================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC. 20549


                                   FORM 10-QSB

(Mark One)

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934.


                 For the Quarterly Period Ended August 31, 2006

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934.

        For the transition period from ______________ to ________________

                        Commission file number 000-28506

                                TRACKPOWER, INC.
        (Exact Name of Small Business Issuer as Specified in Its Charter)

<TABLE>
<CAPTION>
                    WYOMING                                   13-3411167
<S>                                              <C>
(State or Other Jurisdiction of Incorporation)  (I.R.S. Employer Identification No.)
</TABLE>

                                 67 WALL STREET
                         SUITE 2211, NEW YORK, NY 10005
                    (Address of Principal Executive Offices)

                                 (212) 804-5704
                (Issuer's Telephone Number, Including Area Code)

                                       N/A
              (Former Name, Former Address and Former Fiscal Year,
                          if Changed Since Last Report)

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 |_|

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

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

The  number of shares  of common  stock  outstanding  as of  October  20,  2006:
744,268,540

Transitional Small Business Disclosure format (Check one):    Yes |_| No |X|


================================================================================
<PAGE>

                                TRACKPOWER, INC.

                                      INDEX



PART I.  FINANCIAL INFORMATION

Item 1.  Condensed Financial Statements (unaudited)
            Condensed Balance Sheet..........................................  3
            Condensed Statements of Operations...............................  4
            Condensed Statements of Stockholders' Equity.....................  5
            Condensed Statements of Cash Flows...............................  6
            Notes to Condensed Financial Statements..........................  7

Item 2.  Management's Discussion and Analysis or Plan of Operation........... 13

Item 3.  Controls and Procedures............................................. 21

PART II. OTHER INFORMATION

Item 2.  Unregistered Sales of Equity Securities............................. 22

[Item 5. Other Information................................................... 22

Item 6.  Exhibits ........................................................... 23

Signatures and Certifications................................................ 24


<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1.  CONDENSED FINANCIAL STATEMENTS.

                                TRACKPOWER, INC.
                             CONDENSED BALANCE SHEET
                                   (UNAUDITED)
                                 August 31, 2006

ASSETS
Current Assets:
   Cash                                                            $      4,930
   Marketable securities                                                156,804
   Prepaid expenses                                                      13,340
-------------------------------------------------------------------------------
Total current assets                                                    175,074
-------------------------------------------------------------------------------

Office equipment                                                         21,913
   Less:    Accumulated depreciation                                    (14,890)
-------------------------------------------------------------------------------
       Net office equipment                                               7,023

Due from related parties                                                 47,861
Deferred financing costs                                                 70,200
Investments                                                           5,170,480

-------------------------------------------------------------------------------
TOTAL ASSETS                                                       $  5,470,638
-------------------------------------------------------------------------------


LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
   Accounts payable                                                $    266,117
     Due to related parties                                             233,093
   Accrued dividends payable                                             80,164
   Accrued professional fees                                             46,403
   Accrued interest                                                      18,685
     Accrued directors' fees                                             15,000
   Note payable                                                          21,000
-------------------------------------------------------------------------------
Total current liabilities                                               680,462
-------------------------------------------------------------------------------
     Note payable                                                     1,000,000
-------------------------------------------------------------------------------
Total liabilities                                                     1,680,462
-------------------------------------------------------------------------------

Shareholders' equity:
   Series A 8% convertible  preferred  stock,  $3,000 initial
   value, no par value, unlimited shares authorized,
   1,000 shares issued and outstanding                                3,000,000
   Common stock, $.0001  par  value;
   unlimited shares authorized, 744,268,540 shares,
   issued and outstanding                                                74,427
   Additional paid in capital                                        29,756,524
   Common stock subscribed                                              100,000
   Accumulated deficit                                              (29,231,402)
   Other comprehensive income                                            90,627
-------------------------------------------------------------------------------
       Total shareholders' equity                                     3,790,176
-------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                         $  5,470,638
-------------------------------------------------------------------------------

                 See accompanying notes to financial statements.


                                       3
<PAGE>

                                                    TRACKPOWER, INC.
                                           CONDENSED STATEMENTS OF OPERATIONS
                                                      (UNAUDITED)

<TABLE>
<CAPTION>

                                                               THREE MONTHS ENDED              SIX MONTHS ENDED
                                                                   AUGUST 31,                     AUGUST 31,
                                                          -----------------------------   -----------------------------
                                                              2006             2005            2006            2005
                                                          -------------    ------------   -------------    ------------
<S>                                                       <C>              <C>            <C>              <C>
 Revenues:                                                $          --    $         --   $          --    $         --

 Costs and expenses:
     Wages and consulting fees                                   66,238         100,544         224,969         160,622
     Management fees, related party                              66,702          45,000         127,936          80,000
       Professional fees                                         79,668          63,647         237,598          87,461
       General and administrative                                64,242          55,004         136,260          86,574
     Interest                                                    33,603              --         109,015              --
     Depreciation and amortization                                  594             265             781             530
     Share of loss of equity accounted investment               962,720              --       1,283,788              --
     Gain on disposal of investment                             (13,876)             --         (13,876)             --
 ----------------------------------------------------------------------------------------------------------------------
     Total costs and expenses                                 1,259,891         264,460       2,106,471         415,187

 Net loss                                                    (1,259,891)       (264,460)     (2,106,471)       (415,187)

     Preferred dividends                                         60,493              --         120,986              --
 ----------------------------------------------------------------------------------------------------------------------
 Net loss applicable to common shareholders               $  (1,320,384)   $   (264,460)  $  (2,227,457)   $   (415,187)
 ======================================================================================================================

 Loss per share of common stock:
 Weighted average number of common shares outstanding       723,103,956     401,632,950     637,962,459     338,381,278
 Loss per share                                           $     (0.0018)   $    (0.0007)  $     (0.0035)   $    (0.0012)

 Comprehensive Income (Loss)
 Net loss                                                 $  (1,320,384)   $   (264,460)  $  (2,227,457)   $   (415,187)
 Unrealized holding gain on marketable securities                90,627              --          90,627              --
 ----------------------------------------------------------------------------------------------------------------------
 Comprehensive income (loss)                              $  (1,229,757)   $   (264,460)  $  (2,136,830)   $   (415,187)
 ======================================================================================================================


                                    See accompanying notes to financial statements.
</TABLE>


                                                           4
<PAGE>

<TABLE>
<CAPTION>
                                                   TRACKPOWER, INC.
                                     CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
                                                      (UNAUDITED)


                                         Common Stock          Common    Additional                       Total
                                    -----------------------    Stock      Paid-in    Accumulated    Stockholders'
                                       Shares      Amount    Subscribed    Capital     Deficit     (Deficiency)/Equity
                                    -----------  ----------  ----------  ----------  -----------   -------------------
<S>                                 <C>          <C>         <C>         <C>         <C>           <C>
Balance, February 28, 2005          257,992,951  $   25,799      37,200  24,684,873  (25,161,363)             (413,491)

Common stock issued in connection
with private placements              81,740,000       8,174          --     809,226           --               817,400

Common stock issued for
consulting services provided          1,000,000         100     (26,800)     26,700           --                    --

