMBER 31, 2006 AND 2005








NOTE
      H
      - CONVERTIBLE DEBENTURE (Continued)





During
      the year ended December 31, 2006, the Company recognized $32,822 as a non-cash
      loss due to the conversion discount applied upon the conversion of interest
      and
      principle into common stock of the Company pursuant to the Investment Agreement
      and Debenture Agreement.





During
      the year ended December 31, 2006, the Company recognized $142,823 in interest
      expense related to the debentures.





As
      of
      December 31, 2006, the actual dollar amount due to the holders of the Company’s
      debentures was $1,892,710. The following table represents the actual balance
      due
      compared to the amount recorded on the balance sheet as of December 31,
      2006:




**December
                  31, 2006**Amount
                  borrowed under the convertible debenture
              
              
              1,900,000Accrued
                  interest
              
              
              56,006Payments
                  applied to principle during 2006
              
              
              (63,296
              )Debenture
                  balance
              
              
              1,892,710Unamortized
                  beneficial conversion feature
              
              
              (989,423
              )Unamortized
                  Warrant discount
              
              
              (269,212
              )Recorded
                  debenture balance
              
              
              634,075
  NOTE
        I
        - NOTES PAYABLE





Notes
      payable at December 31, 2006 is as follows:





Unsecured
                demand note payable to Ron and Dori Arko, bearing interest at 2%
                per year;
                currently in default.
            
            $
            8,206Unsecured
                demand note payable to John Helms, bearing interest at 2% per year;
                currently in default.
            
            
            155,905Unsecured
                demand note payable to New Heart Ministries, bearing interest at
                2% per
                year; currently in default.
            
            
            1,906Unsecured
                demand note payable to Pacific Sports Investors LLC, bearing interest
                at
                10% per year; currently in default.
            
            
            40,375Secured
                demand note payable to Christian Beckas, bearing interest at 12%
                per year
                collateralized by 80,000 shares of common stock; currently in
                default.
            
            
            17,500Secured
                demand note payable to Hector Peneda, bearing interest at 12% per
                year
                collateralized by 40,000 shares of common stock; currently in
                default.
            
            
            8,000Total
            
            $
            231,892




F-18




EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE
      I
      - NOTES PAYABLE (Continued)





Related
      party Notes payable at December 31, 2006 is as follows:




Secured
                  demand note payable to Craig Hudson, bearing interest at 12% per
                  year,
                  matures February 1, 2007 and is collateralized by 116,000 shares
                  of common
                  stock.
              
              
              29,000Secured
                  demand note payable to Robert Bridges, bearing interest at 9% per
                  year and
                  is collateralized by 240,000 shares of common stock; currently
                  in
                  default
              
              
              60,000Secured
                  demand note payable to Tom Bridges, bearing interest at 9% per
                  year and is
                  collateralized by 240,000 shares of common stock; currently in
                  default
              
              
              60,000Unsecured
                  note payable to Geno Apicella, Vice-President, non-interest
                  bearing.
              
              
              54,700Unsecured
                  demand note payable to Sheryl Gardner, CFO, bearing interest at
                  4% per
                  year; currently in default
              
              
              43,906Total
              
              
              247,606




During
      the year ended December 31, 2006, and 2005 the Company incurred $53,599 and
      $57,699 in interest expense related to the Notes above.





During
      the year ended December 31, 2006, the Company repaid $706,403 of related and
      non
      related party debt by paying cash of $336,061 and converting $370,342 into
      1,862,127 shares of common stock.





The
      interest rate offered on the 2% loans above is below market rate. The Company
      has determined the difference between the stated interest rate and the rate
      available at the date of the loan(s) would be immaterial to these financial
      statements.





NOTE
      J
      - STOCKHOLDERS’ EQUITY





On
      August
      18, 2004, the Company entered into a service contract valued at $100,000 in
      exchange for 400,000 shares of common stock, which represents the fair market
      value of the stock as of that date. The contract term is 24 months. During
      the
      year ended December 31, 2006 and 2005, the company recognized $31,507 and
      $50,000, respectively, of expense in connection with this contract which has
      been fully expensed as of December 31, 2006.





