**Securities
      And Exchange Commission**


Washington,
      D.C. 20549





**FORM
      10-QSB**





(x)
      Quarterly Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange
      Act Of 1934





For
      The
      Quarterly Period Ended September 30, 2006.





(
      )
      Transition Report Under Section 13 Or 15(d) Of The Securities Exchange Act
      Of
      1934





For
      The
      Transition Period From ______________To_________________





Commission
      File Number 333-125868




**Execute
      Sports, Inc.**


(Exact
      Name Of Registrant As Specified In Its Charter)





Nevada
            
            30-0038070(State
                or Other Jurisdiction of Incorporation or Organization)
            
            (I.R.S.
                Employer Identification
                No.)





1284
      Puerta Del Sol, Suite 150


San
      Clemente, CA 92673


(858)
      518-1387


(Address,
      Including Zip Code, And Telephone Number, Including


Area
      Code, Of Registrant's mailing address in California)





Check
      whether the issuer: (1) filed all reports required to be filed by Section
      13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
      period that the registrant was required to file such reports), and (2) has
      been
      subject to such filing requirements for the past 90 days.





Yes
      (x)
      No ( )





The
      number of outstanding shares of the issuer's common stock, $0.001 par value,
      as
      of November 10, 2006 was 24,377,822.


-1-


TABLE
      OF
      CONTENTS





PagePart
                IItem
              1. Financial Statements
            3Consolidated
                Balance Sheet as of September 30, 2006
                (Unaudited)
            3Consolidated
                Statements of Operations for the three and ninemonths
                ended September 30, 2006 and 2005(unaudited)
            4Consolidated
                Statements of Stockholders Equity for thenine
                months Ended September 30, 2006 (unaudited)
            5Consolidated
                Statements of Cash Flows for the three andnine
                months ended September 30, 2006 and 2005 (unaudited)
            6Notes
                To Financial Statements (Unaudited)
            7Item
              2. Management's Discussion and Analysis
            25Item
              3. Controls and Procedures
            37Part
                II - Other InformationItem
              1. Legal Proceedings
            38Item
              2. Unregistered Sales of Equity Securities and use of Proceeds
            38Item
              3. Defaults Upon Senior Notes
            38Item
              4. Submission of Matters to a Vote of Security****Holders
            38Item
              5. Other Information
            38Item
              6. Exhibits
            38Signatures
            39




-2-





**EXECUTE
                SPORTS, INC.**Consolidated
                Balance Sheet (Unaudited)September
                30, 2006September
                30,2006ASSETSCURRENT
                ASSETSCash
            
            $
            67,306
            
            
            2
            %Accounts
                receivable, net (Note B)
            
            
            613,432
            
            
            21
            %Inventory
                (Note C)
            
            
            494,932
            
            
            17
            %Prepaid
                expenses
            
            
            64,049
            
            
            2
            %Deferred
                financing costs (Note H)
            
            
            139,301
            
            
            5
            %Loan
                receivable and accrued interest, net of reserve (Note D)
            
            
            142,272
            
            
            5
            %Employee
                advance
            
            
            12,955
            
            
            0
            %0
            %TOTAL
                CURRENT ASSETS
            
            
            1,534,247
            
            
            53
            %Fixed
                assets (Note E)Cost
            
            
            118,174
            
            
            4
            %Accumulated
                Depreciation
            
            
            (39,120
            )
            
            -1
            %Net
            
            
            79,054Goodwill
                (Note F)
            
            
            1,288,577
            
            
            44
            %Deposits
            
            
            7,618
            
            
            0
            %1,296,195TOTAL
                ASSETS
            
            $
            2,909,496
            
            
            100
            %LIABILITIES
                AND STOCKHOLDERS' EQUITYCURRENT
                LIABILITIESAccounts
                payable and accrued expenses (Note G)
            
            
            728,015
            
            
            25
            %Secured
                borrowings (Note B)
            
            
            157,128
            
            
            5
            %Convertible
                debenture, net (Note H)
            
            
            347,304
            
            
            12
            %Notes
                Payable (Note I)
            
            
            236,391
            
            
            8
            %Related
                party notes payable (Note I)
            
            
            201,718
            
            
            7
            %TOTAL
                CURRENT LIABILITIES
            
            
            1,670,556COMMITMENT
            
            
            -STOCKHOLDERS'
                EQUITY (Note J)Common
                stock, par value $.001, 75,000,000 shares authorizedauthorized;
                issued and outstanding 23,776,166 at September 30, 2006
            
            
            23,771Additional
                paid-in capital
            
            
            8,688,704Retained
                earnings <Deficit>
            
            
            (7,473,535
            )TOTAL
                STOCKHOLDERS' EQUITY
            
            
            1,238,940TOTAL
                LIABILITIES ANDSTOCKHOLDERS'
                EQUITY
            
            $
            2,909,496SEE
                NOTES TO FINANCIAL STATEMENTS


-3-


**EXECUTE
                  SPORTS, INC.**Consolidated
                  Statements of Operations (Unaudited)Three
                  and Nine Months Ended September 30, 2006 and 2005Three
                  Months Ended
              
              Nine
                  Months EndedSeptember
                  30,
              
              
              September
                  30,2006
              
              
              2005
              
              
              2006
              
              
              2005REVENUESSales
              
              $
              531,932
              
              $
              96,211
              
              $
              1,634,456
              
              $
              1,355,104Cost
                  of sales
              
              
              268,375
              
              
              44,819
              
              
              1,100,409
              
              
              925,049Gross
                  profit
              
              
              263,557
              
              
              51,392
              
              
              534,047
              
              
              430,055EXPENSESGeneral
                  and administrative expenses
              
              
              518,452
              
              
              344,760
              
              
              2,218,952
              
              
              3,074,481Selling
                  and advertising
              
              
              163,595
              
              
              39,531
              
              
              429,187
              
              
              148,803Depreciation
                  expense
              
              
              1,138
              
              
              1,488
              
              
              3,414
              
              
              4,465Total
                  expense
              
              
              683,185
              
              
              385,779
              
              
              2,651,553
              
              
              3,227,749Income
                  (loss) from operations
              
              
              (419,628
              )
              
              (334,387
              )
              
              (2,117,506
              )
              
              (2,797,694
              )OTHER
                  INCOME AND EXPENSESInterest
                  income
              
              
              -
              
              
              -
              
              
              6,739
              
              
              -Other
                  income
              
              
              48
              
              
              -
              
              
              2,851
              
              
              -Interest
                  expense
              
              
              (87,078
              )
              
              (5,620
              )
              
              (138,171
              )
              
              (61,296
              )Loss
                  due to loan reserve
              
              
              (250,000
              )
              
              -
              
              
              (250,000
              )
              
              -Loss
                  due to discount on conversion to stock
              
              
              (32,356
              )
              
              -
              
              
              (32,356
              )
              
              -Amortization
                  of beneficial conversion featureof
                  convertible debenture
              
              
              (160,719
              )
              
              -
              
              
              (227,151
              )
              
              -Amortization
                  of warrant discount related toconvertible
                  debenture
              
              
              (81,138
              )
              
              -
              
              
              (120,153
              )
              
              -Amortization
                  of deferred financing costs
              
              
              (34,631
              )
              
              -
              
              
              (51,699
              )
              
              -Total
                  other income and expenses
              
              
              (645,874
              )
              
              (5,620
              )
              
              (809,940
              )
              
              (61,296
              )NET
                  INCOME (LOSS)
              
              $
              (1,065,502
              )
              $
              (340,007
              )
              $
              (2,927,446
              )
              $
              (2,858,990
              )Weighted
                  average shares outstanding
              