Common stock subscribed                      --          --     564,800          --           --               564,800

Loss for the three month period
 ended May 31, 2005                          --          --          --          --     (150,727)             (150,727)

                                    -----------  ---------------------------------------------------------------------
Balance, May 31, 2005               340,732,951  $   34,073     575,200  25,520,799  (25,312,090)              817,982
                                    -----------  ---------------------------------------------------------------------

Common stock issued in connection
with private placements              76,720,000       7,672    (767,200)    759,528           --                    --

Common stock subscribed                      --          --     382,000          --           --               382,000

Loss for the three month period
 ended August 31, 2005                       --          --          --          --     (264,460)             (264,460)

                                    -----------  ---------------------------------------------------------------------
Balance, August 31, 2005            417,452,951  $   41,745     190,000  26,280,327  (25,576,550)              935,522
                                    -----------  ---------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                    Preferred Stock         Common Stock         Common     Additional                    Other          Total
                  -------------------  ----------------------    Stock       Paid-in     Accumulated  Comprehensive  Stockholders'
                  Shares     Amount      Shares       Amount   Subscribed    Capital      Deficit         Income        Equity
                  -------  ----------  -----------  ---------  ----------  -----------  ------------  -------------  -------------
<S>               <C>      <C>         <C>          <C>        <C>         <C>          <C>           <C>            <C>
Balance,
 February 28,
 2006             1,000    $3,000,000  468,052,951  $  46,805  $  909,200  $26,866,267  $(27,003,945)            --  $   3,818,327

Common stock
 issued in
 connection with
 private
 placements            --              202,920,000     20,292    (909,200)   1,906,893            --             --      1,017,985

Common stock
 issued pursuant
 to compensation
 arrangement           --                9,008,089        901          --      242,318            --             --        243,218
</TABLE>


                                                                5
<PAGE>

<TABLE>
<CAPTION>
                    Preferred Stock         Common Stock         Common     Additional                    Other          Total
                  -------------------  ----------------------    Stock       Paid-in     Accumulated  Comprehensive  Stockholders'
                  Shares     Amount      Shares       Amount   Subscribed    Capital      Deficit         Income        Equity
                  -------  ----------  -----------  ---------  ----------  -----------  ------------  -------------  -------------
<S>               <C>      <C>         <C>          <C>        <C>         <C>          <C>           <C>            <C>
Common stock
 issued for
 consulting
 services
 provided              --                  500,000         50          --       17,950            --             --         18,000

Common stock
issued in
lawsuit
settlement             --                4,500,000        450          --      120,150            --             --        120,600

Common stock
subscribed             --                       --         --     370,000           --            --             --        370,000

Loss for the
 three month
 period ended
 May 31, 2006          --                       --         --          --           --      (907,073)            --       (907,073)

Balance,          -------  ----------  -----------  ---------  ----------  -----------  ------------  -------------  -------------
 May 31, 2006       1,000  $3,000,000  684,981,040  $  68,498  $  370,000  $29,153,578  $(27,911,018) $          --  $   4,681,058
                  -------  ----------  -----------  ---------  ----------  -----------  ------------  -------------  -------------
Common stock
 issued in
 connection with
 private
 placements            --               54,725,000      5,473    (547,250)     541,778            --             --             --

Common stock
 issued for
 consulting
 services
 provided              --                4,562,500        456          --       61,169            --             --         61,625

Common stock
 subscribed            --                       --         --     277,250           --            --             --        277,250

Loss for the
 three month
 period ended
 August 31, 2006       --                       --         --          --           --    (1,320,384)            --     (1,320,384)

Unrealized
 holding gain on
 marketable
 securities                                                                                                  90,627         90,627

Balance,          -------  ----------  -----------  ---------  ----------  -----------  ------------  -------------  -------------
 August 31, 2006    1,000  $3,000,000  744,268,540  $  74,427  $  100,000  $29,756,524  $(29,231,402) $      90,627  $   3,790,176
                  -------  ----------  -----------  ---------  ----------  -----------  ------------  -------------  -------------


                                          See accompanying notes to financial statements.
</TABLE>


                                                                6
<PAGE>

                                        TRACKPOWER, INC.
                               CONDENSED STATEMENTS OF CASH FLOWS
                                          (UNAUDITED)


<TABLE>
<CAPTION>
                                                                     SIX MONTHS ENDED
                                                                         AUGUST 31,
                                                            -----------------------------------
                                                                 2006                  2005
                                                            -------------          ------------
<S>                                                         <C>                   <C>
NET CASH FROM OPERATIONS
    Net (loss)                                              $  (2,227,457)         $   (415,187)
    Adjustments to reconcile net (loss)
      to net cash used in operating activities:
         Depreciation and amortization                                781                   530
         Loss in equity accounted investment                    1,283,788                    --
         Gain on disposal of investment                           (13,876)                   --
         Common stock issued for consulting services               79,625                26,800
         provided
         Amortization of deferred financing costs                   8,100                    --
     Changes in:
         Prepaid expenses                                          36,660               (1,679)
         Due from/to related parties                              141,307                    --
         Preferred dividends payable                               20,986                    --
         Accounts payable and accrued expenses                   (134,694)                8,940
-----------------------------------------------------------------------------------------------
Net cash used in operating activities                            (804,780)             (380,596)
-----------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
          Purchase of office equipment                            (4,826)                    --
          Proceeds on disposal of investment                       26,112                    --
          Acquisition of investment                                    --               (41,525)
          Increase in due from/to related parties                      --              (172,551)
          Capital contributions to investments                         --            (1,145,009)
-----------------------------------------------------------------------------------------------
Net cash used in investing activities                              21,286            (1,359,085)
-----------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
          Repayment of notes payable                           (1,486,616)                   --
          Increase in bank indebtedness                                --                 2,281
          Proceeds on issuance of common stock                  1,565,236             1,584,600
          Proceeds from common stock subscribed                   100,000               152,800
-----------------------------------------------------------------------------------------------
Net cash provided by financing activities                         178,620             1,739,681
-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------
Increase in cash                                                 (604,874)                   --
-----------------------------------------------------------------------------------------------
CASH,  beginning of period                                  $     609,804                    --
-----------------------------------------------------------------------------------------------
CASH,  end of period                                        $       4,930          $         --
-----------------------------------------------------------------------------------------------
</TABLE>

Noncash activities:

During the six month period ended August 31, 2006:
      1.    The Company issued a total of 5,062,500  shares of its common stock,
            valued at $79,625 for consulting services provided,
      2.    The Company issued 9,008,089 common shares, valued at $243,218 to an
            officer pursuant to a compensation arrangement,
      3.    The Company issued 4,500,000 common shares,  valued at $120,600,  as
            part of a lawsuit settlement.

During the six month period ended August 31, 2005:
      1.    The Company issued 1,000,000  shares of its common stock,  valued at
            $26,800 for investor relations consulting services provided.


                See accompanying notes to financial statements.


                                       7
<PAGE>

                                TRACKPOWER, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                 August 31, 2006

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      NATURE OF BUSINESS

      TrackPower's  present  business  strategy  and  direction  is primarily to
acquire  interests in horseracing  tracks and also to evaluate other horseracing
industry opportunities.

