UNITED STATES

**SECURITIES AND EXCHANGE COMMISSION**

Washington, D. C. 20549 

 

**FORM 10-QSB/A**

 

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE 

SECURITIES EXCHANGE ACT OF 1934 

For the quarterly period ended: March 31, 2005 

 

(  ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE 

SECURITIES EXCHANGE ACT OF 1934 

For the transition period from to 

 

*Commission File Number:  000-30771*

 

**INTERACTIVE MOTORSPORTS AND**

**ENTERTAINMENT CORP.**

(Exact name of registrant as specified in charter) 

 

Indiana

(State or other jurisdiction of incorporation or organization) 

 

35-2205637

(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 []**

 

As of May 20, 2005, there were 87,715,910 (par value $0.0001) common shares issued and outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE: Exhibit Index on page 31.

 

1

 

**INDEX TO QUARTERLY REPORT ON FORM 10-QSB**

 

 

PAGE

NUMBER

SECTION

 

| NOTE ON FORWARD-LOOKING INFORMATION | 3 |
|-------------------------------------|---|

| BASIS OF PRESENTATION | 4 |
|-----------------------|---|

 

 

**PART I**

 

| ITEM 1. | Unaudited Financial Statements and Notes to Financial Statements |
|---------|------------------------------------------------------------------|

|   | Consolidated Balance Sheets at March 31, 2005 and December 31, 2004 | 5 |
|--------|---------------------------------------------------------------------|---|

|   | Consolidated Statements of Operations for the Three Months Ended |
|--------|------------------------------------------------------------------|

|   | March 31, 2005 and 2004 | 7 |
|--------|-------------------------|---|

|   | Consolidated Statement of Shareholders’ Equity |
|--------|-----------------------------------------------------|

|   | for the Three Months Ended March 31, 2005 | 8 |
|--------|-------------------------------------------|---|

|   | Consolidated Statements of Cash Flows for the Three Months |
|--------|------------------------------------------------------------|

|   | Ended March 31 30, 2005 and 2004 | 9 |
|--------|----------------------------------|---|

|   | Notes to Consolidated Financial Statements | 11 |
|--------|--------------------------------------------|----|

| ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 |
|---------|--------------------------------------------------------------------------------------------|----|

| ITEM 3. | Internal Controls and Procedures | 27 |
|---------|----------------------------------|----|

 

 

**PART II**

 

| ITEM 1. | Legal Proceedings | 28 |
|---------|-------------------|----|

| ITEM 2. | Changes in Securities | 28 |
|---------|-----------------------|----|

| ITEM 3. | Defaults Upon Senior Securities | 28 |
|---------|---------------------------------|----|

| ITEM 4. | Submission of Matters to a Vote of Security Holders | 28 |
|---------|-----------------------------------------------------|----|

| ITEM 5. | Other Information | 28 |
|---------|-------------------|----|

| ITEM 6. | Exhibits and Reports on Form 8-K | 29 |
|---------|----------------------------------|----|

 

| SIGNATURES | 30 |
|------------|----|

 

| EXHIBITS INDEX | 31 |
|----------------|----|

 

 

 

2

 

**NOTE ON FORWARD-LOOKING INFORMATION**

 

This Form 10-QSB/A 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,” “could,” “feel(s),”“believes,” “plan,” “estimate,” “expect,” “should,” “intend,” “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 and/or debt financing; (iv) 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. 

 

 

 

3

 

**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 held 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 through March 31, 2005.

 

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

 

 

 

4

**INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES**

Consolidated Balance Sheet 

 

 

**PART I**

 

**ITEM 1. CONDENSED FINANCIAL STATEMENTS** 

 

**ASSETS**

 

 

|                              |     | *March 31, 2005*** |     |     | *December 31, 2004*** |
|-----------------------------------|----------|--------------------|----------|----------|-----------------------|
|                              |     | (unaudited)        |     |     |                  |
| * *                          | * * | (Restated)         | * * | * * | (Restated)            |
| *Current Assets***                | * * | * *           | * * | * * | * *              |
| Cash                              | $        | 455,138            |     | $        | 1,334,673             |
| Accounts Receivable               |     | 594,330            |     |     | 428,726               |
| Inventory                         |     | 470,690            |     |     | 259,931               |
| Prepaid Expenses                  |     | 33,511             |     |     | 35,490                |
| Total Current Assets              |     | 1,553,669          |     |     | 2,058,820             |
|                              |     |               |     |     |                  |
| *Property and Equipment***        | * * | * *           | * * | * * | * *              |
| Total Property and Equipment, Net |     | 924,847            |     |     | 823,238               |
|                              |     |               |     |     |                  |
| *Other Assets***                  | * * | * *           | * * | * * | * *              |
| Deposits                          |     | 43,401             |     |     | 42,001                |
| Other Intangible Assets, Net      |     | 5,416              |     |     | 11,599                |
| Total Other Assets                |     | 48,817             |     |     | 53,600                |
|                              |     |               |     |     |                  |
| *Total Assets***                  | $        | 2,527,333          | * * | $        | 2,935,658             |

 

 

 

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

 

