UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D. C. 20549


                                   FORM 10-KSB


                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                            For the fiscal year ended
                                December 31, 2003

                        Commission File Number: 000-30771


                           INTERACTIVE MOTORSPORTS AND
                               ENTERTAINMENT CORP.
                   f.k.a. Pacific International Holding, Inc.
               (Exact name of registrant as specified in charter)


                                     Indiana
         (State or other jurisdiction of incorporation or organization)

                                   87-0678630
                           (I.R.S. Employer I.D. No.)

               5624 West 73rd Street, Indianapolis, Indiana 46278
                    (Address of principal executive offices)

                                 (317) 295-3500
              (Registrant's telephone number, including area code)


     Indicate by checkmark 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. (1) Yes [x] No [] (2) Yes [x] No []

     Issuer's Revenues for its most recent fiscal year: $7,557,978

     As of December 31,  2003,  the  aggregate  market value of the voting stock
     held by non-affiliates of the Issuer,  29,928,172  shares,  was $2,394,254.
     The market  value of Common  Stock of the  Issuer,  par value  $0.0001  per
     share,  was  computed  by  reference  to the average of the closing bid and
     asked prices of one share on such date which was $0.08.

     The number of shares of the issuer's Common Stock, par value $0.0001 issued
     and outstanding as of March 31, 2004, was 86,530,184.

                        Exhibit Index located on Page 44
<PAGE>






                      INDEX TO ANNUAL REPORT ON FORM 10-KSB

                                                                        Page
    Section                                                             Number

    BASIS OF PRESENTATION......................................................4

                                     PART I

    Item 1.    Description of Business ........................................5
    Item 2.    Description of Properties .....................................10
    Item 3.    Legal Proceedings .............................................10
    Item 4.    Submission of Matters to a Vote of Security Holders ...........10

                                     PART II

    Item 5.    Market for Common Equity and Related Stockholder Matters ......10
    Item 6.    Management's Discussion and Analysis of Financial
                        Condition and Results of Operations...................11
    Item 7.    Financial Statements and Notes to Financial Statements
                        Consolidated Balance Sheets at December 31,2003
                                and December 31, 2002.........................18
                        Consolidated Statements of Operations for the
                                Year Ended December 31, 2003 .................20
                        Consolidated Statements of Changes in Shareholders'
                                Equity for the Year Ended December 31,
                                2003...........  .............................21
                        Consolidated Statements of Cash Flows for the
                                Year Ended December 31, 2003 .................22
                        Notes to Consolidated Financial Statements............24
                        Report of Independent Auditors........................36
    Item 8.    Changes In and Disagreements with Accountants on Accounting
                        and Financial Disclosure .............................38
    Item 8A.   Controls and Procedures .......................................38

                                    PART III

    Item 9.    Directors, Executive Officers, Promoters and Control
                        Persons ..............................................39
    Item 10.   Executive Compensation ........................................40
    Item 11.   Security Ownership of Certain Beneficial owners and
                        Management ...........................................41
    Item 12.   Certain Relationships and Related Transactions.................41
    Item 13.   Exhibits and Reports on Form 8-K...............................42
    Item 14.   Principal Accountant Fees and Services ........................42


    SIGNATURES ...............................................................43

    CERTIFICATIONS ...........................................................45

    EXHIBITS .................................................................46

<PAGE>


                       NOTE ON FORWARD-LOOKING INFORMATION

    This Form 10-KSB and other statements issued or made from time to time by
    the Company or its representatives contain statements, which may constitute
    "forward-looking statements" within the meaning of the Securities Act of
    1933 and the Securities Exchange Act of 1934, as amended by the Private
    Securities Litigation Reform Act of 1995, 15 U.S.C.A Sections 77z-2 and
    78u-5. Those statements include statements regarding the intent, belief, or
    current expectations of the Company and members of its management team as
    well as the assumptions on which such statements are based. All statements,
    trend analyses, and other information contained in this report relative to
    markets for the Company's products and/or trends in the Company's operations
    or financial results, as well as other statements which include words such
    as "anticipate(s)," "could," "feel(s)," "believes," "plan," "estimate(s),"
    "expect(s)," "should," "intend(s)," "will," and other similar expressions,
    constitute forward-looking statements and are subject to known and unknown
    risks, uncertainties and other factors that may cause actual results to be
    materially different from those contemplated by the forward-looking
    statements. Such factors include, among other things: (i) general economic
    conditions that may impact the disposable income and spending habits of
    consumers; (ii) the availability of alternative entertainment for consumers;
    (iii) the ability of the company to obtain additional capital; (iv) the
    receipt of a going concern opinion from the Company's independent public
    accountants; and (v) the ability of the company to control costs and execute
    its business plan.

    The reader is cautioned that any such forward-looking statements are not
    guarantees of future performance and involve risks and uncertainties, and
    that actual results may differ materially from those contemplated by such
    forward-looking statements. Important factors currently known to management
    that could cause actual results to differ materially from those in
    forward-looking statements are set forth herein. The Company undertakes no
    obligation to update or revise forward-looking statements to reflect changed
    assumptions, the occurrence of unanticipated events or changes to future
    operating results over time.

<PAGE>
                              BASIS OF PRESENTATION

    Effective August 2, 2002, Pacific International Holding, Inc., a Utah
    corporation ("PIH"), which was originally organized in 1986, changed its
    state of domicile and name by merging with and into Interactive Motorsports
    and Entertainment Corp. (the surviving entity), an Indiana corporation (the
    "Company"), pursuant to an Agreement and Plan of Reorganization. Per the
    merger agreement, each share of PIH common stock outstanding immediately
    prior to the effective date of the merger was cancelled and converted into
    four shares of Interactive Motorsports and Entertainment Corp. common stock.
    Although it had been in a variety of businesses for over 15 years, at the
    time of the merger, PIH had limited operations.

    Subsequent to the merger and effective as of the same date, the Company
    acquired pursuant to a Plan and Agreement of Exchange all of the issued and
    outstanding shares of common stock and preferred stock of Perfect Line,
    Inc., an Indiana corporation ("Perfect Line"), from the Perfect Line
    shareholders in exchange on a "share-for-share" basis for shares of the
    Company's common stock and preferred stock. As a result of the share
    exchange, the Perfect Line shareholders hold as of August 2, 2002 Company
    shares representing approximately eighty-two percent (82%) of the Company's
    capital stock. Also effective as of August 2, 2002, the members of the Board
    of Directors of Perfect Line were elected to replace the members of the
    Company's Board of Directors and the executive officers of Perfect Line
    became the executive officers of the Company.

    As Perfect Line had revenues, operations, and business activity, for
    financial reporting purposes, Perfect Line is considered the acquirer, and
    therefore the predecessor, and the Company is considered the acquiree for
    accounting and reporting purposes. Due to the fact that the merger is being
    treated as a reverse acquisition, the equity of the Company has been
    recapitalized for financial reporting purposes. The operations of
    Interactive Motorsports and Entertainment Corp. have been included in
    consolidation from August 2, 2002 until December 31, 2003.

    All information in this Form 10-KSB is presented from the perspective of
    Interactive Motorsports and Entertainment Corp. and its subsidiary Perfect
    Line and not from the perspective of PIH.

<PAGE>


                                     PART I

    ITEM 1. Description of Business

    Overview

    Interactive Motorsports and Entertainment Corp. ("IMTS" or the "Company"),
    an Indiana corporation, through its wholly owned subsidiary, Perfect Line,
    Inc., owns and operates NASCAR Silicon Motor Speedway ("NSMS") racing
    centers, the largest chain of NASCAR branded entertainment and retail
    stores. NSMS customers experience driving in a NASCAR race car that
    simulates the motion, sights and sounds of an actual NASCAR event. Located
    in high profile, high traffic locations, IMTS's racing centers include up to
    14 racecar simulators per location and offer the best selling NASCAR driver
    merchandise available to the market.

    The Company plans to leverage its strategic relationships and proprietary
    assets, which include (a) sophisticated racing simulation technology, (b) an
    exclusive licensing agreement with NASCAR, and (c) license agreements with
    other racing entities including race tracks, race teams, and race sponsors
    to create a dynamic, diversified business.

    For the year ended December 31, 2003, the Company's racing centers and
    revenue share simulators generated revenue of approximately $7.5 million.
    Operating without the necessary capital to properly market and merchandise
    the middle market owned and operated racing centers, sales performance fell
    short of expectation, resulting in a net loss of approximately $3.53 million
    for this period. Beginning in July of 2003, management changed the overall
    business model of the Company by focusing on revenue share installations,
    equipment sales and mobile lease agreements. Management also re-negotiated
    the lease terms in the poorest performing locations and reduced corporate
    overhead while it searched for debt financing.

    Major Agreements: During 2003, the Company entered into lease/revenue share
    arrangements as well as entered into transactions for the sale of
    simulators. The lease/revenue arrangements involve four types of locations
    (including ongoing service agreements for locations of simulators which are
    sold) and four types of arrangements. The Company entered into lease/revenue
    arrangements for fixed locations with (i) new facility operators for new
    locations; (ii) new facility operators to assume the Company's operations
    under presently existing Company locations; (iii) new operations for mobile
    arrangements for use with the Nextel experience; and (iv) simulator
    equipment sales. A brief description of each of those is listed below.

    Perfect Line's racing centers are located in high traffic, high profile mall
    locations.

    Locations

    Company Owned:

                Location             Market               Sq. Ft.    Simulators

    1)   Mall of America           Minneapolis, MN        5,899    12 racecars
    2)   Universal CityWalk        Los Angeles, CA        5,000    12 racecars

    Revenue Share:


                Location             Market                Sq. Ft.   Simulators


    1)       Opry Mills            Nashville, TN           6,007   12 racecars
    2)       Woodfield             Chicago, IL             6,111   12 racecars
    3)       Palisades Center      Nyack, NY               5,700   12 racecars
    4)       Concord Mills         Charlotte, NC           7,865   14 racecars
    5)       Mall of Georgia       Atlanta, GA             5,895   12 racecars
    6)       Katy Mills            Houston, TX             6,172   12 racecars
    7)       Riverchase Galleria   Birmingham, AL          6,188   10 racecars
    8)       NASCAR SpeedPark      Sevierville, TN         1,584    6 racecars
    9)       Pavilion Ocean Front  Myrtle Beach, SC        2,600    5 racecars
    10)      RiverTown Crossing    Grand Rapids, MI        6,100    8 racecars
    11)      Cowboy Pizza          Monterey, CA              968    4 racecars
    12)      NASCAR SpeedPark      St. Louis, MO           1,496    6 racecars
    13)      Burdick Driver's
             Village(1)            Syracuse, NY            3,472    8 racecars
    14)      Playcenter(2)         Sao Paulo, Brazil       1,000    4 racecars
                (1)      Scheduled to open in May, 2004
                (2)      Scheduled to open in July, 2004

The current racing centers average about 5,850 sq. ft.  Each racing center
has up to 800 square feet of retail merchandise space, or a total of more than
6,000 square feet of retail area.  According to IMTS' internal data an estimated
160,000,0002 people annually visit these mall locations.

    Mobile Units:

1) Nextel Mobile Experience 2003-05 NASCAR Nextel Cup series events 6 racecars
2) Nextel Mini Mobile Experience  Various markets                   2 racecars


    Sales of Simulators:

        Buyer                           Market                      Simulators

    1) Roltex                   Moscow, Russian Federation          8 racecars
        2) Yello Properties     London, United Kingdom             12 racecars
    3)  Tonne Mgmt              Wisconsin Dells, WI                 4 racecars
    4)  I-Vision Technologies   Abu Dhabi, UAE                      4 racecars

    Revenue Shares of Existing Company Locations.

    The Company entered into a revenue share agreement at its RiverTown Mall
    racing center in Grand Rapids, Michigan with Checked Flag Lighting, LLC. In
    addition the Company has revenue share agreements with Burroughs and Chapin
    as described below for installation in a variety of locations.

    An individual race costs $8.50 and quantity discounts are offered with
    purchases of multiple races. Customers pay an average of $25 per hour to use
    a simulator during leagues and competitions. Depending on the program or
    package, the targeted yield for group sales averages between $300 and $800
    per hour for the use of the entire racing center. Prices of merchandise
    range from $16 for a hat up to $200 for high-end leather jackets, although a
    shortage of inventory may have contributed to reduced revenues from sale of
    merchandise. Prices for the die-cast and collectable cars range between $15
    and $65.

    History

    Perfect Line, LLC, the predecessor of the Company's wholly owned subsidiary
    Perfect Line, Inc. ("Perfect Line"), was formed in 2001 as a Delaware
    limited liability company and merged with and into Perfect Line, Inc. on
    August 1, 2002. Perfect Line is in the business of owning and operating
    simulated race facilities and selling racing related merchandise.

    NSMS racing centers were originally owned and developed by Silicon
    Entertainment, Inc. ("SEI"). SEI opened its first site in August 1997 at the
    Mall of America in Bloomington, Minnesota, the largest mall in the United
    States. SEI raised large sums of initial capital, of which, according to SEI
    documents, approximately $6.5 million was utilized to create its proprietary
    software technology and approximately $25 million was utilized to produce
    approximately 170 simulators and complete the build-out of 15 stores in high
    traffic malls. SEI was unable to secure additional long term financing to
    support its capital expansion, and was liquidated through Chapter 7
    bankruptcy in April 2001. Perfect Line's assets were primarily acquired from
    creditors of SEI and as a result of SEI's bankruptcy, Perfect Line was able
    to purchase the assets of SEI at a price substantially below SEI's cost.

    Perfect Line re-opened 12 of the racing centers, which utilize 136 of the
    simulators, between July 2001 and August 2002. The Company at that time
    warehoused 32 simulators for future deployment and 2 simulators are used for
    research and development purposes at the Company's technology center in

<PAGE>

    Santa Clara, California. The proprietary technology includes two U.S.
    Patents, which combine to create what management believes to be one of the
    world's most realistic simulation of the sights, sounds and motions
    experienced by driving in an actual NASCAR race. The proprietary
    motion-based platform that the racecar simulator is mounted on is among the
    other assets that were acquired and licensed as part of the transaction.

    In August 2002, Perfect Line became a wholly owned subsidiary of IMTS,
    through an exchange of shares that resulted in Perfect Line shareholders
    owning approximately 82% of IMTS equity. Simultaneous with this event,
    approximately $2.6 million in private equity financing was made available to
    Perfect Line. Half of the funding was used to retire the Company's bank note
    and the balance was used for working capital.