      BASIS OF PRESENTATION

      The accompanying  unaudited financial statements of TrackPower,  Inc. have
been prepared in accordance with generally  accepted  accounting  principles for
interim financial  information and with the instructions to Form 10-QSB and item
310  (b)  of  Regulation  S-B.  Accordingly  they  do  not  include  all  of the
information and footnotes required by generally accepted  accounting  principles
for complete financial statements. In the opinion of management, all adjustments
(consisting  of  normal  recurring  accruals)  considered  necessary  for a fair
presentation have been included.  Operating results for the three and six months
ended August 31, 2006 are not necessarily  indicative of the results that may be
expected for the fiscal year ending February 28, 2007. For further  information,
refer  to  the  financial  statements  and  footnotes  thereto  included  in the
Company's  annual  report on Form 10-KSB for the fiscal year ended  February 28,
2006.

      GOING CONCERN

      The  accompanying  financial  statements  have been prepared  assuming the
Company  will  continue  on  a  going  concern  basis,  which  contemplates  the
realization of assets and the  satisfaction  of liabilities in the normal course
of business.  The Company has suffered  recurring losses from operations  during
its operating history. The ability of the Company to continue as a going concern
is  dependent  upon  obtaining  future  financing  and  profitable   operations.
Management is in the process of evaluating future business opportunities,  which
would generate  revenue to sustain the operations of the Company.  The financial
statements do not include any  adjustments  relating to the  recoverability  and
classification  of recorded assets and  classification of liabilities that might
be necessary should the Company be unable to continue as a going concern.

      USE OF ESTIMATES

      The  preparation  of financial  statements  in conformity  with  generally
accepted  accounting  principles  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. Significant estimates include the recoverability of assets and
the fair  value of common  stock  and other  equity  securities  issued.  Actual
results could differ from those estimates.

      DUE TO/FROM RELATED PARTIES

      Periodically,  the Company  advances  funds and pays expenses on behalf of
related parties


                                       8
<PAGE>

and funds are advanced and expenses are paid by related parties on behalf of the
Company.   These  transactions  result  in  non-interest   bearing  payables  or
receivables to related parties.

At August 31, 2006, amounts due from related parties were:

                                                                August 31,
                                                                   2006
                                                               -------------
             Entities with certain common directors
              and/or officers                                  $      47,861
                                                               =============

At August 31, 2006, amounts due to related parties were:

                                                                 August 31,
                                                                    2006
                                                               -------------
             Officers and directors                            $      63,397
             Entities with certain common directors
             and/or officers                                         169,696
                                                               -------------
             Total                                             $     233,093
                                                               =============

Amounts due to or from related parties are non-interest  bearing,  unsecured and
do not have any specific repayment terms.

      INVESTMENTS

Available for Sale Marketable Securities

      Baymount Incorporated

      The  Company  accounts  for its  investment  in Baymount  Incorporated  as
available  for  sale  marketable  securities.   Available  for  sale  marketable
securities  are recorded at fair value and unrealized  gains and losses,  net of
tax are recorded  separately in stockholders'  equity.  Realized gains or losses
and other than  temporary  declines  in value are  reported  in other  income or
expense as incurred.

      As of August 31,  2006,  the  Company  holds  1,460,000  common  shares of
Baymount  Incorporated.  The  Company  also  holds  the  following  warrants  of
Baymount:  (i) 400,000  warrants that are exercisable at a price of CAD$0.30 per
common share and vest on the date that Wheat City Horse Park receives regulatory
approval for a horseracing license in the Province of Manitoba; and (ii) 400,000
warrants that are  exercisable  at a price of CAD$0.40 per common share and vest
on the date that Wheat City receives  from its auditors an audited  consolidated
financial  statement  evidencing  that Wheat  City's cash flow for the  previous
financial year was positive.

      During the six month period ended August 31, 2006, the Company disposed of
270,000  Baymount  Incorporated  common shares at an average price of $0.097 per
share,  for net proceeds of $26,112 and  recorded a gain of $13,876  (cost basis
for such shares was $12,236 or approximately $0.045 per share).


                                       9
<PAGE>

      The carrying value of the investment,  based on the closing share price of
Baymount  on  August  31,  2006 of  $0.1074  (CAD$0.12),  was  $156,804  and the
unrealized holding gain recorded within other comprehensive income was $90,627.

Equity Accounted Investments

      American Racing and Entertainment, LLC.

      The Company records its investment in American  Racing and  Entertainment,
LLC as an equity accounted investment. Investments in entities under significant
influence are reported using the equity basis for accounting.

      On October 14, 2005, the Company issued $3,000,000 Series A 8% Convertible
Cumulative  Preferred Stock to acquire a 50% membership  interest in Tioga Downs
Racetrack,  LLC  ("TDRLLC") (an entity which owned Tioga Downs  Racetrack)  from
Asolare II LLC, a related  party due to two  directors of the Company also being
members  of  Asolare  II.  The other 50%  member of  TDRLLC  was  Southern  Tier
Acquisition  II, LLC. On November 8, 2005, the Company  entered into  agreements
with Southern Tier  Acquisition II, LLC and Nevada Gold NY, Inc. (a wholly owned
subsidiary  of  Nevada  Gold &  Casinos,  Inc.  AMEX:UWN)  pursuant  to which on
November 28, 2005, the Company  exchanged its 50%  membership  interest in Tioga
Downs Racetrack, LLC ("TDRLLC") for a 25% membership interest in American Racing
and  Entertainment,  LLC  ("American  Racing").  On March 1, 2006,  the  Company
reduced its ownership interest in American Racing from 25% to 20% as a result of
a $20,000,000  investment ($5,000,000 by way of equity and $15,000,000 by way of
proposed indebtedness) in American Racing by Oneida Entertainment LLC. Since the
formation of TDRLLC and subsequent  transfer to American Racing, the Company has
made capital contributions  totaling $3,570,966 ($1,516,616 of which was made by
Southern Tier Acquisition II, LLC on behalf of TrackPower).

American  Racing owns Tioga Downs  racetrack and on May 1, 2006 acquired  Vernon
Downs racetrack. The Tioga Downs and Vernon Downs facilities are being renovated
and will reopen as horseracing and electronic gaming facilities.  The members of
American  Racing are assisting in the  development  of the properties and in the
event that proposed debt  financing is not  sufficient to complete the projects,
each  of the  parties  may be  required  to  make  additional  material  capital
contributions.  Due to the Company's  ability to exhibit  significant  influence
over the day to day business  affairs of American  Racing,  the Company uses the
equity method to account for its investment in American Racing.

The carrying value of the Company's  investment in American Racing at August 31,
2006 was as follows:


             Acquisition cost of Tioga Downs interest          $   3,000,000

             Capital contributions to Tioga Downs
             Racetrack, LLC or American Racing                     3,570,966
                                                               -------------
             Total                                             $   6,570,966


                                       10
<PAGE>

             Less: Membership share of losses since
             acquisition
             October 15, 2005 to December 31, 2005                   116,698
             January 1 to March 31, 2006                             321,068
             April 1 to June 30, 2006                                962,720
                                                               -------------
             Total                                                 1,400,486
                                                               -------------

             Carry value as of August 31, 2006                 $   5,170,480
                                                               -------------


The $1,400,486  membership share of losses  represents the Company's  portion of
losses for the period  since  acquisition  on October 14, 2005 to June 30, 2006.
Losses  for the  period  April 1,  2006 to June 30,  2006  were  $4,813,601  and
$962,720  or 20% were  attributable  to the  Company's  investment  in  American
Racing.