On
      March
      1, 2005, the Company entered into a service contract valued at $62,500 in
      exchange for 250,000 shares of common stock, which represents the fair market
      value of the stock as of that date. The contract term is 24 months. During
      the
      year ended December 31, 2006 and 2005, the company recognized $31,250 and
      $26,113, respectively, of expense in connection with this contract with the
      remaining balance of $5,137 accounted for as prepaid expense as of December
      31,
      2006.





On
      September 9, 2004, the Company commenced a limited Private Placement Memorandum
      (PPM) to raise up to $1,750,000 through the sale of the Company’s common stock
      at a price of $0.25 per share. During the year ended December 31, 2004, the
      Company received $69,500 in exchange for 278,000 shares of common stock.




F-19


EXECUTE
          SPORTS, INC.
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
          THE
          YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE
      J
      - STOCKHOLDERS’ EQUITY (Continued)





Also
      in
      connection with the PPM, during the year ended December 31, 2005, the Company
      received $660,000 in cash in exchange for 2,640,000 shares of common stock.
      In
      total, the PPM resulted in the issuance of 2,918,000 shares of common stock.





On
      January 2, 2005, the Company paid 100,000 shares of common stock for legal
      services valued at $25,000 which represents the fair market value of the stock
      as of that date for services rendered during the quarter ended March 31, 2005.
      We expensed the full value of the common stock during the quarter ended March
      31, 2005.





As
      of
      February 28, 2005, all of the notes payable outstanding at December 31, 2004,
      totaling $614,800, were cancelled and new notes payable were issued accruing
      interest at 2% per annum until February 28, 2006. At that time, the remaining
      outstanding principal balance and all interest accrued but unpaid can be paid
      with the Company’s common stock at a conversion price of $0.25 per share for
      every dollar of interest owed to the note holder. All interest accrued but
      unpaid as of February 28, 2005 was converted to the Company’s common stock at
      the conversion price of $0.25 per share for every dollar of interest owed to
      the
      note holder representing an addition to stockholders’ equity of approximately
      $104,232 and 416,931 shares of common stock.





In
      April
      2005 the Company agreed to issue 8,500,000 shares of its common stock to its
      founding members and key employees for value received of $2,125,000, or $0.25
      per share.





During
      the three months ended June 30, 2005, the company issued 3,060,000 shares of
      its
      common stock in consideration for professional and consulting services to be
      rendered valued at $765,000, or $0.25 per share. During the year ended December
      31, 2006 and 2005, the company recognized $269,580, and $495,420, respectively,
      of expense in connection with these contracts which has been fully expensed
      as
      of December 31, 2006.





The
      Company did not issue any stock during the years ending December 31, 2003,
      2004
      or the six month period ending June 30, 2005. From July 22, 2005 through August
      9, 2005, the Company issued 15,644,931 shares of common stock related to the
      items above. Our December 31, 2005 earnings per share calculation in the
      Statement of Operations is on an “if-issued” basis and reflects the weighted
      average common stock that would have been outstanding had all shares that were
      purchased for cash and all shares that would be issued for services had been
      issued on the date of purchase or contract date for services.





During
      the three months ended December 31, 2005, the Company received net proceeds
      of
      $1,176,550 and issued 3,061,570 shares of common stock with $105,000, or 300,000
      shares unissued and included in common stock payable as of December 31, 2005.
      On
      January 8, 2006, the Company issued the 300,000 shares.





F-20


EXECUTE
          SPORTS, INC.
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
          THE
          YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE
      J
      - STOCKHOLDERS’ EQUITY (Continued)





On
      January 3, 2006, the company issued 200,000 shares in exchange for $70,000.
      These shares were issued pursuant to the company’s SB-2 registration statement
      originally filed with the Securities and Exchange Commission on June 16, 2005
      with final approval occurring on September 27, 2005, our final amended SB-2/A
      filing. In total the company issued 3,561,570 shares of common stock in exchange
      for $1,246,550.