5

**INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES**

Consolidated Balance Sheet (Continued)

 

 

**LIABILTIES AND SHAREHOLDERS’ EQUITY (DEFICIT)**

 

 

|                               |     | *March 31, 2005*** |     |     | *December 31, 2004*** |
|------------------------------------|----------|--------------------|----------|----------|-----------------------|
|                               |     | (unaudited)        |     |     | * *              |
| * *                           | * * | (Restated)         | * * | * * | (Restated)            |
| *Current Liabilities***            | * * | * *           | * * | * * | * *              |
| Accounts Payable                   | $        | 619,621            |     | $        | 418,815               |
| Accrued Payroll Expense            |     | 26,019             |     |     | 67,385                |
| Accrued Sales Tax Payable          |     | 15,999             |     |     | 26,722                |
| Gift Cert. & Customer Deposits |     | 40,556             |     |     | 42,888                |
| Deposits on Simulator Sales        |     | 2,160,851          |     |     | 1,573,978             |
| Accrued Liabilities                |     | 1,110,471          |     |     | 1,158,929             |
| Notes Payable - Related parties    |     | 196,000            |     |     | 186,537               |
| Notes Payable                      |     | 1,003,025          |     |     | 1,243,034             |
| Total Current Liabilities          |     | 5,172,542          |     |     | 4,718,288             |
|                               |     |               |     |     |                  |
| Long-term Liabilities              |     |               |     |     |                  |
| Notes Payable                      |     | 847,424            |     |     | 1,067,905             |
|                               |     |               |     |     |                  |
| Total Liabilities                  |     | 6,019,966          |     |     | 5,786,193             |
|                               |     |               |     |     |                  |
| *Shareholders’ Deficit***     | * * | * *           | * * | * * | * *              |
| Common Stock                       |     | 8,772              |     |     | 8,772                 |
| Additional Paid in Capital         |     | 4,866,001          |     |     | 4,810,767             |
| Retained Deficit                   |     | (8,367,406)        |     |     | (7,670,074)           |
| Total Shareholders’ Deficit   |     | (3,492,633)        |     |     | (2,850,535)           |
|                               |     |               |     |     |                  |
| *Total Liabilities & Equity*** | $**      | 2,527,333          | * * | $**      | 2,965,658             |

 

 

 

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

 

6

**INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES**

Consolidated Statements of Operations

(unaudited)

 

 

|                                   |   |   | *For the Three Months*

*Ending*

*March 31, 2005*** |   |   | *For the Three Months*

*Ending*

*March 31, 2004*** |
|----------------------------------------|--------|--------|------------------------------------------------------|--------|--------|------------------------------------------------------|
|                                   |   |   | (Restated)                                           |   |   |                                                 |
|                                   |   |   |                                                 |   |   |                                                 |
| *Revenues***                           |   |   |                                                 |   |   |                                                 |
| Company Store Sales                    |   | $      | 644,046                                              |   | $      | 1,452,122                                            |
| Revenue Share Sales                    |   |   | 266,194                                              |   |   | 106,599                                              |
| Simulator Leases                       |   |   | -                                                    |   |   | 50,625                                               |
| Sales of Simulator Systems             |   |   | 17,885                                               |   |   | -                                                    |
| Total Revenues                         |   |   | 928,125                                              |   |   | 1,609,346                                            |
|                                   |   |   |                                                 |   |   |                                                 |
| *Cost of Sales***                      |   |   |                                                 |   |   |                                                 |
| COGS - Merchandise                     |   |   | 57,623                                               |   |   | 81,366                                               |
| Group Sales Expenses                   |   |   | 3,661                                                |   |   | 3,541                                                |
| COGS - Sale of Simulators              |   |   | 201,214                                              |   |   | -                                                    |
| Total Cost of Sales                    |   |   | 262,498                                              |   |   | 84,907                                               |
|                                   |   |   |                                                 |   |   |                                                 |
| *Gross Profit***                       |   |   | 665,627                                              |   |   | 1,524,439                                            |
|                                   |   |   |                                                 |   |   |                                                 |
| *General & Admin Expenses***       |   |   |                                                 |   |   |                                                 |
| Payroll Related Expenses               |   |   | 521,671                                              |   |   | 876,813                                              |
| Occupancy Expenses                     |   |   | 301,959                                              |   |   | 601,765                                              |
| Other Operating Expenses               |   |   | 406,688                                              |   |   | 513,265                                              |
| Total Operating Expenses               |   |   | 1,230,318                                            |   |   | 1,991,843                                            |
|                                   |   |   |                                                 |   |   |                                                 |
| *Operating Loss***                     |   |   | (564,691)                                            |   |   | (467,404)                                            |
|                                   |   |   |                                                 |   |   |                                                 |
| Interest Expense                       |   |   | 132,641                                              |   |   | 52,973                                               |
|                                   |   |   |                                                 |   |   |                                                 |
| *Net Loss before Income Tax Expense*** |   |   | (697,332)                                            |   |   | (520,377)                                            |
|                                   |   |   |                                                 |   |   |                                                 |
| Income Tax Expense                     |   |   | -                                                    |   |   | -                                                    |
|                                   |   |   |                                                 |   |   |                                                 |
| *Net Loss***                           |   | $      | (697,332)                                            |   | $      | (520,377)                                            |
|                                   |   |   |                                                 |   |   |                                                 |
| Net Loss per share                     |   | $      | ($0.01)                                              |   | $      | ($0.01)                                              |
|                                   |   |   |                                                 |   |   |                                                 |
| Weighted Average Shares Outstanding    |   |   | 87,715,910                                           |   |   | 86,105,061                                           |