              
              23,321,088
              
              
              15,644,931
              
              
              21,376,749
              
              
              10,347,308Earnings
                  per share
              
              $
              (0.046
              )
              $
              (0.022
              )
              $
              (0.137
              )
              $
              (0.276
              )The
                  average shares listed below were not included in the
                  computationof
                  diluted losses per share because to do so would have
                  beenantidilutive
                  for the periods presented:Stock
                  options
              
              
              900,000
              
              
              -
              
              
              900,000
              
              
              -Warrants
              
              
              3,486,627
              
              
              -
              
              
              1,769,632
              
              
              -Debt
                  collateralized with common stock
              
              
              13,442,627
              
              
              -
              
              
              6,339,565
              
              
              -SEE
                  NOTES TO FINANCIAL STATEMENTS


-4-




**EXECUTE
                  SPORTS, INC.**Consolidated
                  Statement of Stockholder's Equity (Unaudited)As
                  of September 30, 2006Common
                  Stock
              
              Additional
              
              Retained
              
              TotalNumber
                  of
              
              
              
              Payable/
              
              Paid-in
              
              Earnings
              
              Stockholder'sShares
              
              Amount
              
              Subscribed
              
              Capital
              
              <Deficit>
              
              EquityDecember
                  31, 2004
              
              
              -
              
              $
              -
              
              $
              169,500
              
              $
              -
              
              $
              (979,509
              )
              $
              (810,009
              )Share
                  subscriptions receivable
              
              
              
              
              
              
              
              
              
              
              
              (5,130
              )
              
              
              
              
              (5,130
              )Shares
                  subscribed for cash
              
              
              2,918,000
              
              
              2,918
              
              
              (69,500
              )
              
              726,582
              
              
              
              
              
              660,000Shares
                  issued in connection with SB-2
              
              
              3,061,570
              
              
              3,057
              
              
              105,000
              
              
              1,068,494
              
              
              
              
              
              1,176,551Shares
                  payable for services
              
              
              12,310,000
              
              
              12,310
              
              
              (100,000
              )
              
              3,065,190
              
              
              
              
              
              2,977,500Shares
                  payable for accrued interest
              
              
              416,931
              
              
              417
              
              
              
              
              
              103,815
              
              
              
              
              
              104,232Shares
                  issued for acquisition
              
              
              
              
              
              
              
              
              676,400
              
              
              
              
              
              
              
              
              676,400Shares
                  to be issued fordirector
                  compensation
              
              
              
              
              
              
              
              
              7,500
              
              
              
              
              
              
              
              
              7,500Net
                  Loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (3,566,580
              )
              
              (3,566,580
              )December
                  31, 2005
              
              
              18,706,501
              
              $
              18,702
              
              $
              788,900
              
              $
              4,958,951
              
              $
              (4,546,089
              )
              $
              1,220,464Shares
                  subscriptions received
              
              
              
              
              
              
              
              
              
              
              
              5,130
              
              
              
              
              
              5,130Shares
                  issued for acquisition
              
              
              1,932,569
              
              
              1,933
              
              
              (676,400
              )
              
              674,467
              
              
              
              
              
              -Shares
                  issued for director compensation
              
              
              73,808
              
              
              74
              
              
              (7,500
              )
              
              17,533
              
              
              
              
              
              10,107Shares
                  issued for cash in connection withthe
                  SB-2 filed 6/16/05
              
              
              300,000
              
              
              300
              
              
              (105,000
              )
              
              104,700
              
              
              
              
              
              -Founders
                  shares voluntarily canceled
              
              
              (1,000,000
              )
              
              (1,000
              )
              
              
              
              
              1,000
              
              
              
              
              
              -Stock
                  options granted
              
              
              
              
              
              
              
              
              
              
              
              85,313
              
              
              
              
              
              85,313Shares
                  issued for cash
              
              
              1,597,345
              
              
              1,597
              
              
              
              
              
              321,491
              
              
              
              
              
              323,088Shares
                  issued for services
              
              
              529,785
              
              
              529
              
              
              
              
              
              194,803
              
              
              
              
              
              195,332Shares
                  issued for debt retirement
              
              
              1,636,158
              
              
              1,636
              
              
              
              
              
              425,316
              
              
              
              
              
              426,952Beneficial
                  conversion feature ofconvertible
                  debenture
              
              
              
              
              
              
              
              
              
              
              
              1,425,000
              
              
              
              
              
              1,425,000Warrant
                  discount to convertible debenture
              
              
              
              
              
              
              
              
              
              
              
              475,000
              
              
              
              
              
              475,000Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (2,927,446
              )
              
              (2,927,446
              )September
                  30, 2006
              
              
              23,776,166
              
              
              23,771
              
              
              -
              
              
              8,688,704
              
              
              (7,473,535
              )
              
              1,238,940SEE
                  NOTES TO FINANCIAL STATEMENTS


-5-


**EXECUTE
                  SPORTS, INC.**Consolidated
                  Statements of Cash Flows (Unaudited)Three
                  and Nine Months Ended September 30, 2006 and 2005Three
                  Months Ended
              
              Nine
                  Months EndedSeptember
                  30,
              
              September
                  30,2006
              
              
              2005
              
              
              2006
              
              
              2005CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  income (loss)
              
              $
              (1,065,502
              )
              $
              (340,007
              )
              $
              (2,927,446
              )
              $
              (2,858,990
              )Adjustments
                  to reconcile net losstonet
                  cash used by operating activities:Depreciation
              
              
              1,138
              
              
              1,488
              
              
              3,414
              
              
              4,465Common
                  stock payable for services
              
              
              6,250
              
              
              164,116
              
              
              220,753
              
              
              3,141,616Compensation
                  expense on options granted
              
              
              -
              
              
              -
              
              
              85,313
              
              
              -Common
                  stock payable for accrued interest
              
              
              -
              
              
              -
              
              
              -
              
              
              104,232Loss
                  on the conversion of convertible debt
              
              
              43,906
              
              
              -
              
              
              43,906
              
              
              -Amortization
                  of beneficial conversion feature
              
              
              160,719
              
              
              -
              
              
              227,151
              
              
              -Amortization
                  of warrant discount related to convertible debenture
              
              
              81,138
              
              
              -
              
              
              120,153
              
              
              -Increase
                  in loan receivable loss reserve
              
              
              250,000
              
              
              -
              
              
              250,000
              
              
              -CHANGES
                  IN ASSETS AND LIABILITIES:(Increase)
                  decrease in assets:Accounts
                  receivable
              
              
              (300,245
              )
              
              319,960
              
              
              (470,094
              )
              
              (36,986
              )Inventory
              
              
              29,895
              
              
              (24,788
              )
              
              (243,144
              )
              
              (86,760
              )Prepaid
                  expenses
              
              
              81,299
              
              
              (11,500
              )
              
              300,680
              
              
              (574,439
              )Deferred
                  financing costs
              
              
              3,448
              
              
              -
              
              
              (139,301
              )
              
              -Employee
                  advance
              
              
              14,258
              
              
              -
              
              
              (12,955
              )
              
              -Other
                  assets
              
              
              31,183
              
              
              -
              
              
              -
              
              
              -Increase
                  (decrease) in current liabilities:Accounts
                  payable and accrued expenses
              
              
              (291,787
              )
              
              67,232
              
              
              100,935
              
              
              (30,482
              )Customer
                  deposits
              
              
              -
              
              
              -
              
              
              (25,262
              )
              
              -NET
                  CASH USED FOR OPERATING ACTIVITIES
              
              
              (954,300
              )
              
              176,501
              
              
              (2,465,897
              )
              
              (337,344
              )CASH
                  FLOWS FROM INVESTING ACTIVITIES:Loan
                  proceeds to unaffiliated company
              
