United
      States


Securities
      And Exchange Commission


Washington,
      D.C. 20549





FORM
      10-QSB





x
            Quarterly
                Report Under Section 13 Or 15(d) Of The Securities Exchange Act Of
                1934For
                The Quarterly Period Ended June 30, 2007o
            Transition
                Report Under Section 13 Or 15(d) Of The Securities Exchange Act Of
                1934For
                The Transition Period From
                ______________To_________________Commission
                File Number 333-125868








Execute
      Sports, Inc.


(Exact
      Name Of The Small Business Issuer As Specified In Its Charter)








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





21143
      Hawthorne BL #425


Torrance,
      CA 90503


(310)
      515-8902





(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 o





The
      number of outstanding shares of the issuer's common stock, $0.001 par value,
      as
      of August 13, 2007 was 70,452,880.








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





Transitional
      Small Business Disclosure Format (Check one): Yes oNo x











TABLE
      OF
      CONTENTS





PagePart
                IItem
                1.
            Financial
                StatementsConsolidated
                Balance Sheet as of June 30, 2007 (Unaudited)
            1Consolidated
                Statements of Operations for the three and sixMonths
                Ended June 30, 2007 and 2006(unaudited)
            2Consolidated
                Statements of Stockholders Equity for thesix
                months Ended June 30, 2007 (unaudited)
            3Consolidated
                Statements of Cash Flows for the three andsix
                months ended June 30, 2007 and 2006 (unaudited)
            4Notes
                To Financial Statements (Unaudited)
            5Item
                2.
            Management's
                Discussion and Analysis or Plan of Operations
            24Item
                3.
            Controls
                and Procedures
            29Part
                II - Other InformationItem
                1.
            Legal
                Proceedings
            30Item
                2.
            Unregistered
                Sales of Equity Securities and use of Proceeds 30Item
                3.
            Defaults
                Upon Senior Notes
            30Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            30Item
                5.
            Other
                InformationItem
                6.
            Exhibits
            31Signatures
            
            31








**EXECUTE
      SPORTS, INC.**


Consolidated
      Balance Sheet


June
      30,
      2007


(Unaudited)





June
                30,2007ASSETSCURRENT
                ASSETSCash
            
            $
            37,518Accounts
                receivable, net (Note B)
            
            
            216,050Inventory
                (Note C)
            
            
            89,636Deferred
                financing costs (Note G)
            
            
            31,184Other
                current assets
            
            
            6,441TOTAL
                CURRENT ASSETS
            
            
            380,829Fixed
                assets (Note D)Cost
            
            
            141,288Accumulated
                Depreciation
            
            
            (47,714
            )Net
            
            
            93,574Loans
                receivable, net (Note E)
            
            
            146,128TOTAL
                ASSETS
            
            $
            620,531LIABILITIES
                AND STOCKHOLDERS' EQUITYCURRENT
                LIABILITIESAccounts
                payable and accrued expenses (Note F)
            
            $
            145,237Secured
                borrowings
            
            
            102,248Convertible
                debenture (Note G)
            
            
            1,328,934Notes
                Payable (Note H)
            
            
            341,757Related
                party notes payable (Note H)
            
            
            82,313TOTAL
                CURRENT LIABILITIES
            
            
            2,000,489STOCKHOLDERS'
                EQUITY (Note J)Common
                stock, par value $.001, 100,000,000 shares authorizedauthorized;
                issued and outstanding 63,987,011 at June 30, 2007
            
            
            63,982Additional
                paid-in capital
            
            
            9,703,587Retained
                earnings <deficit>
            
            
            (11,147,527
            )TOTAL
                STOCKHOLDERS' EQUITY
            
            
            (1,379,958
            )TOTAL
                LIABILITIES ANDSTOCKHOLDERS'
                EQUITY
            
            $
            620,531


SEE
      NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS




1


**EXECUTE
        SPORTS, INC.**


Three
      and
      Six Months Ended June 30, 2007 and 2006


(Unaudited)





Three
                Months Ended
            
            Six
                Months EndedJune
                30,
            
            June
                30,REVENUES
            
            2007
            
            2006
            
            2007
            
            2006Sales
            
            $
            798,037
            
            $
            506,990
            
            $
            1,351,519
            
            $
            1,102,524Cost
                of sales
            
            
            377,040
            
            
            354,092
            
            
            717,987
            
            
            832,034Gross
                profit
            
            
            420,997
            
            
            152,898
            
            
            633,532
            
            
            270,490EXPENSESGeneral
                and administrative expenses
            
            
            342,141
            
            
            895,857
            
            
            680,604
            
            
            1,700,500Selling
                and advertising
            
            
            24,658
            
            
            138,397
            
            
            47,493
            
            
            265,592Depreciation
                expense
            
            
            2,530
            
            
            1,138
            
            
            5,060
            
            
            2,276Total
                expense
            
            
            369,329
            
            
            1,035,392
            
            
            733,157
            
            
            1,968,368Income
                (loss) from operations
            
            
            51,668
            
            
            (882,494
            )
            
            (99,625
            )
            
            (1,697,878
            )OTHER
                INCOME AND EXPENSESInterest
                income
            
            
            -
            
            
            1,933
            
            
            -
            
            
            6,739Other
                income
            
            
            47,121
            
            
            -
            
            
            47,583
            
            
            2,803Interest
                expense
            
            
            (143,129
            )
            
            (34,247
            )
            
            (213,540
            )
            
            (51,093
            )Loss
                due to discount on conversion to stock
            
            
            -
            
            
            
            
            
            (54,250
            )
            
            -Amortization
                of beneficial conversion featureof
                convertible debenture
            
            
            (350,530
            )
            
            (66,432
            )
            
            (620,825
            )
            
            (66,432
            )Amortization
                of warrant discount related toconvertible
                debenture
            
            
            (95,390
            )
            
            (39,015
            )
            
            (185,771
            )
            
            (39,015
            )Amortization
                of deferred financing costs
            
            
            (36,757
            )
            
            (17,068
            )
            
            (72,791
            )
            
            (17,068
            )Total
                other income and expenses
            
            
            (578,685
            )
            
            (154,829
            )
            
            (1,099,594
            )
            
            (164,066
            )Net
                loss before discontinued operations
            
            
            (527,017
            )
            
            (1,037,323
            )
            
            (1,199,219
            )
            
            (1,861,944
            )Income
                (loss) from discontinued operations
            
            
            -
            
            
            -
            
            
            (1,421
            )
            
            -Gain
                (loss) on disposal of discontinued operations
            
            
            -
            
            
            -
            
            
            208,112
            
            
            -Total
                discontinued operations
            
            
            -
            
            
            -
            
            
            206,691
            
            
            -NET
                INCOME (LOSS)
            
            
            (527,017
            )
            
            (1,037,323
            )
            
            (992,528
            )
            
            (1,861,944
            )Net
                (loss) per common share Basic and diluted fromcontinuing
                operations
            
            $
            (0.009
            )
            $
            (0.048
            )
            $
            (0.024
            )
            $
            (0.091
            )Net
                (loss) per common share basic and diluted afterdiscontinued
                operations
            
            $
            (0.009
            )
            $
            (0.048
            )
            $
            (0.020
            )
            $
            (0.091
            )Weighted
                average common shares outstandingbasic
                and diluted
            
            
            56,597,608
            
            
            21,701,598
            
            
            50,791,144
            
            
            20,352,254The
                  average shares listed below were not included in the computationper share because to do so would have been antidilutive
                  for the
                  periods presented:Stock
                options
            
            
            450,000
            
            
            900,000
            
            
            450,000
            
            
            900,000Warrants
            
            
            3,440,238
            
            
            2,147,090
            
            
            3,440,238
            
            
            1,154,577Debt
                collateralized with common stock
            
            
            11,942,848
            
            
            800,000
            
            
            12,248,142
            
            
            559,333


SEE
      NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS




2


**EXECUTE
      SPORTS, INC.**


Consolidated
      Statement of Stockholder's Equity


As
      of
      June 30, 2007





Common
                Stock
            
            Additional
            
            Retained
            
            TotalNumber
                of
            
            
            
            Payable/
            
            Paid-in
            
            Earnings
            
            StockholdersShares
            
            Amount
            
            Subscribed
            
            Capital
            
            <Deficit>
            
            EquityDecember
                31, 2005
            
            
            18,706,501
            
            $
            18,702
            
            $
            788,900
            
            $
            4,958,951
            
            $
            (4,546,089
            )
            $
            1,220,464Shares
                subscriptions received
            
            
            
            
            
            
            
            
            
            
            
            5,130
            
            
            
            
            
