UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





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FORM 10-Q/A

(Amendment No. 1)



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|[X]                                                            | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|-------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|For the quarterly period ended: March 31, 2008                
|or                                                            
|                                                               |                                                                                         
|[  ]                                                           | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period from: _____________ to _____________





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EXECUTE SPORTS, INC.(Exact name of registrant as specified in its charter)





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|NEVADA                                         | 333-125868               | 30-0038070                          
|---------------------------------------------- | ------------------------ | ------------------------------------
|(State or Other Jurisdiction
of Incorporation) | (Commission
File Number) | (I.R.S. Employer
Identification No.)

21143 Hawthorne BL #425, Torrance, California 90503

(310) 515-8902

(Former name, former address and former fiscal year, if changed since last report)





|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.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[X]  Yes     [  ]  No                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                        
|Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.                                                                                                                                                                                              
|Large accelerated filer                                                                                                                                                                                                                                                                                                                                 
|Non-accelerated filer                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                        
|Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).                                                                                                                                                                                                                                                 
|[  ]  Yes     [X]  No                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                        
|Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.                                                                                                                                                                                                                           
|90,446,790 issued and outstanding as of April 18, 2008.                                                                                                                                                                                                                                                                                                 



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Explanatory Note

This Quarterly Report on Form 10-Q/A is filed as an amendment to the Quarterly  Report on Form 10-QSB for the quarter  ended March 31, 2008 filed by Execute Sports, Inc. (the "Company") on May 5, 2008. The Company is amending; (i) certain notes to the Financial Statements, (ii) Item 4.  Controls and Procedures of Part I, (iii) Item 2 and Item 3 of Part II, and (iv) the certifications contained in Exhibits 31.1.

This Amendment to the Quarterly Report on Form 10-QSB of the Company has not been updated or modified in any other way and speaks only as of the date of the original filing, May 5, 2008.



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TABLE OF CONTENTS



|           |                                                                                                      |    | Page
|---------- | ---------------------------------------------------------------------------------------------------- | -- | ----
|           |                                                                                                      |    |     
|Part I     |                                                                                                      |    |     
|           |                                                                                                      |    |     
|Item 1.    | Financial Statements                                                                                 |    | 2   
|           |                                                                                                      |    |     
|           | Consolidated Balance Sheet as of March 31, 2008 (Unaudited)                                          |    | 2   
|           |                                                                                                      |    |     
|           | Consolidated Statements of Operations for the three months ended March 31, 2008 and 2007 (unaudited) |    | 3   
|           |                                                                                                      |    |     
|           | Consolidated Statements of Stockholders Equity for the three months Ended March 31, 2008 (unaudited) |    | 4   
|           |                                                                                                      |    |     
|           | Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007 (unaudited) |    | 5   
|           |                                                                                                      |    |     
|           | Notes To Financial Statements (Unaudited)                                                            |    | 6   
|           |                                                                                                      |    |     
|Item 2.    | Management's Discussion and Analysis or Plan of Operations.                                          |    | 26  
|           |                                                                                                      |    |     
|Item 3.    | Quantitative and Qualitative Disclosures About Market Risk                                           |    | 30  
|           |                                                                                                      |    |     
|Item 4.    | Controls and Procedures                                                                              |    | 30  
|           |                                                                                                      |    |     
|           | Part II - Other Information                                                                          |    |     
|           |                                                                                                      |    |     
|Item 1.    | Legal Proceedings                                                                                    |    | 31  
|           |                                                                                                      |    |     
|Item 1A.   | Risk Factors                                                                                         |    | 31  
|           |                                                                                                      |    |     
|Item 2.    | Unregistered Sales of Equity Securities and use of Proceeds                                          |    | 31  
|           |                                                                                                      |    |     
|Item 3.    | Defaults Upon Senior Notes                                                                           |    | 31  
|           |                                                                                                      |    |     
|Item 4.    | Submission of Matters to a Vote of Security Holders                                                  |    | 31  
|           |                                                                                                      |    |     
|Item 5.    | Other Information                                                                                    |    | 31  
|           |                                                                                                      |    |     
|Item 6.    | Exhibits                                                                                             |    | 32  
|           |                                                                                                      |    |     
|Signatures |                                                                                                      | 33





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|EXECUTE SPORTS, INC.                                   |                                                                                                                             
|------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------
|Consolidated Balance Sheet (Unaudited)                 |                                                                                                                             
|As of March 31, 2008                                   |                                                                                                                             
|                                                       |                                                                                                                             
|                                                       |                                                                                                                             
|                                                       |                                                                                                                             
|ASSETS                                                 |                                                                                                                             
|CURRENT ASSETS                                         |                                                                                                                             
|                                                       | Cash                                                                                                                        
|                                                       | Accounts receivable, net (Note A)                                                                                           
|                                                       | Inventory                                                                                                                   
|                                                       | Deferred financing costs (Note E)                                                                                           
|                                                       | Other current assets                                                                                                        
|                                                       |                                                                                                                             
|                                                       |                                                                                                                             
|                                                       |                                                                                                                             
|                                                       |                                                                                                                             
|Fixed assets, net (Note B)                             |                                                                                                                             
|Deferred financing costs (Note E)                      |                                                                                                                             
|Intangible assets, net (Note C)                        |                                                                                                                             
|Loans receivable, net (Note D)                         |                                                                                                                             
|                                                       |                                                                                                                             
|                                                       |                                                                                                                             
|                                                       |                                                                                                                             
|                                                       |                                                                                                                             
|                                                       |                                                                                                                             
|                                                       |                                                                                                                             
|                                                       |                                                                                                                             
|LIABILITIES AND STOCKHOLDERS' EQUITY                   |                                                                                                                             
|                                                       |                                                                                                                             
|CURRENT LIABILITIES                                    |                                                                                                                             
|                                                       | Current portion of convertible debentures (Note E)                                                                          
|                                                       | Short term borrowings (Note F)                                                                                              
|                                                       | Related party notes payable (Note F)                                                                                        
|                                                       | Accounts payable and accrued expenses                                                                                       
|                                                       | Interest accrued on convertible debentures (Note E)                                                                         
|                                                       |                                                                                                                             
|                                                       |                                                                                                                             
|                                                       |                                                                                                                             
|Non-current portion of convertible debentures (Note E) |                                                                                                                             
|                                                       |                                                                                                                             
|                                                       |                                                                                                                             
|                                                       |                                                                                                                             
|Commitment                                             |                                                                                                                             
|                                                       |                                                                                                                             
|STOCKHOLDERS' EQUITY (Note G)                          |                                                                                                                             
|                                                       | Common stock, par value $.001, 100,000,000 shares authorized authorized; issued and outstanding 90,446,790 at March 31, 2008
|                                                       | Additional paid-in capital                                                                                                  
|                                                       | Retained earnings <deficit>                                                                                                 
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|SEE NOTES TO FINANCIAL STATEMENTS                     