              
              -
              
              
              (76,940
              )
              
              (155,019
              )
              
              (199,478
              )Acquisition
                  of furniture and equipment
              
              
              (31,938
              )
              
              -
              
              
              (70,175
              )
              
              -NET
                  CASH USED FOR INVESTING ACTIVITIES
              
              
              (31,938
              )
              
              (76,940
              )
              
              (225,194
              )
              
              (199,478
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Increase
                  in deposits
              
              
              -
              
              
              -
              
              
              (1,858
              )
              
              -Common
                  stock subscribed
              
              
              -
              
              
              (670,929
              )
              
              -
              
              
              (109,499
              )Issuance
                  of common stock
              
              
              109,182
              
              
              719,370
              
              
              341,551
              
              
              719,370Proceeds
                  from convertible debenture
              
              
              -
              
              
              -
              
              
              1,900,000
              
              
              -Proceeds
                  from notes payable
              
              
              -
              
              
              -
              
              
              515,000
              
              
              16,000Repayment
                  of notes payable
              
              
              (53,001
              )
              
              -
              
              
              (116,010
              )
              
              (52,542
              )Repayment
                  of related party notes payable
              
              
              (31,306
              )
              
              (11,500
              )
              
              (182,179
              )
              
              (28,008
              )Proceeds
                  from related party notes payable
              
              
              -
              
              
              11,000
              
              
              58,431
              
              
              11,000Secured
                  borrowings
              
              
              71,379
              
              
              (206,164
              )
              
              (127,673
              )
              
              (31,254
              )NET
                  CASH PROVIDED BY FINANCING ACTIVITIES
              
              
              96,254
              
              
              (158,223
              )
              
              2,387,262
              
              
              525,067NET
                  INCREASE <DECREASE> IN CASH
              
              
              (889,984
              )
              
              (58,662
              )
              
              (303,829
              )
              
              (11,755
              )CASH,
                  beginning of period
              
              
              957,290
              
              
              52,060
              
              
              371,135
              
              
              5,153CASH,
                  end of period
              
              $
              67,306
              
              $
              (6,602
              )
              $
              67,306
              
              $
              (6,602
              )SUPPLEMENTAL
                  DISCLOSURE:Taxes
                  paid
              
              $
              -
              
              $
              1,050
              
              $
              13,268
              
              $
              1,050Interest
                  paid
              
              $
              -
              
              $
              1,096
              
              $
              24,829
              
              $
              21,543Other
                  non-cash investing and financing activities:Shares
                  issued for services
              
              $
              6,250
              
              $
              164,116
              
              $
              201,582
              
              $
              2,645,019Shares
                  issued for debt retirement
              
              $
              -
              
              $
              -
              
              $
              426,952
              
              $
              104,232SEE
                  NOTES TO FINANCIAL STATEMENTS




-6-


NOTE
      A
      - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Organization





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





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





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





In
      late
      2005, the Company expanded its product mix by entering into a letter of intent
      to acquire Pacific Sports Group, Inc., ("PSG") which owns and operates Academy
      Snowboards, Kampus Wakesk8s and Kampus Wake Shoes and Collective Development
      Bags and Bindings.





In
      January, 2006, the Company consummated the PSG acquisition.




The
      Company has headquarters in San Clemente, California with offices in Oceanside,
      California.





The
      accompanying unaudited financial statements have been prepared in accordance
      with U.S. generally accepted accounting principles (GAAP) for interim financial
      information and item 301(b) of Regulation S-B. They do not include all of the
      information and footnotes required by U.S. GAAP for complete financial
      statements. In the opinion of management, all adjustments (consisting only
      of
      normal recurring adjustments) considered necessary for a fair presentation
      have
      been included.





The
      results of operations for the periods presented are not necessarily indicative
      of the results to be expected for the full year. For further information, refer
      to the financial statements for the Company as of December 31, 2005 and for
      the
      two years then ended, including notes thereto.





Summary
      of Significant Accounting Principles





Basis
      of Presentation





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





Accounting
      estimates





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


-7-


Principles
      of consolidation





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





Cash
      and cash equivalents





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





Accounts
      receivable





Accounts
      receivable are reported at the customers' outstanding balances less any
      allowance for doubtful accounts. Interest is not accrued on overdue accounts
      receivable. The Company evaluates receivables on a regular basis for potential
      reserve. During the three and nine months ended September 30, 2006, the
      allowance for doubtful accounts did not increase from $4,000 at December 31,
      2005.





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





Inventories





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





Property
      and equipment





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





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


-8-


Goodwill





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





Long-lived
      assets





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





Revenue
      recognition policy





Revenue
      from the sale of water sports clothing, snowboards and apparel are recognized
      when the earning process is complete and the risk and rewards of ownership
      have
      transferred to the customer, which is generally considered to have occurred
      upon
      the shipment to the customer.





Shipping
      and handling costs





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





Advertising





The
      Company expenses all advertising costs as incurred. For the three and nine
      months ended September 30, 2006 and 2005 the Company incurred approximately
      $28,270 and $80,449 and $10,431 and $57,381 in advertising expenses,
      respectively.


-9-





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





Issuance
      of common stock




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





Comprehensive
      loss





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





Income
      taxes





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





Impact
      of accounting standards





In
      November 2004, the FASB issued SFAS 151, Inventory Costs—an amendment of ARB No.
      43, Chapter 4. The Statement amends the guidance of ARB No. 43, Chapter 4,
      Inventory Pricing, by clarifying that abnormal amounts of idle facility expense,
      freight, handling costs, and wasted materials (spoilage) should be recognized
      as
      current-period charges and by requiring the allocation of fixed production
      overheads to inventory based on the normal capacity of the production
      facilities. The adoption of SFAS 151 did not have any impact on the Company’s
      financial condition or results of operations.





In
      December 2004, the FASB issued a revision to SFAS 123 (revised 2004),
      Share-Based Payment. The revision requires all entities to recognize
      compensation expense in an amount equal to the fair value of share-based
      payments granted to employees. The statement eliminates the alternative method
      of accounting for employee share- based payments previously available under
      APB
      25. The provisions of SFAS 123R are effective as of the first interim period
      that begins after June 15, 2005. The Company has adopted this accounting
      pronouncement which will have a material impact on their financial position
      and
      results of operations.


-10-


In
      December 2004, the FASB issued SFAS No. 153 "Exchanges of Nonmonetary
      Assets-amendment of APB Opinion No. 29". Statement 153 eliminates the exception
      to fair value for exchanges of similar productive assets and replaces it with
      a
      general exception for exchange transaction that do not have commercial
      substance, defined as transaction that are not expected to result in significant
      changes in the cash flows of the reporting entity. This statement is effective
      for exchanges of nonmonetary assets occurring after June 15, 2005. The Company
      does not believe that this recent accounting pronouncement will have a material
      impact on their financial position or results of operations.





In
      May
      2005,  the FASB issued FASB Statement No. 154,  "Accounting 
Changes


and
      Error  Corrections" ("SFAS  154") which  replaces  APB
      Opinion No. 20, Accounting Changes, and FASB Statement No. 3, "Reporting
      Accounting Changes in Interim Financial  Statements".  Among other
      changes,  SFAS 154 requires that voluntary change in accounting principle
      or a change required by a new accounting   pronouncement 
that  does  not  include  specific   transition
      provisions  be  applied  retrospectively  with all
      prior  period  financial


statements 
      presented  on  the  new  accounting  principle, 
unless  it  is impracticable  to do so. SFAS 154 also provides
      that (1) a change in method of depreciating or amortizing a long-lived
      non-financial asset be accounted for as a change in estimate 
(prospectively)  that was effected by a change in accounting
      principle,  and (2) correction of errors in previously issued
      financial  statements  should  be  termed  a 
"restatement."  SF AS 154 is effective for accounting changes
      and correction of errors made in fiscal years beginning after June 15,
      2005.  Accordingly, the Company is required to adopt the provisions of
      SF AS 154 in the first quarter of fiscal 2006, beginning on January 1,
      2006.  The Company does not believe that this recent accounting
      pronouncement will have a material impact on their financial position or results
      of operations.