The Company's Current Operations, Recent Developments and Plan for the Future

    The Company's primary focus is to leverage the Company's ownership of its
    internationally unique, proprietary race car simulation technology and
    creating the largest chain of officially-licensed, NASCAR-branded
    entertainment and retail merchandising stores in the world. The Company
    believes that this can be done profitably through a combination of owned and
    operated racing centers, third party revenue share locations (family
    entertainment centers, amusement parks, casinos, auto malls, etc.), mobile
    unit leases and the domestic and international sales of the race simulator
    product.

    NASCAR racing is currently the #1 spectator sport in America. The Company
    has an exclusive license agreement with NASCAR for location-based
    entertainment, which includes the right to use the NASCAR name within the
    Silicon Motor Speedway logo, on racing center signage, within collateral
    sales materials, on the NSMS web site, and within the NSMS racing simulator
    software. The Company has also secured licenses with many popular racetracks
    in the United States, and the cars driven by many of the race fans' favorite
    Nextel Cup teams and drivers, ranging from established stars such as Dale
    Earnhardt, Jr., Tony Stewart, and Dale Jarrett, to rising stars like Matt
    Kenseth and Kurt Busch. These licensing agreements and the use of NASCAR
    related identities and marks provide immediate name recognition,
    credibility, and authenticity to NSMS.

    The Company has integrated these license agreements with sophisticated
    proprietary racing simulator technology to create a chain of NASCAR-themed,
    family-oriented, racing entertainment and retail merchandise centers. The
    Company's racing centers are in some of America's premier shopping malls,
    giving us access to over 160 million annual site visits from potential
    customers.

    Simulator races take place on famous NASCAR Nextel Cup racetracks such as
    Daytona International Speedway, Indianapolis Motor Speedway, Lowe's
    (Charlotte) Motor Speedway, Atlanta Motor Speedway, Bristol Motor Speedway,
    and Richmond International Raceway.

    NSMS owned, as well as many of its revenue share Racing Centers, are
    operated as combined racing entertainment and retail merchandise stores. In
    addition to providing customers with the opportunity to drive Nextel Cup
    racecars, NSMS Racing Centers also feature a large selection of
    officially-licensed NASCAR merchandise. Research indicates that NASCAR fans
    buy more merchandise than fans from almost any other sport and they are also
    the most brand-loyal. These characteristics helped boost worldwide
    NASCAR-branded retail sales from approximately $82 million in 1990 to $1.5
    billion in 2002. The Company's NSMS racing centers are the largest chain of
    officially licensed, NASCAR-branded interactive entertainment stores in the
    world, and offer its customers the most popular NASCAR merchandise
    available. With these factors in place, the Company believes it is
    well-positioned to capitalize on this billion-dollar market.

    Tony Stewart, 2002 NASCAR Winston Cup Champion, is the spokesman and
    technical advisor for NASCAR Silicon Motor Speedway. He will be featured in
    promotions, advertising and point-of-sale material and will also make
    appearances at NSMS racing center locations throughout the country.

    The Company has entered into an agreement, through its wholly owned
    subsidiary, Perfect Line, Inc., with Burroughs and Chapin Company of Myrtle
    Beach, South Carolina for the installation of 16 proprietary simulators at
    the NASCAR SpeedPark Smoky Mountains, the Myrtle Beach Pavilion Amusement
    Park's Ocean Front Arcade and the NASCAR SpeedPark at St. Louis Mills mall.
    Together, both companies are studying further opportunities to install these
    unique NASCAR simulators in other Burroughs and Chapin properties. In
    addition to the three Burroughs and Chapin revenue share locations, the
    Company opened a revenue share location at Cowboy Pizza, a family
    entertainment center in Monterey, CA. The Company has signed revenue share

<PAGE>

    agreements with Burdick Driver's Mall, a large auto mall in Syracuse, NY,
    and with Yello Properties for a 12 simulator installation within a family
    entertainment center in the heart of London, England. The Company has a
    signed two lease agreements with National Tour, Inc. for six of the
    Company's simulators to be featured in the Nextel mobile experience that
    will be taken to all 36 NASCAR Nextel Cup events for the next three years,
    and 2 simulators for the Nextel Mini Experience that Nextel will travel
    around the country.

    Effective November 1, 2003, Perfect Line assigned its lease at RiverTown
    Mall in Grand Rapids, MI, to Checkered Flag Lightning, Inc. and 8 of the 10
    racing simulators will remain in that location on a revenue share basis. The
    transaction converted a poor performing location into a revenue share
    location with guaranteed revenue and no labor, overhead or occupancy
    expenses to the Company.

    The Company has made technological improvements to the simulation, resulting
    in an enhanced racing experience. In addition, two popular racetracks,
    Bristol and Indianapolis, were introduced to the simulation experience late
    in 2002 and early in 2003. Other software improvements were implemented,
    including on-line programs such as MySpeedway. MySpeedway is a feature on
    IMTS's website (www.smsonline.com) that allows customers to find their
    recent lap times, and analyze their results to improve their performance by
    comparing their times to those of other racers throughout the country. Car
    parameters were introduced in August 2003 allowing racers to set up their
    cars to their personal preferences. Adjustable parameters include traction
    control, anti-lock brakes, spoiler angle, steering ratio, front anti-roll
    bar, engine, transmission gearing, and rear end ratio.

    Technological improvements were introduced in the second half of 2003 and
    others are currently under development. These include upgrading and
    enhancing the game graphics, upgrading the underlying operating system in
    order to accommodate future developments, and significant revenue enhancing
    game features that target the Company's core customers.

    The Company is pursuing additional revenue sharing agreements such as those
    entered into with Burroughs and Chapin and Checkered Flag as described above
    and plans to expand this activity, particularly if the Company is successful
    in its future financing. Revenue share locations will provide IMTS the
    opportunity to install simulators in existing or planned entertainment
    venues and share proportionately in the sales generated with
    owner-operators. The Company provides the simulators at cost (expected to be
    financed through a third party leasing firm) and the host organization
    (owner-operator) provides the space, required site build-out, and day-to-day
    operations staffing. The Company's initial revenue share installation's
    began with the NASCAR SpeedPark in mid-April 2003 in Sevierville, Tennessee,
    followed by the Pavilion at Myrtle Beach, South Carolina in early July,
    Cowboy Pizza in Monterey, CA in late October and the NASCAR SpeedPark in
    St.Louis, MO in mid-November.

    In October of 2003, the company bought out its lease at Crossgates Mall in
    Albany, NY, removed the assets from the mall, and re-activated the eight
    simulators into revenue share sites or mobile leases.

    The Company has established a subsidiary, Race Car Simulators, Inc., which,
    upon the receipt of future funding will develop, manufacture, and sell its
    motion-based simulators to the commercial entertainment/amusement market.
    Exploiting this opportunity may create another attractive revenue stream for
    the Company. Race Car Simulators, Inc. has hired an experienced sales
    manager, Mr. Rich Wheeler, and has a representation agreement with veteran
    international amusement park executive Mr. Alain Baldacci for several
    international markets including Brazil, Japan, Australia, Argentina, Chile,
    and Korea. Their efforts have already produced agreements to install 12
    simulators within a family entertainment center in the heart of London,
    England, 8 simulators for an entertainment mall in Moscow, 4 simulators for
    a revenue share family entertainment center in Sao Paulo, Brazil and 4
    simulators for a customer in Abu Dhabi, United Arab Emirates.

    Within its existing racing centers, the Company`s plan is to improve each
    racing center's profitability by increasing the average price of a
    transaction, encouraging customers to select multiple race packages,
    increasing the amount of traffic in the stores through advertising,
    increasing the NASCAR merchandise sales, and improving the retention level
    of existing customers by enhancing the gaming experience through technology
    initiatives and the addition of game parameters.

<PAGE>
    Racing Center Dynamics

    Simulator Racing - The racing centers generate revenues from repeat
    customers that currently represent approximately 65% of IMTS's total
    revenues. Approximately 50% of the Company's first time drivers are
    non-destination walk-ins. A typical customer is a college-educated male over
    the age of 20 with household income in excess of $50,000. Repeat customers
    cite challenge and competition as primary reasons for returning to its
    racing centers.

    Merchandise - The sale of NASCAR licensed merchandise at the Company's
    existing racing centers extends beyond customers participating in the race
    experience. The most popular price points are under $25, predominantly hats
    and t-shirts, and represent a significant portion of the merchandise sales,
    many of which are simply "souvenirs" or impulse pick-up items purchased by
    passers-by. The "collectibles" portion of the inventory is generally sold to
    regular customers who depend on NSMS to stock the collectable die-cast
    models and premium merchandise.

    Staffing -- A General Manager and one to two Assistant General Managers run
    each racing center. A Supervisor ensures the service level within its
    entertainment experience is executed at the highest level. Each store also
    employs an on-site Technical Manager who ensures the computer network and
    physical racecar simulators are maintained at all times.

    Training -The Company provides extensive training programs for both
    employees and managers. New employees are given a thorough orientation on
    all policies and procedures during a three to five day training program. New
    managers must complete an extensive training program that covers all aspects
    of each racing center.

    Employees

    As of March 31, 2004 the Company had 157  employees  including 46 full-time
    and 111 part-time.  The Company considers its relations with its employees
    to be excellent.

<PAGE>

    Item 2. Description of Properties

    The Company is headquartered at 5624 West 73rd Street in Indianapolis,
    Indiana where the Company leases approximately 4,800 square feet. The
    facility consists primarily of office and storage areas and is leased from
    an unrelated third party. The headquarters' lease expires September 14,
    2005. The Company also maintains an engineering office at 2065 Martin Avenue
    in Santa Clara, California where it leases approximately 1,800 square feet
    of office space. The engineering office lease expires on April 30, 2005. The
    Company believes its headquarters and engineering space is adequate for the
    present time and is reviewing options for relocating or extending its leases
    at these locations.

    The nine NASCAR Silicon Motor Speedway racing centers are located in the
    following major shopping malls:

    Location                    Market                        Square Footage

    Mall of America            Minneapolis, Minnesota         5,899
    Universal CityWalk         Los Angeles, California        5,067
    Opry Mills                 Nashville, Tennessee           5,992
    Concord Mills              Charlotte, North Carolina      7,875
    Riverchase Galleria        Birmingham, Alabama            6,188
    Mall of Georgia            Atlanta, Georgia               5,895
    Katy Mills Mall            Houston, Texas                 6,048
    Woodfield Mall             Chicago, Illinois              6,044
    Palisades Center           Suburban New York City         5,700


Item 3. Legal Proceedings

From time to time, the Company may be party to various legal actions and
complaints arising in the ordinary course of business. Following a dispute with
Pyramid Management Group, the landlord for the Company's racing centers in
Albany, NY and West Nyack, NY, the landlord filed a petition for eviction with
Perfect Line for both malls in September, 2003. After further negotiation, a
settlement was reached in November, 2003 that resulted in Perfect Line buying
out its lease at Crossgates Mall in Albany, NY and the assets have been removed
from the mall, and the parties resolved their differences with the Palisades
Mall in West Nyack, NY resulting in an ongoing lease for that mall space. As of
December 31, 2003 and as of the filing of this Annual Report on Form 10-KSB, the
Company is not aware of any material legal actions directed against the Company.

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

None, not applicable.


                                     PART II

Item 5. Market for Common Equity, Related Stockholder Matters and Small Business
        Issuer Purchases of Equity Securities.

Dividend Policy

To date, the Company has not paid dividends on its common stock. The payment of
dividends, if any, is within the discretion of the Board and will depend upon
the Company's earnings, capital requirements and financial condition, and other
relevant factors. The Board does not intend to declare any dividends in the
foreseeable future.

Holders of Record

As of December 31, 2003 there were approximately 270 holders of record of our
Common Stock consisting of 61,440,000 shares issued and outstanding. The number
of holders of record was calculated by reference to reports from the Company's
stock transfer agent.


<PAGE>

Share Price History

The Company's common stock (the "Common Stock") has traded on the
over-the-counter market in what is commonly referred to as the "OTC Bulletin
Board" or the "OTCBB" under the trading symbol "IMTS" since August 14, 2002. The
following table sets forth the high and low bid prices of the Common Stock for
the periods indicated. The price information contained in the table was obtained
from the OTCBB web site and other sources we consider reliable. Note that such
over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, markdown or commission and the quotations may not necessarily represent
actual transactions.

                                           Common Stock Price
Month Ended                 High                 Low                Close

 January 31,2003            .51                 .27                 .35
 February 28, 2003          .39                 .28                 .32
 March 31, 2003             .32                 .16                 .18
 April 30, 2003             .26                 .17                 .17
 May 31, 2003               .20                 .14                 .19
 June 30, 2003              .26                 .12                 .21
 July 31, 2003              .20                 .11                 .13
 August 30, 2003            .17                 .11                 .12
 September 30, 2003         .13                 .09                 .09
 October 31, 2003           .10                 .07                 .08
 November 30, 2003          .09                 .05                 .05
 December 31, 2003          .12                 .03                 .08


Issuance of Securities

In connection with the Company's merger with and into PIH on August 2, 2002, a
total of 11,300,000 shares of Interactive Motorsports and Entertainment Corp.
common stock were issued to shareholders of PIH in exchange for their shares of
common stock of that company.

On August 2, 2002, 4,745,456 shares of the Company's Preferred Stock were issued
for cash consideration of $2,610,050.

In 2003, a total of 140,000 shares of common stock were issued under a Form S-8
filed on February 13, 2003 for consulting services.

On March 7, 2003, the company entered into a short term financial agreement
whereby the company borrowed $700,000 for working capital purposes. The
Agreement also involved the issuance of warrants for 3,235,294 common shares.
The warrants have a strike price of $0.17, and are set to expire on June 30,
2004.

Item 6. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

The following discussion and analysis provides information that we believe is
relevant to an assessment and understanding of the consolidated results of
operations and financial condition of the Company. The terms "Company", "we",
"our" or "us" are used in this discussion to refer to Interactive Motorsports
and Entertainment Corp. along with Interactive Motorsports and Entertainment
Corp.'s wholly owned subsidiary, Perfect Line, Inc., on a consolidated basis,
except where the context clearly indicates otherwise. The discussion and
information that follows concerns the Registrant as it exists today, as of this
filing, including the predecessor of the Company's operations, Perfect Line,
LLC. This discussion and analysis does not relate to the operations of Pacific
International Holding, Inc. which had limited operations prior to the merger
with the Company on August 2, 2002.