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|EXECUTE SPORTS, INC.                              |                                                                                                                                                         |                                 |   |            
|------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------- | - | -----------
|Consolidated Statements of Operations (Unaudited) |                                                                                                                                                         |                                 |   |            
|Three Months Ended March 31, 2008 and 2007        |                                                                                                                                                         |                                 |   |            
|                                                  |                                                                                                                                                         |                                 |  
|                                                  |                                                                                                                                                         |                                 |  
|                                                  |                                                                                                                                                         |                                 |  
|                                                  |                                                                                                                                                         | Three Months Ended              |  
|                                                  |                                                                                                                                                         | March 31,                       |  
|                                                  |                                                                                                                                                         |                                 |   |            
|                                                  |                                                                                                                                                         | 2008                            |   | 2007       
|                                                  |                                                                                                                                                         |                                 |   |            
|REVENUES & COST OF GOODS                          |                                                                                                                                                         |                                 |   |            
|                                                  | Net watersports sales                                                                                                                                   |                                 | $ | 329,223    
|                                                  | Net Sugar Sand sales                                                                                                                                    |                                 |   | 1,475,731  
|                                                  |                                                                                                                                                         |                                 |   |            
|                                                  |                                                                                                                                                         | Total net sales                 |   |            
|                                                  |                                                                                                                                                         |                                 |   |            
|                                                  | Watersports cost of sales                                                                                                                               |                                 |   | 249,310    
|                                                  | Sugar Sand cost of sales                                                                                                                                |                                 |   | 1,401,944  
|                                                  |                                                                                                                                                         |                                 |   |            
|                                                  |                                                                                                                                                         | Total cost of sales             |   |            
|                                                  |                                                                                                                                                         |                                 |   |            
|                                                  |                                                                                                                                                         |                                 |   |            
|                                                  |                                                                                                                                                         | Gross profit                    |   |            
|                                                  |                                                                                                                                                         |                                 |   |            
|EXPENSES                                          |                                                                                                                                                         |                                 |   |            
|                                                  | General and administrative expenses                                                                                                                     |                                 |   | 272,637    
|                                                  | Selling and advertising                                                                                                                                 |                                 |   | 26,175     
|                                                  | Depreciation expense                                                                                                                                    |                                 |   | 102,630    
|                                                  |                                                                                                                                                         |                                 |   |            
|                                                  |                                                                                                                                                         | Total expense                   |   |            
|                                                  |                                                                                                                                                         |                                 |   |            
|                                                  |                                                                                                                                                         |                                 |   |            
|                                                  |                                                                                                                                                         | Income (loss) from operations   |   |            
|                                                  |                                                                                                                                                         |                                 |   |            
|OTHER INCOME AND EXPENSES                         |                                                                                                                                                         |                                 |   |            
|                                                  | Other income                                                                                                                                            |                                 |   |            
|                                                  | Interest expense                                                                                                                                        |                                 |   | (242,187   
|                                                  | Loss due to discount on conversion to stock                                                                                                             |                                 |   |            
|                                                  | Amortization of beneficial conversion feature of convertible debenture                                                                                  |                                 |   | (63,184    
|                                                  | Amortization of warrant discount related to convertible debenture                                                                                       |                                 |   | (2,678     
|                                                  | Amortization of deferred financing costs                                                                                                                |                                 |   | (15,032    
|                                                  |                                                                                                                                                         |                                 |   |            
|                                                  |                                                                                                                                                         | Total other income and expenses |   |            
|                                                  |                                                                                                                                                         |                                 |   |            
|                                                  |                                                                                                                                                         |                                 |   |            
|                                                  | Net loss before discontinued operations                                                                                                                 |                                 |   | (570,823   
|                                                  | Income (loss) from discontinued operations                                                                                                              |                                 |   | -          
|                                                  | Gain (loss) on disposal of discontinued operations                                                                                                      |                                 |   | -          
|                                                  |                                                                                                                                                         |                                 |   |            
|                                                  |                                                                                                                                                         | Total discontinued operations   |   |            
|                                                  |                                                                                                                                                         |                                 |   |            
|                                                  |                                                                                                                                                         |                                 |   |            
|                                                  | NET INCOME (LOSS)                                                                                                                                       |                                 |   | (570,823   
|                                                  |                                                                                                                                                         |                                 |   |            
|                                                  |                                                                                                                                                         |                                 |   |            
|                                                  |                                                                                                                                                         |                                 |   |            
|                                                  |                                                                                                                                                         |                                 |   |            
|                                                  | Net (loss) per common share Basic and diluted from continuing operations                                                                                |                                 | $ | (0.006     
|                                                  | Net (loss) per common share basic and diluted after discontinued operations                                                                             |                                 | $ | (0.006     
|                                                  | Weighted average common shares outstanding basic and diluted                                                                                            |                                 |   | 89,451,823 
|                                                  | The average shares listed below were not included in the computation per share because to do so would have been antidilutive for the periods presented: |                                 |   |            
|                                                  | Stock options                                                                                                                                           |                                 |   | -          
|                                                  | Warrants                                                                                                                                                |                                 |   | 16,161,667 
|                                                  | Debt collateralized with common stock                                                                                                                   |                                 |   | 808,472,298
|                                                 
|SEE NOTES TO FINANCIAL STATEMENTS                



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|EXECUTE SPORTS, INC.                           |                                                                   
|---------------------------------------------- | ------------------------------------------------------------------
|Statements of Stockholders' Equity (Unaudited) |                                                                   
|Three Months Ended March 31, 2008              |                                                                   
|                                               |                                                                   
|                                               |                                                                   
|                                               |                                                                   
|                                               |                                                                   
|                                               |                                                                   
|                                               |                                                                   
|Shares                                         |                                                                   
|                                               |                                                                   
|                                               |                                                                   
|December 31, 2007                              |                                                                   
|                                               |                                                                   
|                                               | Shares issued for director compensation                           
|                                               | Shares issued for services                                        
|                                               | Shares issued for notes payable                                   
|                                               | Shares issued pursuant to put agreement for repayment of debenture
|Net loss                                       |                                                                   
|                                               |                                                                   
|March 31, 2008                                 |                                                                   
|                                               |                                                                   
|                                               |                                                                   
|                                               |                                                                   
|                                               |                                                                   
|SEE NOTES TO FINANCIAL STATEMENTS             