 

 

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

 

7

**INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES**

Consolidated Statement of Shareholders’ Equity (Deficit)

 

 

|                                                                  |   |            |   |         |   |   | Additional

Paid-In Capital |   |   | Retained

Deficit |   |   | Total Shareholders’  Equity (Deficit) |
|-----------------------------------------------------------------------|--------|-----------------|--------|--------------|--------|--------|-----------------------------|--------|--------|-------------------|--------|--------|--------------------------------------------|
|                                                                  |   | Preferred Stock |   | Common Stock |   |   |                        |   |   |              |
|                                                                  |   | Shares          |   |         | Amount |   | Shares                      |   |   | Amount            |   |   |                                       |   |   |   |
| Balance at 

December 31, 2003                                        |   | 2,272,728       |   | $            | 227    |   | 74,314,183                  |   | $      | 7,431             |   | $      | 4,029,002                                  |   | $ | (6,434,655) |   | $ | (2,397,995) |
|                                                                  |   |            |   |         |   |   |                        |   |   |              |   |   |                                       |   |   |   |   |   |   |
| Common stock issued for

2003 Bridge Loan Interest                    |   | -               |   |         | -      |   | 935,726                     |   |   | 94                |   |   | 78,112                                     |   |   | - |   |   | 78,206 |
|                                                                  |   |            |   |         |   |   |                        |   |   |              |   |   |                                       |   |   |   |   |   |   |
| Common stock issued

for services                                     |   | -               |   |         | -      |   | 260,000                     |   |   | 26                |   |   | 17,248                                     |   |   | - |   |   | 17,274 |
|                                                                  |   |            |   |         |   |   |                        |   |   |              |   |   |                                       |   |   |   |   |   |   |
| Conversion of preferred

stock to common stock                        |   | (2,272,728)     |   |         | (227)  |   | 11,363,640                  |   |   | 1,136             |   |   | (909)                                      |   |   | - |   |   | - |
|                                                                  |   |            |   |         |   |   |                        |   |   |              |   |   |                                       |   |   |   |   |   |   |
| Fair value of options and

warrants granted                           |   | -               |   |         | -      |   | -                           |   |   | -                 |   |   | 571,779                                    |   |   | - |   |   | 571,779 |
|                                                                  |   |            |   |         |   |   |                        |   |   |              |   |   |                                       |   |   |   |   |   |   |
| Common stock issued

for payment of prior

year accruals              |   | -               |   |         | -      |   | 842,361                     |   |   | 85                |   |   | 115,535                                    |   |   | - |   |   | 115,619 |
|                                                                  |   |            |   |         |   |   |                        |   |   |              |   |   |                                       |   |   |   |   |   |   |
| Net loss for the year

Ended December 31,

2004 (restated)            |   | -               |   |         | -      |   | -                           |   |   | -                 |   |   | -                                          |   |   | (1,235,419) |   |   | (1,235,419) |
|                                                                  |   |            |   |         |   |   |                        |   |   |              |   |   |                                       |   |   |   |   |   |   |
| Balance at

December 31, 2004

(restated)                             |   | -               |   |         | -      |   | 87,715,910                  |   |   | 8,772             |   |   | 4,810,767                                  |   |   | (7,670,074) |   |   | (2,850,535) |
|                                                                  |   |            |   |         |   |   |                        |   |   |              |   |   |                                       |   |   |   |   |   |   |
| Fair value of warrants

Issued (unaudited)                            |   | -               |   |         | -      |   | -                           |   |   | -                 |   |   | 55,234                                     |   |   | - |   |   | 55,234 |
|                                                                  |   |            |   |         |   |   |                        |   |   |              |   |   |                                       |   |   |   |   |   |   |
| Net loss for the period

Ended March 31, 2005

(unaudited) (restated) |   | -               |   |         | -      |   | -                           |   |   | -                 |   |   | -                                          |   |   | (697,332) |   |   | (697,332) |
|                                                                  |   |            |   |         |   |   |                        |   |   |              |   |   |                                       |   |   |   |   |   |   |
| Balance at

December 31, 2005

(restated)                             |   | -               |   | $            | -      |   | 87,715,910                  |   | $      | 8,772             |   | $      | 4,866,001                                  |   | $ | (8,367,406) |   | $ | (3,492,633) |
|                                                                  |   |            |   |         |   |   |                        |   |   |              |   |   |                                       |   |   |   |   |   |   |
|                                                                  |   |            |   |         |   |   |                        |   |   |              |   |   |                                       |   |   |   |   |   |   |
|                                                                  |   |            |   |         |   |   |                        |   |   |              |   |   |                                       |   |   |   |   |   |   |
|                                                                  |   |            |   |         |   |   |                        |   |   |              |   |   |                                       |   |   |   |   |   |   |