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





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





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





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





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




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


-11-


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





In
      March
      2006, the FASB issued SFAS No. 156 ("FAS 156"), "Accounting for Servicing of
      Financial Assets--An Amendment of FASB Statement No. 140." Among other
      requirements, FAS 156 requires a company to recognize a servicing asset or
      servicing liability when it undertakes an obligation to service a financial
      asset by entering into a servicing contract under certain situations. Under
      FAS
      156 an election can also be made for subsequent fair value measurement of
      servicing assets and servicing liabilities by class, thus simplifying the
      accounting and provide for income statement recognition of potential offsetting
      changes in the fair value of servicing assets, servicing liabilities and related
      derivative instruments. The Statement will be effect beginning the first fiscal
      year that begins after September 15, 2006. The Company is currently evaluating
      the impact of SFAS 155.





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





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


-12-


Concentrations
      of credit risk





The
      Company performs ongoing credit evaluations of its customers. As of September
      30, 2006, the Company's two largest customers accounted for 47% (31% and 16%)
      of
      accounts receivable. As of September 30, 2005, the Company's three largest
      customers accounted for 68% (41%, 16% and 11%) of accounts receivable.





For
      the
      three months ended September 30, 2006, one customer accounted for approximately
      36% of sales. For the nine months ended September 30, 2006, three customers
      accounted for approximately 63% (39%, 13% and 11%) of sales. For the three
      and
      nine months ended September 30, 2005, the Company's two largest customers
      accounted for 29% (17% and 12%), and 66% (52% and 14%) of sales, respectively.





For
      the
      three months ended September 30, 2006 and 2005, approximately 43% and 0%,
      respectively, of the Company’s net sales were made to customers outside the
      United States. For the nine months ended September 30, 2006 and 2005,
      approximately 17% and 10%, 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 and nine months ended September 30,
      2006,
      the Company's two and three largest suppliers individually accounted for
      approximately 87% (55% and 32%) and 76% (35%, 21% and 20%) of product purchases,
      respectively. For the three and nine months ended September 30, 2005, the
      Company's two and one largest suppliers accounted for 100% and 79% of product
      purchases, respectively. The Company is dependent on the ability of its
      suppliers to provide products and services on a timely basis and on favorable
      pricing terms. The loss of certain principal suppliers or a significant
      reduction in product availability from principal suppliers could have a material
      adverse effect on the Company.




Disclosure
      about Fair Value of Financial Instruments





The
      Company estimates that the fair value of all financial instruments at September
      30, 2006, as defined in FASB 107, does not differ materially from the aggregate
      carrying values of its financial instruments recorded in the accompanying
      balance sheet. The estimated fair value amounts have been determined by the
      Company using available market information and appropriate valuation
      methodologies. Considerable judgment is required in interpreting market data
      to
      develop the estimates of fair value, and accordingly, the estimates are not
      necessarily indicative of the amounts that the Company could realize in a
      current market exchange.





NOTE
      B
      - ACCOUNTS RECEIVABLE





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


-13-


The
      Company is reporting the factoring agreement as a secured borrowing in
      accordance with FAS 140, “Accounting for Transfers and Servicing of Financial
      Assets and Extinguishments of Liabilities”. As of September 30, 2006, the
      balance due to the Factor was $157,128 collateralized by factored receivables
      of
      $196,410.





The
      accounts receivable balance as of September 30, 2006 is reported net of an
      allowance for doubtful accounts of $4,000.





NOTE
      C
      - INVENTORY





Inventories
      are comprised of finished goods ready for resale and are stated at the lower
      of
      cost or market, as determined using the average costing method. The following
      table represents the major components of inventory at September 30,
      2006.




2006Finished
                  goods
              
              $494,932


NOTE
      D
      - LOANS RECEIVABLE





During
      the nine months ended September 30, 2006, the Company made strategic loans
      totaling $155,019 for potential future association to an unaffiliated company
      that accrues interest at 2% per year and due 12 months from the date of draw.
      The loans outstanding, including interest receivable, total
      $392,272.





As
      of
      September 30, 2006, $199,000 of the outstanding loans were in default. The
      company has created a reserve in the amount of $250,000 against the loans.





NOTE
      E
      - PROPERTY AND EQUIPMENT





Property
      and equipment at September 30, 2006 consist of the following:


2006Computer
                  and office equipment
              
              $
              104,631Furniture
                  and fixtures
              
              
              2,281Machinery
                  and equipment
              
              
              11,262$
              118,174Less:
                  Accumulated Depreciation
              
              
              (39,120
              )$
              79,054




Depreciation
      expense for the three months ended September 30, 2006 and 2005 was $1,138 and
      $1,488, respectively. Depreciation expense for the nine months ended September
      30, 2006 and 2005 was $3,414 and $4,465, respectively.


-14-


NOTE
      F
      - GOODWILL





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





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





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




NOTE
      G
      - ACCOUNTS PAYABLE AND ACCRUED EXPENSES





Accounts
      payable and accrued expenses at September 30, 2006 consist of the
      following:




2006Payables
                  to vendors
              
              $
              255,912Payables
                  for inventory
              
              
              315,058Payables
                  for professional services
              
              
              60,150Related
                  party payable for professional services
              
              
              20,654Accrued
                  payroll
              
              
              44,751Accrued
                  interest
              
              
              27,683Accrued
                  taxes
              
              
              3,807$
              728,015


NOTE
      H
      - CONVERTIBLE DEBENTURE





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





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


-15-


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.





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





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





The
      issuance costs related to the convertible debentures of approximately $191,000
      in cash were capitalized and are being amortized over the term of the repayment
      schedule and calculated based upon the effective interest method. For the three
      and nine months ended September 30, 2006, the Company recognized $34,631 and
      $51,699, respectively as other expense related to the amortization of the
      issuance costs.





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 will be amortized over the term of the repayment
        schedule, or sixteen (16) months and calculated based upon the effective
        interest method. During the three and nine months ended September 30, 2006,
        the
        Company recognized $81,138 and $120,153, respectively in non-cash interest
        expense related to the warrant discount.  -16-


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 will be amortized over the debenture repayment term and
      calculated based upon the effective interest method. During the three and nine
      months ended September 30, 2006, the Company recognized $160,719 and 227,151,
      respectively in non-cash expense attributable to the amortization of the
      beneficial conversion feature discount.





In
      connection with the debenture, the Company entered into a separate Investment
      Agreement also on May 15, 2006 with Dutchess Private Equities Fund, L.P.
      ("Dutchess") providing for the sale and issuance from time to time of up to
      $10,000,000 in shares of Common Stock for a period of up to 36 months from
      the
      date the Registration Statement is declared effective. The maximum number of
      shares that the Company may put to Dutchess at any one time shall be equal
      to,
      at the Company's election, either (a) 200% of the average daily volume in the
      U.S. market of the Common Stock for the ten trading days prior to the date
      the
      Company notifies Dutchess of its intent to sell shares to Dutchess multiplied
      by
      the average of the three daily closing bid prices immediately preceding the
      date
      a Put Notice is delivered, or (b) a number of shares having a value of $100,000.
      The Company may not submit a Put Notice until after the completion of a previous
      sale under the Investment Agreement. The purchase price for the Common Stock
      to
      be sold shall be equal to 93% of the lowest closing best bid price of the Common
      Stock during the five-day period following the date the Company delivers a
      Put
      Notice. Since the price of the shares put to the investor is expected to be
      below market price at 93% of the market price, there is no added benefit to
      the
      company. Thus, the Company has not recorded an asset related to this agreement.
      Upon the delivery of shares and receipt of cash related to this Investment
      Agreement, the Company will record the increase in cash, common stock and
      additional paid in capital. During the three months ended September 30, 2006,
      the Company placed puts with Dutchess totaling $88,665 resulting in the issuance
      of 742,345 shares of common stock.