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|EXECUTE SPORTS, INC.                               |                                                                             |                                                                   |                                       |          |        
|-------------------------------------------------- | --------------------------------------------------------------------------- | ----------------------------------------------------------------- | ------------------------------------- | -------- | -------
|Consolidated Statements of Cash Flows (Unaudited)  |                                                                             |                                                                   |                                       |          |        
|Three Months Ended March 31, 2008 and 2007         |                                                                             |                                                                   |                                       |          |        
|                                                   |                                                                             |                                                                   |                                      
|                                                   |                                                                             |                                                                   |                                      
|                                                   |                                                                             |                                                                   |                                      
|                                                   |                                                                             | March 31,                                                         |                                      
|                                                   |                                                                             |                                                                   |                                      
|                                                   |                                                                             | 2008                                                              | 2007                                 
|                                                   |                                                                             |                                                                   |                                       |          |        
|CASH FLOWS FROM OPERATING ACTIVITIES:              |                                                                             |                                                                   |                                       |          |        
|                                                   | Net loss from continuing operations                                         |                                                                   | $                                     | (570,823 | )      
|                                                   | Net gain from discontinued operations                                       |                                                                   |                                       | -        |        
|                                                   | Adjustments to reconcile net loss to net cash used by operating activities: |                                                                   |                                       |          |        
|                                                   |                                                                             | Depreciation and amortization                                     |                                       |          | 102,630
|                                                   |                                                                             | Stock based compensation expense                                  |                                       |          | 27,000 
|                                                   |                                                                             | Loss on the conversion of convertible debt                        |                                       |          | -      
|                                                   |                                                                             | Amortization of beneficial conversion feature                     |                                       |          | 63,184 
|                                                   |                                                                             | Amortization of warrant discount related to convertible debenture |                                       |          | 2,678  
|                                                   |                                                                             | Issuance of common stock for debt principle                       |                                       |          | -      
|                                                   |                                                                             | Changes in assets and liabilities, net of effect of acquisitions: |                                       |          |        
|                                                   |                                                                             |                                                                   | Accounts receivable                   |          |        
|                                                   |                                                                             |                                                                   | Inventory                             |          |        
|                                                   |                                                                             |                                                                   | Prepaid expenses                      |          |        
|                                                   |                                                                             |                                                                   | Other current assets                  |          |        
|                                                   |                                                                             |                                                                   | Accounts payable and accrued expenses |          |        
|                                                   |                                                                             |                                                                   | Debenture interest payable            |          |        
|                                                   |                                                                             |                                                                   |                                       |          |        
|NET CASH USED FOR OPERATING ACTIVITIES             |                                                                             |                                                                   | (678,063                              | )        |        
|                                                   |                                                                             |                                                                   |                                       |          |        
|CASH FLOWS FROM INVESTING ACTIVITIES:              |                                                                             |                                                                   |                                       |          |        
|                                                   | Acquisition of furniture and equipment                                      |                                                                   |                                       | -        |        
|                                                   |                                                                             |                                                                   |                                       |          |        
|NET CASH USED FOR INVESTING ACTIVITIES             |                                                                             |                                                                   | -                                     |          |        
|                                                   |                                                                             |                                                                   |                                       |          |        
|CASH FLOWS FROM FINANCING ACTIVITIES:              |                                                                             |                                                                   |                                       |          |        
|                                                   | Issuance of common stock for cash                                           |                                                                   |                                       |          |        
|                                                   | Proceeds from convertible debenture                                         |                                                                   |                                       | 193,447  |        
|                                                   | Proceeds from related party notes payable                                   |                                                                   |                                       | 90,000   |        
|                                                   | Repayment of related party notes payable                                    |                                                                   |                                       | -        |        
|                                                   | Secured borrowings                                                          |                                                                   |                                       | -        |        
|                                                   | Financing related costs                                                     |                                                                   |                                       | 15,032   |        
|                                                   |                                                                             |                                                                   |                                       |          |        
|NET CASH PROVIDED BY FINANCING ACTIVITIES          |                                                                             |                                                                   | 356,910                               |          |        
|                                                   |                                                                             |                                                                   |                                       |          |        
|NET INCREASE <DECREASE> IN CASH                    |                                                                             |                                                                   | (321,153                              | )        |        
|                                                   |                                                                             |                                                                   |                                       |          |        
|CASH, beginning of period                          |                                                                             |                                                                   | 399,255                               |          |        
|                                                   |                                                                             |                                                                   |                                       |          |        
|                                                   |                                                                             |                                                                   |                                       |          |        
|CASH, end of period                                |                                                                             | $                                                                 | 78,102                                |          | $      
|                                                   |                                                                             |                                                                   |                                       |          |        
|                                                   |                                                                             |                                                                   |                                       |          |        
|                                                   |                                                                             |                                                                   |                                       |          |        
|                                                   |                                                                             |                                                                   |                                       |          |        
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION  |                                                                             |                                                                   |                                       |          |        
|                                                   |                                                                             |                                                                   |                                       |          |        
|CASH PAID DURING THE YEAR FOR:                     |                                                                             |                                                                   |                                       |          |        
|Taxes paid                                         |                                                                             | $                                                                 | -                                     |          | $      
|Interest paid                                      |                                                                             | $                                                                 | -                                     |          | $      
|                                                   |                                                                             |                                                                   |                                       |          |        
|Other non-cash investing and financing activities: |                                                                             |                                                                   |                                       |          |        
|Shares issued for services                         |                                                                             | $                                                                 | 27,000                                |          | $      
|Shares issued for debt and accrued interest        |                                                                             | $                                                                 | 1,041                                 |          | $      
|                                                   |                                                                             |                                                                   |                                       |          |        
|SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    

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|EXECUTE SPORTS, INC.                               | 
|-------------------------------------------------- | 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS     | 
|FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 | 
|                                                   | 
|                                                   | 



NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Basis of Presentation



The unaudited financial statements of Execute Sports, Inc. ("Execute Sports" or the "Company") as of March 31, 2008 and for the three month periods ended March 31, 2008 and 2007 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting. Accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Form 10-KSB for the fiscal year ended December 31, 2007 filed with the SEC on March 31, 2008. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the interim financial information have been included. The results of operations for any interim period are not necessarily indicative of the results of operations for the entire year.



Organization



Execute Sports 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.



In January 2006, the Company expanded its product mix by consummating the acquisition of Pacific Sports Group, Inc. ("PSG"), which owned and operated Academy Snowboards, Kampus Wakesk8s, Kampus Wake Shoes and Collective Development Bags and Bindings. In January, 2007, the Company entered into a trademark transfer and assignment agreement whereby all right, title, interest and good will in the Academy brand were transferred to the two former owners of PSG. In connection with the transfer, all of the Company's accounts payable and accounts receivable relating to the trademark were assigned as well.

In August 2007, the Company further expanded its product mix by purchasing the right, title, interest and goodwill relating to the business of designing, manufacturing and marketing jet powered Sugar Sands boats, including the SUGAR SAND trade names, trademarks, service marks, and service names, including www.sugarsand.com . By acquiring the Sugar Sand brand, the Company expanded its product offering without the added responsibilities and complexities of the manufacturing process, while positioning the Company to capitalize on existing sales and marketing relationships.



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|EXECUTE SPORTS, INC.                               | 
|-------------------------------------------------- | 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS     | 
|FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 | 
|                                                   | 
|                                                   | 



NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)



Summary of Significant Accounting Principles



Basis of Presentation



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



Accounting estimates



The preparation of consolidated 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 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. As of March 31, 2008, the allowance for doubtful accounts was $10,000.

The Company has a factoring agreement with JD Factors. Pursuant to the agreement JD Factors' will provide account receivable financing and factoring to the Company. JD Factors purchases 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.





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|EXECUTE SPORTS, INC.                               | 
|-------------------------------------------------- | 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS     | 
|FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 | 
|                                                   | 
|                                                   | 



NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



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 and straight line methods. It is calculated over recovery periods as prescribed by management that range from 5 years for equipment to 7 years for furniture.



Goodwill and Other Intangible Assets



The Company accounts for goodwill and other intangible assets in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. This statement requires that goodwill and other intangible assets 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 and other intangible assets to determine whether impairment, as measured by fair market value, may exist. SFAS No. 142 requires that goodwill and other intangible assets be assessed for impairment using fair value measurement techniques. Specifically, goodwill and other intangible asset impairment is determined using a two-step process. The first step of the goodwill and other intangible asset impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount. If the fair value of a reporting unit exceeds its carrying amount, then the goodwill and other intangible assets of the reporting unit are 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 impairment test is performed to measure the amount of impairment loss, if any. The second step of the impairment test compares the implied fair value of the reporting unit's goodwill and other intangible assets with their carrying amount. If the carrying amount of the reporting unit's goodwill and other intangible assets exceeds their implied fair value, then an impairment loss is recognized in an amount equal to that excess.



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|EXECUTE SPORTS, INC.                               | 
|-------------------------------------------------- | 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS     | 
|FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 | 
|                                                   | 
|                                                   | 



NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Long-lived assets



Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," 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 not be recovered. The Company assesses recoverability of the carrying value of an asset by estimating the fair value of the asset. If the fair value is 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 water sports clothing and apparel, and Sugar Sand boats 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 shipment to the customer.



The Company recognizes revenue under the guidance provided by the SEC Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition" and the Emerging Issues Task Force ("EITF") Abstract No. 99-19 "Reporting Revenue Gross as a Principal versus Net as an Agent" ("EITF 99-19"). Pursuant to EITF 99-19, The Company recognizes revenue from the sale of Sugar Sand boats on a gross basis.



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 three months ended March 31, 2008 and 2007, the Company incurred approximately $11,600 and $0, respectively, in advertising expenses.



Loss per common share



The Company adheres to Statement of Financial Accounting Standards No. 128, which requires 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 covered in this report in the computation of diluted earnings per share.