Overview

The Company has not generated a profit nor has it generated sufficient cash flow
since inception to fund operations. Since inception on May 31, 2001 and through
December 31, 2003, the Company has accumulated aggregate losses totaling

<PAGE>

$(6,434,655), which includes the net loss of $(3,525,581) for the twelve months
ended December 31, 2003, the net loss of $(2,189,220) for the twelve months
ended December 31, 2002 and the net loss of $(719,854) for the period from
inception to December 31, 2001.

The Company has funded its retained losses through the initial investment of
$650,000 in May 2001, $400,000 of capital contributed in February 2002,
approximately $2.6 million received in August 2002 from the sale of Preferred
Stock, $700,000 borrowed in March 2003, $352,000 received in the form of
deposits for the future purchase by third parties of racecar simulators, and
$1,212,619 by delaying payments to its vendors. The Company is presently in the
process of soliciting additional debt and/or equity financing to fund current
operating deficits and the Company's growth plan. See further discussion under
"Liquidity and Capital Resources" and "Risk Factors" below.

During the twelve months ended December 31, 2003, the Company had total revenues
of $7,552,978 compared to $9,636,278 for the twelve months ended December 31,
2002. The 21.6% decrease in revenue is due to: a) the closing of two racing
centers (Arbor Place and Crossgates Mall); b) conversion of RiverTown Mall to a
revenue share location; c) the weakness of the economy and the war in Iraq; and
d) the company's lack of capital to purchase merchandise inventory at levels
great enough to adequately stock its stores and to properly advertise and
promote the racing centers.

Review of Consolidated Financial Position

Cash and Cash Equivalents: The Company had $249,005 in cash and cash equivalents
as of December 31, 2003 compared with $582,905 at December 31, 2002, a decrease
of $333,900. This decrease in cash for the year ended December 31, 2003 relates
principally to the net loss of ($3,525,581).

Trade Accounts Receivable: These are primarily credit card receivables and the
lower balance of $39,459 at December 31, 2003 versus $86,734 at December 31,
2002 is due to the lower volume of business transacted in the final days of
December 2003 versus December 2002.

Merchandise Inventory: At December 31, 2003, merchandise inventory decreased by
$112,584 from December 31, 2002 due primarily to the company's lack of capital
to purchase all the inventory desired..

Accounts Receivable from Related Parties: One hundred thousand dollars of the
balance at December 31, 2003 was a receivable from Perfect Line Investments,
LLC, a related party. This receivable was fully reserved at December 31, 2002 as
its collection is deemed unlikely.

Accounts Payable: Due to the inability of the company's cash flow to fund
operations, the company has relied to a great extent on the credit offered by
vendors to finance its losses from operations. This resulted in an increase in
the Accounts Payable balance of $1,212,619 as compared to the balance at
December 31, 2002.

Line of Credit and Notes Payable: Both the revolving line of credit and the bank
term loan were repaid in full in August 2002 using the proceeds from the May 10,
2002 private placement of preferred stock. Other than the Secured Bridge Notes
issued in March 2003 as further discussed in Note 5 to the Consolidated
Financial Statements, the Company does not currently have a revolving credit
facility in place, although it continues to be in discussions with potential
lenders.

Other Liabilities: Accrued payroll and payroll taxes, sales taxes payable,
unearned revenue, and other accrued expenses fluctuate with the volume of
business, timing of payments, and the day of the week on which the period ends.
At December 31, 2003, the payroll accrual was a week and a half payroll. Gift
certificates at December 31, 2003 decreased by $28,529 compared to December
2002. This decrease can be attributed at least in substantial part to decreased
consumer spending during the 2003 holiday season. Accrued expenses are higher at
December 31, 2003 due primarily to accrual of licensing fees to NASCAR of
$80,000 and the accrual of approximately $431,700 for gas and electric
utilities, and rent due landlords at the various store locations


Review of Consolidated Results of Operations

Sales for the twelve months ended December 31, 2003 were $2,083,300 lower than
for the 12 month period ending December 31, 2002 due primarily to deterioration
in the economy, decreases in consumer spending, the war in Iraq and the limited

<PAGE>

amount of available merchandise inventory resulting from the Company's limited
financial situation. Additionally, the company closed its Albany, New York and
one of its Atlanta, Georgia locations, and converted its Grand Rapids store to a
revenue share store. On a weighted average basis, 11.2 stores were open in the
twelve months ended December 31, 2003 versus 11.4 stores open in the twelve
months ended December 31, 2002. During 2003, the Company experienced a
continuing decline in the average sales per week per company store on a
comparable basis from $13,588 for the period from inception to December 31, 2002
to an average of $11,115 for the year ended December 31, 2003. We believe this
decrease is primarily attributable to deterioration in the economy, decreases in
consumer spending, the war in Iraq, a lack of marketing expenditures, and the
lack of sufficient quantities of merchandise inventory to maximize the
opportunity the retail component of the stores provides.

Operating expenses for the year ended December 31, 2003 were approximately 140%
of net sales and approximately 122% in 2002. Although overall expenses in terms
of dollars declined 9.8% in 2003 as compared to the same period ending December
31, 2002, the extent of the decline was not as great as the 21.6% decline in
revenue. Expenses that increased in 2003 included costs related to employment,
benefits, maintenance and depreciation. Licensing fees to NASCAR, teams and
tracks also increased..

Qualitative and Quantitative Disclosures of Market Risk

The fair value of the assets and liabilities comprising the Company's condensed
consolidated balance sheet are not subject to an inordinate amount of market
risk. The term market risk refers to the risk of loss arising from adverse
changes in interest rates and other relevant market rates and prices. The
Company's primary assets are the racing simulators and the software that runs
them. As such, the Company does not believe it has any significant exposure to
market risk, as defined.

Critical Accounting Policies

The Company's critical accounting policies, including the assumptions and
judgments underlying them, are disclosed in the Notes to Consolidated Financial
Statements for the year ended December 31, 2003 included in Item 7 in this Form
10-KSB. The Company has consistently applied these policies in the year ended
December 31, 2003. Management does not believe that operations to date have
involved uncertainty of accounting treatment, subjective judgment, or estimates,
to any significant degree.

Internal Controls

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, management has
reviewed the Company's disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) as of a date within 90 days prior to this
annual report (the "Evaluation Date"). Management believes that such disclosure
controls and procedures as of the Evaluation Date were adequate to ensure that
employees and others with material information relating to the Company make that
information known to management. To management's knowledge, there were no
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the Evaluation Date.

Liquidity and Capital Resources

The primary source of funds available to the Company are receipts from customers
for simulator and merchandise sales, proceeds from equity offerings including
the $2,610,050 received in August 2002, loans from related parties including net
proceeds of $687,500 received in March, 2003, credit extended by vendors, and
possible future financings.

As of the filing of this Form 10-KSB, the net proceeds of $687,500 from the
Secured Bridge Notes and warrants financing received in March 2003 has been
depleted and the Company believes the projected level of cash receipts from
simulator and merchandise sales may not be sufficient to fund the daily
operations of the business through 2004. A difficult consumer and retail
environment and the lack of merchandise in the stores have created further
challenges at increasing the sales volume in 2004. However, management believes
that under the recently announced conversion of seven owned and operated racing
centers to revenue share locations, and based upon the guaranteed minimum
payments within the Checker Flag agreement as described herein, and the
Company's current financial projections, management expects the Company to show
a positive EBITDA soon after the landlords approval of the conversions. While

<PAGE>

the landlords have not formally agreed to the conversions to revenue and
assumption of the lease obligations, the Company is aware of no reasons why they
will not do so.

Management is seeking additional sources of short-term funds to continue
operations until additional long-term equity and/or debt financing can be
established.

Currently, the Company is exploring both equity and collateralized debt
financing with several sources and is in various stages of discussion with each.
While the Company believes that at least one of these financing efforts will
occur, there are no assurances. Management believes that some combination of
simulator sales (from existing inventory of owned and unencumbered simulators),
equity financing and/or collateralized debt financing will generate enough
capital to sustain the business until permanent financing can be obtained,
although there can be no assurances.

Since inception, the Company's short-term and long-term plans have included
raising a level of investment adequate to accomplish the objectives of the
business. The required level of financing has not yet been achieved. Absent
additional funding, the Company believes it may not have sufficient resources to
satisfy cash requirements for the next twelve months or even the remainder of
2004. The Company's ability to raise the necessary financing will depend on many
factors, including the economic and market conditions prevailing at the time
financing is sought. Management believes that the investment climate since the
Company commenced operations has generally been unfavorable, particularly to
newer enterprises, which has hindered the Company in obtaining its financing
goals. Nonetheless, management believes that the recently announced conversion
of seven of its owed and operated racing centers to revenue share locations,
combined with some combination of simulator sales (from existing inventory of
owned and unencumbered simulators), the increased revenues from the recently
signed third party revenue share agreements, and even a minimum level of equity
financing and/or collateralized debt financing will allow the Company to achieve
positive EBITA and monthly profitability. While management has pursued financing
for some time, it has encountered difficulties in raising the financing, and
there can be no assurance that additional financing will be available or, if
available, that it will be on terms acceptable to the Company.

During the year ended December 31, 2003, the operating activities of the Company
used net cash of $858,169 compared to net cash used of $1,524,364 for the
comparable period in 2002. The majority of the decrease in cash used in
operations was due to an increase in net operating loss before taxes of
approximately $1,336,361 offset by the $1,212,619 increase in accounts payable,
the $352,692 increase in deposits from customers who have contracted to purchase
simulators, and an increase in depreciation and other non-cash expenses of
$284,298.

During the year ended December 31, 2003, the Company used $221,481 of net cash
in investing activities compared with $143,510 of net cash used in investing
activities during the comparable period in 2002. In 2003, the net cash used
relates primarily to the capitalization of internally developed software for the
new Indianapolis Motor Speedway racetrack and other enhancements to the
Company's proprietary racing simulation software.

The Company intends to use the debt and equity markets to raise sufficient
capital to fund its operating deficits while it refines its business model and
technology and then markets the new offering to customers. All of the $745,750
cash provided through financing activities during the year ended December 31,
2003 represents the receipt of proceeds from the issuance of the Secured Bridge
Notes and warrants in March 2003, along with a promissory note in August 2003.
The Secured Bridge Notes matured at December 31, 2003, but all except $50,000 of
the note holders have entered into extension agreements pursuant to which the
maturity of the notes is extended to April 30, 2004.

As of December 31, 2003, the Company had cash and cash equivalents totaling
$249,005 compared to $582,905 at December 31, 2002. Current assets totaled
$381,335 at December 31,2003 compared to $860,804 on December 31, 2002. Current
liabilities totaled $3,654,089 on December 31,2003 compared with $1,286,533 on
December 31, 2002. As such, these amounts represent an overall decrease in
working capital of $2,847,025 from December 31, 2002.


Inflation

We do not expect the impact of inflation on our operations to be significant.

Risk Factors

The Company is subject to certain risk factors due to the organization and
structure of the business, the industry in which we compete and the nature of
our operations. These risk factors include the following:


<PAGE>

Operating History, Operating Losses, and Accumulated Deficit

Perfect Line was formed in June 2001 for the purpose of acquiring certain of the
assets of SEI, a bankrupt corporation, and modifying and improving the business
model under which SEI operated, as more fully described under Overview above.
While the concept is a modification and improvement upon the prior model, the
modified business model was only in place for less than two full years, but also
proved to be unprofitable. It is for that reason, among others, that the Company
has determined to move to the revenue share model, although that business model
has yet to be tested. Perfect Line has a limited operating history and is
subject to numerous risks, expenses, problems, and difficulties typically
encountered in establishing any business. For the 5 months ended December 31,
2001, Perfect Line had sales of $3,533,402, and a loss of $(719,854). For the
year ended December 31, 2002, Perfect Line generated net sales of $9,636,278,
resulting in a net loss of $(2,189,220) As of December 31, 2003 and for the
twelve months then ended, Perfect Line had net sales of $7,557,978 generating a
net loss of $(3,525,581). This resulted in an accumulated deficit of
$(6,434,655) as of December 31, 2003 for the Company. Management believes the
Company can become profitable in the future, based upon revenues generated from
owned and operated racing centers, revenue share locations, mobile leases and
equipment sales. There can be no assurance that the Company will be profitable
for fiscal 2004 or thereafter or that the Company's cash flow will allow it to
continue operations.

Dependence on Discretionary Consumer Spending and Competition

Much of the revenue anticipated by the Company will be the result of
discretionary spending by consumers. If the current downturn in the economy
continues for an extended time or worsens, either overall or in the locations in
which Company racing centers and revenue share sites are located, the amount of
discretionary spending may be reduced which would have a negative effect on the
Company results from operations and its financial position. In addition, if the
popularity of NASCAR diminishes, it is likely that the Company will experience a
similar reduction in simulator usage and merchandise sales that will have a
negative impact on the Company and its future.

There is considerable competition for consumer entertainment dollars. The
Company feels its patented technology, high-traffic, premium locations, licenses
with NASCAR and various teams, drivers, and tracks combined with the NASCAR
retail store-within-a-store concept create significant points of difference
between its competitors and NSMS. However, there can be no assurance that these
factors will be sufficient to assure successful product development into the
marketplace.

Significant Capital Requirements and Need for Additional Financing

The Company's capital requirements have been and will continue to be
significant. The Company is dependent upon the proceeds of additional equity and
debt offerings in order to fund its continued growth and related working capital
requirements. The Company anticipates, based upon its currently proposed plans
and assumptions relating to its operations, that the net financing proceeds
received to date by the Company will only provide a portion of the funds
necessary in connection with the implementation and continuation of its long
term business plans. Ongoing operations, marketing and new product development
will require capital resources greater than the resources currently available to
the Company. To the extent that the Company's operations do not generate
sufficient working capital for its long-term business plans, the Company will
need to obtain additional outside financing. There can be no assurance that
additional financial resources necessary to permit the Company to implement or
continue its programs will be available. See "Liquidity and Capital Resources"
for further discussion of capital requirements.

Currently, the Company is exploring collateralized debt financing with several
sources and is in various stages of discussion with each. While the Company
believes that at least one of these financing efforts will occur, there are no
assurances.