During
      the three months ended September, 30, 2006, the Company recognized $32,356
      as a
      non-cash loss due to the conversion discount applied upon the conversion of
      interest and principle into
      common stock of the Company pursuant to the Investment Agreement and Debenture
      Agreement.


-17-


During
      the three and nine months ended September, 30, 2006, the Company recognized
      $66,930 and $85,759 in interest expense related to the debentures.





The
      actual dollar amount due to the holders of the Company’s debentures as of
      September 30, 2006 was $1,895,998.





NOTE
      I
      - NOTES PAYABLE





Notes
      payable at September 30, 2006 is as follows:




Unsecured
                  demand note payable to Ron and Dori Arko, bearing interest at 2%
                  per
                  year.
              
              $
              8,206Unsecured
                  demand note payable to John Helms, bearing interest at 2% per
                  year.
              
              
              155,905Unsecured
                  demand note payable to New Heart Ministries, bearing interest at
                  2% per
                  year.
              
              
              1,905Unsecured
                  demand note payable to Pacific Sports Investors LLC, bearing interest
                  at
                  10% per year.
              
              
              40,375Secured
                  demand note payable to Christian Beckas, bearing interest at 12%
                  per year,
                  matures July, 30, 2006 and is collateralized by 80,000 shares of
                  common
                  stock.
              
              
              20,000Secured
                  demand note payable to Hector Peneda, bearing interest at 12% per
                  year,
                  matures on August 7, 2006 and is collateralized by 40,000 shares
                  of common
                  stock.
              
              
              10,000Total
              
              $
              236,391Related
                  party**2006**Secured
                  demand note payable to Craig Hudson, bearing interest at 12% per
                  year and
                  collateralized by 200,000 shares of common stock.
              
              
              50,000Secured
                  demand note payable to Robert Bridges, bearing interest at 9% per
                  year and
                  collateralized by 240,000 shares of common stock.
              
              
              60,000Secured
                  demand note payable to Tom Bridges, bearing interest at 9% per
                  year and
                  collateralized by 240,000 shares of common stock.
              
              
              60,000Unsecured
                  note payable to Geno Apicella, Vice-President, non-interest
                  bearing.
              
              
              8,118Unsecured
                  demand note payable to Sheryl Gardner , bearing interest at 2%
                  per
                  year.
              
              
              54,906Total
              
              
              233,024


Related
      party Notes payable at September 30, 2006 is as follows:


Secured
                  demand note payable to Craig Hudson, bearing interest at 12% per
                  year,
                  matures February 1, 2007 and is collateralized by 200,000 shares
                  of common
                  stock.
              
              
              29,000Secured
                  demand note payable to Robert Bridges, bearing interest at 9% per
                  year,
                  matures September 30, 2006 and is collateralized by 240,000 shares
                  of
                  common stock.
              
              
              60,000Secured
                  demand note payable to Tom Bridges, bearing interest at 9% per
                  year,
                  matures September 30, 2006 and is collateralized by 240,000 shares
                  of
                  common stock.
              
              
              60,000Unsecured
                  note payable to Geno Apicella, Vice-President, non-interest
                  bearing.
              
              
              6,812Unsecured
                  demand note payable to Sheryl Gardner, CFO, bearing interest at
                  4% per
                  year.
              
              
              45,906Total
              
              
              201,718


During
      the three and nine months ended September 30, 2006, the Company incurred $19,414
      and $37,054 in interest expense related to the Notes above.





During
      the three and nine months ended September 30, 2006, the Company repaid $84,307
      and $634,446 of related and non related party debt by paying cash of $280,047
      and converting $354,399 into 1,430,270 shares of common stock.





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


-18-


No
      interest was paid during the three months ended September 30, 2006 and
      2005.




NOTE
      J
      - STOCKHOLDERS’ EQUITY





On
      August
      18, 2004, the Company entered into a service contract valued at $100,000 in
      exchange for 400,000 shares of common stock, which represents the fair market
      value of the stock as of that date. The contract term is 24 months. For the
      three months ended September 30, 2006 and 2005, the company recognized $6,712
      and $12,603, respectively, and for the nine months ended September 30, 2006
      and
      2005, the company recognized $31,507 and $37,397, respectively, of expense
      in
      connection with this contract which has been fully expensed as of September
      30,
      2006.





On
      March
      1, 2005, the Company entered into a service contract valued at $62,500 in
      exchange for 250,000 shares of common stock, which represents the fair market
      value of the stock as of that date. The contract term is 24 months. For the
      three months ended September 30, 2006 and 2005, the company recognized $7,877
      and $7,877, respectively, and for the nine months ended September 30, 2006
      and
      2005, the company recognized $23,373 and $18,236, respectively, of expense
      in
      connection with this contract with the remaining balance of $13,014 accounted
      for as prepaid expense.





On
      September 9, 2004, the Company commenced a limited Private Placement Memorandum
      (PPM) to raise up to $1,750,000 through the sale of the Company’s common stock
      at a price of $0.25 per share. During the year ended December 31, 2004, the
      Company received $69,500 in exchange for 278,000 shares of common stock. Also
      in
      connection with the PPM, during the year ended December 31, 2005, the Company
      received $660,000 in cash in exchange for 2,640,000 shares of common stock.
      In
      total, the PPM resulted in the issuance of 2,918,000 shares of common stock.





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





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





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


-19-


During
      the three months ended June 30, 2005, the company issued 3,060,000 shares of
      its
      common stock in consideration for professional and consulting services to be
      rendered valued at $765,000, or $0.25 per share. For the three months ended
      September 30, 2006 and 2005, the company recognized $56,376, and $143,637,
      respectively, and for the nine months ended September 30, 2006 and 2005, the
      company recognized $244,345 and $391,783 respectively, of expense in connection
      with these contracts with the remaining balance of $25,235 accounted for as
      prepaid expense.





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





During
      the three months ended December 31, 2005, the Company received net proceeds
      of
      $1,176,550 and issued 3,061,570 shares of common stock with $105,000, or 300,000
      shares unissued and included in common stock payable as of December 31, 2005.
      On
      January 8, 2006, the Company issued the 300,000 shares. On January 3, 2006,
      the
      company issued 200,000 shares in exchange for $70,000. These shares were issued
      pursuant to the company’s SB-2 registration statement originally filed with the
      Securities and Exchange Commission on June 16, 2005 with final approval
      occurring on September 27, 2005, our final amended SB-2/A filing. In total
      the
      company issued 3,561,570 shares of common stock in exchange for
      $1,246,550.





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





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





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





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


-20-


During
      March 2006, the Company issued 117,357 shares of common stock in exchange for
      services and debt retirement.





During
      the quarter ended June 30, 2006, the Company converted $354,399 of related
      party
      and non related party debt into 1,430,270 shares of common stock. In addition,
      the Company issued 454,999 shares for services valued at $162,135, which
      represents the fair market value of the Company’s common stock on the date of
      issuance.