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|EXECUTE SPORTS, INC.                               | 
|-------------------------------------------------- | 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS     | 
|FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 | 
|                                                   | 
|                                                   | 



NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Issuance of common stock



The Company accounts for stock-based compensation using the fair value method of Financial Accounting Standard No. 123R. Common shares issued for services rendered by a third party (both employees and non-employees) are recorded at management's estimate of the fair value of the shares issued or services rendered, whichever is more readily determinable.



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 included in this report.



Income taxes



On November 1, 2004, the Company amended its Articles of Incorporation to make the transition from an S-Corporation to a C-Corporation. Prior to the transition, 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 I).



Impact of accounting standards



In February 2006, the FASB issued SFAS Statement No. 155, "Accounting for Certain Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and 140" ("SFAS 155"). 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 permits fair value re-measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement 133, 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, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives and 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. SFAS 155 is effective for all financial instruments acquired or issued for the Company for fiscal year begins after September 15, 2006. The adoption of this standard is not expected to have a material effect on the Company's results of operations or financial position.





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|EXECUTE SPORTS, INC.                               | 
|-------------------------------------------------- | 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS     | 
|FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 | 
|                                                   | 
|                                                   | 



NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Impact of accounting standards (Continued)



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 was effective beginning the first fiscal year that begins after September 15, 2006. The Company does not believe that this accounting pronouncement will have a material impact on its financial position or results of operations.



In June 2006, the FASB issued FIN 48, "Accounting for Uncertainty in Income Taxes-an interpretation of FASB No. 109. This Interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with FASB No. 109, "Accounting for Income Taxes". This interpretation prescribes recognition of threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This interpretation is effective for fiscal years beginning after December 15, 2006. Earlier application is permitted if the entity has not yet issued interim or annual financial statements for that fiscal year. The adoption of this standard is not expected to have a material effect on the Company's results of operations or financial position.



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 November 15, 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.





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|EXECUTE SPORTS, INC.                               | 
|-------------------------------------------------- | 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS     | 
|FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 | 
|                                                   | 
|                                                   | 



NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Impact of accounting standards (Continued)



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 132R" ("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 does not believe that this accounting pronouncement will have a material impact on its financial position or results of operations.



In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities". This statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Company's Board of Directors long-term measurement objectives for accounting for financial instruments. This Statement is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007. The Company does not believe that this recent accounting pronouncement will have a material impact on its financial position or results of operations.



In December 2007, the FASB issued SFAS 141(revised 2007), Business Combinations ("SFAS 141R"). SFAS 141R will significantly change the accounting for business combinations in a number of areas including the treatment of contingent consideration, contingencies, acquisition costs, IPR&D and restructuring costs. In addition, under SFAS 141R, changes in deferred tax asset valuation allowances and acquired income tax uncertainties in a business combination after the measurement period will impact income tax expense. SFAS 141R is effective for fiscal years beginning after December 15, 2008 and, as such, the Company will adopt this standard in fiscal 2010. The Company has not yet determined the impact, if any, of SFAS 141R on its consolidated financial statements.



In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 ("SFAS 160"). SFAS 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests (NCI) and classified as a component of equity. This new consolidation method will significantly change the account with minority interest holders. SFAS 160 is effective for fiscal years beginning after December 15, 2008 and, as such, the Company will adopt this standard in fiscal 2010. The Company does not believe that this recent accounting pronouncement will have a material impact on its financial position or results of operations.





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|EXECUTE SPORTS, INC.                               | 
|-------------------------------------------------- | 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS     | 
|FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 | 
|                                                   | 
|                                                   | 



NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Concentrations of credit risk



The Company performs ongoing credit evaluations of its customers. As of March 31, 2008, four customers accounted for 87% (31%, 31%, 14 and 10%) of accounts receivable. As of March 31, 2007, two customers accounted for 59% (47% and 12%) of accounts receivable.



For the three months ended March 31, 2008, one customer accounted for approximately 82% of sales. For the three months ended March 31, 2007, two customers accounted for approximately 91% of sales (65% and 26%).



For the three months ended March 31, 2008 and 2007, approximately 2% and 0%, 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 three months ended March 31, 2008, the Company's two largest suppliers accounted for 95% (85% and 10%) of product purchases. For the three months ended March 31, 2007, the Company's two largest suppliers accounted for 96% (77% and 19%) of product purchases.



The Company has maintained balances in excess of federally insured limits from time to time during the quarter. Management periodically reviews the adequacy and strength of the financial institutions and deems this to be an acceptable risk.



Disclosure about Fair Value of Financial Instruments



The Company estimates that the fair value of all financial instruments at March 31, 2008, 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.





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|EXECUTE SPORTS, INC.                               | 
|-------------------------------------------------- | 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS     | 
|FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 | 
|                                                   | 
|                                                   | 



NOTE B - PROPERTY AND EQUIPMENT



Property and equipment at March 31, 2008 consists of the following:





|                               | 2008
|------------------------------ | ----
|                               |     
|Computer and office equipment  | $   
|Furniture and fixtures         |     
|Machinery and equipment        |     
|Boat molds                     |     
|                               |     
|                               |     
|Less: Accumulated Depreciation |     
|                               |     
|                               | $   
|                               |     
|                               |     
|                               |     



Depreciation expense for the three months ended March 31, 2008 and 2007 was $102,630 and $2,530, respectively.



NOTE C - INTANGIBLE ASSETS



On August 29, 2007, Execute Sports, Inc. (the "Company" or "Execute Sports") entered into an Asset Purchase Agreement (the "Agreement") with Challenger Powerboats, Inc. ("Challenger") and its wholly owned subsidiary, IMAR Group, Inc. ("IMAR", together with Challenger, the "Sellers"), pursuant to which Execute Sports purchased from the Sellers, and Sellers sold and transferred to Execute Sports, all right, title, interest and goodwill in and to certain assets, properties and rights relating to, used in or held for use in IMAR's business of designing, manufacturing and marketing water jet powered Sugar Sands boats, including the SUGAR SAND trade names and associated trade names, trademarks, service marks and service names, and the associated logos and their goodwill, and all associated domain names, in particular the domain www.sugarsand.com, trades secrets and copyrights and their goodwill. The purchase price was $5,000,000. Execute Sports did not assume any obligations of IMAR in connection with the acquisition, other than the obligation to procure or maintain permits in connection with the post-closing operation of the Business by the Company. The following trade names were included in the purchase: Sugar Sand, Sugar Sand Sting, Sugar Sand Tango, Sugar Sand Mirage, Sugar Sand Calais, Sugar Sand Oasis, and Sugar Sand Airwave.



In connection with the transaction, Execute Sports and IMAR entered into an Agreement for Exclusive Right of Supply, pursuant to which IMAR will manufacture and be the exclusive supplier of the Sugar Sand line of jet boats to Execute Sports, for an initial term of 10 years. In addition, Execute Sports entered into an Exclusive Sales and Marketing Agreement with Challenger, pursuant to which Challenger will provide sales and marketing services related to the Sugar Sand boats for an initial term of 10 years.



The $5,000,000 purchase price was allocated $1,000,000 to boat molds, $500,000 to marketing/sales infrastructure and client lists, and $3,500,000 to trademarks resulting in an increase of $1,000,000 to our net fixed assets and $4,000,000 to intangible assets (See Also - Footnote M - "Subsequent Events").





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|EXECUTE SPORTS, INC.                               | 
|-------------------------------------------------- | 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS     | 
|FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 | 
|                                                   | 
|                                                   | 



NOTE C - INTANGIBLE ASSETS (Continued)



During the three months ended March 31, 2008, the Company recognized $25,000 of amortization related to the $500,000 of marketing/sales infrastructure and client lists.



NOTE D - LOANS RECEIVABLE



During 2005 and 2006, the Company made strategic loans totaling $396,127 for potential future association to an unaffiliated company that accrues interest at 2% per year and due 12 months from the date of draw.