 

 

 

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

 

8

**INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES**

Consolidated Statements of Cash Flows

(Unaudited)

 

 

|                                                       |   |   | For the Three Months Ended

March 31 |
|------------------------------------------------------------|--------|--------|--------------------------------------|
|                                                       |   |   |
|                                                       |   |   | 2005

(Restated)                     |   |   | 2004

  |
|                                                       |   |   |                                 |   |   |   |
| CASH FLOWS FROM OPERATING ACTIVITIES                       |   |   |                                 |   |   |   |
|                                                       |   |   |                                 |   |   |   |
| Net Loss                                                   |   | $      | (697,332)                            |   | $ | (520,377) |
| Adjustments to reconcile net loss to net cash              |   |   |                                 |   |   |   |
| used by operating activities:                              |   |   |                                 |   |   |   |
| Depreciation and amortization                              |   |   | 91,606                               |   |   | 95,887 |
| Common stock issued for services                           |   |   | -                                    |   |   | 2,300 |
| Common stock issued for interest                           |   |   | -                                    |   |   | 10,000 |
| Warrants issued related to sales agreements                |   |   | 55,233                               |   |   | - |
| Amortization of notes payable discount                     |   |   | 56,769                               |   |   | 14,480 |
| Net changes in operating assets and liabilities:           |   |   |                                 |   |   |   |
| (Increase) decrease in trade accounts and other receivable |   |   | (165,604)                            |   |   | 7,881 |
| Increase in inventory                                      |   |   | (210,759)                            |   |   | (16,448) |
| (Increase) decrease in prepaid expenses and other assets   |   |   | 1,979                                |   |   | (651) |
| Decrease in intangibles                                    |   |   | (46,482)                             |   |   | - |
| Increase in deposits                                       |   |   | (1,400)                              |   |   | (2,036) |
| Increase in accounts payable                               |   |   | 200,806                              |   |   | 29,564 |
| Increase (decrease) in accrued payroll and payroll taxes   |   |   | (41,366)                             |   |   | 43,298 |
| Decrease in sales tax payable                              |   |   | (10,723)                             |   |   | (9,621) |
| Decrease in gift certificates and customer deposits        |   |   | (2,331)                              |   |   | (6,152) |
| Increase (decrease) in accrued expenses                    |   |   | (48,454)                             |   |   | 101,131 |
| Increase in deposits on simulator sales                    |   |   | 586,873                              |   |   | 273,853 |
|                                                       |   |   |                                 |   |   |   |
| Net Cash Provided (Used) by Operations                     |   |   | (231,185)                            |   |   | 23,109 |
|                                                       |   |   |                                 |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                       |   |   |                                 |   |   |   |
|                                                       |   |   |                                 |   |   |   |
| Purchase of property and equipment                         |   |   | (208,951)                            |   |   | (77,708) |
| Sale of property and equipment                             |   |   | 63,445                               |   |   | - |
|                                                       |   |   |                                 |   |   |   |
| Net Cash Used by Investing Activities                      |   |   | (145,506)                            |   |   | (77,708) |
|                                                       |   |   |                                 |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                       |   |   |                                 |   |   |   |
|                                                       |   |   |                                 |   |   |   |
| Loan repayments to related parties                         |   |   | -                                    |   |   | (45,000) |
| Proceeds from issuance (payment) of notes payable          |   |   | (502,844)                            |   |   | 185,000 |
|                                                       |   |   |                                 |   |   |   |
| Net Cash Provided (Used) by Financing Activities           |   |   | (502,844)                            |   |   | 140,000 |
|                                                       |   |   |                                 |   |   |   |
| INCREASE (DECREASE) IN CASH                                |   |   | (879,535)                            |   |   | 85,401 |
|                                                       |   |   |                                 |   |   |   |
| CASH, BEGINNING OF PERIOD                                  |   |   | 1,334,673                            |   |   | 249,005 |
|                                                       |   |   |                                 |   |   |   |
| CASH, END OF PERIOD                                        |   | $      | 455,138                              |   | $ | 334,406 |
|                                                       |   |   |                                 |   |   |   |

 

 

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

 

9

**INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES**

Consolidated Statements of Cash Flows (Continued)

(Unaudited)

 

 

|                                              |   |   | For the Three Months Ended

March 31 |
|---------------------------------------------------|--------|--------|--------------------------------------|
|                                              |   |   |
|                                              |   |   | 2005

(Restated)                     |   |   | 2004

  |
|                                              |   |   |                                 |   |   |   |
| SUPPLEMENTAL CASH FLOW DISCLOSURES:               |   |   |                                 |   |   |   |
|                                              |   |   |                                 |   |   |   |
| Cash paid for interest                            |   | $      | 23,882                               |   | $ | 87,332 |
| Cash paid for income taxes                        |   | $      | -                                    |   | $ | - |
|                                              |   |   |                                 |   |   |   |
| SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS: |   |   |                                 |   |   |   |
|                                              |   |   |                                 |   |   |   |
| Common stock issued for accrued liabilities       |   | $      | -                                    |   | $ | 115,620 |
| Accrued interest converted to notes payable       |   | $      | -                                    |   | $ | 250 |
| Discount on convertible notes                     |   | $      | 51,812                               |   | $ | 276,122 |
| Common stock issued for capitalized loan fees     |   | $      | -                                    |   | $ | 15,000 |
| Warrants issued related to sales agreements       |   | $      | 55,233                               |   | $ | - |
|                                              |   |   |                                 |   |   |   |