During
      the quarter ended September 30, 2006, the Company issued 41,666 shares of common
      stock valued at the closing price of the stock on the date of issuance, or
      $6,250 to two if its directors as payment in lieu of cash.





During
      the quarter ended September 30, 2006, 255,000 “Debenture” Warrants were
      exercised at a strike price of $.15 resulting in proceeds of $38,250 to the
      Company and a loss due to the conversion discount of $11,550.





During
      the quarter ended September 30, 2006, the company placed 742,345 shares to
      Dutchess pursuant to the Investment Agreement (See Note H). The total value
      of
      the shares on the dates of issuance was $103,288. Of this amount $70,932 was
      applied as a reduction to accrued interest on the Company’s debenture and
      $32,356 was recognized as a loss due to a conversion discount.





NOTE
      K
      - WARRANTS





At
      September 30, 2006 the Company had 3,440,238 Warrants outstanding entitling
      the
      holder thereof the right to purchase one common share for each warrant held
      as
      follows:





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


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





During
      the three months ended June 30, 2006, the company issued a warrant to purchase
      3,166,667 shares of Common Stock in connection with a convertible debenture
      (See
      NOTE H).





During
      the three months ended September 30, 2006, 255,000 Debenture warrants were
      exercised (See Note J).


-21-


*Stock
      Warrants Issued to Third Parties*





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





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





During
      the nine months ended March 31, 2006, three warrants were issued; a 500,000
“A”
Warrant; a 28,571 “A” Warrant and 3,166,667 Debenture warrants. The debenture
      warrants are discussed in detail above (See Note H). The terms of each “A”
warrant are substantially the same. No additional services are required beyond
      the issue date, each warrant has registration rights, but no liquidated damage
      clause and net-share settlement is required. Thus, pursuant to EITF 00-19,
      the
      Company has included the fair market value of these warrants in stockholders
      equity. The Company calculated the value of the 500,000 “A” warrants on the
      closing date of the transactions as being $ 45,000 as determined using a
      Black-Scholes option pricing model with the following assumptions: expected
      term
      2.5 years, exercise price $.35, volatility 1.6%, risk free rate 4.86%, and
      zero
      dividend yield. The Company calculated the value of the 28,571 “A” warrants on
      the closing date of the transactions as being $ 4,571 as determined using a
      Black-Scholes option pricing model with the following assumptions: expected
      term
      1.5 years, exercise price $.35, volatility 5.2%, risk free rate 4.86%, and
      zero
      dividend yield. Both warrants were unexercised as of September 30,
      2006.





NOTE
      L
      - STOCK INCENTIVE PLAN





On
      December 31, 2005, the Board of Directors of the Company adopted the 2006
      Execute Sports, Inc. Stock Incentive Plan (the “Plan”). The Plan is to advance
      the interests of Execute Sports, Inc. through the attraction, motivation and
      retention of key Employees (including officers and employee directors) and
      Consultants of the Company, its Affiliates and its stockholders by providing
      those persons who have substantial responsibility for the management and growth
      of the Company and its Affiliates with additional incentives and an opportunity
      to obtain or increase their proprietary interest in the Company, thereby
      encouraging them to continue in the employ of the Company or any of its
      Affiliates.





The
      total
      number of shares of stock set aside for awards may be granted under the Plan
      shall be 1,500,000 shares. The Company may issue each of the following under
      this Plan: Incentive Option, Nonqualified Option, Restricted Stock and/or
      Deferred Stock. No Incentive Option, Nonqualified Option, Restricted Stock
      and/or Deferred Stock shall be granted pursuant to the Plan ten years after
      the
      Effective Date. The Plan was effective January 1, 2006 (the "Effective Date").





On
      December 13, 2005, pursuant to an Employment Agreement and in anticipation
      of
      approval of the Stock Incentive Plan, the Company awarded its Product Manager,
      Duane Pacha a non qualified
      stock option to purchase 300,000 shares of common stock of the Company at an
      exercise price of $.35 per share with an expiration date of December 12, 2015.
      The options vest and become exercisable at a rate of 12,500 per month over
      a
      twenty-four month period.


-22-


On
      December 13, 2005, pursuant to an Employment Agreement and in anticipation
      of
      approval of the Stock Incentive Plan, the Company awarded its Marketing
      Director, Jeff Baughn a non-qualified stock option to purchase 300,000 shares
      of
      common stock of the Company at an exercise price of $.35 per share with an
      expiration date of December 12, 2015. The options vest and become exercisable
      at
      a rate of 12,500 per month over a twenty-four month period.





On
      December 15, 2005, pursuant to an Employment Agreement and in anticipation
      of
      approval of the Stock Incentive Plan, the Company awarded its President, Todd
      Pitcher a non-qualified stock option to purchase 300,000 shares of common stock
      of the Company at an exercise price of $.35 per share with an expiration date
      of
      December 14, 2015. The options vest and become exercisable at a rate of 12,500
      per month over a twenty-four month period.





The
      Stock
      Incentive Plan shall have a duration of ten years commencing on January 1,
      2006.
      Stock Options are non-qualified right-to-buy Options for the purchase of Common
      Stock of the Company. The term of each option shall be ten years from the Date
      of Grant. The option price shall be the fair market value of Execute Sports,
      Inc. Common Stock on the date the option is granted. Under no circumstances
      shall any option vest in less than one year from the date of grant. Shares
      purchased upon exercise of an Option must be paid for in cash and in full at
      the
      time of exercise. Neither the Committee on Directors and Governance nor the
      Board of Directors may reprice any Option that is "underwater ." Restricted Stock is Common Stock of the Company restricted as to sale in such
      fashion as the Committee on Directors and Governance shall determine. Prior
      to
      the lifting of the restrictions, the Awardee will be entitled to receive
      dividends from and to vote the shares of Restricted Stock.





The
      following table summarizes the Company's stock option activity for the three
      months ended September 30, 2006:


2006Weighted
                  AverageShares
              
              Exercise
                  PriceOutstanding
                  at beginning of period
              900,000
              
              $
                  0.35Granted
              -Forfeited
              -Exercised
              -Outstanding
                  at end of period
              900,000
              
              $
                  0.35Options
                  exerciseable at end of period
              337,500 -23-


The
      following table summarizes information about the Company's stock options
      outstanding at September 30, 2006:





Options
                  Outstanding
              
              Options
                  ExercisableNumber
              
              Weighted
              
              Weighted
              
              
              
              WeightedRange
                  of
              
              Outstanding
              
              Average
              
              Average
              
              
              
              AverageExercise
              
              At
                  September 30,
              
              Contractural
              
              Exercise
              
              Number
              
              ExercisePrices
              
              2006
              
              Life
                  (years)
              
              Price
              
              Outstanding
              
              Price$
                  0.35
              
              900,000
              
              1.20
              
              $
                  0.35
              
              337,500
              
              $
                  0.35Total
              
              900,000
              
              1.20
              
              $
                  0.35
              
              337,500
              
              $
                  0.35




The
      Company accounts for stock options pursuant to Financial Accounting Standards
      No. 123 (revised 2004), Share-Based Payment. The Company values each option
      grant utilizing the grant date fair value for fixed awards. Compensation cost
      is
      amortized over the vesting period. The current options were granted prior to
      the
      Company’s common stock trading in the secondary markets. Thus, fair value was
      determined to be $0.35 per share using the Company’s SB-2 (originally filed on
      June 16, 2005) as a proxy. Given that the Company is currently trading on the
      secondary markets and relevant fair market value data is available, the Company
      intends to value all future stock option grants using the Black-Scholes Option
      Pricing Model. During the three months ended September 30, 2006, the Company
      recognized compensation expense of $39,375 and an offsetting allowance for
      the
      same amount due to the unlikelihood that these options will ever be exercised.
      For the nine months ended September 30, 2006 and since the grant date, the
      Company has recognized compensation expense in the amount of
      $85,313.