The fiscal year end of  American  Racing is December  31st and  accordingly  the
equity portion of losses recorded by the Company was up to June 30, 2006.

      NOTES PAYABLE

                                                                 August 31,
                                                                   2006
                                                               -------------

             SIG Communications Partnership 10% unsecured
             promissory note                                   $      21,000

             Melillo Investments, 11% 5 year secured
             promissory note                                       1,000,000
                                                               -------------
             Total                                             $   1,021,000

             Less: current portion                                    21,000
                                                               -------------
             Long term portion                                 $   1,000,000
                                                               -------------

SIG Communications Partnership Promissory Note

10%  promissory  note due to SIG  Communications  Partnership  in the  amount of
$20,000  (excluding  an  interest  accrual of  $1,000).  The SIG  Communications
Partnership  note and related  accrued  interest  was due May 16,  2000.  During
fiscal 2002,  accrued  interest of $4,500 was added to the note  principal.  The
Company agreed to repay the outstanding  balance in monthly  payments of $3,500.
At February 28, 2006,  $3,500 has been repaid.  The Company is in default of its
agreement.

Melillo Investments Promissory Note

On January 13, 2006, the Company issued a $1,000,000 11% secured promissory note
to Melillo Investments pursuant to a financing.  The financing consisted of a $1
million loan and a commitment  fee of 3,000,000  shares of the Company's  common
stock. The promissory note pays interest quarterly in arrears beginning on March
31, 2006 at the rate of 11% per annum. The


                                       11
<PAGE>

promissory  note matures on the earlier of the fifth  anniversary of the date of
issuance  or on the  closing  date of new  debt  financing  of no  less  than $5
million.  Additionally, the Company entered into a pledge and security agreement
to secure the  promissory  note providing as collateral all of the Company's 20%
membership  interest in American Racing. Two of the Company's directors executed
a limited personal guaranty agreement whereby they both individually  guaranteed
the  obligations of the Company under  promissory  note.  Upon the occurrence of
certain  events,  the  guaranties  will be limited to only the interest  payable
under the  promissory  note for the  first  twelve  months  from the date of the
promissory note.

      LOSS PER SHARE

      Loss per common  share is based on the weighted  average  number of shares
outstanding  during  each  period  presented.  Warrants  to  purchase  stock are
included as common stock equivalents only when dilutive.

      RELATED PARTY TRANSACTIONS

      During the six month  period  ended  August 31,  2006,  the  Company  paid
$50,000 in  compensation  to two  directors  for their  personal  guarantee of a
$1,000,000  note payable and $102,015 to officers and  directors as a 5% success
fee on private  placements  arising from their  introductions.  An entity solely
owned by a  director  of the  Company  paid  certain  expenses  on behalf of the
Company  totaling  $150,000.  The  Company  also pays;  1) $15,000  per month in
management  fees to an entity  solely  owned by a director  of the  Company  for
strategic consulting services, 2) $5,350 per month to an entity controlled by an
officer of the Company for corporate  secretarial  services, 3) CAD$250 per hour
to an entity in which the Company's  CFO is an officer for financial  consulting
services.

RECENT ACCOUNTING PRONOUNCEMENTS

In May  2005,  the FASB  issued  SFAS No.  154,  "Accounting  Changes  and Error
Corrections"  ("SFAS 154"). SFAS 154 replaces APB No. 20,  "Accounting  Changes"
and SFAS No. 3, "Reporting  Accounting Changes in Interim Financial  Statements"
and establishes retrospective application as the required method for reporting a
change in  accounting  principle.  SFAS 154 provides  guidance  for  determining
whether  retrospective  application  of a  change  in  accounting  principle  is
impracticable  and for  reporting a change  when  retrospective  application  is
impracticable. The reporting of a correction of an error by restating previously
issued  financial  statements  is also  addressed.  SFAS  154 is  effective  for
accounting  changes and  corrections  of errors made in fiscal  years  beginning
after December 15, 2005.  The Company does not  anticipate  that the adoption of
SFAS 154 will have a  material  impact on its  consolidated  balance  sheets and
statements of operations, shareholders' equity and cash flows.

FASB  STATEMENT  NO. 123R,  SHARE BASED  PAYMENT.  The FASB issued SFAS No. 123R
which revises SFAS No. 123 and is effective for small business issuers as of the
beginning of the first  interim or annual  reporting  period after  December 31,
2005.  SFAS No. 123R requires  public entities to measure the cost of employment
services  received  in  exchange  for an  award  of  equity  instruments  on the
grant-date fair value of the award.  The cost will be recognized over the period
during  which an employee is  required  to provide  service in exchange  for the
award--the   requisite   service  period  (usually  the  vesting   period).   No
compensation  cost is recognized for equity  instruments  for which employees do
not render the requisite service. Employee share


                                       12
<PAGE>

purchase plans will not result in recognition  of  compensation  cost if certain
conditions are met; those conditions are much the same as the related conditions
in Statement 123. The Company does not anticipate that the adoption of SFAS 123R
will have a material impact on its consolidated balance sheets and statements of
operations, shareholders' equity and cash flows.

In February 2006, the FASB issued SFAS No. 155,  "Accounting  for Certain Hybrid
Financial Instruments." which amends SFAS No. 133 and SFAS No. 140. SFAS No. 155
permits hybrid financial  instruments  that contain an embedded  derivative that
would  otherwise  require  bifurcation  to  irrevocably be accounted for at fair
value,  with changes in fair value  recognized in the  statement of income.  The
fair value election may be applied on an  instrument-by-instrument  basis.  SFAS
No. 155 also eliminates a restriction on the passive derivative instruments that
a qualifying  special  purpose  entity may hold.  SFAS No. 155 is effective  for
those  financial  instruments  acquired or issued  after  December  1, 2006.  At
adoption,  any difference  between the total  carrying  amount of the individual
components of the existing  bifurcated hybrid financial  instrument and the fair
value of the  combined  hybrid  financial  instrument  will be  recognized  as a
cumulative-effect  adjustment to beginning retained  earnings.  The Company does
not  expect  the new  standard  to have any  material  impact  on our  financial
position and results of operations.

In March  2006,  the FASB  issued SFAS No. 156,  "Accounting  for  Servicing  of
Financial Assets, an amendment of FASB Statement No. 140." SFAS No. 156 requires
all  separately  recognized  servicing  assets and servicing  liabilities  to be
initially measured at fair value, if practicable. The standard permits an entity
to subsequently measure each class of servicing assets or servicing  liabilities
at fair value and report changes in fair value in the statement of income in the
period in which the changes occur.  SFAS No. 156 is effective for the Company as
of December 1, 2006.  The Company  does not expect the new  standard to have any
material impact on our financial position and results of operations.