On
      December 31, 2005, the Company’s board of directors approved the issuance of
      21,428 shares of common stock payable to a member of the Board of Directors
      for
      services rendered during fiscal year 2005. The shares were expensed in fiscal
      2005 and valued at fair market value, or $0.35 resulting in compensation expense
      of $7,500. The shares were issued on March 6, 2006





On
      December 28, 2005, the Company and the stockholders of PSG entered into a
      binding letter of intent providing for the acquisition of PSG by the Company.
      On
      March 10, 2006, the company issued the PSG shareholder’s 1,932,569 shares of
      common stock valued at $0.35, or $676,400 (See NOTE F).





During
      the quarter ended March 31, 2006, 1,000,000 shares of common stock previously
      issued to the founders and president (300,000 Don Dallape, 300,000 Scott
      Swedener, 300,000 Geno Apicella and 100,000 Todd Pitcher) were retired and
      canceled by each shareholder in an effort to improve the Company’s capital
      structure (See NOTE O).





On
      March
      8, 2006, the Company entered into a line of credit with a primary softgoods
      supplier whereby the company will issue up to 1,142,857 shares of common stock
      in exchange for $400,000 of inventory. On March 10, 2006, the Company issued
      174,031 shares of common stock pursuant to the line of credit in exchange for
      a
      reduction in accounts payable for inventory valued at $60,911. Pursuant to
      this
      agreement, the supplier was granted two warrants to purchase the Company’s
      common stock. The supplier exercised one warrant in full and received 400,000
      shares of common stock in exchange for $100,000. The remaining warrant gives
      the
      supplier the right to purchase 500,000 shares of common stock for $0.35 per
      share (see NOTE K).





In
      July
      of 2006, 255,000 “Debenture” Warrants were exercised at a strike price of $.15
      resulting in proceeds of $38,250 to the Company.





During
      the year ended December 31, 2006, the Company issued 12,129,785 shares of common
      stock in exchange for services and product valued on the date of each issuance
      or $430,923.





During
      the year ended December 31, 2006, the Company converted $370,342 of related
      party and non related party debt into 1,862,127 shares of common stock.





During
      the year ended December 31, 2006, the Company issued 1,073,808 shares of common
      stock valued at the closing price of the stock on the date of issuance, or
      $30,106 to two if its directors as payment in lieu of cash.





F-21


EXECUTE
          SPORTS, INC.
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
          THE
          YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE
      J
      - STOCKHOLDERS’ EQUITY (Continued)





During
      the year ended December 31, 2006, the Company placed 2,750,049 shares to
      Dutchess pursuant to the Investment Agreement (See NOTE H). The total value
      of
      the shares on the dates of issuance was $164,097. Of this amount $131,275 was
      applied as a reduction of principle and interest on the Company’s debenture and
      $32,822 was recognized as a loss due to a conversion discount.





NOTE
      K
      - WARRANTS





At
      December 31, 2006 the Company had 3,440,238 Warrants outstanding entitling
      the
      holder thereof the right to purchase one common share for each warrant held
      as
      follows:




ExerciseWarrant
              
              Number
                  of
              
              Price
                  Per
              
              Issue
              
              ExpirationClass
              
              Warrants
              
              Warrant
              
              Date
              
              DateA
              
              
              500,000
              
              $
              0.35
              
              
              3/3/2006
              
              
              TBDA
              
              
              28,571
              
              $
              0.35
              
              
              3/29/2006
              
              
              9/30/07Debenture
              
              
              2,911,667
              
              $
              0.15
              
              
              5/15/2006
              
              
              5/15/11Total
              
              
              3,440,238




During
      the year ended December 31, 2006, three “A” Warrants were granted. A single
      400,000 “A” Warrant was exercised resulting in $100,000 to the Company and the
      issuance of 400,000 shares of Common Stock (See NOTE J).





During
      the year ended December 31, 2006, the company issued a warrant to purchase
      3,166,667 shares of Common Stock in connection with a convertible debenture
      (See
      NOTE H). Dutchess exercised 255,000 of these warrants in July of 2006 (See
      NOTE
      J).





*Stock
      Warrants Issued to Third Parties*





The
      Company accounts for stock-based compensation issued to non-employees in
      accordance with the provisions of SFAS 123 and the Emerging Issues Task Force
      consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for Equity Instruments
      that are Issued to Other Than Employees for Acquiring or in Conjunction with
      Selling, Goods or Services".