            5,130Shares
                issued for acquisition
            
            
            1,932,569
            
            
            1,933
            
            
            (676,400
            )
            
            674,467
            
            
            
            
            
            -Shares
                issued for director compensation
            
            
            1,073,808
            
            
            1,073
            
            
            (7,500
            )
            
            36,533
            
            
            
            
            
            30,106Shares
                issued for cash in connection withthe
                SB-2 filed 6/16/05
            
            
            300,000
            
            
            300
            
            
            (105,000
            )
            
            104,700
            
            
            
            
            
            -Founders
                shares voluntarily canceled
            
            
            (1,000,000
            )
            
            (1,000
            )
            
            
            
            
            1,000
            
            
            
            
            
            -Shares
                issued pursuant to warrant exercises
            
            
            655,000
            
            
            655
            
            
            
            
            
            137,595
            
            
            
            
            
            138,250Shares
                issued for cash
            
            
            200,000
            
            
            200
            
            
            
            
            
            69,800
            
            
            
            
            
            70,000Shares
                issued for services
            
            
            12,303,816
            
            
            12,304
            
            
            
            
            
            470,399
            
            
            
            
            
            482,703Shares
                issued for notes payable
            
            
            1,862,127
            
            
            1,862
            
            
            
            
            
            368,480
            
            
            
            
            
            370,342Shares
                issued pursuant to PUT agreement
            
            
            2,750,049
            
            
            2,750
            
            
            
            
            
            161,347
            
            
            
            
            
            164,097Stock
                options granted
            
            
            
            
            
            
            
            
            
            
            
            85,313
            
            
            
            
            
            85,313Beneficial
                conversion feature ofconvertible
                debenture
            
            
            
            
            
            
            
            
            
            
            
            1,425,000
            
            
            
            
            
            1,425,000Warrant
                discount to convertible debenture
            
            
            
            
            
            
            
            
            
            
            
            475,000
            
            
            
            
            
            475,000Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (5,608,910
            )
            
            (5,608,910
            )December
                31, 2006
            
            
            38,783,870
            
            $
            38,779
            
            $
            -
            
            $
            8,973,715
            
            $
            (10,154,999
            )
            $
            (1,142,505
            )Shares
                issued for director compensation
            
            
            1,634,616
            
            
            1,635
            
            
            
            
            
            76,250
            
            
            
            
            
            77,885Shares
                issued for services
            
            
            1,546,154
            
            
            1,546
            
            
            
            
            
            66,300
            
            
            
            
            
            67,846Shares
                issued to induce creditor to makeloans
                to the Company
            
            
            1,400,000
            
            
            1,400
            
            
            
            
            
            27,200
            
            
            
            
            
            28,600Shares
                issued for notes payable
            
            
            5,190,040
            
            
            5,190
            
            
            
            
            
            97,054
            
            
            
            
            
            102,244Shares
                issued pursuant to put agreementfor
                repayment of debenture
            
            
            7,679,788
            
            
            7,680
            
            
            
            
            
            263,643
            
            
            
            
            
            271,323Shares
                issued pursuant to put agreementfor
                repayment of loans
            
            
            5,840,338
            
            
            5,840
            
            
            
            
            
            125,169
            
            
            
            
            
            131,009Shares
                issued pursuant to put agreement for cash
            
            
            1,912,205
            
            
            1,912
            
            
            
            
            
            74,256
            
            
            
            
            
            76,168Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (992,528
            )
            
            (992,528
            )June
                30, 2007
            
            
            63,987,011
            
            $
            63,982
            
            $
            -
            
            $
            9,703,587
            
            $
            (11,147,527
            )
            $
            (1,379,958
            )





SEE
      NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS




3


**EXECUTE
      SPORTS, INC.**


Consolidated
      Statements of Cash Flows


Three
      and
      Six Months Ended June 30, 2007 and 2006


(Unaudited)





Three
                Months Ended
            
            Six
                Months EndedJune
                30,
            
            June
                30,2007
            
            2006
            
            2007
            
            2006CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                loss from continuing operations
            
            $
            (527,017
            )
            $
            (1,037,323
            )
            $
            (1,199,219
            )
            $
            (1,861,944
            )Net
                gain from discontinued operations
            
            
            -
            
            
            -
            
            
            206,691
            
            
            -Adjustments
                to reconcile net losstonet
                cash used by operating activities:Depreciation
            
            
            2,530
            
            
            1,138
            
            
            5,060
            
            
            2,276Common
                stock payable for services
            
            
            61,831
            
            
            162,135
            
            
            174,331
            
            
            214,503Compensation
                expense on options granted
            
            
            -
            
            
            39,375
            
            
            -
            
            
            85,313Loss
                on the conversion of convertible debt
            
            
            -
            
            
            -
            
            
            54,250
            
            
            -Amortization
                of beneficial conversion feature
            
            
            350,530
            
            
            66,432
            
            
            620,825
            
            
            66,432Amortization
                of warrant discount related to convertible debenture
            
            
            95,390
            
            
            39,015
            
            
            185,771
            
            
            39,015Issuance
                of common stock for convertible debenture
            
            
            -
            
            
            -
            
            
            53,126
            
            
            -Issuance
                of common stock for notes payable
            
            
            233,253
            
            
            -
            
            
            233,253
            
            
            -CHANGES
                IN CURRENT ASSETS AND CURRENTLIABILITIES:(Increase)
                decrease in current assets:Accounts
                receivable
            
            
            (1,349
            )
            
            (56,946
            )
            
            36,887
            
            
            (169,849
            )Inventory
            
            
            323
            
            
            (53,157
            )
            
            (61,281
            )
            
            (273,039
            )Prepaid
                expenses
            
            
            -
            
            
            95,708
            
            
            49,494
            
            
            219,381Deferred
                financing costs
            
            
            36,757
            
            
            (142,749
            )
            
            72,791
            
            
            (142,749
            )Employee
                advance
            
            
            -
            
            
            (17,084
            )
            
            -
            
            
            (27,213
            )Other
                current assets
            
            
            -
            
            
            (31,183
            )
            
            (5,441
            )
            
            (31,183
            )Increase
                (decrease) in current liabilities:Accounts
                payable and accrued expenses
            
            
            (240,935
            )
            
            123,359
            
            
            (595,046
            )
            
            392,722Customer
                deposits
            
            
            -
            
            
            -
            
            
            -
            
            
            (25,262
            )NET
                CASH USED FOR OPERATING ACTIVITIES
            
            
            11,313
            
            
            (811,280
            )
            
            (168,508
            )
            
            (1,511,597
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Loan
                proceeds to unaffiliated company
            
            
            -
            
            
            (12,583
            )
            
            -
            
            
            (155,019
            )Acquisition
                of furniture and equipment
            
            
            -
            
            
            (34,931
            )
            
            (1,058
            )
            
            (38,237
            )NET
                CASH USED FOR INVESTING ACTIVITIES
            
            
            -
            
            
            (47,514
            )
            
            (1,058
            )
            
            (193,256
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Increase
                in deposits
            
            
            -
            
            
            (295
            )
            
            -
            
            
            (1,858
            )Common
                stock subscribed
            
            
            -
            
            
            (4,828
            )
            
            -
            
            
            -Issuance
                of common stockIssuance
                of common stock for cash
            
            
            -
            
            
            -
            
            
            76,168
            
            
            232,369Proceeds
                from convertible debenture
            
            
            52,213
            
            
            1,900,000
            
            
            52,213
            
            
            1,900,000Proceeds
                from notes payable
            
            
            731,425
            
            
            -
            
            
            1,110,299
            
            
            515,000Repayment
                of notes payable
            
            
            (876,636
            )
            
            (26,411
            )
            
            (1,121,636
            )
            
            (63,009
            )Proceeds
                from related party notes payable
            
            
            -
            
            
            -
            
            
            18,207
            
            
            58,431Repayment
                of related party notes payable
            
            
            -
            
            
            (138,313
            )
            
            (62,300
            )
            
            (150,873
            )Secured
                borrowings
            
            
            94,268
            
            
            30,384
            
            
            59,747
            
            
            (199,052
            )NET
                CASH PROVIDED BY FINANCING ACTIVITIES
            
            
            1,270
            
            
            1,760,537
            
            
            132,698
            
            
            2,291,008NET
                INCREASE <DECREASE> IN CASH
            
            
            12,583
            
            
            901,743
            
            
            (36,868
            )
            
            586,155CASH,
                beginning of period
            
            
            24,935
            
            
            55,547
            
            
            74,386
            
            
            371,135CASH,
                end of period
            
            $
            37,518
            
            $
            957,290
            
            $
            37,518
            
            $
            957,290SUPPLEMENTAL
                DISCLOSURE:Taxes
                paid
            