 

 

 

 

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

 

10

**INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES**

Notes to the Consolidated Financial Statements

March 31, 2005 and December 31, 2004

 

| NOTE 1 - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|----------|--------------------------------------------|

 

|   | a. | Unaudited Interim Financial Information |
|--------|----|-----------------------------------------|

 

The accompanying unaudited condensed consolidated balance sheets of Interactive Motorsports and Entertainment Corp. (the “Company”) at March 31, 2005 and December 31, 2004 and the unaudited consolidated statements of operations and statements of cash flows for the three months ended March 31, 2005 and March 31, 2004 have been prepared by the Company’s management and do not include all the information and notes to the financial statements necessary for a complete presentation of the financial position, results of operations, and cash flows in conformity with generally accepted accounting principles.  In the opinion of management, all adjustments necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.  Although management believes the disclosures are adequate to makethe information presented not misleading, it is suggested that these condensed consolidated financial statements be read in conjunction with the audited financial statements and the notes thereto included in the Company’s latest annual financial statements included in the Company’s annual report on Form 10-KSB.  The results of operations for the three months ended March 31, 2005 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2005 or any future period.

 

|   | b. | 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.

 

|   | c. | Change in accounting method for the sale of Simulators |
|--------|----|--------------------------------------------------------|

 

During the quarter the Company changed the method it uses to record the sale of simulators from the completed contract method to the percentage of completion method.  The percentage of completion for any given sales contract is determined by the ratio of costs incurred to date to the total estimated cost for each site build.  Costs incurred consist of purchased components, outside services, and outside contract labor cost.  The Company believes that the percentage of completion method more accurately represents the simulator sales activities of the Company.

 

 

 

11

**INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES**

Notes to the Consolidated Financial Statements

March 31, 2005 and December 31, 2004

 

| NOTE 2 - | DEBT AND CREDIT ARRANGEMENTS |
|----------|------------------------------|

 

Pursuant to the Note and Option Purchase Agreement and Security Agreement dated February 2, 2004 (“Agreement”), the Company issued notes bearing an interest rate of 9.6% payable in the total amount of $750,000.  These notes were issued between February 2, 2004 and June 6, 2004.  Each note came 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.  The options expired on March 2, 2005.  The notes became due on February 2, 2005, and $260,000 of the notes were paid in full at that time.  The noteholder of an additional $344,000 of the notes has elected to receive $16,000 in cash and exercise most of the options granted with the note purchase for full payment of the notes per the terms of the Agreement.  This transaction occurred in the quarter subsequentto March 31, 2005, and thus is not reflected in the financial statements as of March 31, 2005.  The noteholder of the final note in the amount of $146,000 has agreed to extend the maturity date of the note to August 2, 2005, with the accompanying option to expire on September 1, 2005.  Other than the options related to the $344,000 note mentioned above, all options related to the Agreement expired unexercised on March 2, 2005.

 

The value of the options was amortized to interest expense over their original life which expired March 1, 2005.  Amortization of option discount of $51,812 was included in interest expense for the three months ended March 31, 2005.

 

| NOTE 3 - | SIMULATOR AGREEMENTS |
|----------|----------------------|

 

On December 31, 2004, the Company entered into an Asset Purchase Agreement pursuant to which it sold thirty-four (34) of its existing race car simulators to Race Car Simulation Corporation (“RCSC”), a wholly owned subsidiary of Dolphin Direct Equity Partners, LP (“Dolphin”) for an aggregate purchase price of $1,535,000.  The Purchase Agreement is accounted for as a borrowing in accordance with the guidance provided in paragraphs 21-22 of SFAS 13.  The Agreement also granted RCSC an option to purchase an additional ten (10) new race car simulators for an aggregate purchase price of $1,320,000.  On March 31, 2005, the Company and RCSC entered into a Second Asset Purchase Agreement whereby the Company received the proceeds from the sale of four of the ten additional race car simulators for an aggregate purchase price of $720,000.  The Second Agreement also called for theCompany to issue 1,080,000 warrants as part of the transaction.  The sale of the new simulators occurred prior to the completion of the installation process, and was recorded using the percentage of completion method.  Additionally, the issuance of the warrants was recorded in the current period.  The portion of the sale proceeds that could not be recorded on the Income Statement was recorded on the Balance Sheet as an increase to Deposits on Simulator Sales, and will be recorded on the Income Statement in the second quarter, 2005 now that the installation is complete. 