In
      addition, the Company evaluates each derivative issued to determine whether
      treatment as either equity or a liability is warranted pursuant to EITF 00-19,
      Accounting for Derivative Financial Instruments Indexed to, and Potentially
      Settled in a Company's Own Stock of that derivative.





During
      the year ended December 31, 2006, three qualified warrants were issued; a
      500,000 “A” Warrant; a 28,571 “A” Warrant and 3,166,667 Debenture warrants. The
      debenture warrants are discussed in detail above (See NOTE H).




F-22


EXECUTE
            SPORTS, INC.
 NOTES
            TO
            THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
            THE
            YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE
      K
      - WARRANTS (Continued)





The
      terms
      of each “A” warrant are substantially the same. No additional services are
      required beyond the issue date, each warrant has registration rights, but no
      liquidated damage clause and net-share settlement is required. Thus, pursuant
      to
      EITF 00-19, the Company has included the fair market value of these warrants
      in
      stockholders equity. The Company calculated the value of the 500,000 “A”
warrants on the closing date of the transactions as being $ 45,000 as determined
      using a Black-Scholes option pricing model with the following assumptions:
      expected term 2.5 years, exercise price $.35, volatility 1.6%, risk free rate
      4.86%, and zero dividend yield. The Company calculated the value of the 28,571
      “A” warrants on the closing date of the transactions as being $ 4,571 as
      determined using a Black-Scholes option pricing model with the following
      assumptions: expected term 1.5 years, exercise price $.35, volatility 5.2%,
      risk
      free rate 4.86%, and zero dividend yield. Both warrants were unexercised as
      of
      December 31, 2006.





NOTE
      L
      - INCENTIVE STOCK OPTIONS





On
      December 13, 2005, pursuant to an Employment Agreement and in anticipation
      of
      approval of the Stock Incentive Plan, the Company awarded its then Product
      Manager, Duane Pacha a non-qualified stock option to purchase 300,000 shares
      of
      common stock of the Company at an exercise price of $.35 per share with an
      expiration date of December 12, 2015. The options vest and become exercisable
      at
      a rate of 12,500 per month over a twenty-four month period. On December 31,
      2006, the Company terminated Mr. Pacha’s position as Product Manager due to the
      disposition of the Academy business. At the time of departure from the Company,
      150,000 shares had vested. The remaining 150,000 shares were canceled.





On
      December 13, 2005, pursuant to an Employment Agreement and in anticipation
      of
      approval of the Stock Incentive Plan, the Company awarded its then Marketing
      Director, Jeff Baughn a non-qualified stock option to purchase 300,000 shares
      of
      common stock of the Company at an exercise price of $.35 per share with an
      expiration date of December 12, 2015. The options vest and become exercisable
      at
      a rate of 12,500 per month over a twenty-four month period. On December 15,
      2006, the Company terminated Jeff Baughn’s position as Marketing Director due to
      the disposition of the Academy business. At the time of departure from the
      Company, 150,000 shares had vested. The remaining 150,000 shares were canceled.





On
      December 15, 2005, pursuant to an Employment Agreement and in anticipation
      of
      approval of the Stock Incentive Plan, the Company awarded its President, Todd
      Pitcher a non-qualified stock option to purchase 300,000 shares of common stock
      of the Company at an exercise price of $.35 per share with an expiration date
      of
      December 14, 2015. The options vest and become exercisable at a rate of 12,500
      per month over a twenty-four month period. On December 22, 2006, the Company
      and
      Todd Pitcher mutually agreed to terminate Mr. Pitcher as President in order
      to
      improve operational cash flow. At the time of departure from the Company,
      150,000 shares had vested. The remaining 150,000 shares were canceled.