Dependence on Updated Technology and Licenses/Leases

The Company will likely have a need to routinely update and upgrade its
simulation technology. If the Company is not able to retain appropriate
personnel with the skills and ability to maintain its simulators, it will likely
have a material adverse effect on the Company. The Company will also need to
routinely upgrade the appearance of the simulators to closely approximate that

<PAGE>

of the then current NASCAR sponsors. This updating may involve significant time
and expense and, in certain instances, require additional license agreements
from new teams and/or sponsors. The Company will also need to renew existing
licensing agreements with NASCAR teams and/or drivers. The Company currently has
executed either contracts or term sheets with fourteen teams and/or drivers. The
Company has established licensing relationships with a significant number of
racetracks at which NASCAR events are held. The Company has license agreements
with International Speedway Corp (ISC), Speedway Motorsports International (SMI)
and the Indianapolis Motor Speedway (IMS), and has incorporated to date six
NASCAR tracks into its proprietary software. The Company has the rights to many
more prominent NASCAR tracks, and plans to add tracks to its software once
funded. The Company has entered into an exclusive location based entertainment
license agreement with NASCAR to utilize its logo. The license agreement permits
the continued use of the NASCAR logo in the Las Vegas NASCAR Cafe and the
Daytona USA simulator and provides that it is not a breach of the exclusivity
clause for those two venues to continue to use their current simulator
experiences. The license requires the Company to utilize its best efforts to
maintain a minimum of eight entertainment stores. The Company's confidential
licensing agreement with NASCAR required an annual royalty payment in 2002 and
quarterly royalty payments commencing in 2003 through 2009 based on simulator,
merchandise, food, beverage, sponsor, and remote site revenues at varying
percentages. The licensing agreement is subject to renewal on December 31, 2009.

Dependence on Small Number of Key Management Personnel

We do not have employment agreements with any of our employees. Our future
success depends, in part, on the continued service of our key executive,
management, and technical personnel. If key officers or employees are unable or
unwilling to continue in their present positions, our business and our ability
to raise capital could be harmed.

Our business is especially dependent upon the continued services of our Chairman
and Chief Executive Officer, William R. Donaldson. Should we lose the services
of Mr. Donaldson, our operations will be negatively impacted. The loss of the
services of Mr. Donaldson would have a material adverse effect upon our
business.

Officers and Directors Have Limited Liability and Indemnification Rights

Our officers and directors are required to exercise good faith and high
integrity in the management of our affairs. Our certificate of incorporation and
bylaws, however, provide, that the officers and directors shall have no
liability to the stockholders for losses sustained or liabilities incurred which
arise from any transaction in their respective managerial capacities unless they
violated their duty of loyalty, did not act in good faith, engaged in
intentional misconduct or knowingly violated the law, approved an improper
dividend or stock repurchase, or derived an improper benefit from the
transaction. Our certificate of incorporation and bylaws also provide for us to
indemnify our officers and directors against any losses or liabilities they may
incur as a result of the manner in which they operate our business or conduct
our internal affairs, provided that the officers and directors reasonably
believe such actions to be in, or not opposed to, our best interests, and their
conduct does not constitute gross negligence, misconduct or breach of fiduciary
obligations.

Market and Capital Risks

Future issuance of Common Stock of the Company may lead to dilution in the value
of our common stock, a reduction in shareholder voting power, and allow a change
in control.

Stock issuances may result in reduction of market price of our outstanding
shares of common stock. If we issue any additional shares of common or preferred
stock, proportionate ownership of our common stock and voting power will be
reduced. Further, any new issuance of common or preferred shares may prevent a
change in our control or management.

Issuance of our preferred stock could depress the market value of current
shareholders. We have 10,000,000 authorized shares of convertible preferred
stock that may be issued by action of our Board of Directors. Our Board of
Directors may designate voting control, liquidation, dividend and other
preferred rights to preferred stock holders. Our Board of Directors' authority
to issue preferred stock without shareholder consent may have a depressive
effect on the market value of our common stock. The issuance of preferred stock,
under various circumstances, could have the effect of delaying or preventing a
change in our control or other take-over attempt and could adversely affect the
rights of holders of our shares of common stock.


<PAGE>

High-Risk Investment and Restrictions on Marketability

Our common stock has traded on the Over-the Counter Bulletin Board since August
2002. The bid price of our common stock has been less than $5.00 during this
period. As such, we are subject to the penny stock rules adopted by the
Securities and Exchange Commission that require brokers to provide extensive
disclosure to its customers prior to executing trades in penny stocks. These
disclosure requirements may cause a reduction in the trading activity of our
common stock.

Broker-dealer practices in connection with transactions in penny stocks are
regulated by certain penny stock rules adopted by the Securities and Exchange
Commission. Penny stocks generally are equity securities with a price of less
than $5.00. Penny stock rules require a broker dealer prior to a transaction in
a penny stock not otherwise exempt from the rules, to deliver a standardized
risk disclosure document that provides information about penny stocks and the
risks in the penny stock market. The broker-dealer also must provide the
customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction, and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules generally require
that prior to a transaction in a penny stock, the broker-dealer makes a special
written determination that the penny stock is a suitable investment for the
purchaser and receives the purchaser's written agreement to the transaction.

Because we are subject to the penny stock rules our shareholders may find it
difficult to sell their shares.

<PAGE>




                          Item 7. Financial Statements

        INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES
                           Consolidated Balance Sheet

                                     ASSETS

                                                                    December 31,
                                                                            2003

CURRENT ASSETS

   Cashand cash equivalents                                    $         249,005
   Trade accounts receivable                                              39,459
   Other receivable                                                       10,000
   Merchandise inventory                                                  48,875
   Prepaid insurance and other expenses                                   33,996
                                                               -----------------

     Total Current Assets                                                381,335
                                                               -----------------

PROPERTY AND EQUIPMENT, NET (NOTE 4)                                     869,014
                                                               -----------------

OTHER ASSETS

   Deposits                                                               39,953
   Other intangible assets, net                                           11,542
                                                               -----------------

       Total Other Assets                                                 51,495
                                                               -----------------

     TOTAL ASSETS                                              $       1,301,844
                                                               =================

<PAGE>


        INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES
                     Consolidated Balance Sheet (Continued)


                 LIABILTIES AND SHAREHOLDERS' EQUITY (Deficit)

                                                                    December 31,
                                                                            2003
CURRENT LIABILITIES

   Accounts payable                                            $       1,561,830
   Accrued payroll and payroll taxes                                      98,858
   Sales tax payable                                                      51,308
   Gift certificates and customer deposits, net                          113,087
   Deposits on simulator sales (Note 2)                                  352,692
   Accrued expenses                                                      776,314
   Notes payable - related parties (Note 5)                              200,000
   Notes payable (Note 5)                                                500,000
                                                               -----------------

       Total Current Liabilities                                       3,654,089
                                                               -----------------

LONG TERM LIABILITIES

   Note payable - related party                                           45,750
                                                               -----------------

       Total Long Term Liabilities                                        45,750
                                                               -----------------

     TOTAL LIABILITIES                                                 3,699,839
                                                               -----------------

COMMITMENT AND CONTINGENCIES (Notes 7 and 8)

SHAREHOLDER'S EQUITY (Deficit)

   Convertible preferred stock, $0.0001 par value, 10,000,000
     shares authorized, 2,272,728 shares issued and outstanding              227
   Common stock; $0.0001 par value, 200,000,000 shares
     authorized, 74,314,183 shares issued and outstanding                  7,431
   Additional paid-in capital                                          4,029,002
   Retained deficit                                                  (6,434,655)
                                                                ---------------

       Total Shareholder's equity (deficit)                          (2,397,995)
                                                                ---------------

     TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY (Deficit)      $       1,301,844
                                                               =================

The accompanying notes are an integral part of these consolidated financial
statements.

<PAGE>


        INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES
                      Consolidated Statements of Operations

                                                      For the Years Ended
                                                            December 31,
                                      ------------------------------------------
                                                    2003               2002
                                             ---------------     ---------------


NET SALES                                  $        7,557,978  $       9,636,278

TOTAL OPERATING EXPENSES                           10,583,124         11,730,301
                                           ------------------  -----------------

OPERATING LOSS                                    (3,025,146)        (2,094,023)
                                            -----------------   ---------------

INTEREST EXPENSE                                      500,435             95,197
                                           ------------------  -----------------

LOSS BEFORE INCOME TAX                            (3,525,581)        (2,189,220)
                                            -----------------   ---------------

PROVISION FOR INCOME TAX                                    -                  -
                                           ------------------  -----------------

NET LOSS                                   $      (3,525,581)  $     (2,189,220)
                                            =================   ===============

BASIC NET LOSS PER COMMON SHARE            $           (0.05)  $          (0.04)
                                            =================   ===============

WEIGHTED AVERAGE NUMBER OF SHARES
  OUTSTANDING                                      66,741,310         61,300,000
                                           ==================  =================

The accompanying notes are an integral part of these consolidated
financial statements.



<PAGE>


<TABLE>
<CAPTION>
        INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES
                  Statements of Shareholders' Equity (Deficit)



<S>                             <C>              <C>            <C>     <C>           <C>       <C>         <C>      <C>

                                                                                     Member     Additional           Total
                                 Preferred Stock        Common Stock                 Units and   Paid-In   Retaine Shareholders'
                                                                                     Dollars     Capital   Deficit   Equity
                                Shares      Amount          Shares      Amount                                      (Deficit)

Balance at
  December 31, 2001                    -            -        -            --            650,000      -      (719,854)       (69,854)

Conversion of member
  loans to equity                      -            -         -            -            400,000      -           -           400,000

Conversion of member's
  equity to common stock               -            -      61,300,000     6,130     (1,050,000)   1,043,870     -                 -

Issuance of preferred
  stock with warrants          4,745,456       475               -               -                2,609,575               2,610,050

Net loss for 2002                      -         -               -               -                         (2,189,220)   (2,189,220)
                             -----------    ------------    ------------   -------------           ------------    ----------------

Balance at
  December 31, 2002            4,745,456       475      61,300,000   6,130       -               3,653,445 (2,909,074)      750,976

Common stock issued
  For extinguishment of
   debt                                -         -          20,000      2        -               7,298       -                7,300

Common stock issued
  for services                         -         -         120,000     12        -              19,688       -               19,700

Common stock issued
  for license fees                     -         -         150,000     15        -              32,985       -               33,000

Conversion of preferred
  stock to common stock      (2,472,728)        (248)      12,724,183    1,272                   1,024)      -           -

Fair value of warrants
  granted                              -            -               -               -            316,610                    316,610

Net loss for the year
  Ended December 31,
   2003                                -            -               -               -                      (3,525,581)   (3,525,581)
                             -----------    ------------    ------------   ------   ------      -------------         -------------

Balance at
  December 31, 2003            2,272,728    $    227      74,314,183   $7,431  $   -        $ 4,029,002=   (6,434,655)  $(2,397,995)
                             ===========    ============  ==========   ========  ==---==     =============  ----------   ----------

</TABLE>

The accompanying notes are an integral part of these consolidated
financial statements.


<PAGE>


        INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows


                                                        For the Years Ended
                                                             December 31,
                                                    ----------------------------
                                                        2003               2002
                                                    -----------      -----------

CASH FLOWS FROM OPERATING ACTIVITIES

   Net loss                                          $ (3,525,581)  $(2,189,220)
   Adjustments to reconcile net loss to net cash
    used by operating activities:
     Depreciation and amortization                   413,606             398,618
     Common stock issued for services                 52,700                   -
     Amortization of notes payable discount          316,610                   -
     Provision for related party receivable                -             100,000
   Net changes in operating assets and liabilities:
     (Increase) decrease in trade accounts and other
                receivable                            37,275            (35,050)
     (Increase) decrease in merchandise inventory    112,584            (89,149)
     Decrease in prepaid expenses and other assets    57,331               1,098
     Increase in accounts payable                  1,212,619             126,710
     Increase (decrease) in accrued payroll and
                payroll taxes                       (64,036)              61,936
     Decrease in sales tax payable                  (14,115)            (29,199)
     Decrease in gift certificates and customer
                deposits                            (28,529)            (29,821)
     Increase in accrued expenses                    235,867             116,521
     Increase (decrease) in accrued property taxes  (17,192)              43,192
     Increase in deposits on simulator sales         352,692                   -
                                                 --------------    -------------

       Net Cash used by operations                 (858,169)         (1,524,364)
                                                 -------------     -------------

CASH FLOWS FROM INVESTING ACTIVITIES

   Increase in deposits                                    -            (12,932)
   Purchase of property and equipment              (221,481)           (130,578)
                                                   -------------    ------------

       Net Cash Used by Investing Activities        221,481)           (143,510)
                                                   -------------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES

   Loans from and (repayments to) related parties    245,750              38,298
   Net borrowings on line of credit                        -           (350,000)
   Net borrowings on bank loan                             -           (826,198)
   Proceeds from issuance of preferred stock with
        warrants                                           -           2,610,050
   Bridge loan proceeds                              500,000                   -
                                                   -------------    ------------

       Net Cash Used by Financing Activities         745,750           1,472,150
                                                   -------------    ------------

DECREASE IN CASH AND CASH EQUIVALENTS              (333,900)           (195,724)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD       582,905             778,629
                                                   -------------    ------------

CASH AND CASH EQUIVALENTS, END OF PERIOD         $    249,005       $    582,905
                                                 ==================  ==========

The accompanying notes are an integral part of these consolidated
financial statements.


<PAGE>


        INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES
                Consolidated Statements of Cash Flows(Continued)


SUPPLEMENTAL CASH FLOW DISCLOSURES:

   Cash paid for interest                 $           68,951  $           45,384
   Cash paid for income taxes             $                -  $                -

SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:

   Conversion of member loans to equity   $                -  $          400,000
   Common stock issued for notes payable  $           52,700  $                -
   Warrants granted for notes payable     $          316,610  $                -
   Common stock issued for license fees   $           33,000  $                -


The accompanying notes are an integral part of these consolidated financial
statements.


<PAGE>

NOTE 1 -      MERGER AND BASIS OF PRESENTATION

              Effective August 2, 2002, Pacific International Holding, Inc., a
              Utah corporation ("PIH"), which was originally organized in 1986,
              changed its state of domicile and name by merging with and into
              Interactive Motorsports and Entertainment Corp. (the surviving
              entity), an Indiana corporation (the "Company"), pursuant to an
              Agreement and Plan of Reorganization. Per the merger agreement,
              each share of PIH common stock outstanding immediately prior to
              the effective date of the merger was cancelled and converted into
              four shares of Interactive Motorsports and Entertainment Corp.
              common stock. Although it had been in a variety of businesses for
              over 15 years, at the time of the merger PIH had limited
              operations.