In July 2006,  the FASB  issued  FASB  Interpretation  No. 48,  "Accounting  for
Uncertainty in Income Taxes - an  interpretation  of FASB Statement No. 109 (FIN
48),  which  clarifies the accounting  for  uncertainty  in tax positions.  This
Interpretation  requires  that we recognize  in our  financial  statements,  the
impact of a tax  position,  if that  position  is more  likely than not of being
sustained  on  audit,  based  on  the  technical  merits  of the  position.  The
provisions  of FIN 48 are effective as of the beginning of our 2007 fiscal year,
with the cumulative effect of the change in accounting  principle recorded as an
adjustment to opening retained earnings.  We are currently evaluating the impact
of adopting FIN 48 on our financial statements.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

      FORWARD LOOKING STATEMENTS

      Certain  matters   discussed  in  this  Quarterly  Report  may  constitute
forward-looking   statements  within  the  meaning  of  the  Private  Securities
Litigation  Reform Act of 1995 and as such may involve risks and  uncertainties.
These forward-looking statements relate to, among other things,  expectations of
the business  environment in which the Company  operates,  projections of future
performance,  perceived opportunities in the market and statements regarding the
Company's  goals.  The Company's  actual results,  performance,  or achievements
expressed or implied in such forward-looking statements may differ. We are under
no duty to update,  and do not undertake to update,  any of the  forward-looking
statements  contained in this quarterly report to conform them to actual results
or to changes in our expectations.


                                       13
<PAGE>

      RECENT DEVELOPMENTS

AMERICAN RACING AND ENTERTAINMENT ACQUISITION OF VERNON DOWNS

      On May 3, 2006 the Company  announced that Vernon Downs  Acquisition,  LLC
("VDA")  completed  the  acquisition  of Mid-State  Raceway,  Inc.  ("Raceway").
Raceway  operates  Vernon Downs  racetrack and is also the 100% equity holder of
Mid-State  Development  Corp., which operates a hotel at Vernon Downs racetrack.
VDA is a special purpose  Delaware limited  liability  company owned by American
Racing and  Entertainment,  LLC, a limited liability company in which TrackPower
is a 20% member. OPENING OF TIOGA DOWNS RACETRACK

      On June 9, 2006 Tioga Downs  racetrack  opened for  racing,  simulcasting,
food and beverage and  entertainment.  Representatives  of TrackPower,  together
with its business partners including local and state  dignitaries,  were present
for a ribbon cutting ceremony.

      On June 27, 2006 the Company announced that the New York State Lottery had
approved a license to operate 750 video gaming machines at Tioga Downs Raceway.

      On July 4, 2006  Tioga  Downs  opened the new 19,000  square  foot  gaming
facility.  Approximately  10,000  visitors  enjoyed  750 video  gaming  machines
reporting $343.00 win per unit.

OPENING OF RACING AT VERNON DOWNS RACETRACK

      On August 31, 2006,  Vernon Downs Racetrack opened for racing with a crowd
of over  12,000  fans.  It is  anticipated  that the grand  opening of the newly
renovated gaming facility complete with video gaming machines will occur in late
October.

PLAN OF OPERATIONS

      The  Company  holds a 20%  membership  interest  in  American  Racing  and
Entertainment,  LLC, a New York Limited Liability company,  that is developing a
horseracing and gaming facility in Nichols, New York known as Tioga Downs and is
renovating  another New York  facility  known as Vernon  Downs.  The Tioga Downs
facility  began to  operate in June 2006 and the  Company  is in the  process of
reopening the Vernon Downs facility.  Under the terms of the operating agreement
with American  Racing the Company,  TrackPower and its partners are obligated to
advance further amounts to the venture.

      The  Company  will need to raise  additional  cash to  continue to pay its
operating expenses in the next twelve months until the distribution from the new
ventures exceed the day to day operating  costs.  The Company also plans to seek
other racing and gaming opportunities in the United States.

      The Company plans to raise  additional  funds,  in the next twelve months,
through the issuance of its common stock or through a combination  of equity and
debt security instruments.  It is anticipated that the debt security instruments
will have  conversion  features  that would cause  further  dilution to existing
shareholders.


                                       14
<PAGE>

RESULTS OF OPERATIONS

      FOR THE THREE MONTH PERIOD ENDED AUGUST 31, 2006

      Total costs and expenses totaled  $1,259,891 during the three-month period
ended August 31, 2006 approximately  $995,000 higher than during the three month
period ended August 31, 2005. The reason for the  substantial  increase  results
from the Company's  acquisition of a membership  interest in American Racing and
Entertainment,  LLC which has opened  for  operations  but has not yet  achieved
breakeven  results.  For the three month period  August 31, 2006 the Company has
recognized $962,720 of equity losses in that investment.

      Wages and  consulting  fees were  $100,544  during the three month  period
ended  August 31, 2005  compared to $66,238  during the three month period ended
August 31,  2006.  The wages and  consulting  fees during the three month period
ended August 31, 2005  represented  $79,300 paid for consulting costs associated
with the Company's CEO, wage costs of a part time accountant totaling $5,648 and
$15,596 for marketing  consulting  costs. The Company's CEO was paid $50,000 per
month of which $20,000 is recovered from Tioga Downs Racetrack,  LLC (during the
three  month  period  ended  August 31,  2005 the  Company  accrued  four months
recovery from Tioga Downs Racetrack, LLC). Wages and consulting costs during the
three month  period  ended  August 31, 2006  consisted  of  employment  costs of
$39,419 (including an accrual of $6,619  representing  future common stock based
compensation  pursuant to an employment letter memorandum) paid to the Company's
CEO,  financial  accounting   consulting  costs  totaling  $10,910  and  various
consulting fees totaling $15,909.

      Management and consulting fees paid to related parties were $45,000 during
the quarter ended August 31, 2005 and $66,702 in the current quarter. During the
current quarter $45,000 was for the strategic  consulting services of a director
and $21,702 was for corporate secretarial services of an officer.

      General and  administrative  expenses were $55,004  during the three month
period ended August 31, 2005  compared to $64,242  during the three month period
ended August 31, 2006.

      Within   general  and   administrative   costs;   1)  travel,   meals  and
entertainment  totaled  $19,696  during the three month  period ended August 31,
2005 and $16,212 in the  comparative  quarter in the current  year, 2) corporate
fees and  directors  fees  totaled  $9,907  during the three month  period ended
August 31, 2005 and $10,780 during the  comparative  period in the current year,
3) auto lease,  repair and gasoline  expenses were $8,481 during the three month
period  ended  August  31,  2005 and  $10,416 in the  comparative  period in the
current year, 4) investor  relations  costs of $6,850 during the current quarter
and $7,350 the year before,  5) rent and  insurance  expenses were $6,575 in the
current  quarter and $2,695 in the prior  year,  6) foreign  exchange  losses of
$1,729 in the current quarter compared to $2,200 during the comparative  quarter
in the prior year, and 7) other  miscellaneous  costs totaled $11,680 during the
current quarter and $4,675 during the three month period ended August 31, 2005.