As of March 31, 2008, the entire balance of the loans was in default. However, we are in the process of collections and believe a portion will be collected. Therefore, the Company has created a reserve of $250,000 against the loans.



NOTE E - CONVERTIBLE DEBENTURES



May 15, 2006 Debenture ($1,900,000)



On May 15, 2006, the Company completed a private placement of convertible debentures to Dutchess Private Equities Fund, L.P. ("Holder" or "Dutchess") 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 debentures are senior secured debt of the Company secured by a lien on all of the Company's assets. The Company was unable to make the scheduled payments on the debentures during the three month period ending March 31, 2008 and is in payment default on the debentures. At this time Dutchess has not initiated any collection action against the Company and has not exercised or given notice of its intent to exercise any remedies available to them under the terms of the notes. However, there can be no assurance that Dutchess will not exercise its rights and remedies as senior secured creditor at a future date.



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 common stock. The debenture agreement payment schedule provides for full repayment by September 15, 2007, or sixteen (16) months from the closing date. However, the debenture agreement maturity date is September 30, 2011 at which time any remaining principle balance automatically converts to the Company's common stock. The Company has recorded the entire principle balance of $1,900,000 of this debenture as a current liability due to the short term nature of the agreement payment schedule.



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). 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.





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|EXECUTE SPORTS, INC.                               | 
|-------------------------------------------------- | 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS     | 
|FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 | 
|                                                   | 
|                                                   | 



NOTE E - CONVERTIBLE DEBENTURES (Continued)



May 15, 2006 Debenture ($1,900,000) (Continued)



In connection with the transaction, the Company 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 underlying the convertible debenture and issuable upon the exercise of the warrants based on a conversion price of $0.15 per share.



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 would 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 both within the time frames set forth in the Registration Rights Agreement.



The issuance costs related to the convertible debentures of approximately $191,000 in cash were capitalized to deferred financing costs on the balance sheet and are being amortized over the term of the repayment schedule which is calculated based upon the effective interest method. The Company recognized $103,975 and $87,025 during the year ended December 31, 2007 and 2006, respectively, as other expense related to the amortization of the issuance costs. The deferred financing costs were fully amortized as of September 30, 2007.



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. 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 was amortized over the term of the repayment schedule, or sixteen (16) months, and is calculated based upon the effective interest method. The Company recognized $269,212 and $205,788 during the year ended December 31, 2007 and 2006, respectively, in non-cash amortization expense related to the warrant discount. The warrant discount was fully amortized as of September 30, 2007.





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|EXECUTE SPORTS, INC.                               | 
|-------------------------------------------------- | 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS     | 
|FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 | 
|                                                   | 
|                                                   | 



NOTE E - CONVERTIBLE DEBENTURES (Continued)



May 15, 2006 Debenture ($1,900,000) (Continued)



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 was amortized over the debenture repayment term of sixteen (16) months and calculated based upon the effective interest method. The Company recognized $989,423 and $435,577 during year ended December 31, 2007 and 2006, respectively, in non-cash amortization expense attributable to the amortization of the beneficial conversion feature discount. The beneficial conversion feature was fully amortized as of September 30, 2007.



During the three months ended March 31, 2008, the Company made no payments nor issued any stock in repayment of this debenture.



During the three months ended March 31, 2008 and 2007, the Company recognized $57,480 and $53,049, in interest expense related to the May 2006 debenture.



The debenture balance, including interest and principle as of March 31, 2008 is $1,950,476.



August 23, 2007 Debenture ($5,750,000)



On August 23, 2007, the Company completed a private placement of convertible debentures to Dutchess Private Equities Fund LP generating gross proceeds of $5.75 million, and the issuance of warrants to purchase 5,750,000 shares of the Company's common stock for $.02 per share.  Fees totaled $307,500, which were paid in cash. The debentures are senior secured debt of the Company secured by a lien on all of the Company's assets. The Company was unable to make the scheduled interest payments on the debentures during the three month period ending March 31, 2008 and is in payment default on the debentures. At this time Dutchess has not initiated any collection action against the Company and has not exercised or given notice of its intent to exercise any remedies available to them under the terms of the notes. However, there can be no assurance that Dutchess will not exercise its rights and remedies as senior secured creditor at a future date.





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|EXECUTE SPORTS, INC.                               | 
|-------------------------------------------------- | 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS     | 
|FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 | 
|                                                   | 
|                                                   | 



NOTE E - CONVERTIBLE DEBENTURES (Continued)



August 23, 2007 Debenture ($5,750,000) (Continued)



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 common stock. The debenture has a term of five (5) years and matures August 23, 2012. Any remaining principle balance automatically converts to the Company's common stock. The Company is not obligated to make payments until maturity. Therefore, the Company has classified the entire balance of $4,424,344 of this debenture as a non current liability.



Prior to maturity, the debentures are convertible into the Company's common stock at the lesser of (i) seventy-five percent (75%) of the lowest closing bid price of the Common Stock during the twenty (20) trading days immediately prior to a Conversion Notice; or (ii) 2/100 U.S. dollars ($.02).



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.



The issuance costs related to the convertible debentures of approximately $307,500 in cash were capitalized to deferred financing costs on the balance sheet and are being amortized over the term of the debenture which is calculated based upon the effective interest method. During the three months ended March 31, 2008, the Company recognized $15,032 as other expense related to the amortization of the issuance costs. The balance of deferred financing costs as of March 31, 2008 was $272,490.



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 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 $53,759 as determined using a Black-Scholes option pricing model with the following assumptions: expected term 5 years, exercise price $0.02, Strike price $.025, volatility 14.28%, risk free rate 4.62%, and zero dividend yield. The discount to the debenture is being amortized over the term of the debenture and is calculated based upon the effective interest method. During the three months ended March 31, 2008, the Company recognized $2,678 in non-cash amortization expense related to the warrant discount.



The Company determined that the debenture was issued with a beneficial conversion feature ("BCF") due to the conversion price ($0.020) being less than the closing stock price ($.025) 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, 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 $1,424,185 using the intrinsic value method. The BCF discount is being amortized over the term of the debenture. During the three months ended March 31, 2008, the Company recognized $63,184 in non-cash amortization expense attributable to the amortization of the BCF discount.





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|EXECUTE SPORTS, INC.                               | 
|-------------------------------------------------- | 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS     | 
|FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 | 
|                                                   | 
|                                                   | 



NOTE E - CONVERTIBLE DEBENTURES (Continued)



August 23, 2007 Debenture ($5,750,000) (Continued)



During the three months ended March 31, 2008, the Company issued 123,900 shares of common stock in payment of $1,041 of interest related to the August 2007 debenture.



During the three months ended March 31, 2008, the Company recognized $172,027 in interest expense related to this debenture.



The debenture balance, including interest and principle as of March 31, 2008 is $6,051,025.



As of March 31, 2008, the actual dollar amount due to the Holders of the Company's May 15, 2006 ($1.9 million), and August 23, 2007 ($5.75 million) debentures was $8,001,501. The following table represents the actual balance due compared to the amount recorded on the balance sheet as of March 31, 2008:





|                                                 | December 31,
2007 | 
|------------------------------------------------ | ----------------- | 
|                                                 |                   | 
|Amount borrowed under the convertible debentures |                   | 
|Accrued interest                                 |                   | 
|                                                 |                   | 
|Debenture balance payable                        |                   | 
|                                                 |                   | 
|Unamortized beneficial conversion feature        |                   | 
|                                                 |                   | 
|Unamortized Warrant discount                     |                   | 
|Recorded debenture balance                       |                   | 
|                                                 |                   | 
|                                                 |                   | 
|                                                 |                   | 
|                                                 |                   | 
|BALANCE SHEET ACCOUNTS                           |                   | 
|Current portion of convertible debentures        |                   | 
|Interest accrued on convertible debentures       |                   | 
|Non-current portion of convertible debentures    |                   | 
|                                                 |                   | 
|Recorded debenture balance                       |                   | 
|                                                 |                   | 
|                                                 |                   | 
|                                                 |                   | 



Investment Agreement



In connection with the debenture, the Company entered into a separate Investment Agreement on May 15, 2006 with Dutchess Private Equities Fund, L.P. ("Dutchess"), which provides 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 Dutchess are 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.