              Subsequent to the merger and effective as of the same date, the
              Company acquired pursuant to a Plan and Agreement of Exchange all
              of the issued and outstanding shares of common stock and preferred
              stock of Perfect Line, Inc., an Indiana corporation ("Perfect
              Line"), from the Perfect Line shareholders in exchange for shares
              of the Company's common stock and preferred stock on a
              "share-for-share" basis. As a result of the share exchange, the
              Perfect Line shareholders as of August 2, 2002 held Company shares
              representing approximately eighty-two percent (82%) of the
              Company's capital stock. Also effective as of August 2, 2002, the
              members of the Board of Directors of Perfect Line were elected to
              replace the members of the Company's Board of Directors and the
              executive officers of Perfect Line became the executive officers
              of the Company.

              As Perfect Line had revenues, operations, and business activity,
              for financial reporting purposes, Perfect Line is considered the
              acquirer, and therefore the predecessor, and the Company is
              considered the acquiree for accounting reporting purposes. Due to
              the fact that the merger is being treated as a reverse
              acquisition, the equity of the Company has been recapitalized for
              financial reporting purposes. The operations of Interactive
              Motorsports and Entertainment Corp. have been included in the
              consolidated financial statements from August 2, 2002 until
              December 31, 2003.

              Perfect Line owns and operates the NASCAR Silicon Motor Speedway
              store chain, which offers licensed NASCAR-branded entertainment
              products. A predecessor of Perfect Line commenced operations on
              June 8, 2001 when it completed the acquisition of the assets,
              naming rights and intellectual property related to NASCAR Silicon
              Motor Speedway for $1,050,000. The Company also completed asset
              acquisitions of $124,320 in August 2001 and $250,000 in December
              2001. Of the total acquisition price of $1,424,320, $500,000 was
              paid in cash and $924,320 was financed with debt. In addition,
              Perfect Line granted warrants to the sellers as part of these
              transactions (Note 3). These acquisitions were accounted for by
              the purchase method.

NOTE 2 -      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

              a. USE OF 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 the 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.

              b. SIGNIFICANT ESTIMATES: The most significant estimates made by
              management are determining the estimated useful lives of the fixed
              assets, determining the obsolescence of merchandise inventory, and
              assessing the realization of deferred tax benefits relating to the
              Company's net operating loss carry forwards.


<PAGE>

              NOTE 2 -    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


              c. LONG-LIVED ASSETS: Long-lived assets are reviewed for
              impairment whenever events or changes in circumstances indicate
              that the carrying amount of an asset may not be recoverable.
              Recoverability is measured by comparison of the carrying amount to
              future net undiscounted cash flows expected to be generated by the
              related asset. If such assets are considered to be impaired, the
              impairment to be recognized is measured by the amount by which the
              carrying amount exceeds the fair market value of the assets. To
              date, no adjustments to the carrying amount of long-lived assets
              have been required.

              d. MERCHANDISE INVENTORY: Merchandise inventories are carried at
              the lower of cost or market as determined by the first-in,
              first-out (FIFO) method. The Company reduces the stated value of
              inventory for excess quantities or obsolescence in an amount equal
              to the difference between the cost of inventory and the estimated
              market value based upon assumptions about future demand and market
              conditions. If actual future demand or market conditions are less
              favorable than those projected by management, additional
              reductions in stated value may be required.

              e. PROPERTY AND EQUIPMENT: The Company records its property and
              equipment at cost and depreciates it using the straight-line
              method over the estimated useful lives of the respective asset
              classes as follows:

              Software 3 Years, Furniture, Fixtures, and Equipment 5 to 7 Years

              f. DIVIDENDS: The Company has not paid any dividends and any
              dividends that may be paid in the future will depend upon the
              financial requirements of the Company and other relevant factors.
              The Company does not presently intend to pay dividends at any
              point in the foreseeable future.

              g. CONSOLIDATION: The consolidated financial statements at
              December 31, 2003 and 2002 include the accounts of the Company and
              its wholly owned operating subsidiaries, Perfect Line, Inc. and
              Race Car Simulators, Inc. Intercompany transactions and balances
              have been eliminated in consolidation.

              h. NET LOSS PER SHARE: The computation of net loss per share of
              common stock is based on the weighted average number of shares
              outstanding during the periods presented. The Company calculates
              loss per share pursuant to Statement of Financial Accounting
              Standards No. 128 ("SFAS 128"), Earnings Per Share. Basic loss per
              share is computed based upon the weighted average number of common
              shares issued and outstanding during each year. Diluted loss per
              share amounts assume conversion, exercise, or issuance of all
              potential common stock instruments (stock options, warrants and
              convertible preferred stock). Potentially dilutive securities
              including preferred stock, warrants and stock options are excluded
              from diluted loss per share during net loss periods because these
              securities would be anti-dilutive. The Company has excluded
              14,598,945 of dilutive instruments at December 31, 2003.

              i. INCOME TAXES: The Company provides for income taxes based on
              the liability method, which requires recognition of deferred tax
              assets and liabilities based on differences between the financial
              reporting and tax bases of assets and liabilities measured using
              enacted tax rates and laws that are expected to be in effect when
              the differences are expected to reverse. At December 31, 2003, the
              Company's net deferred tax asset is fully offset by a valuation
              allowance.




<PAGE>

              NOTE 2 -    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


              j. REVENUE RECOGNITION AND UNEARNED REVENUE: The Company
              recognizes revenue for its services at the time the services have
              been rendered. In the case of gift certificates and customer
              deposits for group events, these amounts are deferred and
              recognized when the associated services are rendered or upon
              expiration. During 2003 the Company began a program of selling
              some of its simulators either new or used. The Company has
              received deposits of $352,692 relating to these sales. The
              Company's policy is to defer all revenue recognition associated
              with these sales until all terms of the contract have been met and
              no obligations remain for the Company to perform.

              k. CASH AND CASH EQUIVALENTS: For purposes of the statement of
              cash flows, the Company considers all demand deposit balances and
              all highly liquid debt instruments purchased with maturity of
              three months or less to be cash equivalents.

              l. ADVERTISING: Advertising expenses were $252,992 and $168,118
              for the years ended December 31, 2003 and 2002, respectively.

              m. RECLASSIFICATIONS: Certain prior year amounts have been
              reclassified to conform to the current year presentation.

NOTE 3 -      EQUITY TRANSACTIONS AND COMMON STOCK WARRANTS

              Preferred Stock

              At June 30, 2002, Perfect Line placed with investors 4,745,456
              shares of convertible preferred stock (the, "Preferred Stock") for
              cash proceeds of $2,610,050 under a private placement memorandum
              dated May 10, 2002. These funds were to be held in escrow until a
              transaction such as that described in Note 1 above occurred.
              Simultaneous to the exchange of stock with PIH on August 2, 2002,
              these funds were released from escrow and subsequently transferred
              to Perfect Line. The proceeds of this offering were used to pay
              down debt and other liabilities and to provide working capital
              funds for the business. The Preferred Stock is mandatorily
              convertible one year after issuance into one share of Common Stock
              or one dollar worth of Common Stock as of the conversion date, as
              calculated by the 10-day trailing average of the bid and ask price
              prior to conversion, whichever is more favorable to the
              shareholder. On July 31, 2003 the Company entered into an
              agreement with one preferred shareholder which extended the
              conversion date to January 1, 2004.

              For every two shares of Preferred Stock, the investor received one
              warrant (the "Preferred Stock Warrants") to purchase Common Stock
              at a price of $1.50 per share expiring three years from the date
              of issuance. The Preferred Stock Warrants are callable by the
              Company for $0.10 per warrant at any time at the option of the
              Company. At December 31, 2003 and as of the date of this filing,
              all 2,372,728 of the Preferred Stock Warrants were outstanding.
              Management assigned no value to the Preferred Stock Warrants.

         Common Stock

              In connection with the bank line of credit agreement, the Company
              granted warrants to the Bank to purchase up to $1.6 million of the
              Company's common stock at a price equal to 50% of the value per
              share at the time the warrants are exercised. The warrants are
              exercisable at any time prior to June 8, 2011, upon the occurrence
              of certain events. Management has determined the likelihood of
              occurrence of these certain events is remote and has therefore
              assigned no value to these warrants. No warrants have been
              exercised as of December 31, 2003.

<PAGE>

NOTE 3 -      EQUITY TRANSACTIONS AND COMMON STOCK WARRANTS (continued)

              In connection with a certain asset purchase agreement (Note 1),
              the Company granted warrants to allow the seller to purchase up to
              $2 million in value of the Company's common stock at a price equal
              to the value per share at the time the warrants are exercised. The
              warrants are exercisable at any time prior to December 14, 2011,
              upon the occurrence of certain events. Management has determined
              the likelihood of occurrence of these certain events is remote and
              has therefore assigned no value to these warrants. No warrants
              have been exercised as of December 31, 2003.

              In connection with the merger with and into Pacific International
              Holding, Inc. more fully described in Note 1, the Company paid a
              finder's fee of 2,000,000 shares of common stock to Pacific
              Management Services, Inc. In connection with this fee, the Company
              granted a common stock value assurance warrant for 300,000 common
              shares to Pacific Management Services, Inc. The holder may
              exercise this warrant and receive 300,000 shares of common stock
              for no additional consideration if the value of the finder's fee
              falls below $1 million within the period ending one year from the
              merger date (August 1, 2002). The warrants expired in July 2003
              unexercised.

              On January 30, 2003, the Company issued 20,000 shares of common
              stock for the extinguishments of consulting services payable at
              December 31,2002. The shares were valued at $7,800, which was the
              closing price on the dates that the shares should have been issued
              in 2002.

              During 2003, the Company issued 120,000 shares of common stock for
              consulting services that were rendered. The shares were valued at
              their closing prices on the date of issue. Total consulting
              expense associated with these issuances was $19,700.

              During 2003, the Company issued 150,000 shares of common stock for
              a license fee agreement. The shares were valued at their closing
              price on the date of issue. Total license fee expense was $33,000.

              On August 2, 2003, the Company converted 2,472,728 shares of
              preferred stock into 12,724,183 shares of common stock pursuant to
              the conversion terms of the preferred stock. The remaining
              2,272,728 shares of preferred stock had not been converted as of
              December 31, 2003 pursuant to an extension agreement entered into
              by the Company with the preferred shareholders.

NOTE 4 -      PROPERTY AND EQUIPMENT

              At December 31, 2003, property and equipment was comprised of the
following:

                                                                       2003

                      Furniture, fixtures and equipment    $           1,125,429
                      Software                                           658,293
                                                          ----------------------
                                                                       1,783,722

                      Less: Accumulated depreciation                     914,708
                                                           ---------------------

                                                           $             869,014
                                                           =====================


              Depreciation expense for the years ended December 31, 2003 and
              2002 was $411,231 and $339,906 respectively.


<PAGE>

NOTE 5 -      DEBT AND CREDIT ARRANGEMENTS

              On March 7, 2003, Perfect Line, Inc. issued Secured Bridge Notes
              due December 31, 2003 (the "Bridge Notes") in the aggregate
              principal amount of $700,000 to one institutional investor and
              three related-party investors (See Note 9). Under the terms of the
              agreement; Ropart Asset Management Fund, LLC ("Ropart"), Tampa Bay
              Financial, Inc. (related-party), William R. Donaldson
              (related-party) and Erik R. Risman (related-party at that time),
              were to receive the principal sum of $500,000, $100,000, $50,000
              and $50,000, respectively, on December 31, 2003. Interest was to
              be paid on the unpaid principal balance existing prior to maturity
              at an annual rate of twelve percent (12%). Interest on the unpaid
              principal under the Notes was due and payable in arrears on the
              first day of each month, commencing April 1, 2003. Additionally,
              interest accrued at an annual rate of twelve percent (12%), which
              was to be repaid in shares of common stock. All amounts due under
              the notes were due and payable December 31, 2003. Note holders of
              $550,000 have signed amendments extending the note until the end
              of April, 2004, $100,000 was converted to the Company's February
              Note and Option and Security offering (Note 14) and $50,000 has
              been paid in 2004 by the Company to one of the purchasers.

              Ropart and Mr. Risman also received warrants in the amounts of
              2,941,176 and 294,118, respectively, entitling them to purchase
              from the Company, at an exercise price of $0.17, common shares of
              the Company at any time before the earlier of June 30, 2004 or six
              months following payment of the Bridge Note in full. Management
              has determined the value of the Ropart and Risman warrants to
              total $316,610. This amount has been fully amortized to interest
              expense at December 31, 2003.

NOTE 6 -      LICENSING AND CONSULTING AGREEMENTS

              The Company has a licensing agreement with the National
              Association for Stock Car Auto Racing, Inc. ("NASCAR") for
              location-based entertainment, which allows the Company to use the
              NASCAR name and logo. The Company's confidential licensing
              agreement with NASCAR requires annual royalty payments in 2002 and
              quarterly royalty payments from 2003 through 2009 based on
              simulator, merchandise, food, beverage, sponsor, and remote site
              revenues at varying percentages. The licensing agreement is
              subject to renewal on December 31, 2009.

              The Company also has licensing agreements with several NASCAR race
              teams, drivers, and racetracks that expire on various dates
              between December 31, 2004 and December 31, 2007.

NOTE 7 -      RENT COMMITMENTS

              The Company rents various office and retail space under long-term,
              non-cancelable operating leases, some of which include renewal
              options, expiring on various dates through 2010. The company also
              leases certain office equipment pursuant to a non-cancelable
              operating lease with terms of three years. Rent expense
              approximated $2,662,000 and $2,903,000 for the years ended
              December 31, 2003 and 2002, respectively.

              At December 31, 2003, the future minimum rental payments required
              under all non-cancelable operating leases were as follows:


<PAGE>

NOTE 7 - RENT COMMITMENTS (continued)


                    Payable In                              Rental Payments
              --------------------------                 -----------------------
                        2004                             $             1,670,310
                        2005                                           1,253,414
                        2006                                           1,049,781
                        2007                                             553,774
                        2008                                             369,922
                     Later years                                         323,922
                                                         -----------------------

              Total Required Rental Payments             $             5,221,123
                                                         =======================


NOTE 8 -      COMMITMENTS AND CONTINGENCIES

              From time to time, the Company may be party to various legal
              actions and complaints arising in the ordinary course of business.
              Following a dispute with Pyramid Management Group, the landlord
              for the Company's racing centers in Albany, NY and West Nyack, NY,
              the landlord filed a petition for eviction with Perfect Line for
              both malls in September, 2003. After further negotiation, a
              settlement was reached in November, 2003 that resulted in Perfect
              Line buying out its lease at Crossgates Mall in Albany, NY and the
              assets have been removed from the mall, and the parties resolved
              their differences with the Palisades Mall in West Nyack, NY
              resulting in an ongoing lease for that mall space. As of December
              31, 2003, the Company is not aware of any material legal actions
              directed against the Company.