 

 

12

**INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES**

Notes to the Consolidated Financial Statements

March 31, 2005 and December 31, 2004

 

| NOTE 3 - | SIMULATOR AGREEMENTS (Continued) |
|----------|----------------------------------|

 

On December 1, 2004, the Company entered into an agreement with I-Vision Technology for the purchase of two new simulators and related equipment.  By March 31, 2005, the Company had been paid in full, and the simulators were en route to the installation site.  The sale of the new simulators occurred prior to the completion of the installation process, and was recorded using the percentage of completion method.  The portion of the sale proceeds that could not be recorded on the Income Statement was recorded on the Balance Sheet as an increase to Deposits on Simulator Sales, and will be recorded on the Income Statement in the second quarter, 2005 now that the installation is complete. 

 

During the period ending March 31, 2005, the Company recorded the sale and completed the installation of the simulators located at Ft. Gordon, GA., and was paid in full per the terms of the sales agreement.

 

| NOTE 4 - | RESTATEMENT |
|----------|-------------|

 

Company management made the decision to restate the Company’s financials from the period beginning with Form 10-KSB for the year ended December 31, 2004 to the current date in order to account for the transactions with Race Car Simulator Corporation (“RCSC”) as a borrowing rather than an asset purchase in accordance with the guidance provided in paragraphs 21-22 of the Statement of Financial Accounting Standards No. 13 (SFAS 13).  Management has concluded that it made a misinterpretation of this technical accounting rule.  In order to make a fair presentation of its financials in compliance with Generally Accepted Accounting Principles, the Company is revising its revenue recognition policy with respect to sales where the Company retains substantial risk of ownership as defined in SFAS 13.   

 

 

13

**INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES**

Notes to the Consolidated Financial Statements

March 31, 2005 and December 31, 2004

 

| NOTE 4 - | RESTATEMENT (Continued) |
|----------|-------------------------|

 

SFAS 13, paragraph 21 states, “The sale of property subject to an operating lease, or of a property that is leased by or intended to be leased by the third-party purchaser to another party, shall not be treated as a sale if the seller or any party related to the seller retains substantial risks of ownership in the leased property.”  The paragraph goes on to describe an example where, in the case of a default by lessee or termination of the lease, the arrangements may involve a commitment by the seller to substitute an existing lease or to secure a replacement lessee under a remarketing agreement.  A remarketing agreement by itself shall not disqualify accounting for the transaction as a sale if the seller (a) will receive a reasonable fee commensurate with the effort involved at the time of securing a replacement lessee for the property and (b) is not required to give priorityto the re-leasing of the property owned by the third party purchaser over similar property owned by the seller.  In the case of the Company’s Asset Purchase Agreements and Management Agreements with RCSC, Section 4.12 of the Asset Purchase Agreement provides RCSC, the Buyer, with a performance guarantee from the Company, the Seller, that Buyer shall receive at least the minimum guaranteed minimum payment amounts with respect to each Lease in effect on the date of the transaction.  Since most of the Leases had terms of 3 years, the Company is considered to maintain “significant risk” during this guarantee period of time as defined in SFAS 13.  Secondly, Section 1(a)(ii) of the Management Agreement between the Company and RCSC states that if any Simulators are not, at any time, being utilized to generate revenue for RCSC, the Company is obligated to place such Simulators into service under Leases with operators prior to placing any of its own Simulators into any sucharrangements.  Management has determined that the “substantial risk” under the Asset Purchase Agreements with RCSC is valid for a three year period since the risk of receiving ongoing minimum guarantees from the lease or revenue share agreements shifts to the Buyer after the three year period.   Management has determined that the “substantial risk” under the Management Agreement is valid for a five year period since this is the expected time period for RCSC’s Aggregate Investment Amount to reach zero as detailed in Section 4 (a) of the Management Agreement.  Once the Aggregate Investment Amount has reached zero (five years at the minimum payment levels of the leases/revenue share agreements), then the Company is compensated with 75% of the aggregate cash payments received by RCSC from the leases/revenue share agreements.  Under the guidance provided in SFAS 13, the risk shifts to the Buyer (RCSC) at this time since the Seller (the Company) is being reasonablycompensated for the effort under the Management Agreement. 

 

 

14

**INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES**

Notes to the Consolidated Financial Statements

March 31, 2005 and December 31, 2004

 

| NOTE 4 - | RESTATEMENT (Continued) |
|----------|-------------------------|

 

Management has concluded that the because “substantial risk”, as defined within SFAS 13, exists during the five year period after the Asset Purchase Agreement and Management Agreement transactions with RCSC and that such risk shifts at the three and five year periods, the Company’s transactions with RCSC on December 31, 2004, March 31, 2005 and April 15, 2005 shall each be treated from an accounting standpoint as a borrowing rather than an asset sale, and has restated its financials during this period of time to reflect this change in accounting.  

 

The discovery has prompted management to restate its 2004 financial statements to recognize a change in Net Income (Loss) through an adjustment to revenue from simulator sales.