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|EXECUTE SPORTS, INC.                               | 
|-------------------------------------------------- | 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS     | 
|FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 | 
|                                                   | 
|                                                   | 



NOTE E - CONVERTIBLE DEBENTURES (Continued)



Investment Agreement (Continued)



During the three months ended March 31, 2008, the Company placed puts with Dutchess totaling $1,041 resulting in the issuance of 123,900 shares of common stock that reduced the same amount of accrued interest.



NOTE F - NOTES PAYABLE



Notes Payable



Non-related party notes payable at March 31, 2008 is as follows:





|Unsecured demand note payable bearing interest at 2% per year; currently in default.                                                                                                                   |  | $ | 9,538   | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | - | ------- | 
|                                                                                                                                                                                                       |  |   |         | 
|Unsecured demand note payable to John Helms bearing interest at 4% per year; matures 3/31/09.                                                                                                          |  | $ | 63,370  | 
|                                                                                                                                                                                                       |  |   |         | 
|Unsecured demand note payable to New Heart Ministries, bearing interest at 4% per year; currently in default.                                                                                          |  | $ | 2,925   | 
|                                                                                                                                                                                                       |  |   |         | 
|Unsecured demand note payable to Pacific Sports Investors LLC, bearing interest at 15% per year; currently in default.                                                                                 |  | $ | 48,923  | 
|                                                                                                                                                                                                       |  |   |         | 
|Secured demand note payable to Hector Peneda, bearing interest at 12% per year collateralized by 40,000 shares of common stock; currently in default.                                                  |  | $ | 8,800   | 
|                                                                                                                                                                                                       |  |   |         | 
|Secured promissory note to Dutchess Private Equities Fund, Ltd., bearing interest at 12% per year and collateralized by however many shares are needed to settle the debt; matures May 1, 2008.        |  | $ | 45,623  | 
|                                                                                                                                                                                                       |  |   |         | 
|Secured promissory note to Dutchess Private Equities Fund, Ltd., bearing interest at 12% per year and collateralized by however many shares are needed to settle the debt; matures September 13, 2008. |  | $ | 312,000 | 
|                                                                                                                                                                                                       |  |   |         | 
|Unsecured demand note payable April 21, 2008 and including a 4.5% fee of $2,516.                                                                                                                       |  | $ | 58,431  | 
|                                                                                                                                                                                                       |  |   |         | 
|                                                                                                                                                                                                       |  |   |         | 
|TOTAL                                                                                                                                                                                                  |  | $ | 549,610 | 
|                                                                                                                                                                                                       |  |   |         | 
|                                                                                                                                                                                                       |  |   |         | 
|                                                                                                                                                                                                       |  |   |         | 





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|EXECUTE SPORTS, INC.                               | 
|-------------------------------------------------- | 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS     | 
|FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 | 
|                                                   | 
|                                                   | 



NOTE F - NOTES PAYABLE (Continued)



Notes Payable (Continued)



The interest rate offered on the 2% through 4% 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.



In January 2008, the Company issued 991,349 shares of common stock to John Helms in exchange for $11,797 in amounts owed to him, including accrued interest of $816 and principle of $10,981.



On May 1, 2007, the Company issued to Dutchess a promissory note in the face amount of $132,000 for gross proceeds of $110,000. The Note bears interest at 12% per annum and matures on May 1, 2008. Pursuant to the Note, the Company is required to make payments to Dutchess in the amount of the greater of a) one hundred percent (100%) of each Put (as defined in the Investment Agreement (See Note G) between the Company and the Investor given to Dutchess from the Company; or b) eleven thousand seven hundred twenty-one dollars and 39/100 ($11,721.39) until the Face Amount is paid in full, minus any fees due. In connection with the issuance of the Note, the Company has agreed to provide Collateral to Dutchess in the form of thirty (30) Put Notices. In the event that the Company has not repaid the Face Amount by the maturity date, then as liquidated damages, the face amount shall be increased by ten percent (10.0%) as an initial penalty and an additional two and one-half percent (2.5%) per month (pro rata for partial periods), compounded daily, for each month until the face amount is paid in full.



As an incentive to enter into this note, the Company issued to Dutchess 800,000 shares of the Company's restricted common stock. During the year ended December 31, 2007, the Company issued 4,699,033 shares of common stock in repayment of $86,377 of the May 1, 2007 promissory note, which has a balance of $45,623 as of March 31, 2008.



On August 13, 2007, the Company issued to Dutchess a promissory note in the face amount of $312,000 for gross proceeds of $260,000. The Note bears interest at 12% per annum and matures on September 13, 2008. Pursuant to the Note, the Company is required to make payments to Dutchess in the amount of one hundred percent (100%) of each Put (as defined in the Investment Agreement until the Face Amount is paid in full, minus any fees due. In connection with the issuance of the Note, the Company has agreed to provide Collateral to Dutchess in the form of thirty (30) Put Notices. In the event that the Company has not repaid the Face Amount by the maturity date, then as liquidated damages, the face amount shall be increased by ten percent (10.0%) as an initial penalty and an additional two and one-half percent (2.5%) per month (pro rata for partial periods), compounded daily, for each month until the face amount is paid in full.



During the three months ended March 31, 2008, the Company borrowed $55,915 from a single source for the purchase of goods for resale. The loan includes a 4.5% fee, or $2,516 bringing the total amount due to $58,431, which is due April 21, 2008.





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|EXECUTE SPORTS, INC.                               | 
|-------------------------------------------------- | 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS     | 
|FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 | 
|                                                   | 
|                                                   | 



NOTE F - NOTES PAYABLE (Continued)



Notes Payable (Continued)



During the three months ended March 31, 2008 and 2007, the Company recognized $6,130 and $3,674 of interest expense related to the notes above. No interest was paid during the three months ended March 31, 2008 or 2007.



Related Party Notes Payable



Related party Notes payable at March 31, 2008 is as follows:





|Secured demand note payable to Craig Hudson, bearing interest at 12% per year collateralized by 116,000 shares of common stock; currently in default.       |  | $ | 32,065  | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ------- | 
|                                                                                                                                                            |  |   |         | 
|Unsecured demand note payable to Sheryl Gardner, former CFO, bearing interest at 4% per year.                                                               |  | $ | 47,225  | 
|                                                                                                                                                            |  |   |         | 
|Unsecured demand note payable to Phase 2 Sales, owned by Geno Apicella, CEO, bearing fees of 4.5% per purchase order transaction and maturing May 15, 2008. |  | $ | 90,000  | 
|                                                                                                                                                            |  |   |         | 
|                                                                                                                                                            |  |   |         | 
|Total                                                                                                                                                       |  | $ | 169,290 | 
|                                                                                                                                                            |  |   |         | 
|                                                                                                                                                            |  |   |         | 
|                                                                                                                                                            |  |   |         | 



During the three months ended March 31, 2008, the Company borrowed $90,000 from Phase 2 Sales, a corporation owned by Geno Apicella, CEO. The funds are being used to purchase goods for resale and bear interest of 4.5% per purchase transaction. The funds are due May 15, 2008.



During the three months ended March 31, 2008 and 2007, the Company recognized $5,484 and $1,434, respectively, of interest expense related to the notes above. No interest was paid during the three months ended March 31, 2008 or 2007.