NOTE 9 -      RELATED PARTY TRANSACTIONS

               As  further  described  in Note 5, on March 7,  2003 the  Company
               issued to three  related  parties a total of  $200,000 of Secured
               Bridge  Notes.  These notes were  issued to Tampa Bay  Financial,
               Inc.,  Mr.  William  R.  Donaldson,  and Mr.  Erik  Risman in the
               amounts of  $100,000,  $50,000,  and $50,000,  respectively.  The
               Chairman  and Chief  Executive  Officer  of Tampa Bay  Financial,
               Inc., Mr. Carl L. Smith,  is also a director of the Company.  Mr.
               Donaldson  is the  Chairman  and Chief  Executive  Officer of the
               Company  and  Mr.  Risman  is  the  Former  President  and  Chief
               Operating Officer of the Company.

NOTE 10 -     INTANGIBLES

              The components of intangibles as of December 31, 2003 are as
follows:

                                            Gross Carrying          Accumulated
                                            Amount                  Amortization

                   Patents and name rights       $  22,700          $   (11,158)


              Patents and name rights are being amortized using the
              straight-line method over the five-year term of the agreements.
              The weighted-average amortization period for all amortized
              intangibles acquired is three years, with amortization expense
              aggregating $6,450 and $58,712 for the years ended December 31,
              2003 and 2002 respectively.

NOTE 11 -     INCOME TAXES

               Deferred  taxes  are  provided  on  a  liability  method  whereby
               deferred  tax  assets are  recognized  for  deductible  temporary
               differences and operating loss and tax credit  carryforwards  and
               deferred tax  liabilities  are recognized  for taxable  temporary
               differences. Temporary
<PAGE>

NOTE 11 -     INCOME TAXES (Continued)

              differences are the differences between the reported amounts of
              assets and liabilities and their tax bases. Deferred tax assets
              are reduced by a valuation allowance when, in the opinion of
              management, it is more likely that not that some portion or all of
              the deferred tax assets will not be realized. Deferred tax assets
              and liabilities are adjusted for the effects of changes in tax
              laws and rates on the date of enactment.

               Net deferred tax assets consist of the following components as of
               December 31, 2003 and 2002:


                                                        2003                2002
                                          ------------------  ------------------

              Deferred tax assets:
                NOL Carryover             $        1,918,625  $          852,155
                Valuation for investment              57,000              41,535
                Depreciation                          93,750              34,974


              Deferred tax liabilities:                    -                   -
                State deferred liability            (62,945)            (54,875)
              Valuation allowance                (2,006,430)           (873,789)
                                          ------------------  -----------------

              Net deferred tax asset      $                -  $                -
                                          ==================  ==================

               The income tax  provision  differs  from the amount of income tax
               determined by applying the U.S. federal income tax rate of 39% to
               pretax  income  from  continuing  operations  for the years ended
               December 31, 2003 and 2002 due to the following:


                                                        2003                2002
                                          ------------------  ------------------

              Book loss                   $        1,374,976  $          873,789
              Meals and Entertainment                 (2,645)                  -
              Stock for services/options expense    (144,030)                  -
              Valuation allowance                (1,228,301)           (873,789)
                                          ------------------  -----------------

                                          $                -  $                -
                                          ==================  ==================


               At  December  31,  2003,  the  Company  had  net  operating  loss
               carryforwards  of  approximately  $4,900,000  that may be  offset
               against future taxable income from the year 2003 through 2023. No
               tax benefit has been reported in the December 31, 2003  financial
               statements  since  the  potential  tax  benefit  is  offset  by a
               valuation allowance of the same amount.

               Due to the change in ownership  provisions  of the Tax Reform Act
               of 1986, net operating loss  carryforwards for Federal income tax
               reporting  purposes are subject to annual  limitations.  Should a
               change in ownership occur, net operating loss  carryforwards  may
               be limited as to use in the future years.




<PAGE>

NOTE 12 -     RECENT ACCOUNTING PRONOUNCEMENTS

              During the year ended December 31, 2003, the Company adopted the
              following accounting pronouncements:

              SFAS No. 143 -- In August 2001, the FASB issued SFAS No. 143,
              Accounting for Asset Retirement Obligations, which established a
              uniform methodology for accounting for estimated reclamation and
              abandonment costs. The statement was effective for fiscal years
              beginning after June 15, 2002. The adoption of SFAS No. 143 did
              not have a material effect on the consolidated financial
              statements of the Company.

              SFAS No. 145 -- On April 30, 2002, the FASB issued FASB Statement
              No. 145 (SFAS 145), "Rescission of FASB Statements No. 4, 44, and
              64, Amendment of FASB Statement No. 13, and Technical
              Corrections." SFAS 145 rescinds both FASB Statement No. 4 (SFAS
              4), "Reporting Gains and Losses from Extinguishment of Debt," and
              the amendment to SFAS 4, FASB Statement No. 64 (SFAS 64),
              "Extinguishments of Debt Made to Satisfy Sinking-Fund
              Requirements." Through this rescission, SFAS 145 eliminates the
              requirement (in both SFAS 4 and SFAS 64) that gains and losses
              from the extinguishment of debt be aggregated and, if material,
              classified as an extraordinary item, net of the related income tax
              effect. However, an entity is not prohibited from classifying such
              gains and losses as extraordinary items, so long as it meets the
              criteria in paragraph 20 of Accounting Principles Board Opinion
              No. 30, Reporting the Results of Operations Reporting the Effects
              of Disposal of a Segment of a Business, and Extraordinary, Unusual
              and Infrequently Occurring Events and Transactions. Further, SFAS
              145 amends paragraph 14(a) of FASB Statement No. 13, "Accounting
              for Leases", to eliminate an inconsistency between the accounting
              for sale-leaseback transactions and certain lease modifications
              that have economic effects that are similar to sale-leaseback
              transactions. The amendment requires that a lease modification (1)
              results in recognition of the gain or loss in the 9 financial
              statements, (2) is subject to FASB Statement No. 66, "Accounting
              for Sales of Real Estate," if the leased asset is real estate
              (including integral equipment), and (3) is subject (in its
              entirety) to the sale-leaseback rules of FASB Statement No. 98,
              "Accounting for Leases: Sale-Leaseback Transactions Involving Real
              Estate, Sales-Type Leases of Real Estate, Definition of the Lease
              Term, and Initial Direct Costs of Direct Financing Leases."
              Generally, FAS 145 is effective for transactions occurring after
              May 15, 2002. The adoption of SFAS 145 did not have a material
              effect on the consolidated financial statements of the Company.

              SFAS No. 146 -- In June 2002, the FASB issued SFAS No. 146,
              "Accounting for Exit or Disposal Activities" (SFAS 146). SFAS 146
              addresses significant issues regarding the recognition,
              measurement, and reporting of costs that are associated with exit
              and disposal activities, including restructuring activities that
              are currently accounted for under EITF No. 94-3, "Liability
              Recognition for Certain Employee Termination Benefits and Other
              Costs to Exit an Activity (including Certain Costs Incurred in a
              Restructuring)." The scope of SFAS 146 also includes costs related
              to terminating a contract that is not a capital lease and
              termination benefits that employees who are involuntarily
              terminated receive under the terms of a one-time benefit
              arrangement that is not an ongoing benefit arrangement or an
              individual deferred-compensation contract. SFAS 146 will be
              effective for exit or disposal activities that are initiated after
              December 31, 2002 and early application is encouraged. The
              provisions of EITF No. 94-3 shall continue to apply for an exit
              activity initiated under an exit plan that met the criteria of
              EITF No. 94-3 prior to the adoption of SFAS 146. The effect on
              adoption of SFAS 146 will change on a prospective basis the timing
              of when the restructuring charges are recorded from a commitment
              date approach to when the liability is incurred. The adoption of
              SFAS 146 did not have a material effect on the consolidated
              financial statements of the Company.

<PAGE>

NOTE 12 -  RECENT ACCOUNTING PRONOUNCEMENTS (continued)

              SFAS No. 147 -- In October 2002, the Financial Accounting
              Standards Board (FASB) issued Statement of Financial Accounting
              Standards (SFAS) No. 147, "Acquisitions of certain Financial
              Institutions" which is effective for acquisitions on or after
              October 1, 2002. This statement provides interpretive guidance on
              the application of the purchase method to acquisitions of
              financial institutions. Except for transactions between two or
              more mutual enterprises, this Statement removes acquisitions of
              financial institutions from the scope of both SFAS 72 and
              Interpretation 9 and requires that those transactions be accounted
              for in accordance with SFAS No. 141, "Business Combinations" and
              No. 142, "Goodwill and Other Intangible Assets". The adoption of
              SFAS No. 147 did not have a material effect on the consolidated
              financial statements of the Company.

              SFAS No. 148 -- In December 2002, the FASB issued SFAS No. 148,
              "Accounting for Stock Based Compensation-Transition and
              Disclosure-an amendment of FASB Statement No. 123" which is
              effective for financial statements issued for fiscal years ending
              after December 15, 2002. This Statement amends SFAS 123,
              Accounting for Stock-Based Compensation, to provide alternative
              methods of transition for a voluntary change to the fair value
              based method of accounting for stock-based employee compensation.
              In addition, this Statement amends the disclosure requirements of
              SFAS 123 to require prominent disclosures in both annual and
              interim financial statements about the method of accounting for
              stock-based compensation and the effect of the method used on
              reported results. The adoption of SFAS No. 148 did not have a
              material effect on the consolidated financial statements of the
              Company.

               SFAS No. 149 -- In April 2003, the FASB issued SFAS No. 149,
               "Amendment of Statement 133 on Derivative Instruments and Hedging
               Activities" which is effective for contracts entered into or
               modified after June 30, 2003 and for hedging relationships
               designated after June 30, 2003. This statement amends and
               clarifies financial accounting for derivative instruments
               embedded in other contracts (collectively referred to as
               derivatives) and hedging activities under SFAS 133. The adoption
               of SFAS No. 149 did not have a material effect on the
               consolidated financial statements of the Company.

               SFAS No. 150 -- In May 2003, the FASB issued SFAS No. 150,
               "Accounting for Certain Financial Instruments with
               Characteristics of both Liabilities and Equity" which is
               effective for financial instruments entered into or modified
               after May 31, 2003, and is otherwise effective at the beginning
               of the first interim period beginning after June 15, 2003. This
               Statement establishes standards for how an issuer classifies and
               measures in its statement of financial position certain financial
               instruments with characteristics of both liabilities and equity.
               It requires that an issuer classify a financial instrument that
               is within its scope as a liability (or an asset in some
               circumstances) because that financial instrument embodies an
               obligation of the issuer. The adoption of SFAS No. 150 did not
               have a material effect on the consolidated financial statements
               of the Company.

               FASB Interpretation No. 45 -- "Guarantor's Accounting and
               Disclosure Requirements for Guarantees, Including Indirect
               Guarantees of Indebtedness of Others - an Interpretation of FASB
               Statements No. 5, 57 and 107". The initial recognition and
               initial measurement provisions of this Interpretation are to be
               applied prospectively to guarantees issued or modified after
               December 31, 2002. The disclosure requirements in the
               Interpretation were effective for financial statements of interim
               or annual periods ending after December 15, 2002. The adoption of
               FASB Interpretation No. 45 did not have a material effect on the
               consolidated financial statements of the Company.

               FASB  Interpretation  No. 46 -- In January 2003,  the FASB issued
               FASB  Interpretation  No. 46  "Consolidation of Variable Interest
               Entities." FIN 46 provides guidance on the
<PAGE>

NOTE 12 -  RECENT ACCOUNTING PRONOUNCEMENTS (continued)

               identification of entities for which control is achieved through
               means other than through voting rights, variable interest
               entities, and how to determine when and which business
               enterprises should consolidate variable interest entities. This
               interpretation applies immediately to variable interest entities
               created after January 31, 2003. It applies in the first fiscal
               year or interim period beginning after June 15, 2003, to variable
               interest entities in which an enterprise holds a variable
               interest that it acquired before February 1, 2003. The adoption
               of FIN 46 did not have a material impact on the Company's
               financial statements.

               During the year ended December 31, 2003, the Company adopted the
               following Emerging Issues Task Force Consensuses: EITF Issue No.
               00-21 "Revenue Arrangements with Multiple Deliverables", EITF
               Issue No. 01-8 " Determining Whether an Arrangement Contains a
               Lease", EITF Issue No. 02-3 "Issues Related to Accounting for
               Contracts Involved in Energy Trading and Risk Management
               Activities", EITF Issue No. 02-9 "Accounting by a Reseller for
               Certain Consideration

               Received from a Vendor", EITF Issue No. 02-17, "Recognition of
               Customer Relationship Intangible Assets Acquired in a Business
               Combination", EITF Issue No. 02-18 "Accounting for Subsequent
               Investments in an Investee after Suspension of Equity Method Loss
               Recognition", EITF Issue No. 03-1, "The Meaning of Other Than
               Temporary and its Application to Certain Instruments", EITF Issue
               No. 03-5, "Applicability of AICPA Statement of Position 9702,
               `Software Revenue Recognition' to Non-Software Deliverables in an
               Arrangement Containing More Than Incidental Software", EITF Issue
               No. 03-7, "Accounting for the Settlement of the Equity Settled
               Portion of a Convertible Debt Instrument That Permits or Requires
               the Conversion Spread to be Settled in Stock", EITF Issue No.
               03-10, "Application of EITF Issue No. 02-16 by Resellers to Sales
               Incentives Offered to Consumers by Manufacturers.

NOTE 13 -      MANAGEMENT PLANS

               The accompanying consolidated financial statements have been
               prepared in accordance with accounting principles generally
               accepted in the United States of America and contemplate the
               Company's ability to continue as a going concern. The
               consolidated financial statements do not include any adjustments
               that might result if the Company is unable to obtain additional
               financing. Absent additional funding, the Company may not have
               sufficient resources to satisfy cash requirements for the next
               twelve months.

               For the year ended December 31, 2003, the second full year of
               operations since the Company's acquisitions of the racing
               centers, the Company's racing centers generated revenue of
               approximately $7.8 million. Operating without the necessary
               capital to properly market and merchandise these stores, sales
               performance fell short of expectation, resulting in a net loss of
               approximately $3.5 million for the year ended December 31, 2003.
               However, management believes that under the recently announced
               conversion of seven owned and operated racing centers to revenue
               share locations, and based upon the guaranteed minimum payments
               within the Checker Flag agreement and the Company's current
               financial projections, management expects the Company to show a
               positive EBITDA soon after the landlords approval of the
               conversions. Management believes this transaction will enhance
               the Company's ability to secure long debt or equity financing in
               order to meet its short term debt obligations.