 

 

|                 | As Reported | As Adjusted | Difference | Change in EPS |
|----------------------|-------------|-------------|------------|---------------|
| For the Period ended |        |        |       |          |   |   |   |   |
| 3/31/2005            |        |        |       |          |   |   |   |   |
| Total Assets         | $           | 2,333,870   | $          | 2,527,333     | $ | 193,463 |   |   |
| Total Liabilities    | $           | 4,058,794   | $          | 6,019,966     | $ | 1,961,172 |   |   |
| Shareholder Deficit  | $           | (1,724,924) | $          | (3,492,633)   | $ | (1,767,709) |   |   |
| Net Income (Loss)    | $           | (38,726)    | $          | (697,332)     | $ | (658,606) | $ | (0.01) |
|                 |        |        |       |          |   |   |   |   |

 

 

 

15

**INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES**

Notes to the Consolidated Financial Statements

March 31, 2005 and December 31, 2004

 

| NOTE 5 - | SUBSEQUENT EVENTS |
|----------|-------------------|

 

On April 15, 2005, the Company and RCSC entered into a Third Asset Purchase Agreement whereby the Company received the proceeds from the sale of six of the ten additional race car simulators referenced above for an aggregate purchase price of $600,000.  The Purchase Agreement is accounted for as a borrowing in accordance with the guidance provided in paragraphs 21-22 of SFAS 13.  The Third Agreement also called for the Company to issue 900,000 warrants as part of the transaction.  

 

During the period ending March 31, 2005, management was approached by the owner of the mall where the Company’s Nyack, NY store was located.  After a period of negotiation, the Company accepted the mall owner’s offer to accelerate the termination date of the lease on the store’s space.  The store closed on March 27, 2005, but expenses associated with the store and its closure was incurred through April, 2005.

 

 

 

16

 

**ITEM 2. 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 onAugust 2, 2002.

 

**Overview**

 

Interactive Motorsports and Entertainment Corp. (“IMTS” or the “Company”), an Indiana corporation, through its wholly owned subsidiary, Perfect Line, Inc., is a world leader in race simulation that owns and operates racing centers, leases or revenue shares with third party operators and sells race car simulators.  NASCAR Silicon Motor Speedway (“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, the Company’s racing centers range from 2 to 12 race car simulators per location and many sites offer what the Company believes to be the best selling NASCAR driver merchandise available to the market.

 

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.   In February, 2004, Nextel debuted The Nextel Experience, a mobile fan interactive experience that features six of the Company’s race simulators.  Nextel has subsequently taken delivery of three additional 2-simulator mobile experiences that they use for promotional events that features the Company’s simulators.

 

 

17

The change in the business model, and particularly the sale of simulators as outlined in Note 3 of the financial statements above, has allowed the Company to generate three consecutive quarters of operating profit and positive Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), its first quarterly net profit in the fourth quarter of 2004 and its first annual profit in the year ending December 31, 2004.

 

Since inception on May 31, 2001 and through March 31, 2005, the Company has accumulated aggregate losses totaling $8,367,406, which includes the net loss of $697,332 for the three months ending March 31, 2005, the net profit of $8,869 for the twelve months ended December 31, 2004, 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, $604,000 in net proceeds borrowed between February 2004 and June 2004, $1.897 million received in the form of deposits for the placement of race car simulators in revenue share locations, or for the future purchase by third parties of race car simulators, and $1,056,692 by delaying payments to its vendors.  See further discussion under “Liquidity and Capital Resources” and “Risk Factors” below.

 

During the three months ended March 31, 2005, the Company had total revenues of $928,125 compared to $1,609,346 for the three months ended March 31, 2004.  The 81% decrease in revenue is due primarily to the implementation of the Company’s revised business model during 2004, including the sale of simulators.  Most of the Company store locations at March 31, 2004 have either been converted to Checker Flag Lightning, Inc. revenue share locations, or have been relocated or closed under arrangements with the respective landlords that management believes are favorable to the Company.  This has resulted in the Company recognizing just a portion of the revenue generated by the location as revenue share income, with little related expense, rather than recognizing all the revenue generated at a location, but also recognizing the payroll, rent and operating expenses associated with the location as well.  Theresultant reduction in revenue from store sites was partially offset by the 150% increase in revenue share income, and the recognition of the sale of race car simulators to Race Car Simulation Corp., I-Vision Technology, and to Ft. Gordon, GA.

 

 

18

The Company has established four primary sources of revenues: (i) company owned and operated racing centers; (ii) lease/revenue share arrangements of two types – (a) new facility operators for new locations, and (b) new facility operators to assume the Company’s operations under presently existing Company locations; (iii) new operators for mobile lease arrangements such as with the Nextel experience; and (iv) simulator equipment sales.   A brief description of each of those is listed below.