            $
            800
            
            $
            800
            
            $
            800
            
            $
            13,268Interest
                paid
            
            $
            -
            
            $
            18,829
            
            $
            -
            
            $
            24,829Other
                non-cash investing and financing activities:Shares
                issued for services
            
            $
            61,831
            
            $
            158,278
            
            $
            174,331
            
            $
            195,332Shares
                issued for debt retirement
            
            $
            233,253
            
            $
            354,399
            
            $
            504,576
            
            $
            426,952





SEE
      NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS








4


EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
 
 NOTE
        A
        - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Basis
        of Presentation
 
 The
        unaudited financial statements of Execute Sports, Inc. (“Execute Sports” or the
“Company”) as of June 30, 2007 and for the three and six month periods ended
        June 30, 2007 and 2006 have been prepared in accordance with accounting
        principles generally accepted in the United States for interim financial
        reporting. Accordingly, they do not include all of the disclosures required
        by
        accounting principles generally accepted in the United States for complete
        financial statements and should be read in conjunction with the audited
        consolidated financial statements and notes thereto included in the Company’s
        Form 10-KSB for the fiscal year ended December 31, 2006 filed with the SEC
        on
        April 16, 2007. In the opinion of management, all adjustments (consisting
        only
        of normal recurring adjustments) considered necessary for a fair presentation
        of
        the interim financial information have been included. The results of operations
        for any interim period are not necessarily indicative of the results of
        operations for the entire year.
 
 Organization
 
 Execute
        Sports was founded in 2002 as Padova International USA, Inc. to produce graphics
        kits and ancillary soft goods for the motocross, enduro and ATV
        markets.
 
 In
        2003,
        the Company launched its water sports division under the "Execute Sports"
        brand
        to provide wetsuits, vests, rash guards and ancillary products to the wake
        board
        and ski markets.
 
 On
        March
        3, 2005 the Company changed its name from Padova International U.S.A., Inc.
        (DBA
        Execute Sports) to Execute Sports, Inc.
 
 In
        January 2006, the Company expanded its product mix by consummating the
        acquisition of Pacific Sports Group, Inc. (“PSG”), which owned and operated
        Academy Snowboards, Kampus Wakesk8s, Kampus Wake Shoes and Collective
        Development Bags and Bindings. In January, 2007, the Company entered into
        a
        trademark transfer and assignment agreement whereby all right, title, interest
        and good will in the Academy brand were transferred to the two former owners
        of
        PSG. In connection with the transfer, all of the Company’s account payables and
        account payables and account receivables relating to the trademark were assigned
        as well.
 
 Summary
        of Significant Accounting Principles
 
 Basis
        of Presentation
 
 The
        financial statements include the accounts of Execute Sports and its wholly
        owned
        subsidiary PSG under the accrual basis of accounting.
  5
  EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
 
 NOTE
        A
        - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Accounting
        estimates
 
 The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities and disclosure of contingent assets and liabilities at the date
        of
        the financial statements and the reported amounts of revenues and expenses
        during the reporting period. Actual results could differ from those
        estimates.
 
 Principles
        of consolidation
 
 The
        consolidated financial statements include the accounts of Execute Sports
        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 months ended June 30, 2007, the allowance for doubtful
        accounts decreased $29,000 from $49,000 at March 31, 2007 to $20,000 at June
        30,
        2007.
 
 The
        Company has entered into a factoring agreement with JD Factors. Pursuant
        to 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.
  6
  EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
 
 NOTE
        A
        - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 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.
 
 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 and apparel, and motorcycle accessories
        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 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 six
        months
        ended June 30, 2007 and 2006 the Company incurred approximately $8,118 and
        $8,118 and $17,516 and $52,179, respectively, in advertising
        expenses.
  7
  EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
 
 NOTE
        A
        - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Loss
        per common share
 
 The
        Company adopted Statement of Financial Accounting Standards No. 128, that
        requires reporting of both basic and diluted earnings (loss) per share. Basic
        loss per share is calculated using the weighted average number of common
        shares
        outstanding in the period. Diluted loss per share includes potentially dilutive
        securities such as outstanding options and warrants, using the “treasury stock”
method and convertible securities using the "if-converted" method. There
        were no
        adjustments required to net loss for the period covered in this report in
        the
        computation of diluted earnings per share.
 
 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
        included in this report.
 
 Income
        taxes
 
 On
        November 1, 2004, the Company amended its Articles of Incorporation to make
        the
        transition from an S-Corporation to a C-Corporation. Prior to the transition,
        the S-Corporation was not a tax paying entity for federal or state income
        tax
        purposes and thus no provision for income taxes was recognized. Subsequent
        to
        the change, the Company began recognizing the full valuation for deferred
        tax
        assets (See Note N).
 
 Impact
        of accounting standards
 
 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:
 
  8
  EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
 
 NOTE
        A
        - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Impact
        of accounting standards (Continued)
 
 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.
 
 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 does not believe that this accounting pronouncement will have a material
        impact on their financial position or results of operations.
 
 In
        March
        2006, the FASB issued SFAS No. 156 ("FAS 156"), "Accounting for Servicing
        of
        Financial Assets--An Amendment of FASB Statement No. 140." Among other
        requirements, FAS 156 requires a company to recognize a servicing asset or
        servicing liability when it undertakes an obligation to service a financial
        asset by entering into a servicing contract under certain situations. Under
        FAS
        156 an election can also be made for subsequent fair value measurement of
        servicing assets and servicing liabilities by class, thus simplifying the
        accounting and provide for income statement recognition of potential offsetting
        changes in the fair value of servicing assets, servicing liabilities and
        related
        derivative instruments. The Statement was effective beginning the first fiscal
        year that begins after September 15, 2006. The Company does not believe that
        this accounting pronouncement will have a material impact on its financial
        position or results of operations.
 
 In
        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
  9
  EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
 
 NOTE
        A
        - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Impact
        of accounting standards (Continued)
 
 or
        liability. In support of this principle, the standard establishes a fair
        value
        hierarchy that prioritizes the information used to develop those assumptions.
        The Statement is effective for financial statements issued for fiscal years
        beginning after November 15, 2007, and interim periods within those fiscal
        years. The Company is currently evaluating the Statement to determine what
        impact, if any, it will have on the Company.
 
 In
        September 2006, the FASB issued Statement of Financial Accounting Standards
        No.
        158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement
        Plans, an amendment of FASB Statements No. 87, 88, 106 and 132R” (“SFAS 158”).
        This statement requires balance sheet recognition of the funded status, which
        is
        the difference between the fair value of plan assets and the benefit obligation,
        of pension and postretirement benefit plans as a net asset or liability,
        with an
        offsetting adjustment to accumulated other comprehensive income in shareholders’
equity. In addition, the measurement date, the date at which plan assets
        and the
        benefit obligation are measured, is required to be the company’s fiscal year
        end. The Company does not believe that this accounting pronouncement will
        have a
        material impact on its financial position or results of operations.
 
 In
        February 2007, the FASB issued Statement of Financial Accounting Standards
        No.
        159, “The Fair Value Option for Financial Assets and Financial Liabilities”.
        This statement permits entities to choose to measure many financial instruments
        and certain other items at fair value. The objective is to improve financial
        reporting by providing entities with the opportunity to mitigate volatility
        in
        reported earnings caused by measuring related assets and liabilities differently
        without having to apply complex hedge accounting provisions. This Statement
        is
        expected to expand the use of fair value measurement, which is consistent
        with
        the Company’s Board of Directors long-term measurement objectives for accounting
        for financial instruments. This Statement is effective as of the beginning
        of an
        entity’s first fiscal year that begins after November 15, 2007. The Company does
        not believe that this recent accounting pronouncement will have a material
        impact on its financial position or results of operations.
 
 Concentrations
        of credit risk
 
 The
        Company performs ongoing credit evaluations of its customers. In the three
        months ended June 30, 2007, the Company's two largest customers accounted
        for
        90% (79% and 11%) of accounts receivable. In the three months ended June
        30,
        2006, the Company's largest customer accounted for 44% of accounts receivable.
 
  10
  EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
 
 NOTE
        A
        - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Concentrations
        of credit risk (Continued)
 
 For
        the
        three and six months ended June 30, 2007, three customers accounted for
        approximately 93% (45%, 25% and 23%) and 93% (54%, 24% and 15%) of sales,
        respectively. For the three and six months ended June 30, 2006, two customers
        accounted for approximately 74% (46% and 28%) and 71% (58% and 13%) of sales,
        respectively.
 