               As of December 31, 2003, the $740,000 from the Secured Bridge
               Note and additional Promissory Note has been depleted and the
               Company believes that, absent the final consent from the
               landlords for the Checker Flag Lightning conversions (see "
               Description of Business-Major Agreement"), the projected level of
               cash receipts from simulator and

<PAGE>

NOTE 13 -      MANAGEMENT PLANS (continued)

               merchandise sales will not be sufficient to fund the daily
               operations of the business through 2004, unless additional
               sources of funds are created through bank credit facilities,
               equity or debt financing infusions, or other financing. The
               Company received net proceeds of $687,500 from the issuance of
               $700,000 of Secured Bridge Notes in March 2003 as previously
               reported in that Form 8-K filed with the Securities and Exchange
               Commission on March 13, 2003. Deterioration in the economy,
               decreases in consumer spending, the war in Iraq and the Company's
               lack of capital for merchandise inventory and marketing the
               racing centers have created further declines in sales volume in
               2003. However, management believes that under the recently
               announced conversion of seven owned and operated racing centers
               to revenue share locations, and based upon the guaranteed minimum
               payments within the Checker Flag agreement and the company's
               current financial projections, management expects the company to
               show a positive EBITDA soon after the landlords approval of the
               conversions. Management believes this transaction will enhance
               the company's ability to secure long debt or equity financing in
               order to meet its short term debt obligations. Management is in
               the process of seeking additional sources of short-term funds to
               continue operations until additional long-term equity and/or debt
               financing can be established. (See Note 14 - Subsequent Events.)

               Since inception, the Company's short-term and long-term plans
               have included raising a level of investment adequate to
               accomplish the objectives of the business. The required level of
               financing has not yet been achieved. The Company's ability to
               raise the necessary financing will depend on many factors,
               including the economic and market conditions prevailing at the
               time financing is sought. Management believes it can achieve the
               required level of financing; however, there can be no assurance
               that additional financing will be available or, if available,
               that it will be on terms acceptable to the Company.

               In July of 2003, management revised the Company's business model,
               changing the focus from Company owned and operated mall-based
               racing centers to revenue share racing centers (mall merchandise
               retailers, family entertainment centers, amusement parks,
               casinos, auto malls, etc.) and mobile lease programs such as the
               Nextel Experience. Without the burden of occupancy costs and
               labor costs, management believes this is a profitable model going
               forward, but the model is not yet proven and there can be no
               assurances of its success.

               Currently, the Company is exploring collateralized debt financing
               with several sources and is in various stages of discussion with
               each. Additionally, the Company has obtained investors for
               $331,000 of the maximum $750,000 Secured Note and Option
               Agreement (see "Note 14, Subsequent Events"). The Company has
               interest from parties interested in an equity investment in the
               Company, but management's first priority is secured debt
               financing using the value of its simulator inventory (161
               remaining after recent purchases) and its recent sales and
               revenue transactions to establish a market value of $75,000 per
               simulator.


NOTE 14 -      SUBSEQUENT EVENTS

               On January 13, 2004,  the Company  issued 10,000 shares of common
               stock  to an  unrelated  entity  as the last  installment  on the
               Company's most recent S-8 registration statement.

               On January 27, 2004,  the Company  issued  39,742  common  shares
               issued to its  former  President  for the  extinguishment  of the
               Stock Purchase Interest on the Bridge financing.

               On January 27, 2004,  the Company issued 150,000 common shares to
               Cameron & Associates for consulting services provided.

<PAGE>

NOTE 14 -      SUBSEQUENT EVENTS (continued)

               On January 27, 2004, the Company issued 468,060 shares to Ropart
               Asset Mgmnt Fund for the extinguishment of the Stock Purchase
               Interest on the Bridge financing.

               On January 29, 2004, the Company issued 11,363,651 shares for the
               conversion of all of the remaining preferred stock to common
               stock.

               On January 30, 2004, the Company entered into an amendment and
               extension agreement with Ropart, Tampa Bay Financial, Inc. and
               William R. Donaldson, which extended the due dates of the bridge
               loans with those parties to February 29, 2004.

               On February 4, 2004, the Company issued 184,559 shares to Erik
               Risman for the extinguishment of a liability to him of $ 31,375.

               On February 5, 2004, Perfect Line entered into a lease agreement
               with National Tour, Inc. for a second Nextel sponsored mobile fan
               experience. The first lease involves six of the Company's
               simulators, and this second lease involves two simulators.
               National Tour travels these mobile fan experiences for NASCAR
               Series sponsor Nextel.

               On March 10, 2004, the Company entered into an amendment and
               extension agreement with Ropart, Tampa Bay Financial, Inc. and
               William R. Donaldson which extended the due dates of the bridge
               loans with those parties to April 30, 2004

               On March 12, 2004, the Company issued 65,034 to Ropart Asset
               Management Fund for the extinguishment of the Stock Purchase
               Interest on the Bridge financing.

               Pursuant to a note and option purchase agreement and security
               agreement dated February 2, 2004, the Company has issued notes
               payable in the amount of $331,000. The notes are due February 2,
               2005, but may be prepaid after six months from their date of
               issuance. Each note comes with an option to purchase common
               shares of the Company equal to the amount of notes purchased
               divided by the fair market value of the Company's stock on the
               date of issuance of the note.

               The notes are secured by the Company's simulators and a worldwide
               royalty free, non-exclusive license to use the Company's
               propriety software that is loaded into the simulators which
               secure the notes.

               On March 18, 2004, the Company entered into agreement with
               Michigan based Checker Flag Lightning, LLC to convert seven of
               its nine corporate owned racing centers into revenue share
               stores. The agreement shifts the burden of occupancy and labor
               costs to Checker Flag, and guarantees the Company a minimum
               revenue share income for each site.

<PAGE>


                          INDEPENDENT AUDITORS' REPORT


To the board of Directors and Shareholders of
Interactive Motorsports and Entertainment Corp. and Subsidiaries
Indianapolis, Indiana

We have audited the accompanying consolidated balance sheet of Interactive
Motorsports and Entertainment Corp. and Subsidiaries, as of December 31, 2003,
and the related consolidated statements of operations, shareholder's equity
(deficit) and cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Interactive
Motorsports and Entertainment Corp. and Subsidiaries, as of December 31, 2003,
and the results of their operations and their cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 13 to the
consolidated financial statements, the Company has suffered recurring losses
from operations and has a working capital deficit that raises substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to those matters are also described in Note 13 to the consolidated financial
statements. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.



HJ & Associates, LLC
Salt Lake City, Utah
April 7, 2004



<PAGE>
Board of Directors and Shareholders of
Interactive Motorsports and Entertainment Corp. and Subsidiary
Indianapolis, Indiana

We have audited the accompanying consolidated statements of operations, changes
in shareholders' equity and cash flows for the year ended December 31, 2002.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.

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

In our opinion, the 2002 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of its
operations and its cash flows for the year ended December 31, 2002 in conformity
with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 13 to the
consolidated financial statements, the Company has suffered recurring losses
from operations and has an insufficient cash balance that raises substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 13 to the consolidated
financial statements. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.



/s/ Crowe Chizek and Company LLC


Indianapolis, Indiana
April 4, 2003


<PAGE>



Item 8. Changes In and Disagreements With Accountants on Accounting and
        Financial Disclosure

By letter dated March 15, 2004, Crowe Chizek and Company LLC (Crowe Chizek)
informed the Company that it was notifying the Securities and Exchange
Commission of its earlier termination of the client-auditor relationship between
Crowe Chizek and the Company. That letter referred to the letter to the Company
dated December 31, 2003 that effective December 31, 2003 Crowe Chizek terminated
the client-auditor relationship with the Company. However, the Company continued
to meet with and provide information to Crowe Chizek after receipt of the
December 31, 2003 letter. The Company believed that Crowe Chizek had continuing
interest in an auditor-client relationship with the Company and as recently as
March 1, 2004 had held discussions with representatives of Crowe Chizek
requesting continuation of the auditor-client relationship in connection with
the audit for the fiscal year ended December 31, 2003. It was not until the
March 15, 2004 letter that the Company believed the relationship had ended.

The report of Crowe Chizek for the fiscal year ended December 31, 2002, the only
year for which the Company was subject to the reporting provisions of the
Securities Exchange Act of 1934 and which Crowe Chizek served as auditors of the
Company, contained a "going concern" uncertainty explanatory paragraph, but did
not contain an adverse opinion or disclaimer of opinion, or qualification as to
audit scope or accounting principles.

During the fiscal year ended December 31, 2002 and the periods up to and
including December 31, 2003, there were no disagreements between the Company and
Crowe Chizek on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which, if not resolved to
the satisfaction of Crowe Chizek, would have caused it to make reference to the
subject matter of the disagreement in connection with its report on the
Company's consolidated statements for such periods; and there were no reportable
events as defined in Item 304(a)(1) of Regulation S-K.

The Company has provided Crowe Chizek with a copy of the information disclosed
in the Current Report on Form 8-K which was filed with the Commission on March
18, 2004 and is incorporated herein by reference. Crowe Chizek provided the
Company a letter dated March 18, 2004, for filing as an Exhibit to the Form 8-K
which indicated. The letter stated, in essence, that Crowe Chizek did not
disagree with the above disclosure, although it expressed not opinion as to what
the Company believed as stated in the fourth and fifth sentences of the first
paragraph of this Item 8.

Effective March 17, 2004, the Company engaged HJ & Associates, L.L.C. ("HJ") of
Salt Lake City, Utah, as its new independent accountant to audit the Company's
financial statements for the year ended December 31, 2003. The retention of HJ
was reported on a current report on Form 8-K on March 19, 2003, which is
incorporated herein by reference.

During the years ended December 31, 2002 and 2003 and the interim period up to
and including March 17, 2004, neither the Company nor anyone acting on the
Company's behalf consulted HJ regarding either: (i) the application of
accounting principles to a specified transaction, either contemplated or
proposed; to the type of audit opinion that might be rendered on the Company's
financial statements, and neither a written report nor oral advice was provided
by HJ to the Company that HJ concluded was an important factor considered by the
Company in reaching a decision as to any accounting, auditing or financial
reporting issues; or (ii) any matter that was either the subject of a
"disagreement" as that term is describe in Item 304 (a)(1)(iv) of Regulation S-K
promulgated under the Securities Exchange Act of 1934, as amended, and the
related instruction to Item 304 of Regulation S-K, or a "reportable event" as
that term is described in Item 304 (a)(1)(v) of Regulation S-K.

The Company has provided to HJ a copy of the disclosure regarding its retention
as auditors to the Company, prior to filing of the Form 8-K reporting the
retention. HJ informed the Company that it did not disagree with the disclosure
contained in the Form 8-K which is substantially duplicated in the immediately
proceeding paragraph of this Item 8.

ITEM 8A. Controls and Procedures.

The Principal Executive Officer ("PEO"), who is also the Principal Financial
Officer ("PFO") of the Company has evaluated the effectiveness of its disclosure
controls and procedures (as defined in Rule 13a-14 of the Exchange Act) within
90 days prior to the filing of this report. Based on that evaluation, the
PEO/PFO has concluded that the Company's disclosure controls and procedures are
adequate and effective. There have been no significant changes in the Company's

<PAGE>

internal controls, or in factors that could significantly affect internal
controls, subsequent to the most recent evaluation of such controls.



                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        With Section 16(a) of the Exchange Act

The Board of Directors and Executive Officers of the Company consist of the
persons named in the table below. Vacancies in the Board of Directors may only
be filled by the Board of Directors by majority vote at a Board of Director's
meeting of which stockholders holding a majority of the issued and outstanding
shares of capital stock are present. The directors are elected annually by the
stockholders at the annual meetings. Each director shall be elected for the term
of one year, and until his or her successor is elected and qualified, or until
his earlier resignation or removal. The bylaws provide that we have at least one
director. The directors and executive officers of the Company are as follows:

Name                            Age     Position

William R. Donaldson             47     Chairman, Chief Executive Officer,
                                                and Secretary
Carl L. Smith, Sr.               61     Director
Cary Agajanian                   62     Director

Mr. Donaldson has been a major influence in the international racing industry
for over 25 years. He served as the Executive Vice President of the Indianapolis
Motor Speedway ("IMS"), the largest spectator stadium in the world, and
concurrently served as President of IMS subsidiaries, IMS Properties and IMS
Events. At IMS, he was on the executive management team that initiated such
events as the NASCAR Brickyard 400, Indy FanFest, the Senior PGA Tournament held
at Brickyard Crossing, the Indy 200 at Walt Disney World, and the launch of the
Indy Racing League. Donaldson also managed the Inaugural NASCAR Winston Cup
event at Las Vegas Motor Speedway, and he managed the launch of the Petit Le
Mans at Road Atlanta, and the American and European Le Mans Series. He has
extensive experience with domestic and international television broadcasting. He
has a Bachelor of Arts degree from DePauw University in Greencastle, Indiana.

Mr. Smith is a successful entrepreneur, whose business interests and ownerships
have over his professional life, spanned a wide variety of products and
services. With over 38 years of experience in business development, marketing,
sales and finance, he provides a diverse level of knowledge and expertise to the
Company. He was the founder of Catalyst Marketing Corporation, a public company
that, under his leadership, grew to become one of the most successful
telecommunications marketing agencies for products and services of industry
giant, MCI, which was later acquired by WorldCom. In 1991, he co-founded Tampa
Bay Financial, Inc., a venture capital firm that specializes in micro-cap, first
stage corporate investments and, one year later, was selected as a member of the
prestigious "Who's Who of American Business Executives". Mr. Smith has
successfully engineered the turn around and revitalization of several troubled
public companies and has also been involved in capitalizing and taking many
young private companies public through a reverse merger strategy. He presently
sits on the Board of Directors of NeoGenomics, Inc. (OTCBB: NOGN) and several
private companies.