NOTE G - STOCKHOLDERS' EQUITY



During the year ended December 31, 2007, the Company issued 3,266,968 shares of common stock valued at the closing price of the stock on the date of issuance, or $110,532 to two of its directors as payment in lieu of cash.



During the year ended December 31, 2007, the Company issued 3,177,271 shares of common stock valued at the closing price of the stock on the date of issuance, or $101,519 as payment for services rendered in lieu of cash.



During the year ended December 31, 2007, the Company issued 1,400,000 shares of common stock valued at the closing price of the stock on the date of issuance, or $28,600 to the Holders of our convertible debentures as an inducement to make short term loans to the Company for the purpose of financing production and working capital.





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|EXECUTE SPORTS, INC.                               | 
|-------------------------------------------------- | 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS     | 
|FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 | 
|                                                   | 
|                                                   | 



NOTE G - STOCKHOLDERS' EQUITY (Continued)



During the year ended December 31, 2007, the Company issued 8,933,552 shares of common stock in exchange for the retirement of $205,476 of principal amount owed and $14,145 of accrued interest thereon. The stock was valued at the closing price of the stock on the date of issuance and resulted in an increase to shareholders equity of $186,114 and a gain of $33,507.



During the year ended December 31, 2007, the Company issued 31,894,880 shares to Dutchess pursuant to the Investment Agreement (See NOTE E). The total value of the shares on the dates of issuance was $683,543. Of this amount $76,168 was received in cash, $219,530 was applied to promissory notes made to the Company (See Note F), $54,250 was recognized as a loss due to the conversion discount, $217,073 was applied to accrued interest on the May 2006 debenture and $116,525 was applied to accrued interest on the August 2007 debenture.



During three months ended March 31, 2008, the Company issued 750,000 shares of common stock valued at the closing price of the stock on the date of issuance, or $12,000 to two of its directors as payment in lieu of cash.



During three months ended March 31, 2008, the Company issued 1,125,000 shares of common stock valued at the closing price of the stock on the date of issuance, or $15,000 as payment for services rendered in lieu of cash.



During three months ended March 31, 2008, the Company issued 991,349 shares of common stock in exchange for the retirement of $10,981 of principal amount owed and $816 of accrued interest. The stock was valued at the closing price of the stock on the date of issuance.



During three months ended March 31, 2008, the Company issued 123,900 shares to Dutchess pursuant to the Investment Agreement (See NOTE E). The total value of the shares on the dates of issuance was $1,041. This amount was applied to accrued interest on the August 2007 debenture.



NOTE H - WARRANTS



At March 31, 2008, the Company had 15,661,667 Warrants outstanding entitling the holder thereof the right to purchase one share of common stock for each warrant held as follows:





|Warrant
Class         |  | Number of
Warrants |            | Exercise
Price Per
Warrant |   | Expiration
Date | 
|--------------------- |  | ------------------ | ---------- | -------------------------- | - | --------------- | 
|                      |  |                    |            |                            |   |                 | 
|May 2006 Debenture    |  |                    | 2,911,667  |                            | $ | 0.150           | 
|August 2007 Debenture |  |                    | 5,750,000  |                            | $ | 0.020           | 
|B                     |  |                    | 5,000,000  |                            | $ | 0.001           | 
|B                     |  |                    | 2,000,000  |                            | $ | 0.001           | 
|                      |  |                    |            |                            |   |                 | 
|Total                 |  |                    | 15,661,667 |                            |   |                 | 



| |  |  |  |  |  |  |  |  |  | 
| |  |  |  |  |  |  |  |  |  | 
| |  |  |  |  |  |  |  |  |  | 
| |  |  |  |  |  |  |  |  |  | 





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|EXECUTE SPORTS, INC.                               | 
|-------------------------------------------------- | 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS     | 
|FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 | 
|                                                   | 
|                                                   | 



NOTE H - WARRANTS (Continued)



The fair market value of warrants is calculated using the Black-Scholes Option Pricing Model.



During the three months ended March 31, 2008, the Company canceled 500,000 warrants that had expired.



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 for that derivative pursuant to EITF 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a Company's Own Stock of that derivative.



The Company noted that if all warrants (15,661,667) were exercised and added to the currently outstanding shares (90,446,790), the Company would have 106,108,457 shares outstanding, which is 6,108,457 shares in excess of the authorized shares of 100,000,000.  Pursuant to EITF 00-19, this should result in a portion of the warrants being reclassified from permanent equity to liabilities.  However, given that the total value of debentures is only 5% of total assets and that the debenture warrants which total 8,661,667 and have a fair value of only $575, the Company has elected to maintain the classification of all warrants as permanent equity.



NOTE I - 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.



At December 31, 2007, 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 Date |                  
|----------------- |  | ------ | --------- | --------------- | -----------------
|                  |  |        |           |                 |                  
|December 31, 2007 |  | $      | 2,276,281 |                 | December 31, 2027
|December 31, 2006 |  | $      | 5,089,954 |                 | December 31, 2026
|December 31, 2005 |  | $      | 574,866   |                 | December 31, 2025
|December 31, 2004 |  | $      | 420,421   |                 | 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 book loss for the fiscal year ended December 31, 2007, was $2,671,410. As of December 31, 2007, a valuation allowance for the full amount of the net deferred tax asset has been recognized over the period for $3,344,610, based on an anticipated tax rate of 40%.





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|EXECUTE SPORTS, INC.                               | 
|-------------------------------------------------- | 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS     | 
|FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 | 
|                                                   | 
|                                                   | 



NOTE J - 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 consolidated financial statements do not include any adjustments that might result from the outcome of these risks and uncertainty.



NOTE K - RELATED PARTY TRANSACTIONS



In January 2008, just prior to his departure as a board member, the Company made payments totaling $2,000 to Craig Washington for accounting services.



During the three months ended March 31, 2008, the Company borrowed $90,000 from Phase 2 Sales, a corporation owned by Geno Apicella, CEO (See NOTE F).



NOTE L - CONTINGENCIES

Litigation



The Company is involved in various legal proceedings arising in the ordinary course of business. The ultimate outcome of these proceedings cannot be determined because of the uncertainties that exist. In the opinion of management, the disposition of matters that are pending or asserted will not have a materially adverse effect on the financial position, results of operations or cash flows of the Company.



NOTE M - SUBSEQUENT EVENTS



On April 25, 2008, Challenger Powerboats, Inc. filed for bankruptcy protection under Chapter 7 of the United States Bankruptcy Code and indicated it intends to liquidate. IMAR, a division of Challenger and exclusive manufacturer of the Company's Sugar Sand boats, was included in the bankruptcy.  The Company believes that it is unlikely that it will be able to arrange any feasible means to produce Sugar Sand boats in the future, and therefore, in its next fiscal quarter for the period ending June 30, 2008 it intends to recognize an impairment charge of $4,825,000 related to the entire investment made in Sugar Sand.





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Item 2  Management's Discussion and Analysis or Plan of Operations



This management's discussion and analysis of results of operations and financial condition contains forward-looking statements that involve risks and uncertainties. In some cases, you can identify these statements by forward-looking words such as "may," "might," "will," "should," "expect(s)," "plan(s)," "anticipate(s)," "believe(s)," "estimate(s)," "predict(s)," "intend(s)," "potential" and similar expressions. All of the forward-looking statements contained in this registration statement are based on estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market and other factors. Although we believe such estimates and assumptions are reasonable, they are inherently uncertain and involve risks and uncertainties. In addition, management's assumptions about future events may prove to be inaccurate. We caution you that the forward-looking statements contained in this registration statement are not guarantees of future performance and we cannot assure you that such statements will be realized. In all likelihood, actual results will differ from those contemplated by such forward-looking statements as a result of a variety of factors, including, but not limited to, those factors discussed in "Risk Factors" and included in our on Form 10-KSB for the fiscal year ended December 31, 2007. Except as required by law, we undertake no obligation to update any of these forward-looking statements.