      Professional fees during the three month period ended August 31, 2006 were
$79,668  marginally  higher  compared to $63,647 during the quarter ended August
31, 2005.  Accounting  fees were $9,000 during both the three month period ended
August 31, 2005 and $19,975 during the


                                       15
<PAGE>

quarter ended August 31, 2006, the increase being the result of relatively  more
complex  accounting issues associated with the Company's  investment in American
Racing.  Legal fees were  $54,647  during the quarter  ended August 31, 2005 and
$9,179 in the current  period.  The  Company  also  incurred  $50,514 in various
professional  consulting  fees a portion  of which was  settled  with  4,562,500
shares of the Company's common stock.

      Amortization  increased  from $265  during the three  month  period  ended
August 31, 2005 to $594 during the current quarter.

      The Company  disposed of 270,000  common  shares of Baymount  Incorporated
during the three month period ended August 31, 2006, for a gain of $13,876.  The
Company  received net proceeds of $26,112 and the common  shares had a cost base
of $12,236.

      Interest  expense  during the three month period ended August 31, 2006 was
$33,603.  Interest expenses arose from a note payable issued during fiscal 2006.
Interest expense also included $4,050 of amortized deferred financing costs.

      The Company  began to account for its  investment  in American  Racing and
Entertainment,  LLC through the equity method  effective at acquisition  date on
October 14, 2005.  During the three month  period  ended  August 31,  2006,  the
Company  recorded  $962,720 in equity  losses  arising  from the  operations  of
American Racing.  Consolidated  losses of American Racing were $4,813,601 during
the period  April 1 to June 30, 2006 of which 20% or $962,720  were  recorded as
equity losses in the financial  records of Trackpower for the three month period
ended August 31, 2006.

      The  Company  also  accrued  $60,493  as  dividends  on  the  Series  A 8%
Convertible  Cumulative  Preferred  Stock issued during the quarter ended August
31, 2006.

      The  Company  recorded a net loss of  $1,320,384  during  the three  month
period  ended  August 31,  2006  ($0.0018  per share)  compared to a net loss of
$264,460 ($0.0007 per share) during the comparative period in the current year.

      FOR THE SIX MONTH PERIOD ENDED AUGUST 31, 2006

      Total costs and expenses  totaled  $2,106,471  during the six-month period
ended August 31, 2006 approximately  $1,691,000 higher than during the six month
period ended August 31, 2005. The reason for the  substantial  increase  results
from the Company's  acquisition of a membership  interest in American Racing and
Entertainment,  LLC which has opened  for  operations  but has not yet  achieved
breakeven  results.  For the six month  period  August 31,  2006 the Company has
recognized $1,283,788 of equity losses in that investment.

      Wages and consulting  fees were $160,622 during the six month period ended
August 31,  2005  compared  to  $224,969  during the  comparative  period in the
current year.  The wages and  consulting  fees during the six month period ended
August 31, 2005  represented  $131,941 paid for consulting costs associated with
the Company's new CEO, wage costs of a part time accountant  totaling $7,978 and
$20,703 for marketing  consulting  costs.  The Company's CEO is paid $50,000 per
month of which $20,000 is recovered from Tioga Downs  Racetrack,  LLC. Wages and
consulting  costs during the six month period ended August 31, 2006 consisted of
employment  costs of  $151,386  (including  an accrual  of $43,861  representing
future common stock based


                                       16
<PAGE>

compensation  pursuant to an employment letter memorandum) paid to the Company's
CEO,  financial  accounting   consulting  costs  totaling  $21,689  and  various
consulting fees totaling $51,894.

      Management and consulting fees paid to related parties were $80,000 during
the six month  period  ended  August 31,  2005 and  $127,936  during the current
period.  During the  current  period  $90,000 was for the  strategic  consulting
services of a director and $37,936 was for corporate  secretarial services of an
officer.

      General and  administrative  expenses  were  $86,574  during the six month
period  ended August 31, 2005  compared to $136,260  during the six month period
ended August 31, 2006.

      Within   general  and   administrative   costs;   1)  travel,   meals  and
entertainment  totaled $29,264 during the six month period ended August 31, 2005
and were $48,480 in the  comparative  period in the current  year,  2) corporate
fees and directors fees totaled $17,456 during the six month period ended August
31, 2005 and $21,193 during the comparative  period in the current year, 3) auto
lease,  repair and gasoline  expenses  were $14,196  during the six month period
ended  August 31, 2005 and $20,710  during the six month period ended August 31,
2006,  4) rent and  insurance  expenses  were  $19,086 in the  current six month
period and $6,390 in the prior year, 5) communications  costs including cellular
service  and land line were  $12,805  in the  current  six month  period up from
$2,670 in the prior year 6) investor  relations  costs of $7,350  during the six
month period  ended August 31, 2005 and compared to $6,850 in the current  year,
7) foreign exchange losses of $1,696 in the current six month period compared to
$6,226  during  the  comparative   period  in  the  prior  year,  and  8)  other
miscellaneous  costs  totaled  $3,022  during the current  six month  period and
$5,440 during the six month period ended August 31, 2006.

      Professional  fees were  $87,461  during the six month period ended August
31, 2005  substantially  less than $237,598 during the comparative period in the
current  year.  Accounting  fees were $18,000  during the six month period ended
August 31, 2005 and $28,975  during the six ended  August 31,  2006.  Legal fees
were  $69,461  during the six month period ended August 31, 2005 and $108,109 in
the comparative period a current year. The increase in legal fees is a result of
legal  advice  sought on  structuring  the Nevada Gold  transaction,  additional
public  company  filings  associated  with the  transaction  and the legal costs
associated  with a judgment  arising  from a former  consultant  of the Company.
During the six month period ended August 31, 2006, the Company  incurred $50,000
in guarantee  fees  associated  with two  directors  personally  guaranteeing  a
$1,000,000  note payable and $50,514 in various  professional  consulting fees a
portion of which was  settled  with  4,562,500  shares of the  Company's  common
stock.

      Amortization  increased from $530 during the six month period ended August
31, 2005 to $781 during the current period.

      The Company  disposed of 270,000  common  shares of Baymount  Incorporated
during the six month period ended  August 31, 2006,  for a gain of $13,876.  The
Company  received net proceeds of $26,112 and the common  shares had a cost base
of $12,236.

      Interest  expense  during the six month  period  ended August 31, 2006 was
$109,015.  Interest  expenses  arose from a notes  payable  issued during fiscal
2006.  Interest  expense also included  $8,100 of amortized  deferred  financing
costs.

      The Company began to account for its investment in American Racing and


                                       17
<PAGE>

Entertainment,  LLC through the equity method  effective at acquisition  date on
October 14, 2005. During the six month period ended August 31, 2006, the Company
recorded  $1,283,788  in equity losses  arising from the  operations of American
Racing.  During the three month period  ended May 31, 2006 the Company  recorded
equity  losses of $321,068  and during the three month  period  ended August 31,
2006 the Company  recorded  equity  losses of  $962,720.  The  Trackpower  first
quarter equity losses of American Racing and  Entertainment  were for the period
January 1, 2006 to March 31,  2006 and the  second  equity  losses  were for the
period  April 1,  2006 to June  30,  2006.  The  Company  held a 25%  membership
interest for the period January 1 to February 28 and a 20%  membership  interest
(reduced because of a new member making an investment) for the period March 1 to
June 30, 2006.