NOTE
      M
      - NET OPERATING LOSS CARRY FORWARD





In
      assessing the ability to realize deferred tax assets, management considers
      whether it is more likely than not that some portion or all of the deferred
      tax
      assets will not be realized. The ultimate realization of deferred tax assets
      is
      dependent upon the generation of future taxable income during the periods in
      which those temporary differences become deductible. Management considers the
      scheduled reversal of deferred tax liabilities, projected future taxable income
      and tax planning strategies in making this assessment. At December 31, 2005
      a
      valuation allowance for the full amount of the net deferred tax asset was
      recorded because of uncertainties as to the amount of taxable income that would
      be generated in future years.




United
      States Corporation Income Taxes


Period
                of Loss
            Amount
            Expiration
                DateDecember
                31, 2005
            $3,566,580
            December
                31, 2025December
                31, 2004
            $420,935
            December
                31, 2024





Prior
      to
      November 2004 the Company was organized as an S-Corporation and all losses
      were
      distributed and recognized through the tax returns of the owners.





The
      loss
      for the fiscal year ended December 31, 2005 was $3,566,580. As of December
      31,
      2005 a valuation allowance for the full amount of the net deferred tax asset
      has
      been recognized over the periods for $1,426,632, based on an anticipated tax
      rate of 40%.


-24-


NOTE
      N
      - GOING CONCERN AND MANAGEMENT’S PLANS





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





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





NOTE
      O
      - RELATED PARTY TRANSACTIONS





During
      the nine months ended September 30, 2006, 1,000,000 shares of common stock
      previously issued to the founders and president (300,000 Don Dallape, 300,000
      Scott Swedener, 300,000 Geno Apicella and 100,000 Todd Pitcher) were voluntarily
      returned to the Company and cancelled by each shareholder in an effort to
      improve the Company’s capital structure. The shares were originally expensed as
      stock compensation expense for $0.25 per share, or $250,000 on April 1, 2005.
      The Company reclassified the par value, or $1,000 out of Common Stock and
      increased Additional-Paid-in-Capital in order to reflect the reduction in the
      legal value of the canceled shares.





During
      the three and nine months ended September 30, 2006 ,
      the
      Company incurred $7,857 and $26,749 of expenses paid on its behalf by
      Comprehensive Communications LLC, a company wholly owned by the Company’s
      President, Todd Pitcher.





NOTE
      P
      - SUBSEQUENT EVENTS





In
      October 2006, the Company issued 601,656 shares pursuant to the Investment
      Agreement (See Note H).




**Item
      2 - Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations**





***Critical
      Accounting Policies***





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




***Inventories***




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




***Revenue
      recognition***




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




***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.


-25-


***Product
      Warranty***




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




***Income
      taxes***




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


-26-


**Overview**





**Results
      of Operations**





THREE
      AND
      NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005





Net
      Sales
      for the three months ended September
      30, 2006 and 2005 were $531,932 and $96,211, respectively, representing a
      $435,721, or 452% increase. The three month year-over-year increase is due
      primarily to sale of snowboards, which were not included in the previous
      period’s sales, and online sales of water sports products.




Net
      Sales
      for the nine months ended September 30, 2006 and 2005 were $1,634,456 and
      $1,355,104, respectively, representing a $279,352, or 20.6% increase. The nine
      month year-over-year increase is primarily due to sale of snowboards, which
      were
      not included in the previous period’s sales and increases in overall sales of
      water sports products.




Gross
      margin for the three months ended September 30, 2006 and 2005 was $263,557,
      or
      49.5% and $51,392, or 53.4%, respectively. The 3.9% year-over-year decrease
      in
      our gross margin was primarily due to the increase in costs of goods for
      snowboard and water sports products, as well as increases in payments for
      freight and duty charges for snowboard products.





Gross
      margin for the nine months ended September 30, 2006 and 2005 was $534,047,
      or
      32.7% and $430,055, or 31.7%, respectively. The 1% year-over-year increase
      in
      our gross margin was primarily due to reduction in operational and shipping
      costs for our moto line, a reduction in freight and duty for the water sports
      products.





Selling,
      General and Administrative expenses for the three months ended September 30,
      2006 and 2005 was $683,185 and $385,779, respectively, representing a $297,406
      increase. Selling, General and Administrative expenses for the nine months
      ended
      September 30, 2006 and 2005 was $2,651,553 and $3,227,749, respectively,
      representing a $576,196 decrease. The three month year-over-year increase was
      due to higher personnel, marketing and advertising related costs whereas the
      nine month year-over-year decrease was primarily the result of reductions in
      professional services fees and stock compensation expenses.





Net
      loss
      for the three months ended September 30, 2006 and 2005 was $1,065,502 and
      $340,007, respectively, representing an increase in net loss of $725,495. The
      three month year-over-year net loss increased primarily due to non cash costs
      related to the amortization of our debenture warrants, beneficial conversion
      feature, loss due to conversions of the debenture, loan interest, the reserve
      created for strategic loans made to an unaffiliated company and increases in
      selling and advertising expenses. Net loss for the nine months ended September
      30, 2006 and 2005 was $2,927,446 and $2,858,990, respectively, representing
      a
      increase in net loss of $68,456. The nine month year-over-year net loss
      increased due primarily to an increase in debenture related costs and the loan
      reserve offset by lower stock based compensation for professional services
      and
      key employees.


-27-


Financial
      Condition





From
      inception to September 30, 2006, we incurred an accumulated deficit of
      $7,473,535, and we expect to incur additional losses through the year ending
      December 31, 2006 and for the foreseeable future. This loss has been incurred
      through a combination of selling and operating expenses related to expensing
      of
      stock, as well as in support of our plans to expand sales and distribution
      channels, as well as to develop new products.





We
      have
      financed our operations since inception primarily through debt and equity
      financing. During the three months ended September 30, 2006, we had a net
      decrease in cash of $889,984. Total cash resources as of September 30, 2006
      was
      $67,306 compared with $957,290 at June 30, 2006 and $371,135 at December 31,
      2005.





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




***The
      Company’s Liquidity Plan***





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





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





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


-28-


**Risk
      Factors**





**Risks
      Related To Our Business:**





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





In
      the
      audit of our financial statements, our auditors, Bedinger & Company, have
      questioned our ability to continue as a going concern. This is based on our
      Company’s history of reported losses. We have a history of losses. We had a net
      loss of $3,566,580 for the fiscal year ended December 31, 2005 and a net loss
      of
      $540,490 for the fiscal year ended December 31, 2004.





The
      majority of net loss for the year ended December 31, 2005 was incurred due
      to
      the non-cash expensing of $2,125,000 in stock issued to founders and $596,533
      issued for services.





We
      expect
      to significantly increase our operating expenses by expanding our marketing
      operations and increasing our level of capital expenditures in order to grow
      our
      business and further develop and maintain our services. Such increases in
      operating expense levels and capital expenditures may adversely affect our
      operating results if we are unable to immediately realize benefits from such
      expenditures. In addition, if we are unable to manage a significant increase
      in
      operating expenses, our liquidity will likely decrease and negatively impact
      our
      cash flow and ability to sustain operations. In turn, this would have a negative
      impact on our financial condition and share price.





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





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





***Watersports***




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


-29-


Academy
      Snowboard Company





Academy
      Snowboard customers typically issue purchase orders from October through March
      for the coming sales year and are shipped in July through September. We
      anticipate this cyclical aspect of our snow business to continue for the
      foreseeable future but can make no assurances that will be the case.