 For
        the
        three months ended June 30, 2007 and 2006, approximately 0% and 3%,
        respectively, of the Company’s net sales were made to customers outside the
        United States. For the six months ended June 30, 2007 and 2006, approximately
        0%
        and 6%, 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 six months ended June 30, 2007,
        the
        Company's two largest suppliers individually accounted for approximately
        100%
        (67% and 33%) and 97% (71%, and 27%) of product purchases, respectively.
        For the
        three and six months ended June 30, 2006, the Company's two and three largest
        suppliers individually accounted for approximately 83% (47% and 36%) and
        81%
        (54%, 15% and 12%) 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 June
        30,
        2007, 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 (the “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.
  11
  EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
 
 NOTE
        B
        - ACCOUNTS RECEIVABLE (Continued)
 
 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 of the Company’s assets.
 
 The
        Company is reporting the factoring agreement as a secured borrowing in
        accordance with FAS 140, “Accounting for Transfers and Servicing of Financial
        Assets and Extinguishments of Liabilities.” As of June 30, 2007, the balance due
        to the Factor was $102,248 which is collateralized by factored receivables
        of
        approximately $127,810.
 
 The
        accounts receivable balance as of June 30, 2007 is reported net of an allowance
        for doubtful accounts of $20,000.
 
 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 June 30,
        2007:
 
 2007Finished
                  goods
              
              $
              89,636
 
 NOTE
        D
        - PROPERTY AND EQUIPMENT
 
 Property
        and equipment at June 30, 2007 consists of the following:
 
 2007Computer
                  and office equipment
              
              $
              127,745Furniture
                  and fixtures
              
              
              2,281Machinery
                  and equipment
              
              
              11,262$
              141,288Less:
                  Accumulated Depreciation
              
              
              (47,714
              )$
              93,574
 
 Depreciation
        expense for the three and six months ended June 30, 2007 and 2006 was $2,530
        and
        $5,060 and $1,138 and $2,276, respectively.
 
 NOTE
        E
        - LOANS RECEIVABLE
 
 During
        2005 and 2006, the Company made strategic loans totaling $396,127 for potential
        future association to an unaffiliated company that accrues interest at 2%
        per
        year and due 12 months from the date of draw.
  12
  EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
 
 NOTE
        E
        - LOANS RECEIVABLE (Continued)
 
 As
        of
        June 30, 2007, the entire balance of the loans were in default. The Company
        has
        created a reserve of $250,000 against the loans.
 
 
 NOTE
        F
        - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
 
 Accounts
        payable and accrued expenses at June 30, 2007 consist of the
        following:
 
 2007Payables
                  to vendors
              
              $
              42,318Payables
                  for inventory
              
              
              15,476Payables
                  for professional services
              
              
              36,734Accrued
                  payroll
              
              
              39,149Accrued
                  interest
              
              
              11,560$
              145,237
 
 NOTE
        G
        - 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 common stock. The debenture agreement payment
        schedule provides for full repayment by September 30, 2011, the maturity
        date of
        this debenture, any remaining principle balance automatically converts to
        the
        Company’s common stock.
 
 Prior
        to
        maturity, the debentures and warrants are convertible into the Company's
        common
        stock at a fixed conversion price equal to the lowest closing bid price of
        the
        common stock between the issuance date and the date of the filing the
        registration statement covering resale of the shares underlying the debenture,
        or at a conversion price of fifteen cents ($.15). 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.
  13
  EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
 
 NOTE
        G
        - CONVERTIBLE DEBENTURE (Continued)
 
 In
        connection with the transaction, the Company entered into a Registration
        Rights
        Agreement. Pursuant to the terms of the Registration Rights Agreement, within
        twenty-one calendar days following the initial closing date, or June 5, 2006,
        the Company was required to file with the Securities and Exchange Commission
        a
        registration statement under the Securities Act of 1933, as amended, covering
        the resale of all of the common stock underlying the convertible debenture
        and
        issuable upon the exercise of the warrants based on a conversion price of
        $0.15
        per share.
 
 The
        Registration Rights Agreement further provides that if a registration statement
        is not filed within 21 days from the initial closing date, then in addition
        to
        any other rights the Holder may have, and until the registration statement
        is
        filed, the Company would be required to pay the Holder an amount in cash,
        as
        liquidated damages, equal to an aggregate two percent (2%) of the purchase
        price
        of the debentures. In addition, the conversion price would decrease by 10%
        of
        the fixed conversion price for each fifteen (15) day calendar period that
        a
        registration statement is not filed. The Registration Rights Agreement further
        provides that if a registration statement is not declared effective within
        80
        days from the initial closing date, then the Company would be required to
        pay
        the Holder an amount in cash, as liquidated damages, equal to an aggregate
        two
        percent (2%) of the purchase price of the debentures until the registration
        statement becomes effective. The Company initially filed the registration
        statement on May 24, 2006 and it was declared effective on June 15, 2006,
        or 30
        days from the initial close date both within the time frames set forth in
        the
        Registration Rights Agreement.
 
 The
        issuance costs related to the convertible debentures of approximately $191,000
        in cash were capitalized to prepaid expenses on the balance sheet and are
        being
        amortized over the term of the repayment schedule which is calculated based
        upon
        the effective interest method. For the three and six months ended June 30,
        2007
        and 2006, the Company recognized $36,757 and $72,791 and $17,068 and $17,068,
        respectively as other expense related to the amortization of the issuance
        costs
        with a $31,185 balance remaining in current assets deferred financing 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 is being amortized over the term
        of the
        repayment schedule, or sixteen (16) months, and is calculated based upon
        the
        effective interest method. During the three and six months ended June 30,
        2007
  14
  EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
 
 NOTE
        G
        - CONVERTIBLE DEBENTURE (Continued)
 
 and
        2006,
        the Company recognized $95,390 and $185,771 and $39,015 and $39,015,
        respectively in non-cash amortization expense related to the warrant
        discount.
 
 The
        Company determined that the $1.90 million debenture was issued with a beneficial
        conversion feature (“BCF”) due to the conversion price ($0.15) being less than
        the closing stock price ($.32) on the date of issuance, and the conversion
        feature being in-the-money. Thus, pursuant to EITF 00-27, 27, Application
        of
        Issue No. 98-5 to Certain Convertible Instruments, the BCF has been determined
        based on the gross debenture amount less the portion attributable to the
        warrants described above, and recorded as a discount to reduce the carry
        value
        of the debenture and increase additional-paid-in-capital. The Company calculated
        the initial BCF on the closing date of the transaction to be $1,615,000 using
        the intrinsic value method.
 
 Since
        this amount is greater than the $1,425,000 remaining value of the debenture
        after deducting for the warrant discount described above, the Company reduced
        the initial carry value of the debenture to zero effectively recording a
        BCF of
        $1,425,000 as additional-paid-in-capital. The BCF discount is being amortized
        over the debenture repayment term of sixteen (16) months and calculated based
        upon the effective interest method. During the three and six months ended
        June
        30, 2007, the Company recognized $350,530 and $620,825 and $66,432 and $66,432,
        respectively in non-cash amortization expense attributable to the amortization
        of the beneficial conversion feature discount.
 
 In
        connection with the debenture, the Company entered into a separate Investment
        Agreement on May 15, 2006 with Dutchess Private Equities Fund, L.P.
        ("Dutchess"), which provides for the sale and issuance from time to time
        of up
        to $10,000,000 in shares of Common Stock for a period of up to 36 months
        from
        the date the Registration Statement is declared effective. The maximum number
        of
        shares that the Company may put to Dutchess at any one time shall be equal
        to,
        at the Company's election, either (a) 200% of the average daily volume in
        the
        U.S. market of the Common Stock for the ten trading days prior to the date
        the
        Company notifies
 
 Dutchess
        of its intent to sell shares to Dutchess, multiplied by the average of the
        three
        daily closing bid prices immediately preceding the date a Put Notice is
        delivered, or (b) a number of shares having a value of $100,000. The Company
        may
        not submit a Put Notice until after the completion of a previous sale under
        the
        Investment Agreement. The purchase price for the Common Stock to be sold
        shall
        be equal to 93% of the lowest closing best bid price of the Common Stock
        during
        the five-day period following the date the Company delivers a Put Notice.
        Since
        the price of the shares put to Dutchess are expected to be below market price
        at
        93% of the market price, there is no added benefit to the Company. Thus,
        the
        Company has not recorded an asset related to this agreement. Upon the delivery
        of shares and receipt of cash related to this Investment Agreement, the Company
        records the increase in cash or decrease in debenture interest and principle,
        and an increase in common stock and additional paid in capital. During the
        six
        months ended June 30, 2007, the Company placed puts with Dutchess totaling
        $478,500 resulting in the issuance of 15,432,331 shares of common stock.
        Of the
        $478,500, $76,168 was received as cash, $131,009 was applied to advances
        made to
        the Company, $54,250 was
  15
  EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
 
 NOTE
        G
        - CONVERTIBLE DEBENTURE (Continued)
 
 recognized
        as a loss due to the conversion discount and $217,073 was applied to accrued
        interest and principle.
 