F-23


EXECUTE
            SPORTS, INC.
 NOTES
            TO
            THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
            THE
            YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE
      L
      - INCENTIVE STOCK OPTIONS (Continued)





The
      following table summarizes the Company's stock option activity for the year
      ended December 31, 2006:




2006Weighted
                  AverageShares
              
              Exercise
                  PriceOutstanding
                  at beginning of period
              
              
              900,000
              
              $
              0.35Granted
              
              
              -Forfeited
              
              
              (450,000
              )Exercised
              
              
              -Outstanding
                  at end of period
              
              
              450,000
              
              $
              0.35Options
                  exerciseable at end of period
              
              
              450,000


The
      following table summarizes information about the Company's stock options
      outstanding at December 31, 2006:




Options
                  Outstanding
              
              Options
                  ExercisableNumber
              
              Weighted
              
              Weighted
              
              
              
              WeightedRange
                  of
              
              Outstanding
              
              Average
              
              Average
              
              
              
              AverageExercise
              
              At
                  December 31,
              
              Contractural
              
              Exercise
              
              Number
              
              ExercisePrices
              
              2006
              
              Life
                  (years)
              
              Price
              
              Outstanding
              
              Price$
                  0.35
              
              
              450,000
              
              
              -
              
              $
              0.35
              
              
              450,000
              
              $
              0.35Total
              
              
              450,000
              
              
              -
              
              $
              0.35
              
              
              450,000
              
              $
              0.35




The
      Company accounts for stock options pursuant to Financial Accounting Standards
      No. 123 (revised 2004), Share-Based Payment. The Company values each option
      grant utilizing the grant date fair value for fixed awards. Compensation cost
      is
      amortized over the vesting period. The current options were granted prior to
      the
      Company’s common stock trading in the secondary markets. Thus, fair value was
      determined to be $0.35 per share using the Company’s SB-2 (originally filed on
      June 16, 2005) as a proxy. Given that the Company is currently trading on the
      secondary markets and relevant fair market value data is available, the Company
      intends to value all future stock option grants using the Black-Scholes Option
      Pricing Model. During the year ended December 31, 2006, the Company recognized
      compensation expense of $85,313.





NOTE
      M
      - NET OPERATING LOSS CARRY FORWARD





In
      assessing the ability to realize deferred tax assets, management considers
      whether it is more likely than not that some portion or all of the deferred
      tax
      assets will not be realized. The ultimate realization of deferred tax assets
      is
      dependent upon the generation of future taxable income during the periods in
      which those temporary differences become deductible. Management considers the
      scheduled reversal of deferred tax liabilities, projected future taxable income
      and tax planning strategies in making this assessment.





F-24


EXECUTE
            SPORTS, INC.
 NOTES
            TO
            THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
            THE
            YEARS ENDED DECEMBER 31, 2006 AND 2005


NOTE
      M
      - NET OPERATING LOSS CARRY FORWARD (Continued)





At
      December 31, 2005 a valuation allowance for the full amount of the net deferred
      tax asset was recorded because of uncertainties as to the amount of taxable
      income that would be generated in future years.




United
      States Corporation Income Taxes




Period
                of Loss
            
            Amount
            
            Expiration
                DateDecember
                31, 2006
            
            $
            5,608,910
            
            
            December
                31, 2026December
                31, 2005
            
            $
            3,566,580
            
            
            December
                31, 2025December
                31, 2004
            
            $
            420,935
            
            
            December
                31, 2024





Prior
      to
      November 2004 the Company was organized as an S-Corporation and all losses
      were
      distributed and recognized through the tax returns of the owners.  The
      loss
      for the fiscal year ended December 31, 2006 was $5,608,910. As of December
      31,
      2006 a valuation allowance for the full amount of the net deferred tax asset
      has
      been recognized over the period for $2,243,564, based on an anticipated tax
      rate
      of 40%.





NOTE
      N
      - GOING CONCERN AND MANAGEMENT’S PLANS





The
      Company has suffered recurring losses from operations since inception. In
      addition, the Company has yet to generate an internal cash flow from its
      business operations. These factors raise substantial doubt about its ability
      to
      continue as a going concern.





Management’s
      plans with regard to these matters encompass the following actions: 1) obtain
      funding from new investors to alleviate the Company’s working capital
      deficiency, and 2) implement a plan to generate additional sales. The Company’s
      continued existence is dependent upon its ability to resolve its liquidity
      problems and increase profitability in its current business operations. However,
      the outcome of management’s plans cannot be ascertained with any degree of
      certainty. The accompanying financial statements do not include any adjustments
      that might result from the outcome of these risks and uncertainty.