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





The
      markets in which we cater to are intensely competitive. Our primary competitors
      for wetsuits include Jet Pilot, Body Glove, O’neil, Rip Curl and Quicksilver,
      and our primary competitors in the snow sports markets include Burton, Ride,
      Forum, K2 and Rome The market for the Company’s products is characterized by
      competing businesses introducing products similar to those offered by the
      Company. There are relatively low barriers to entry into the business. Many
      of
      the Company’s competitors or potential competitors have longer operating
      histories, longer customer relationships and significantly greater financial,
      managerial, sale and marketing and other resources than does the Company. The
      Company is vulnerable to a competitor making a late, but well-funded, run at
      the
      Company if it is not aggressive in quickly attaining a consumer base sufficient
      for the Company to rely on for sustainable cash flow, and strategic partners
      as
      well as establishing a strong brand identity.





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





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





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





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





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


·
            Attract
                and maintain customer loyalty;


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


·
            Provide
                desirable products to customers at attractive prices;


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


·
            Rapidly
                respond to competitive developments;


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


·
            Attract,
                retain and motivate qualified personnel.


-30-


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




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




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




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





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





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





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


-31-


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





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





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


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


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


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


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


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


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


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


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





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





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





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


-32-


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





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





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





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





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





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


-33-


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





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





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





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





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





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


-34-


**Risks
      Relating To Our Common Stock:**





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





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





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


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


·
            actual
                or anticipated fluctuations in our operating results;


·
            introductions
                of new products by us or our competitors;


·
            changes
                in the number of our distribution partners;


·
            loss
                of key employees;


·
            changes
                in the market valuations of similar companies; and


·
            changes
                in our industry and the overall economic environment.





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





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





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





Price
      and
      volume fluctuations in our stock might negatively impact our ability to
      effectively use our stock to pay for services, or it could cause us to offer
      stock as compensation for services on terms that are not favorable to the
      Company and its shareholders. If we did resort to granting stock in lieu of
      cash
      for consulting and professional services fees under unfavorable circumstances,
      it would result in increased dilution to investors.  -35-
 **Management
        has broad discretion to use the proceeds from financing activities for business
        activities that may not be successful, which could affect the trading price
        of
        our common stock.**


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





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





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





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




As
      of
      September 30, 2006, a total of 12,671,610 shares of our outstanding common
      stock
      were "restricted securities" and could be sold in the public markets only in
      compliance with Rule 144 adopted under the Securities Act of 1933 or other
      applicable exemptions from registration. Rule 144 provides that a person holding
      restricted securities for a period of one year may thereafter sell, in brokerage
      transactions, an amount not exceeding in any three-month period the greater
      of
      either (i) 1% of the issuer's outstanding common stock or (ii) the average
      weekly trading volume in the securities during a period of four calendar weeks
      immediately preceding the sale. Persons who are not affiliated with the issuer
      and who have held their restricted securities for at least two years are not
      subject to the volume limitation. Possible or actual sales of our common stock
      by present shareholders under Rule 144 could have a depressive effect on the
      price of our common stock.





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




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


-36-


**ITEM
      3. CONTROLS AND PROCEDURES**




(a)  Evaluation
      of Disclosure Controls and Procedures





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





Based
      on
      the evaluation, which disclosed no deficiencies or material weaknesses, the
      Company’s President and Chief Financial Officer concluded that the Company’s
      disclosure controls and procedures are effective as of the end of the period
      covered by this report.





(b)  Changes
      in Internal Controls Over Financial Reporting





In
      accordance with Item 308 (c) of Regulation S-B, as of September 30, 2006 there
      were no changes in the Company’s internal control reporting in connection with
      the Company’s evaluation of its internal controls that occurred during the most
      recent fiscal quarter covered by this Form 10-QSB.


-37-


Part
      II -
      Other Information





**Item
      1.**  **Legal
      Proceedings**





The
      Company is not involved in any pending legal proceedings other than routine
      legal proceedings occurring in the ordinary course of business, which, in the
      aggregate, involved amounts which are believed to be immaterial to the
      consolidated financial condition and operations of the Company.








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





There
      were no unregistered sales of equity securities during the period ended
      September 30, 2006.





**Item
      3. Defaults Upon Senior Notes.**





The
      Company is currently in default on the following Notes:


Unsecured
                  demand note payable to Ron and Dori Arko, bearing interest at 2%
                  per
                  year.
              
              $
              8,206Unsecured
                  demand note payable to John Helms, bearing interest at 2% per
                  year.
              
              
              155,905Unsecured
                  demand note payable to New Heart Ministries, bearing interest at
                  2% per
                  year.
              
              
              1,905Unsecured
                  demand note payable to Pacific Sports Investors LLC, bearing interest
                  at
                  10% per year.
              
              
              40,375Secured
                  demand note payable to Christian Beckas, bearing interest at 12%
                  per year,
                  matures July, 30, 2006 and is collateralized by 80,000 shares of
                  common
                  stock.
              
              
              20,000Secured
                  demand note payable to Hector Peneda, bearing interest at 12% per
                  year,
                  matures on August 7, 2006 and is collateralized by 40,000 shares
                  of common
                  stock.
              
              
              10,000Unsecured
                  demand note payable to Sheryl Gardner, CFO, bearing interest at
                  4% per
                  year.
              
              
              45,906Total
              
              $
              282,297Related
                  party**2006**Secured
                  demand note payable to Craig Hudson, bearing interest at 12% per
                  year and
                  collateralized by 200,000 shares of common stock.
              
              
              50,000Secured
                  demand note payable to Robert Bridges, bearing interest at 9% per
                  year and
                  collateralized by 240,000 shares of common stock.
              
              
              60,000Secured
                  demand note payable to Tom Bridges, bearing interest at 9% per
                  year and
                  collateralized by 240,000 shares of common stock.
              
              
              60,000Unsecured
                  note payable to Geno Apicella, Vice-President, non-interest
                  bearing.
              
              
              8,118Unsecured
                  demand note payable to Sheryl Gardner , bearing interest at 2%
                  per
                  year.
              
              
              54,906Total
              
              
              233,024


Total
      interest due on the above Notes is $16,653 bringing the total amount in default
      to $298,950.





**Item
      4. Submission of Matters to a Vote of Security Holders.**





None.





**Item
      5. Other Information.**





None.





**ITEM
      6. Exhibits And Reports On Form 10-QSB September 30,
      2006**








**Exhibit
                Number**
            **Description**
            **By
                Reference from Document**31.1
            Certification
                of Chief Executive Officer Pursuant to Rules 13a-14 and 15d-14 of
                the
                Securities Exchange Act of 1934
            *31.2
            Certification
                of Chief Financial Officer Pursuant to Rules 13a-14 and 15d-14 of
                the
                Securities Exchange Act of 1934
            *32.1
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002
            *32.2
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002
            *





*Filed
                herewith




-38-


**EXECUTE
      SPORTS**




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.





/s/
              Todd
              Hahn
            
            
            /s/
              Sheryl
              GardnerTodd
                HahnChief Executive Officer
              November 15, 2006
            
            
            Sheryl
                Gardner
              Chief
                Financial Officer
              November 15, 2006




**Exhibit
                  Number**
              **Description**
              **By
                  Reference from Document**31.1
              Certification
                  of Chief Executive Officer Pursuant to Rules 13a-14 and 15d-14
                  of the
                  Securities Exchange Act of 1934
              *31.2
              Certification
                  of Chief Financial Officer Pursuant to Rules 13a-14 and 15d-14
                  of the
                  Securities Exchange Act of 1934
              *32.1
              Certification
                  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002
              *32.2
              Certification
                  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002
              *
 
 *Filed
                  herewith


-39-