 On
        April
        9, 2007, the Company issued to Dutchess a promissory note in the face amount
        of
        $132,000 for gross proceeds of $110,000 (the “Note”). The Note bears interest at
        12% per annum and matures on April 9, 2008 (“Maturity Date”). Pursuant to the
        Note, the Company is required to make payments to Dutchess in
        the
        amount of the greater of a) one hundred percent (100%) of each Put (as defined
        in the Investment Agreement between the Company and the Investor dated June
        28,
        2005) given to Dutchess from the Company; or b) eleven thousand seven hundred
        twenty-one dollars and 39/100 ($11,721.39) (the “Payment Amount”) until the Face
        Amount is paid in full, minus any fees due. The First Payment will be due
        on May
        1, 2007 and each subsequent Payment will be made at the Closing of each Put
        until the Note is paid in full, with a minimum amount of eleven thousand
        seven
        hundred twenty-one dollars and 39/100 ($11,721.39) per month. In connection
        with
        the issuance of the Note, the Company has agreed to provide Collateral to
        Dutchess in the form of thirty (30) Put Notices. The
        Put
        Notices are to be submitted to Dutchess only in the event of default as provided
        in the Note. In
        the
        event that the Company has not repaid the Face Amount by the Maturity Date
        (the
“ Residual
        Amount ”),
        then
        as liquidated damages (the “ Liquidated
        Damages ”),
        the
        face amount shall be increased by ten percent (10.0%) as an initial penalty *and* an
        additional two and one-half percent (2.5%) per month (pro rata for partial
        periods), compounded daily, for each month until the face amount is paid
        in
        full. Further, if a Residual Amount remains at Maturity, it shall constitute
        an
        Event of Default hereunder. Further,
        in the event of default as provided in the Note, Dutchess may elect to, among
        other things, either switch the Residual Amount (as defined in the Note)
        to a
        three-year, eighteen percent (18%) interest bearing convertible debenture
        at a
        twenty-five percent (25%) discount to the market during conversion or increase
        the Payment Amount (as defined in the Note) to fulfill the repayment of the
        Residual Amount. In the event that Dutchess elects to switch to a convertible
        debenture, the Company will be required to file within ten (10) business
        days a
        registration statement covering three hundred percent (300%) of the Residual
        Amount. The
        Company also issued to Dutchess incentive shares consisting of 600,000 shares
        of
        the Company’s restricted common stock.
 
 During
        the three and six months ended June 30, 2007 and 2006, the Company recognized
        $0
        and $54,250 and $0 and $0, respectively as a non-cash loss due to the conversion
        discount applied upon the conversion of interest and principle into common
        stock
        of the Company pursuant to the Investment Agreement and Debenture
        Agreement.
 
 During
        the three and six months ended June 30, 2007 and 2006, the Company recognized
        $52,512 and $105,561 and $18,829 and $18,829, respectively in interest expense
        related to the debentures.
 
 As
        of
        June 20, 2007, the actual dollar amount due to the Holders of the Company’s
        debentures was $1,781,894. The following table represents the actual balance
        due
        compared to the amount recorded on the balance sheet as of June 30,
        2007:
  16
  EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
 
 NOTE
        G
        - CONVERTIBLE DEBENTURE (Continued)
 
 June
                  30, 2007Amount
                  borrowed under the convertible debenture
              
              
              1,900,000Accrued
                  interest
              
              
              117,997Payments
                  applied to principle
              
              
              (236,103
              )Debenture
                  balance
              
              
              1,781,894Unamortized
                  beneficial conversion feature
              
              
              (369,519
              )Unamortized
                  Warrant discount
              
              
              (83,441
              )Recorded
                  debenture balance
              
              
              1,328,934
 
 NOTE
        H
        - NOTES PAYABLE
 
 Notes
        payable at June 30, 2007 is as follows:
 
 Unsecured
                  demand note payable to Ron and Dori Arko, bearing interest at 2%
                  per year;
                  currently in default.
              $
              9,539Unsecured
                  demand note payable to John Helms, bearing interest at 2% per year;
                  currently in default.
              $
              159,828Unsecured
                  demand note payable to New Heart Ministries, bearing interest at
                  2% per
                  year; currently in default.
              $
              2,925Unsecured
                  demand note payable to Pacific Sports Investors LLC, bearing interest
                  at
                  10% per year; currently in default.
              $
              40,375Secured
                  demand note payable to Christian Beckas, bearing interest at 12%
                  per year
                  collateralized by 80,000 shares of common stock; currently in
                  default.
              $
              19,300Secured
                  demand note payable to Hector Peneda, bearing interest at 12% per
                  year
                  collateralized by 40,000 shares of common stock; currently in
                  default.
              $
              8,800Secured
                  promissory note to Dutchess Private Equities Fund, Ltd., bearing
                  interest
                  at 12% per year and collateralized by however many shares are needed
                  to
                  settle the debt.
              $
              100,990Total
              $
              341,757
 
 Related
        party Notes payable at June 30, 2007 is as follows:
 
 Secured
                  demand note payable to Craig Hudson, bearing interest at 12% per
                  year
                  collateralized by 116,000 shares of common stock; currently in
                  default
              $
              32,065Unsecured
                  note payable to Geno Apicella, Vice-President, non-interest
                  bearing.
              $
              3,023Unsecured
                  demand note payable to Sheryl Gardner, CFO, bearing interest at
                  4% per
                  year; currently in default
              $
              47,225Total
              $
              82,313
 
 The
        interest rate offered on the 2% through 4% loans above is below market rate.
        The
        Company has determined the difference between the stated interest rate and
        the
        rate available at the date of the loan(s) would be immaterial to these financial
        statements
  17
  EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
 
 NOTE
        H
        - NOTES PAYABLE (Continued)
 
 During
        the three and six months ended June 30, 2007 and 2006, the Company recognized
        $32,975 and $37,851 and $15,174 and $28,652, respectively, of interest expense
        related to the notes above.
 
 During
        the six months ended June 30, 2007, the Company repaid $120,000 of principle
        and
        $9,751 of interest on non related party debt by converting into 5,190,040
        shares
        of common stock.
 
 The
        Company anticipates entering into debt conversion agreements with certain
        of the
        noteholders to convert the principle and interest into shares of common
        stock.
 
 NOTE
        I
        - PURCHASE ORDER FINANCING
 
 During
        the six months ended June 30, 2007, the Holders of our convertible debentures
        advanced to the Company $869,425 to be used specifically for production of
        watersports goods. The advances bear interest of three percent (3%) per month
        and mature within three months. The advances are secured by the Company’s assets
        and are convertible into shares of common stock of the Company at the lenders
        discretion pursuant to the Investment Agreement as described in Note G above.
        During the six months ended June 30, 2007, the Company repaid $869,425 of
        principle and incurred $70,192 of interest expense related to the purchase
        order
        financing. No debt was converted into common stock.
 
 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 common stock as of that date. The contract term is 24 months.
        During the three and six months ended June 30, 2006, the Company recognized
        $12,465 and $24,795, respectively, of expense in connection with this contract,
        which has been fully expensed as of December 31, 2006.
 
 On
        March
        1, 2004, 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 and six months ended June 30, 2007 and 2006, the Company recognized
        $0 and
        $5,137 and $7,791 and $15,497, respectively, of expense in connection with
        this
        contract, which has been fully expensed as of June 30, 2007.
 
 During
        the six months ended June 30, 2007, the Company issued 1,634,616 shares of
        common stock valued at the closing price of the stock on the date of issuance,
        or $77,885 to two of its directors as payment in lieu of cash.
 
 During
        the six months ended June 30, 2007, the Company issued 1,546,154 shares of
        common stock valued at the closing price of the stock on the date of issuance,
        or $67,846 to two of its employees as payment in lieu of cash.
  18
  EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
 
 NOTE
        J
        - STOCKHOLDERS’ EQUITY (Continued)
 
 During
        the six months ended June 30, 2007, the Company issued 1,400,000 shares of
        common stock valued at the closing price of the stock on the date of issuance,
        or $28,600 to the Holders of our convertible debentures as an inducement
        to make
        short term loans to the Company for the purpose of financing production and
        working capital.
 