The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The following discussion of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements for the years ended December 31, 2007 and 2006, together with notes thereto included on Form 10-KSB as filed with the Commission on March 31, 2008.



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.





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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.

The Company recognizes revenue under the guidance provided by the SEC Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition" and the Emerging Issues Task Force ("EITF") Abstract No. 99-19 "Reporting Revenue Gross as a Principal versus Net as an Agent" ("EITF 99-19"). Pursuant to EITF 99-19, the Company recognizes revenue from the sale of Sugar sand boats on a gross basis.



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 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.





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Income taxes



On November 1, 2004, the Company amended its Articles of Incorporation to make the transition from an S-Corporation to a C-Corporation. Prior to this transaction, 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.

Overview

Results of Operations

THREE MONTHS ENDED MARCH 31, 2008 AND 2007

Revenue

Net Sales for the three months ended March 31, 2008 and 2007 were $1,804,954 and $553,482, respectively, representing a $1,251,472, or 226% increase. The three month year-over-year increase is due to $1,475,731 of sales related to Sugar Sand boats that were not part of the Company's product portfolio during the same period in the previous year. Watersports sales decreased $224,259, or 41% from the previous year due to production delays that pushed deliveries in to the first quarter compared to the first quarter of 2007.



Gross Margin



Gross margin for the three months ended March 31, 2008 and 2007 was $153,700 or 9% of revenue and $212,535, or 38% of revenue, respectively. The $58,835 decrease in gross margin over the previous year was primarily due to Sugar Sand sales which have approximately a 5% gross margin compared to watersports whose gross margin is higher than Sugar Sand boats at 24% and 38% during the three months ended March 31, 2008 and 2007, respectively.





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Operating Expenses



Selling, General and Administrative expenses for the three months ended March 31, 2008 and 2007 was $401,442 and $363,828, respectively, representing a $37,614 or 10% increase. The year-over-year increase was due to an increase of $100,100 related to depreciation and amortization of Sugar Sand offset by a decrease of $65,826 primarily related to less stock based compensation expense in the current quarter compared to the same quarter in the prior year.



Other Income and Expenses



Other expense for the three months ended March 31, 2008 and 2007 was $323,081 and $520,909, respectively, representing a $197,828 or 38% decrease in expense. The decrease is due to $315,816 less in amortization expense related to our debentures offset by a $171,776 increase in interest expense primarily related to our outstanding debentures.



Net Loss



Net loss from continuing operations for the three months ended March 31, 2008 and 2007 was $570,823 and $672,202, respectively, representing a $101,379, or 15% decrease in the net loss from continuing operations compared to the same period last year. The improvement in net loss is due primarily to decreased amortization costs related to our convertible debentures.



Net loss for the three months ended March 31, 2008 and 2007 was $570,823 and $465,511, respectively, representing a $105,312, or 23% increase in net loss compared to the same period last year. The net loss for the three months ended March 31, 2007 includes a net gain of $206,691 recognized by the Company upon the disposition of the Academy brand.



Financial Condition



From inception to March 31, 2008, we incurred an accumulated deficit of $13,397,232, 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 three months ended March 31, 2008, we had a net decrease in cash of $321,153. Total cash resources as of March 31, 2008, were $78,102, compared with $399,255 at December 31, 2007. We currently do not have sufficient funds to continue for the next twelve months.



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.





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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 2007 and the latter half of 2006, 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.



Management is currently in the process of seeking additional debt and equity financing with related and unrelated parties. 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.



ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.



ITEM 4.  CONTROLS AND PROCEDURES



(a) Evaluation of Disclosure Controls and Procedures

As of March 31, 2008, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer (who is also our Chief Financial Officer) of our disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our Chief Executive/Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) accumulated and communicated to our management, including our Chief Executive/Financial Officer, as appropriate to allow timely decisions regarding required disclosure; and (ii) recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. There was no change to our internal controls or in other factors that could affect these controls during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

(b)  Changes in Internal Controls over financial reporting

There have been no changes in our internal controls over financial reporting during our last fiscal quarter, which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.





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Part II - Other Information



Item 1.

No change since previous filing.



Item 1A.  Risk Factors.

Not applicable.



Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

In January 2008 the Company issued 991,349 shares of restricted common stock in exchange for the retirement of $10,981 of principal amount owed and $816 of accrued interest.  The stock was valued at the closing price of the stock on the date of issuance.



In February 2008 the Company issued 1,125,000 shares of restricted common stock valued at the closing price of the stock on the date of issuance, or $15,000, as payment for services rendered in lieu of cash.



In February 2008 the Company issued 750,000 shares of restricted common stock valued at the closing price of the stock on the date of issuance, or $12,000, to two of its directors as payment for services rendered in lieu of cash.



Item 3.  Defaults Upon Senior Securities.

The Company is in default on the payment of interest on two senior secured debentures issued to Dutchess Private Equities Fund LP having a combined unpaid principal balance of $7,650,000 as of March 31, 2008. (see also Financial Footnotes E and F). The debentures are secured by a lien on all of the Company's assets. At this time Dutchess has not initiated any collection action against the Company and has not exercised or given notice of its intent to exercise any remedies available to them under the terms of the notes. However, there can be no assurance that Dutchess will not exercise its rights and remedies as senior secured creditor at a future date. Such remedies could include Dutchess taking action to foreclose on all of the Company's assets.



Item 4.  Submission of Matters to A Vote of Security Holders.

None.



Item 5.  Other Information.

There were no matters required to be disclosed on a current report on Form 8-K during the period covered by this report that were not so disclosed.

There were no changes to the procedures by which security holders may recommend nominees to the Company's Board of Directors since the Company last disclosed these procedures.





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Item 6.  Exhibits



|Exhibit Number |                | Description                                                                                                            |  | Incorporated By Reference to   
|-------------- | -------------- | ---------------------------------------------------------------------------------------------------------------------- |  | -------------------------------
|               |                |                                                                                                                        |  |                                
|10.1           |                | Departure of director Craig Washington, effective February 1, 2008.                                                    |  | Form 8-K filed February 7, 2008
|               |                |                                                                                                                        |  |                                
|10.2           |                | Departure of director Benjamin Amendolara, effective February 8, 2008.                                                 |  | Form 8-K filed February 8, 2008
|               |                |                                                                                                                        |  |                                
|31.1           |                | Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act                 |  | *                              
|               |                |                                                                                                                        |  |                                
|32.1           |                | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  | *                              
|               |                |                                                                                                                        |  |                                
|*              | Filed herewith



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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|Signature             |  | Title                                               |  | Date           
|--------------------- |  | --------------------------------------------------- |  | ---------------
|                      |  |                                                     |  |                
|                      |  |                                                     |  |                
|/s/ James R. Arabia   |  | Chief Executive Officer
and Chief Financial Officer |  | October 8, 2008
|                     
|Name: James R. Arabia





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INDEX TO EXHIBITS





|Exhibit Number |                | Description                                                                                                            |  | Incorporated By Reference to   
|-------------- | -------------- | ---------------------------------------------------------------------------------------------------------------------- |  | -------------------------------
|10.1           |                | Departure of director Craig Washington, effective February 1, 2008.                                                    |  | Form 8-K filed February 7, 2008
|               |                |                                                                                                                        |  |                                
|10.2           |                | Departure of director Benjamin Amendolara, effective February 8, 2008.                                                 |  | Form 8-K filed February 8, 2008
|               |                |                                                                                                                        |  |                                
|31.1           |                | Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act                 |  | *                              
|               |                |                                                                                                                        |  |                                
|32.1           |                | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  | *                              
|               |                |                                                                                                                        |  |                                
|*              | Filed herewith





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