      The  Company  also  accrued  $60,493  as  dividends  on  the  Series  A 8%
Convertible  Cumulative Preferred Stock issued during the six month ended August
31, 2006.

      The Company recorded a net loss of $2,227,457  during the six month period
ended  August 31, 2006  ($0.0035  per share)  compared to a net loss of $415,187
($0.0012 per share) during the comparative period in the current year.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

      The  discussion  and  analysis  of results  of  operations  and  financial
condition are based upon the financial  statements,  which have been prepared in
accordance with accounting principles generally accepted in the United States of
America  (GAAP).  The  preparation  of  these  financial   statements   requires
management to make estimates and judgments  that affect the reported  amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. Management evaluates the estimates on an on-going basis,
including those related to bad debts, investments, customer accounts, intangible
assets,  income taxes, and  contingencies  and litigation.  Management bases its
estimates on historical  experience and on various other  assumptions  that they
believe to be reasonable under the circumstances,  the results of which form the
basis for making  judgments  about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.  Note 2 of the "Notes
to Financial  Statements" of the Company's Annual Audited  Financial  Statements
includes a summary of the  significant  accounting  policies and methods used in
the  preparation  of  the  financial  statements.   The  following  is  a  brief
description of the more significant  accounting policies and methods the Company
uses.

Fair Value of Financial Instruments:

      Cash,  accounts  payable,   accrued  expenses,   note  payable  and  loans
receivable are carried in the financial  statements at amounts which approximate
fair value.

Investments:

      The  Company's  investments  consist of common  stock of  publicly  quoted
company  and a  membership  interest  in a private  New York  Limited  Liability
Company.  The  common  stock  of the  publicly  quoted  company  are  considered
"available for sale  securities"  and are recorded at fair value with unrealized
gains and losses,  net of tax are recorded  separately in stockholders'  equity.
Realized gains or losses and other than temporary declines in value are reported
in other


                                       18
<PAGE>

income or expense as incurred.  The  investment  in the private New York Limited
Liability Company is accounted for using the equity method.

      FINANCIAL CONDITION

      During the six month period ended August 31, 2006,  total assets decreased
from  $7,273,764 to  $5,470,638.  The decrease is primarily the result of equity
losses of American Racing and reduced cash balances.

      Current assets decreased from $659,804 at February 28, 2006 to $175,074 at
August 31,  2006.  The  reduction  is  attributable  to a reduction in cash from
$609,804 to $4,930,  a reduction in prepaid  costs and expenses  from $50,000 to
$13,340  and an  increase  in  marketable  securities  from  zero  to  $156,804.
Marketable  securities at August 31, 2006,  included  1,460,000 common shares of
Baymount Incorporated valued at $156,804.

      The  carrying  value of the American  Racing  investment,  of  $5,170,480,
consists  of the  original  amount  paid  for the  Tioga  Downs  Racetrack,  LLC
interest,  cash amounts  transferred to Tioga Downs  Racetrack,  LLC or American
Racing less the Company's share of losses from operations.

      The Company's  liabilities  decreased from  $3,455,437 at the beginning of
the year to $1,680,462  at August 31, 2006.  The decrease is  substantially  the
result  of  the  Company  repaying  a  $1,486,616  note  payable  which  matured
subsequent to year end.

      Accounts  payable  increased from $261,403 at the beginning of the year to
$266,117 at August 31, 2006.  The increase is  attributable  to higher levels of
activity  associated  with the  Company's  investments.  Due to related  parties
decreased  from  $287,143 at February  28, 2006 to $233,093 at August 31,  2006.
Amounts owed to related parties primarily represents unpaid amounts for services
rendered to the Company by related parties.  Due from related parties  increased
from nil at February  28, 2006 to $47,861 at August 31,  2006.  Amounts  owed by
related  parties  primarily  represent costs and expenses paid by the Company on
behalf of related parties.

      The  Company  settled  a  lawsuit  with a  former  consultant  by  issuing
4,500,000  shares of the  Company's  common  stock,  valued at  $120,600  and by
issuing a cash  payment of $125,000  during the first half of the year which had
been fully accrued for at February 28, 2006. Accrued professional fees decreased
from $73,134 at February 28, 2006 to $46,403 at August 31, 2006.

      During the year ended February 28, 2006, the Company issued  $3,000,000 in
Series A preferred  shares to acquire the Tioga Downs  assets,  which formed the
basis of the eventual American Racing investment.

      In order to continue to meet capital  contributions to the American Racing
investment  the Company  issued a $1,000,000  note payable,  during fiscal 2006,
pursuant to which  $18,685 in accrued and unpaid  interest  was  outstanding  at
August 31, 2006.

      As mentioned  above in January 2006, the Company,  entered into $1 million
of debt  financing  with Melillo  Investments.  The financing  consisted of a $1
million  secured  promissory  note and 3 million shares of the Company's  Common
Stock. The note pays interest  quarterly in arrears  beginning on March 31, 2006
at the rate of 11% per annum and matures on the earlier of


                                       19
<PAGE>

the fifth anniversary of the date of issuance or on the closing date of new debt
financing of no less than $5 million.

      The stockholders' equity decreased from $3,818,327 at February 28, 2006 to
$3,790,176 at May 31, 2006. The decrease is attributable to:

      -     257,645,000  common  shares  issued for net  proceeds of  $2,474,436
            ($909,200 of which had been received during fiscal 2006 and recorded
            in common  stock  subscribed  at  February  28,  2006)  and  further
            subscriptions   for  10,000,000   common  shares  (for  proceeds  of
            $100,000) but not issued as of August 31, 2006,

      -     5,062,500  common shares  issued for  consulting  services  provided
            valued at $79,625,

      -     9,008,089  common shares  (valued at $243,218)  issued to an officer
            and director pursuant to compensation arrangements,

      -     4,500,000 shares of common stock (valued at $120,600) issued as part
            of a lawsuit settlement,

      -     an unrealized holding gain on marketable securities of $90,627, and

      -     an increase in the  accumulated  deficit arising from the $2,227,457
            loss for the year.

      LIQUIDITY AND CAPITAL RESOURCES

      During the six month  period  ended  August 31,  2006,  the  Company  used
$804,780 in cash from  operating  activities  primarily as a result of operating
losses. Cash provided by financing  activities during the first half amounted to
$178,620,  which  resulted  from private  placements  of shares of the Company's
common  stock  totaling  $1,665,236  offset by a repayment  of notes  payable of
$1,486,616.  Cash used  provided by  investing  activities  totaled  $21,286 and
primarily arose from the disposal of certain investments.

      The  revenues of the Company  during the six month period ended August 31,
2006  were  zero  therefore  did  not  play  a  significant  role  in  financing
operations.  Management  expects  to  begin  receiving  distributions  from  the
American Racing investment during fiscal 2007.