 During
        the six months ended June 30, 2007, the Company issued 5,190,040 shares of
        common stock in exchange for the retirement of $120,000 of principle and
        $9,751
        of accrued interest. The stock valued at the closing price of the stock on
        the
        date of issuance and resulted in an increase to shareholders equity of $102,244
        and a gain of $27,507.
 
 During
        the six months ended June 30, 2007, the Company issued 15,432,331 shares
        to
        Dutchess pursuant to the Investment Agreement (See NOTE G). The total value
        of
        the shares on the dates of issuance was $478,500. Of this amount $76,168
        was
        received in cash, $348,082 was applied as a reduction of principle and interest
        on the Company’s debenture and other short term financing provided by Dutchess,
        and $54,250 was recognized as a loss due to a conversion discount.
 
 NOTE
        K
        - WARRANTS
 
 At
        June
        30, 2007, the Company had 3,440,238 Warrants outstanding entitling the holder
        thereof the right to purchase one share of common stock for each warrant
        held as
        follows:
 
 ExerciseWarrant
              
              Number
                  of
              
              Price
                  Per
              
              Issue
              
              ExpirationClass
              
              Warrants
              
              Warrant
              
              Date
              
              DateA
              
              
              500,000
              
              $
              0.35
              
              
              3/3/2006
              
              
              3/31/08A
              
              
              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 six months ended June 30, 2007, no warrants were issued or
        exercised.
 
 *Stock
        Warrants Issued to Third Parties*
 
 The
        Company accounts for stock-based compensation issued to non-employees in
        accordance with the provisions of SFAS 123 and the Emerging Issues Task Force
        consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for Equity Instruments
        that are Issued to Other Than Employees for Acquiring or in Conjunction with
        Selling, Goods or Services."
 
 In
        addition, the Company evaluates each derivative issued to determine whether
        treatment as either equity or a liability is warranted for that derivative
        pursuant to EITF 00-19, Accounting for Derivative Financial Instruments Indexed
        to, and Potentially Settled in a Company's Own Stock of that
        derivative.
  19
  EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
 
 NOTE
        L
        - STOCK INCENTIVE PLAN
 
 On
        December 13, 2005, pursuant to an Employment Agreement and in anticipation
        of
        approval of the Stock Incentive Plan, the Company awarded its then Product
        Manager, Duane Pacha a non-qualified stock option to purchase 300,000 shares
        of
        common stock of the Company at an exercise price of $.35 per share with an
        expiration date of December 12, 2015. The option vests and become exercisable
        at
        a rate of 12,500 per month over a twenty-four month period. On December 31,
        2006, the Company terminated Mr. Pacha’s position as Product Manager due to the
        disposition of the Academy business. At the time of departure from the Company,
        options to purchase 150,000 shares had vested. The remaining options to purchase
        150,000 shares were canceled. As of June 30, 2007, the vested options were
        canceled due to non exercise.
 
 On
        December 13, 2005, pursuant to an Employment Agreement and in anticipation
        of
        approval of the Stock Incentive Plan, the Company awarded its then Marketing
        Director, Jeff Baughn a non-qualified stock option to purchase 300,000 shares
        of
        common stock of the Company at an exercise price of $.35 per share with an
        expiration date of December 12, 2015. The option vests and become exercisable
        at
        a rate of 12,500 per month over a twenty-four month period. On December 15,
        2006, the Company terminated Jeff Baughn’s position as Marketing Director due to
        the disposition of the Academy business. At the time of departure from the
        Company, options to purchase 150,000 shares had vested. The remaining options
        to
        purchase 150,000 shares were canceled. As of June 30, 2007, the vested options
        were canceled due to non exercise.
 
 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 option vests and become exercisable at a rate of 12,500
        per month over a twenty-four month period. On December 22, 2006, the Company
        and
        Todd Pitcher mutually agreed to terminate Mr. Pitcher as President in order
        to
        improve operational cash flow. At the time of departure from the Company,
        options to purchase 150,000 shares had vested. The remaining options to purchase
        150,000 shares were canceled. As of June 30, 2007, the vested options were
        canceled due to non exercise.
 
 The
        following table summarizes the Company's stock option activity for the six
        months ended June 30, 2007:
 
 2007Weighted
                  AverageShares
              
              Exercise
                  PriceOutstanding
                  at beginning of period
              
              
              450,000
              
              $
              0.35Granted
              
              
              -Forfeited
              
              
              (450,000
              )
              
              0.35Exercised
              
              
              -Outstanding
                  at end of period
              
              
              -
              
              $
              0.35Options
                  exerciseable at end of period
              
              
              -
 
  20
  EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
 
 NOTE
        L
        - STOCK INCENTIVE PLAN (Continued)
 
 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 based on the
        Black-Scholes Option Pricing Model. Compensation cost is amortized over the
        vesting period.
 
 During
        the six months ended June 30, 2007, no compensation expense related to options
        was recognized. To date, the Company has recognized compensation expense
        of
        $85,313.
 
 NOTE
        M
        - NET OPERATING LOSS CARRY FORWARD
 
 In
        assessing the ability to realize deferred tax assets, management considers
        whether it is more likely than not that some portion or all of the deferred
        tax
        assets will not be realized. The ultimate realization of deferred tax assets is
        dependent upon the generation of future taxable income during the periods
        in
        which those temporary differences become deductible. Management considers
        the
        scheduled reversal of deferred tax liabilities, projected future taxable
        income
        and tax planning strategies in making this assessment.
 
 At
        December 31, 2006, a valuation allowance for the full amount of the net deferred
        tax asset was recorded because of uncertainties as to the amount of taxable
        income that would be generated in future years.
  United
        States Corporation Income Taxes
 
 Period
                  of Loss
              
              Amount
              
              Expiration
                  DateDecember
                  31, 2006
              
              $
              5,602,753
              
              
              December
                  31, 2026December
                  31, 2005
              
              $
              3,559,866
              
              
              December
                  31, 2025December
                  31, 2004
              
              $
              420,421
              
              
              December
                  31, 2024
 
 Prior
        to
        November 2004 the Company was organized as an S-Corporation and all losses
        were
        distributed and recognized through the tax returns of the owners. The loss
        for
        the fiscal year ended December 31, 2006, was $5,608,910. As of December 31,
        2006, a valuation allowance for the full amount of the net deferred tax asset
        has been recognized over the period for $2,243,564, based on an anticipated
        tax
        rate of 40%.
 
 NOTE
        N
        - GOING CONCERN AND MANAGEMENT’S PLANS
 
 The
        Company has suffered recurring losses from operations since inception. In
        addition, the Company has yet to generate an internal cash flow from its
        business operations. These factors raise substantial doubt about its ability
        to
        continue as a going concern.
 
 Management’s
        plans with regard to these matters encompass the following actions: 1) obtain
        funding from new investors to alleviate the Company’s working capital
        deficiency; and 2) implement a plan to generate additional sales. The Company’s
        continued existence is dependent
  21
  EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
 
 NOTE
        N
        - GOING CONCERN AND MANAGEMENT’S PLANS
 
 upon
        its
        ability to resolve its liquidity problems and increase profitability in its
        current business operations. However, the outcome of management’s plans cannot
        be ascertained with any degree of certainty. The accompanying consolidated
        financial statements do not include any adjustments that might result from
        the
        outcome of these risks and uncertainty.
 
 NOTE
        O
        - RELATED PARTY TRANSACTIONS
 
 As
        of
        December 31, 2006, Mr. Apicella was owed $54,700. During the three months
        ended
        March 31, 2007, the Company incurred $11,800 of expenses paid on its behalf
        by
        Geno Apicella, CEO. In addition, during the three months ended March 31,
        2007,
        the Company repaid $62,300 to Mr. Apicella leaving a balance due to Mr. Apicella
        of $4,223 as of March 31, 2007. During the three months ended June 30, 2007,
        the
        Company repaid an additional $1,200 bringing the balance due Mr. Apicella’s to
        $3,023.
 
 NOTE
        P
        - DISPOSITION OF ACADEMY LINE
 
 On
        February 5, 2007 the Company filed a current report on Form 8-k with the
        United
        States Securities and Exchange Commission relating to the January 31, 2007,
        Trademark Transfer and Assignment Agreement (the “Agreement”) with Duane Pacha
        (“Duane”) and Jeff Baughn (“Jeff”, with Duane, the “Buyers”) pursuant to which
        the Company transferred all right, title, interest and good will in the ACADEMY
        SNOWBOARD CO. and ACADEMY trademarks, and the associated ACADEMY logo and
        their
        goodwill, and all associated domain names, in particular the domain
        www.academysnowboards.com, trades secrets and copyrights and their goodwill
        (collectively, the “Brand”). Moreover, as per the Agreement, there was no cash
        component relating to the transfer and assignment of the Brand and the Company
        shall assign to Buyers certain of the Company’s accounts payable and accounts
        receivable relating to the Brand. Specifically, the accounts receivable in
        the
        amount of $107,761.52 were transferred to the Buyers resulting in a decrease
        to
        accounts receivable. Accounts payable in the amount of $345,321.50 were
        transferred to the Buyers resulting in a decrease to accounts
        payable.
 