Mr. Agajanian literally grew up in the sport of auto racing, with his family
running racing teams and racetracks. He now owns Motorsports Management
International, a multi-faceted company that is an industry leader in the areas
of event representation, corporate consulting, and sponsorship negotiation. For
the past 10 years, Mr. Agajanian has served on Motorsports boards such as the
Automobile Competition Committee of the United States (ACCUS), the American
Motorcyclist Association (AMA, Vice-Chairman) and United States Auto Club (USAC)
Properties. Mr. Agajanian's company has been involved in securing hundreds of
sponsorship arrangements and is the only company in the United States to offer
star race drivers premium representation services in corporate structures,
pension benefits, trusts and estates and contract negotiation. NASCAR Winston
Cup star Tony Stewart has been represented by Motorsports Management
International, and Agajanian also previously represented Jeff Gordon. Mr.
Agajanian's car ownership division has entered cars in the Indianapolis 500 for
36 consecutive years and now owns one of the premier teams in the NASCAR Busch
Series.

Our Executive Officers are elected by the Board on an annual basis and serve at
the discretion of the Board.


<PAGE>

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires that our executive
officers, directors and persons who beneficially own more than 10% of the
Company's Common Stock to file initial reports of ownership and reports of
changes in ownership with the SEC. Such persons are required by SEC regulations
to furnish us with copies of all Section 16(a) forms filed by such persons.

Based solely on our review of such forms furnished to us and representations
from certain reporting persons, filing requirements applicable to our executive
officers, directors and more than 10% stockholders have been complied with
during the twelve months ending December 31, 2003 with the exception of Vicki
Cook and James Matheny, each of whom have failed to file a Form 3, Initial
Statement of Beneficial Ownership, reporting their ownership of in excess of 10%
of the issued and outstanding voting shares of the Company.

Item 10. Executive Compensation

The following table sets forth information concerning the compensation paid to
all persons serving as the Company's chief executive officer and the Company's
most highly compensated executive officers other than its chief executive
officer who were serving as executive officers at December 31, 2003 and whose
annual compensation exceeded $100,000 during such year (collectively, the "Named
Executive Officers").

                        Annual Compensation        Long-Term Compensation Awards

Name and Principal  Year/ Salary  Bonus  Other  Restricted   Securities     LTIP
Position            Period               Annual Stock       Underlying   Payouts
                                         Comp.  Awards      Options/SARS
                                         (2)


William R. Donaldson, 2003 $150,039  -  $7,140     -            -              -
Chairman and CEO

                      2002 $147,115  -  $5,688     -            -              -


(2) Includes cost of medical and life insurance.

Director Compensation

Directors of the Company are currently not paid for their services; however, the
Company intends to establish a compensation plan utilizing stock awards versus
cash payments in 2004.

Indemnification for Securities Act Liabilities

Indiana law authorizes, and the Company's Bylaws and Indemnity Agreements
provide for, indemnification of the Company's directors and officers against
claims, liabilities, amounts paid in settlement and expenses in a variety of
circumstances. Indemnification for liabilities arising under the Act may be
permitted for directors, officers and controlling persons of the Company
pursuant to the foregoing or otherwise. However, the Company has been advised
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.

Stock Options and Warrants

The Company plans to establish in 2004 stock option plans that will enable
management and the board to issue to officers, directors, consultants and
employees nonqualified and incentive options to purchase the Company's common
stock.


<PAGE>

Compensation Committee Interlocks and Insider Participation

No executive officers of the Company serve on the Compensation Committee (or in
a like capacity) for the Company or any other entity.

Item 11. Security Ownership of Certain Beneficial Owners and Management

Security Ownership of Certain Beneficial Owners

The following table sets forth certain information with respect to the
beneficial ownership of our Common Stock as of April 1, 2004, for each person or
entity that is known by us to beneficially own more than 5 percent of our Common
Stock. As of April 1, 2004, the Company had 86,530,184 shares of Common Stock
outstanding.

Name and Address                        Amount of       Nature of       Percent
of Beneficial Owner                     Beneficial      Ownership       of Class
                                        Ownership (1)

  William R. Donaldson, Carmel, IN      16,873,982      Direct            19.50%
  James Matheny, Cary, NC               14,556,451      Direct            16.82%
  Vikki Cook, Sarasota, FL              12,127,993      Direct            14.02%
  Lucky Dog, LLC, New York, NY           6,989,252      Direct             8.00%
  Coldwater Capital, LLC, New York, NY   6,348,594      Direct             7.00%

    Total                               56,866,272                        65.34%
                                        ==========                        ======

Security Ownership of Management

The following table sets forth certain information with respect to the
beneficial ownership of our Common Stock as of April 1, 2004, for each of our
directors and each of our Named Executive Officers, and all directors and
executive officers as a group. As of April 1, 2004, the Company had 86,530,184
shares of Common Stock outstanding.

                                        Amount of
Name, Position and Address              Beneficial       Nature of    Percent of
of Beneficial Owner                     Ownership (1)    Ownership       Class

William R. Donaldson, Chairman, Chief
Executive Officer, and Secretary;
Carmel, Indiana                         16,873,982          Direct         19.5%

Carl L. Smith, Director;
Sarasota, Florida                               -           n/a               -

Cary Agajanian, Director;
Los Angeles, California                         -           n/a               -
                                       ----------          -------        ------

All Executive Officers & Directors as
a Group(6 persons)                      16,873,982                         19.5%
                                        ==========                         =====

(1) Beneficial ownership is determined in accordance with SEC rules and
generally includes holding voting and investment power with respect to the
securities. Shares of Common Stock subject to options or warrants currently
exercisable, or exercisable within 60 days, are deemed outstanding for computing
the percentage of the total number of shares beneficially owned by the
designated person, but are not deemed outstanding for computing the percentage
for any other person.

Change in Control

We are not currently engaged in any activities or arrangements that we
anticipate will result in a change in control of the Company.

Item 12. Certain Relationships and Related Transactions

The Company has a receivable from a related party, Perfect Line Investments, LLC
that has been fully reserved at December 31, 2003 as its collection is deemed
unlikely.

The Company issued March 10, 2003 to three related parties a total of $200,000
of Secured Bridge Notes as previously disclosed in that Form 8-K filed on March

<PAGE>

13, 2003. These notes were issued to Tampa Bay Financial and Mr. William R.
Donaldson in the amounts of $100,000 and $50,000, respectively. The Chairman and
Chief Executive Officer of Tampa Bay Financial, Mr. Carl L. Smith, is also a
director of the Company. Mr. Donaldson is the Chairman and Chief Executive
Officer of the Company.

Item 13. Exhibits and Reports on Form 8-K

A. Exhibits.
         3(i) Articles of Incorporation* 3(ii) By-Laws*
11.1     Computation of Earnings Per Share
         21.1     Subsidiaries
99.1.1   Certification of William R. Donaldson as chief executive officer
                pursuant to 18 U.S.C. Section 1350
99.1.2   Certification of William R. Donaldson as chief financial officer
                pursuant to 18 U.S.C. Section 1350

* Incorporated by reference from Form 10QSB filed on November 14, 2002

B. Reports on Form 8-K.

   1. Form 8-K   Filed October 30, 2003         Termination of the Merger and
                                                Acquisition Advisor Agreement
                                                between the Company and Dan
                                                Rubin dated September 2, 2003.

   2. Form S-8   Filed September 8, 2003        Current Report on Form S-8
                                                disclosing the terms of the
                                                Merger and Acquisition Advisor
                                                Agreement between the Company
                                                and Dan Rubin dated September 2,
                                                2003, and the registration of
                                                5,000,000 shares of $.0001 par
                                                Common Stock.


   3. Form 8-K   Filed June 6, 2003             Resignation of Frederick C.
                                                Treadway from the Registrant's
                                                Board of Directors.


   1. Form 8-K    Filed March 13, 2003          Describing credit agreement with
                                                Ropart Asset Management LLC,
                                                Tampa Bay Financial Inc.,
                                                William R. Donaldson, and Erik
                                                R. Risman

   2. Form 8-K    Filed January 6, 2003         Current Report on Form 8-K
                                                disclosing under Item 5 the text
                                                of a newsletter describing the
                                                events from the formation of the
                                                Company in August 2002 through
                                                the date of the Form 8-K.


ITEM 14.  Principal Accountant Fees and Services.

AUDIT FEES
         Fees for audit services from Crowe Chizek and Company totaled $23,350
for the year ended December 31, 2003, and $13,650 for the year ended December
31, Fees for audit services from HJ and Associated totaled $29,000 for the year
ended December 31, 2003. Those auditing fees included fees associated with the
annual audit, reviews of quarterly reports on Form 10-Q and procedures required
by GAAP and GAAS.

AUDIT-RELATED FEES
         Fees for audit-related services from Crowe Chizek and Company totaled
$0 for the year ended December 31, 2002,and $2,635 for the year ended December
31, 2003. These auditing services consisted of assistance related to routine
audits and procedures and consultation with respect to the filing of Forms S-8.
<PAGE>

TAX FEES

Fees from Crowe Chizek and Company for tax services, including fees for review
of the consolidated federal income tax return, totaled $10,180 for the year
ended December 31, 2002 and $150 for the year ended December 31,2003. Fees from
HJ and Associates for tax services, including fees for review of the
consolidated federal income tax return, have yet to be determined for the year
ended December 31, 2003.

All Other Fees

         No fees were billed by Crowe Chizek and Company LLC for professional
services rendered during the fiscal year ended December 31, 2002 or HJ and
Associates for the fiscal December 31, 2003 other than those specified above.

PRE-APPROVAL POLICY FOR AUDIT AND NON-AUDIT SERVICES

            The Company does not have a standing audit committee, and the full
Board performs all functions of an audit committee, including the pre-approval
of all audit and non-audit services before the Company engages an accountant.
All of the services rendered to the Company by HJ & Associates, LLC after March
18, 2004 were pre-approved by the Board of Directors of the Company.

            The Company is contemplates working with its legal counsel to
establish formal pre-approval policies and procedures for future engagements of
the Company's accountants. The new policies and procedures will be detailed as
to the particular service, will require that the Board or an audit committee
thereof be informed of each service, and will prohibit the delegation of
pre-approval responsibilities to management. It is currently anticipated that
the Company's new policy will provide (i) for an annual pre-approval, by the
Board or audit committee, of all audit, audit-related and non-audit services
proposed to be rendered by the independent auditor for the fiscal year, as
specifically described in the auditor's engagement letter, and (ii) that
additional engagements of the auditor, which were not approved in the annual
pre-approval process, and engagements that are anticipated to exceed previously
approved thresholds, will be presented on a case-by-case basis, by the Chairman
of the Board of Directors, for pre-approval by the Board or audit committee,
before management engages the auditors for any such purposes. The new policy and
procedures may authorize the Board or audit committee to delegate, to one or
more of its members, the authority to pre-approve certain permitted services,
provided that the estimated fee for any such service does not exceed a specified
dollar amount (to be determined). All pre-approvals shall be contingent on a
finding, by the Board, audit committee, or delegate, as the case may be, that
the provision of the proposed services is compatible with the maintenance of the
auditor's independence in the conduct of its auditing functions. In no event
shall any non-audit related service be approved that would result in the
independent auditor no longer being considered independent under the applicable
rules and regulations of the Securities and Exchange Commission.

There were no fees in 2003 which were not pre-approved by the Board of
Directors. All services described above under the captions "Audit Fees", "Audit
Related Fees" and "Tax Fees" were approved by the Board of Directors pursuant to
SEC Regulation S-X, Rule 2-01(c)(7)(i).

<PAGE>


                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                 INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP.

Date: April 14, 2004           By:       /s/ William R. Donaldson
                                   ---------------------------------------------
                               William R. Donaldson
                               Chairman of the Board and Chief Executive Officer


Pursuant to the requirements of the Securities Exchange of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.


Date: April 14, 2004            By:       /s/ William R. Donaldson
                                 -----------------------------------------------
                               William R. Donaldson
                               Chairman of the Board and Chief Executive Officer
                              (Principal Executive Officer)

Date: April 14, 2004           By:      /s/ William R. Donaldson
                                 -----------------------------------------------
                               William R. Donaldson
                               Chief Financial Officer and Treasurer
                               (Principal Financial Officer)

Date: April 14, 2004           By:      /s/ Carl L. Smith
                                 -----------------------------------------------
                               Carl L. Smith
                               Director

Date: April 14, 2004           By:      /s/ Cary Agajanian
                                 -----------------------------------------------
                               Cary Agajanian
                               Director

<PAGE>


                     CERTIFICATION OF WILLIAM R. DONALDSON

I, William R. Donaldson, certify that:

1.      .I have reviewed this annual report on Form 10-KSB of Interactive
        Motorsports and Entertainment Corp.;
2.      Based on my knowledge, this annual report does not contain any untrue
        statement of a material fact or omit to state a material fact necessary
        to make the statements made, in light of the circumstances under which
        such statements were made, not misleading with respect to the period
        covered by this annual report;
3.       Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this annual report;
4.       The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         we have:
        a.      designed such disclosure controls and procedures to ensure that
                material information relating to the registrant, including its
                consolidated subsidiaries, is made known to us by others within
                those entities, particularly during the period in which this
                annual report is being prepared;
        b.      evaluated the effectiveness of the registrant's disclosure
                controls and procedures as of a date within 90 days prior to the
                filing date of thisannual report (the "Evaluation Date"); and
        c.      presented in this annual report our conclusions about the
                effectiveness of the disclosure controls and procedures based on
                 our evaluation as of the Evaluation Date;
5.       The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent function):
        a.      all significant deficiencies in the design or operation of
                internal controls which could adversely affect the registrant's
                ability to record, process, summarize and report financial data
                and have identified for the registrant's auditors any material
                weaknesses in internal controls; and
        b.      any fraud, whether or not material, that involves management or
                other employees who have a significant role in the registrant's
                internal controls; and
6.       The registrant's other certifying officers and I have indicated in this
         annual report whether or not there were significant changes in internal
         controls or in other factors that could significantly affect internal
         controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.

Date: April 14, 2004              By:       /s/ William R. Donaldson
                                  ----------------------------------------------
                                  William R. Donaldson
                                  Chairman and Chief Executive Officer, Chief
                                  Financial Officer and Treasurer


A signed original of this written statement has been provided to Interactive
Motorsports and Entertainment Corp. and will be retained by Interactive
Motorsports and Entertainment Corp. and furnished to the Securities and Exchange
Commission or its staff upon request.

<PAGE>



                                  EXHIBIT INDEX


Exhibits:
         3(i)     Articles of Incorporation*
         3(ii)    By-Laws*
         11.1     Computation of Earnings (Loss) Per Share
         21.1     Subsidiaries
         99.1     Certification of William R. Donaldson as chief executive
                  officer pursuant to 18 U.S.C. Section 1350.
         99.2     Certification of William R. Donaldson as chief financial
                  officer pursuant to 18 U.S.C. Section 1350.

* Incorporated by reference from Form 10QSB filed on November 14, 2002