      The Company  continues to be  successful  in raising  sufficient  funds to
offset  operating  losses.  The Company issued  257,645,000  common shares under
private  placements  for total net proceeds of  approximately  $2.5 million.  In
addition the Company  received  common  stock  subscriptions  totaling  $100,000
during the quarter ended August 31, 2006 for which stock  certificates  totaling
10,000,000 common shares had not been issued as of August 31, 2006. There can be
no  assurance  that the  Company's  ability  to raise  capital  through  private
placements will continue.

      Management  is hopeful that the future  business  direction of the Company
will  substantially  decrease  the history of  operating  losses and provide the
ability to improve the Company's liquidity.  The Company will require additional
capital  over the next  year in order to  satisfy  existing  liabilities  and to
provide further capital contributions to its investments. Failure to obtain such
capital could adversely impact the Company's operations and prospects.


                                       20
<PAGE>

      OFF-BALANCE SHEET ARRANGEMENTS.

      The Company does not have any off balance sheet arrangements. However, the
Company may be obligated  under its membership  interest in American  Racing and
Entertainment,  LLC to make further pro-rata  capital  contributions to fund the
development of Tioga Downs and Vernon Downs.

ITEM 3. CONTROLS AND PROCEDURES.

As of the end of the period  covered by this report,  an evaluation  was carried
out  under  the  supervision  and  with  the   participation  of  the  Company's
management,  including the Company's Chief Executive Officer and Chief Financial
Officer,  of  the  effectiveness  of  the  Company's   disclosure  controls  and
procedures,  as defined in Rule 13a-15(e)  promulgated  under the Securities and
Exchange  Act of 1934  (the  "Exchange  Act").  Based on their  evaluation,  the
Company's  Chief Executive  Officer and Chief  Financial  Officer have concluded
that the Company's  disclosure  controls and  procedures are effective to ensure
that  information  required to be  disclosed  by the Company in reports  that it
files or submits under the Exchange Act is recorded,  processed,  summarized and
reported within the time periods specified in Securities and Exchange Commission
rules and forms.

There have been no changes in the Company's  internal  controls  over  financial
reporting during the Company's most recently  completed fiscal quarter that have
materially affected, or are reasonably likely to materially affect, our internal
controls over financial reporting.


                                       21
<PAGE>

                           PART II. OTHER INFORMATION

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES.

The Company issued the following unregistered  securities during the three month
period ended August 31, 2006. The offering was for one  restricted  common share
at $0.01 per share plus one-half  warrant  exercisable at $0.04 at any time over
the next three years.

                                                Number of        Number of
Date         Securities sold to                 Shares           Warrants

Issuances during June 2006

             Kenneth Adelberg                   25,000,000       12,500,000
             FS Holdings                         1,000,000          500,000
             Marc Schreiber                      1,000,000          500,000
             Meschame Lev                        1,000,000          500,000

Issuances during July 2006

             Luigi & Angela Marsiglio            9,250,000        4,625,000
             Eve Atlin & Randy Atlin             2,000,000        1,000,000
             Alexa Usher Jones                  11,250,000        5,625,000
             Craig Folise                        2,500,000        1,250,000
             David T Morgan                      1,000,000          500,000
             Paul Duffy                            225,000          112,500
             Meschame Lev                        2,000,000              Nil
             Peter Gossman                         300,000          150,000
             Stuart Cumming                        200,000          100,000

Issuance during August 2006

             Paul Marsiglio                      2,562,500              Nil

      The  issuance  of the  foregoing  securities  by the Company was a private
placement  made in reliance on Section 4(2) of the  Securities  Act of 1933,  as
amended.

      The primary use of proceeds was to fund the working  capital  needs of the
Company.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

On January 13, 2006, TrackPower,  Inc. (the "Company"),  entered into $1 million
of debt financing with Melillo Investments of Phoenixville,  PA ("Lender").  The
financing  consisted  of a $1  million  secured  promissory  note (the  "Melillo
Secured  Promissory  Note") and 3 million shares of the Company's  Common Stock.
The Company  entered into a Pledge and Security  Agreement (the "Melillo  Pledge
and Security  Agreement")  to secure the Secured  Promissory  Note  providing as
collateral all of  TrackPower's  25% membership  interest in American Racing and
Entertainment, LLC.


                                       22
<PAGE>

On February 27, 2006, TrackPower executed a $1,516,616 note bearing 12% interest
per annum due and  payable to  Southern  Tier  Acquisitions  II, LLC  ("Southern
Tier")  on  May  29,  2006  in  order  to  meet  its   obligations  for  capital
contributions to American Racing and Entertainment, LLC ("American Racing"). The
note is secured by an assignment of 23% of TrackPower's  membership  interest in
American  Racing to  Southern  Tier.  This note  matured and was paid on May 29,
2006.

Section 9(x) of the Melillo  Pledge and Security  Agreement  contains a covenant
that   prohibits  the  Company  from  assigning  its  interest  in  the  Pledged
Collateral,  the Company's  membership  interest in American  Racing.  Under the
terms of the promissory note payable to Southern Tier, the Company  assigned 23%
of its  membership  interest  in  American  Racing  to  Southern  Tier to secure
repayment  of the note.  This  assignment  was in  violation  of the  restricted
covenant  in  the  Melillo  Pledge  and  Security  Agreement.   Therefore,  this
assignment of the Company's  membership in American  Racing Southern Tier was an
Event of Default under the terms of the Melillo Secured Promissory Note.


ITEM 6.  EXHIBITS


EXHIBIT        DOCUMENT
-------        -----------------------------------------------------------------
31.1           Certification  pursuant to Section 302 of the  Sarbanes-Oxley Act
               of 2002.*

31.2           Certification  pursuant to Section 302 of the  Sarbanes-Oxley Act
               of 2002.*

32.1           Certification  pursuant  to 18 U.S.C.  Section  1350,  as adopted
               pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

32.2           Certification  pursuant  to 18 U.S.C.  Section  1350,  as adopted
               pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *


----------
(*)   Filed with this Report.


                  (REMAINDER OF PAGE LEFT INTENTIONALLY BLANK)


                                       23
<PAGE>

                                   SIGNATURES

In accordance with the registration  requirements of the Securities Exchange Act
of 1934,  the  registrant has duly caused this report to be signed on its behalf
by the undersigned, thereto duly authorized.



DATE:  OCTOBER 20, 2006               BY:  /s/ Edward Tracy
                                           ------------------------
                                           Edward M. Tracy
                                           President and Chief Executive Officer


DATE:  OCTOBER 20, 2006               BY:  /s/ John G. Simmonds
                                           ----------------------------
                                           John G. Simmonds
                                           Chief Financial Officer
                                           (principal financial officer)


                                       24
<PAGE>

                                  EXHIBIT INDEX



EXHIBIT        DOCUMENT
-------        -----------------------------------------------------------------

31.1           Certification  pursuant to Section 302 of the  Sarbanes-Oxley Act
               of 2002.*

31.2           Certification  pursuant to Section 302 of the  Sarbanes-Oxley Act
               of 2002.*

32.1           Certification  pursuant  to 18 U.S.C.  Section  1350,  as adopted
               pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

32.2           Certification  pursuant  to 18 U.S.C.  Section  1350,  as adopted
               pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

----------
(*)   Filed with this Report.



                  (REMAINDER OF PAGE LEFT INTENTIONALLY BLANK)



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