 NOTE
        Q
        - SUBSEQUENT EVENTS
 
 From
        July
        1, 2007 through August 4, 2007, the Company issued 794,117 and 882,352 shares
        of
        common stock to two officers and two directors, respectively, with a combined
        value of $33,529 based on the closing stock price on the date of
        issuance..
 
 From
        July
        1, 2007 through August 4, 2007, the Company issued 1,163,400 shares of common
        stock to Dutchess in exchange for the reduction of $17,759 of short term
        loans.
 
 On
        July
        31, 2007, the Company entered into an Addendum to Promissory Note (“Addendum”)
        with John Helms (“Helms”), as more fully described herein, amending the
        repayment provisions of certain debt obligations of the Company to Helms.
        On
        August 4, 2004, Execute Sports issued a promissory note to Helms bearing
        interest at two percent (2%) per annum (the “2004 Note”).
  22
  EXECUTE
        SPORTS, INC.
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR
        THE
        THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
 
 NOTE
        Q
        - SUBSEQUENT EVENTS
 
 On
        February 28, 2005, Execute Sports entered into a certain Promissory Note
        Cancellation and Reissuance Agreement with Helms providing for, among other
        things, the cancellation of the 2004 Note and the issuance of a new Payment
        in
        Kind Promissory Note in the principal face amount of $210,000, bearing interest
        at two percent (2%) per annum (the “2005 Note”). On March 15, 2006, Execute
        Sports entered into a new Promissory Note Cancellation and Reissuance Agreement
        with Helms, providing for, among other things, the cancellation of the 2005
        Note
        and the issuance of a new Payment in Kind Promissory Note in the principle
        amount of $174,824.26, bearing interest at four percent (4%) per annum (the
        “Note”).
 
 According
        to the Addendum, Helms and the Company agreed that the amount owed under
        the
        Note, or approximately $164,221.45 (the “Amount Owed”) shall be paid in the
        following manner: (a) 3,000,000 shares of restricted common stock of the
        Company
        to be issued and forwarded to Helms within seven (7) business days from the
        date
        of the Addendum (the “Initial Payment”), representing repayment of seventy-five
        thousand dollars ($75,000) towards the accrued interest to date due under
        the
        Note, with the remaining amount to be applied to the principal. After the
        Initial Payment, the principal amount owed by the Company to Helms shall
        be
        eighty-nine thousand two hundred twenty-one and 45/100 dollars ($89,221.45)
        (the
“Remaining Amount”). The Remaining Amount due under the Note is to be paid over
        the next consecutive six (6) quarters, in equal installments of approximately
        fourteen thousand eight hundred seventy and 24/100 dollars ($14,870.24 ),
        plus
        accrued interest to date, worth of the Company’s common stock. The amount of
        shares to be issued to Helms shall be based on the closing price of the
        Company’s common stock on the last trading day of each calendar quarter,
        beginning on September 28, 2007, and shall be paid within seven (7) business
        days from said date. The payments shall be applied first to accrued interest
        and
        then principal. The Company’s Board of Directors has the discretion to issue a
        greater amount of shares pursuant to this Section in order to pay off the
        Note
        sooner and any such amounts paid shall be without penalty.
  23
 **Item
        2 - Management's Discussion and Analysis or Plan of
        Operations**
  This
        management’s discussion and analysis of results of operations and financial
        condition contains forward-looking statements that involve risks and
        uncertainties. In some cases, you can identify these statements by
        forward-looking words such as "may," "might," "will," "should," "expect(s),"
        "plan(s)," "anticipate(s)," "believe(s)," "estimate(s)," "predict(s),"
        "intend(s)," "potential" and similar expressions. All of the forward-looking
        statements contained in this registration statement are based on estimates
        and
        assumptions made by our management. These estimates and assumptions reflect
        our
        best judgment based on currently known market and other factors. Although
        we
        believe such estimates and assumptions are reasonable, they are inherently
        uncertain and involve risks and uncertainties. In addition, management’s
        assumptions about future events may prove to be inaccurate. We caution you
        that
        the forward-looking statements contained in this registration statement are
        not
        guarantees of future performance and we cannot assure you that such statements
        will be realized. In all likelihood, actual results will differ from those
        contemplated by such forward-looking statements as a result of a variety
        of
        factors, including, but not limited to, those factors discussed in "Risk
        Factors" and included in our on Form 10-KSB for the fiscal year ended December
        31, 2006. Except as required by law, we undertake no obligation to update
        any of
        these forward-looking statements.
 
 ***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.
  24
  ***Revenue
        recognition***
 
 The
        Company recognizes revenue when the product is shipped to the
        customer.  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.
  ***Product
        Warranty***
 
 The
        Company's Watersports products carry a ninety-day warranty. Warranty costs
        are
        charged against sales in the period products are sold as a reduction in the
        selling price.  Historically, warranty costs have been less than 1% of
        sales. In estimating its warranty obligations, the Company considers various
        relevant factors, including the Company's stated warranty policies, the
        historical frequency of claims, and the cost to replace or repair the
        product.  If the actual amount of warranty claims significantly
        exceeds the estimated expense, the Company's costs of goods sold and gross
        profit and resulting net income or loss would be significantly adversely
        affected.
  ***Income
        taxes***
 
 On
        November 1, 2004, the Company amended its Articles of Incorporation to make
        the
        transition from an S-Corporation to a C-Corporation. Prior to the transition
        the
        S Corporation was not a tax paying entity for federal or state income tax
        purposes and thus no provision for income taxes was recognized. 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.
 
 25
 **Overview**
 
 **Results
        of Operations**
 
 THREE
        AND
        SIX MONTHS ENDED JUNE 30, 2007 AND 2006
 
 Net
        Sales
        for the three months ended June
        30,
        2007 and 2006 were $798,037 and $506,990, respectively, representing a $291,047,
        or 57% increase. The three month year-over-year increase is due primarily
        to the
        increase in sales with existing customers and the increase in sales with
        our
        internet partners. We also increased our volume with small domestic dealers
        and
        international distributors.
 
 Net
        Sales
        for the six months ended June 30, 2007 and 2006 were $1,351,519 and $1,102,524,
        respectively, representing a $248,995, or 23% increase. The six month
        year-over-year increase is primarily due to the increase in sales with existing
        customers and the increase in sales with our internet partners. We also
        increased our volume with small domestic dealers and international
        distributors.
 
 Gross
        margin for the three months ended June 30, 2007 and 2006 was $420,997, or
        53%
        and $152,898, or 30%, respectively. The $268,099 increase in gross margin
        over
        the previous year was primarily due to a $161,933 credit taken by the Company
        for past due amounts to a former supplier of motocross sticker
        kits.
 
 Gross
        margin for the six months ended June 30, 2007 and 2006 was $633,532, or 47%
        and
        $270,490, or 25%, respectively. The $363,042 increase in gross margin over
        the
        previous year was due to an improved product mix towards higher margin products,
        a $161,933 credit taken by the Company for past due amounts to a former
        supplier, more favorable materials prices for rubber products and lower shipping
        rates.
 
 26
 Selling,
        General and Administrative expenses for the three months ended June 30, 2007
        and
        2006 was $369,329 and $1,035,392, respectively, representing a $666,063 or
        64%
        decrease. Selling, General and Administrative expenses for the six months
        ended
        June 30, 2007 and 2006 was $733,157 and $1,968,368, respectively, representing
        a
        $1,235,211 or 63% decrease. The three and six month year-over-year decrease
        was
        the result of no acquisition costs, significantly less stock based compensation
        expense, lower selling and advertising costs and lower personnel and
        professional service costs compared to the same periods in the prior
        year.
  Net
        loss
        from continuing operations and net loss for the three months ended June 30,
        2007
        and 2006 was $527,017 and $1,037,323, respectively. Net loss from continuing
        operations for the six months ended June 30, 2007 and 2006 was $1,199,219
        and
        $1,861,944, respectively. The net loss from continuing operations decreased
        for
        the three and six month periods by $510,306, or 49% and $662,725 or 36%,
        respectively. The improvement in net loss is due primarily to decreased
        operating costs described above offset by higher, non-cash convertible debenture
        related amortization and interest expense.
 