NOTE
      O
      - RELATED PARTY TRANSACTIONS





During
      the year ended December 31, 2006, 1,000,000 shares of common stock previously
      issued to the founders and president (300,000 Don Dallape, 300,000 Scott
      Swedener, 300,000 Geno Apicella and 100,000 Todd Pitcher) were voluntarily
      returned to the Company and cancelled by each shareholder in an effort to
      improve the Company’s capital structure. The shares were originally expensed as
      stock compensation expense for $0.25 per share, or $250,000 on April 1, 2005.
      The Company reclassified the par value, or $1,000 out of Common Stock and
      increased Additional-Paid-in-Capital in order to reflect the reduction in the
      legal value of the canceled shares.




F-25


EXECUTE
            SPORTS, INC.
 NOTES
            TO
            THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
            THE
            YEARS ENDED DECEMBER 31, 2006 AND 2005


During
      the year ended December 31, 2006, the Company incurred $35,622 of expenses
      paid
      on its behalf by Comprehensive Communications LLC, a company wholly owned by
      the
      Company’s former President, Todd Pitcher.





NOTE
      O
      - RELATED PARTY TRANSACTIONS (Continued)





During
      the year ended December 31, 2006, the Company incurred $25,856 of expenses
      paid
      on its behalf by Geno Apicella, CEO. In addition, Geno made loans to the company
      totaling $103,636 of which the Company has repaid $57,577 as of December 31,
      2006. As of December 31, 2006, the Company was indebted to Mr. Apicella for
      $54,700.





NOTE
      P
      - LEGAL PROCEEDINGS





During
      2006 two claims were filed against Execute Sports and one claim was filed by
      Execute Sports for repayment of past due loans receivable.





A
      former
      employee of the company filed a complaint on August 14, 2006 against the Company
      and two of its officers for breach of contract, breach of the implied covenant
      of good faith and fair dealing, libel, and interference with contract. The
      Company answered on behalf of all named defendants. Through law and motion
      hearings, the Company was able to obtain a dismissal of the libel claim. During
      the first quarter of 2007 the parties were able to reach a tentative agreement.
      If the settlement is not consummated the Company will defend the action. Legal
      representatives for the Company, at this stage of the litigation, believe it
      is
      impracticable to render an opinion about whether the likelihood of an
      unfavorable outcome is either “probable” or “remote”, however, the Company
      believes it has meritorious defenses. Therefore, no liability has been
      recognized by the Organization as of the date of this report. While the outcome
      of this claim cannot be predicted with certainty, management does not believe
      that the outcome of any pending legal matters will have a material adverse
      effect on the financial position, although results of operations or cash flows
      could be affected in a particular period.





A
      former
      consultant filed a complaint on April 11, 2006 for breach of contract. The
      consultant seeks compensatory damages and issuance of unrestricted stock and
      attorneys fees. Legal representatives for the Company, at this stage of the
      litigation, believe it is impracticable to render an opinion about whether
      the
      likelihood of an unfavorable outcome is either “probable” or “remote”, however,
      the Company believes it has meritorious defenses. Therefore, no liability has
      been recognized by the Organization as of the date of this report. While the
      outcome of this claim cannot be predicted with certainty, management does not
      believe that the outcome of any pending legal matters will have a material
      adverse effect on the financial position, although results of operations or
      cash
      flows could be affected in a particular period.





On
      December 6, 2006, the Company filed a claim against two corporations and two
      individuals claiming breach of promissory notes, breach of contracts, and
      recovery under common counts. The Company seeks repayment of money loaned to
      the
      defendants in the aggregate sum of approximately $500,000.





NOTE
      Q
      - SUBSEQUENT EVENTS




On
      January 31, 2007, the Company entered into a Trademark Transfer and Assignment
      Agreement pursuant to which the Company transferred all right, title, interest
      and good will in the ACADEMY SNOWBOARD CO. and ACADEMY trademarks, and the
      associated ACADEMY logo, goodwill, and all associated domain names back to
      the
      original owners.





From
      January 1, 2007 through April 9, 2007, the Company issued 9,186,793 to Dutchess
      pursuant to the investment agreement and 2,250,000 to company officers and
      directors for services valued at $112,500 or the fair market value on the date
      of issuance.




F-26