 Net
        loss
        for the six months ended June 30, 2007 and 2006 was $992,528 and $1,861,944,
        respectively, representing an $869,416, or 47% decrease in net loss compared
        to
        the same period last year. The improvement in the net loss compared to the
        net
        loss from continuing operations is due to the $206,691 net gain recognized
        by
        the Company upon the disposition of the Academy brand.
 
 ***Financial
        Condition***
 
 From
        inception to June 30, 2007, we Incurred an accumulated deficit of $11,147,527,
        and we expect to incur additional losses through the fiscal year ending December
        31, 2007 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 six months ended June 30, 2007, we had a net decrease
        in
        cash of $36,868. Total cash resources as of June 30, 2007 was $37,518, compared
        with $74,386 at December 31, 2006.
 
 Our
        available working capital and capital requirements will depend on numerous
        factors, including progress in our distribution and sales of our products,
        the
        timing and cost of expanding into new markets, the cost of developing new
        products, changes in our existing collaborative and licensing relationships,
        the
        resources that we devote to developing new products and commercializing
        capabilities, the status of our competitors, our ability to establish
        collaborative arrangements with other organizations, our ability to attract
        and
        retain key employees, our management of inventory and our need to purchase
        additional capital equipment.
 
 ***The
        Company’s Liquidity Plan***
 
 Recent
        operating results give rise to concerns about the Company’s ability to generate
        cash flow from operations sufficient to sustain ongoing viability. During
        2006
        and the latter half of 2005, the Company’s cost control strategies focused on
        managing general and administrative expenses through keeping headcount to
        a
        minimum, amongst other things, and maintaining a focused marketing and sales
        strategy that leverages existing channel partnerships.
 
 27
 The
        Company’s need to raise additional equity or debt financing and the Company’s
        ability to generate cash flow from operations will depend on its future
        performance and the Company’s ability to successfully implement business and
        growth strategies. The Company’s performance will also be affected by prevailing
        economic conditions. Many of these factors are beyond the Company’s control. If
        future cash flows and capital resources are insufficient to meet the Company’s
        commitments, the Company may be forced to reduce or delay activities and
        capital
        expenditures or obtain additional equity capital. In the event that the Company
        is unable to do so, the Company may be left without sufficient liquidity.
 
 In
        September 2004, we commenced a private placement to sell up to 7,000,000
        shares
        of our common stock at a per share cost of $.25. We closed the financing
        on May
        27, 2005, accepting no further subscription agreements pursuant to the September
        2004 private placement offering, and have received proceeds of $729,500 in
        connection with the financing.
 
 On
        December 26, 2005, the Company’s SB-2 registration statement was declared
        effective by the Securities and Exchange Commission. Pursuant to the terms
        of
        the Offering, the Company offered to certain investors up to 3,571,428 shares
        of
        the Company’s common stock for consideration of $0.35 per share. As of December
        31, 2005, the Company has received $1,246,550 in proceeds $70,000 of which
        was
        received on January 3, 2006.
 
 On
        June
        15, 2006, pursuant to the filing of an effective SB-2 registration statement,
        we
        finalized a private placement and received $1,900,000 of convertible debentures
        with a $10,000,000 equity line of credit whereby the company places stock
        puts
        with the creditor in exchange for cash or repayment of debt. During the six
        months ended June
        30,
        2007, the Company recognized $478,500 from the stock puts (See Footnote J
        to the
        financial statements)
 
 Management
        is currently in the process of seeking additional equity financing with
        potential investors. Management is also working with the holders of our
        convertible debentures to finance production and provide working capital
        when
        needed. There can be no assurance that such additional financing will be
        obtained. The financial statements do not include any adjustments that might
        result from the outcome of this uncertainty.
 
 
  28
  **ITEM
        3. CONTROLS AND PROCEDURES**
 
 (a)
        As of
        December 31, 2006, we conducted an evaluation, under the supervision and
        participation of our management, including the Company’s President and Chief
        Executive Officer (who is the principal accounting officer) of the effectiveness
        of the Company’s disclosure controls and procedures as of the end of the period
        covered by this report, as required by Rule 13a-15(b) under the Exchange
        Act of
        1934, as amended (the “Exchange Act”)
 
 In
        connection with the audit of our Consolidated Financial Statements for the
        fiscal year ended December 31, 2006, our independent registered public
        accounting firm informed us that we had significant deficiency constituting
        material weaknesses as defined by the standards of the Public Company Accounting
        Oversight Board, which had been identified in connection with the audit of
        our
        Consolidated Financial Statements for the fiscal year ended December 31,
        2006
 
 The
        significant deficiency in internal control identified consisted of inadequate
        segregation of duties affecting initiating, recording and processing financial
        data.
 
 Based
        on
        the evaluation, which disclosed a deficiency in the segregation of financial
        duties, the Company’s President and Chief Executive Officer (who is the
        principal accounting officer) concluded that the Company’s disclosure controls
        and procedures were effective as of the end of the period covered by this
        report.
  The
        Company has taken, and will continue to take, steps to address the specific
        problems identified by the auditors including, but not limited to, emphasizing
        enhancement of the segregation of duties based on the limited resources the
        Company has, and, where practical, the Company will continue to assess the
        cost
        versus benefit of adding additional resources that would mitigate the situation.
        Our President and Chief Executive Officer will monitor our accounting policies
        to assure proper accounting on an ongoing basis.
 
 (b)
        There
        were no changes in the Company’s internal controls over financial reporting
        identified in connection with the evaluation by management described above
        that
        occurred during the period covered by this report that has materially effected,
        or is reasonably likely to materially effect the Company’s internal control over
        financial reporting.
 
 
  29
  **Part
        II - Other Information**
 
 **Item
        1.**  **Legal
        Proceedings**
 
 No
        change
        since previous filing.
 
 
 **Item
        2. Unregistered Sales of Equity Securities and Use of
        Proceeds**
 
 There
        were no unregistered sales of equity securities during the period ended June
        30,
        2007.
 
 
 **Item
        3. Defaults Upon Senior Notes.**
 
 Due
        to
        our inability to pay, the Company is currently in default on the following
        Notes:
 
 **Item
        4.** **Submission of Matters to A Vote of Security Holders.**
 
 None.
 
 **Item
        5. Other Information.**
 
 There
        were no matters required to be disclosed on a current report on Form 8-K
        during
        the period covered by this report that were not so disclosed.
 
 There
        were no changes to the procedures by which security holders may recommend
        nominees to the Company’s Board of Directors since the Company last disclosed
        these procedures .
  Unsecured
                    demand note payable to Ron and Dori Arko, bearing interest at
                    2% per year;
                    currently in default.
                
                $
                9,539Unsecured
                    demand note payable to John Helms, bearing interest at 2% per
                    year;
                    currently in default.
                
                $
                159,828Unsecured
                    demand note payable to New Heart Ministries, bearing interest
                    at 2% per
                    year; currently in default.
                
                $
                2,925Unsecured
                    demand note payable to Pacific Sports Investors LLC, bearing
                    interest at
                    10% per year; currently in default.
                
                $
                40,375Secured
                    demand note payable to Christian Beckas, bearing interest at
                    12% per year
                    collateralized by 80,000 shares of common stock; currently in
                    default.
                
                $
                19,300Secured
                    demand note payable to Hector Peneda, bearing interest at 12%
                    per year
                    collateralized by 40,000 shares of common stock; currently in
                    default.
                
                $
                8,800Total
                
                $
                240,767
  Due
        to
        our inability to pay, the Company is currently in default on the following
        related party Notes:
  30
  Secured
                    demand note payable to Craig Hudson, bearing interest at 12%
                    per year
                    collateralized by 116,000 shares of common stock; currently in
                    default
                
                
                32,065Unsecured
                    demand note payable to Sheryl Gardner, CFO, bearing interest
                    at 4% per
                    year; currently in default
                
                
                47,225Total
                
                
                79,290
 Total
        interest due on the above Notes is $11,560, bringing the total amount in
        default
        to $331,617.
 
 **Item
        6. Exhibits**
 
 **Exhibit
                  Number**
              **Description**
              **By
                  Reference from Document**31.1
              Certification
                  of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a)
                  of
                  the Exchange Act
              *32.1
              Certification
                  Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002
              *
 
 *
              Filed
                  herewith
 
 
 SIGNATURES
 
 In
        accordance with the requirements of the Exchange Act, the registrant caused
        this
        report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
 
 Signature
              
              Title
              
              Date/s/ Geno M. Apicella
              
              Chief
                  Executive Officer and Principle Accounting Officer
              
              August 10, 2007Name:
                  Geno M. Apicella
 
  31