 

**Locations**

 

***Company Owned (24 Simulators):***

 

| ***Location*****              | ***Market*****  | ***Sq. Ft.***** | ***Simulators***** |
|-------------------------------|-----------------|-----------------|--------------------|
| ***1)***   Mall of America    | Minneapolis, MN | 5,899           | 12 race cars       |
| ***2)***   Universal CityWalk | Los Angeles, CA | 5,000           | 12 race cars       |

 

 

***Revenue Share (128 Simulators):***

 

| ***Location*****                         | ***Market*****    | ***Sq. Ft.***** | ***Simulators***** |
|------------------------------------------|-------------------|-----------------|--------------------|
| ***1)***   Opry Mills                    | Nashville, TN     | 6,007           | 10 race cars       |
| ***2)***   Gurnee Mills                  | Chicago, IL       | 6,111           | 6 race cars        |
| ***3)***   Concord Mills                 | Charlotte, NC     | 7,865           | 12 race cars       |
| ***4)***   Katy Mills                    | Houston, TX       | 6,172           | 8 race cars        |
| ***5)***   Mall of Georgia               | Atlanta, GA       | 5,895           | 8 race cars        |
| ***6)***   Riverchase Galleria           | Birmingham, AL    | 6,188           | 8 race cars        |
| ***7)***   RiverTown Crossing            | Grand Rapids, MI  | 6,100           | 8 race cars        |
| ***8)***   Jordan Creek Town Ctr         | Des Moines, IA    | 4,000           | 8 race cars        |
| ***9)***   NASCAR SpeedPark              | Sevierville, TN   | 1,584           | 6 race cars#       |
| ***10)***  NASCAR SpeedPark              | St. Louis, MO     | 1,496           | 6 race cars#       |
| ***11)***  NASCAR SpeedPark              | Toronto, Canada   | 1,500           | 6 race cars#       |
| ***12)***  NASCAR Speedpark (a)          | Myrtle Beach, SC  | 1,600           | 6 race cars#*      |
| ***13)***  Gate A Sports                 | Cleveland, OH     | 2,470           | 5 race cars        |
| ***14)***  Playcenter (b)                | Sao Paulo, Brazil | 1,000           | 4 race cars*       |
| ***15)***  Burdick Driver’s Village | Syracuse, NY      | 3,472           | 8 race cars#       |
| ***16)***  Big River Entertainment (b)   | Memphis, TN       | 5,000           | 12 race cars*      |
| ***17)***  Bass Pro Shop                 | Harrisburg, PA    | 500             | 2 race cars        |
| ***18)***  University Mall (a)           | Burlington, VT    | 3,700           | 5 race cars*       |

 

 

|   | a. | Scheduled to open Q2 |
|--------|----|----------------------|

|   | b. | Scheduled to open TBD |
|--------|----|-----------------------|

 

 

 

19

***Mobile Units (14 Simulators):***

 

| ***1)***   Nextel Mobile Experience    | 2004-06 NASCAR Nextel Cup series events | 6 race cars# |
|----------------------------------------|-----------------------------------------|--------------|
| ***2)***   Perfect Line/NTI Experience | Joint Venture Mobile Experience         | 2 race cars  |
| ***3)***   Nextel Mini Experiences     | Nextel regional marketing               | 6 race cars# |

 

 

***Sales of Simulators (20 Simulators):***

 

| ***Buyer*****             | ***Market*****             | ***Simulators***** |
|---------------------------|----------------------------|--------------------|
| ***1)***   Roltex         | Moscow, Russian Federation | 8 race cars*       |
| ***2)***   Tonne Mgmt.    | Wisconsin Dells, WI        | 4 race cars*       |
| ***3)***   Ft. Gordon     | Ft. Gordon, GA             | 2 race cars        |
| ***4)***   I-Vision Tech. | Abu Dhabi, UAE             | 4 race cars        |
| ***5)***   I-Vision Tech. | Abu Dhabi, UAE             | 2 race cars        |

 

# Denotes asset sold to Race Car Simulation Corporation

* Denotes that simulators are not yet installed

 

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 internal 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. 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, LLC, a predecessor to Perfect Line, Inc., re-opened 12 of the racing centers, which utilized 136 of the simulators, between July 2001 and August 2002.  The Company then warehoused 32 simulators for future deployment and 2 simulators are used for research and development purposes at the Company’s technology center in 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 simulations of the sights, sounds and motions experienced by driving in an actual NASCAR race. The proprietary motion-based platform that the race car 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.  Approximately one-half of the funding was used to retire the Company’s bank note and the balance was used for working capital.  

 

 

20

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 and simulator sales.  

 

On December 31, 2004, the Company entered into an Asset Purchase Agreement pursuant to which it sold thirty-four (34) of its existing race car simulators to Race Car Simulation Corporation (“RCS”), a wholly owned subsidiary of Dolphin Direct Equity Partners, LP (“Dolphin”) for an aggregate purchase price of $1,536,600.  The Agreement also granted RCS an option to purchase an additional ten (10) new race car simulators for an aggregate purchase price of $1,320,000.  On March 31, 2005, the Company and RCSC entered into a Second Asset Purchase Agreement whereby the Company received the proceeds from the sale of four of the ten additional race car simulators for an aggregate purchase price of $720,000.  On April 15, 2005, the Company and RCSC entered into a Third Asset Purchase Agreement whereby the Company received the proceeds from the sale of six of the ten additional race car simulatorsreferenced above for an aggregate purchase price of $600,000.  The March 31, 2005 and April 15, 2005 simulator sales transactions completed the exercise of RCS’s option stemming from the December 31, 2004 simulator sale.  These sales transactions are accounted for as borrowings in accordance with the guidance provided in paragraphs 21-22 of SFAS 13.

 

**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 create the largest network of officially-licensed, NASCAR-branded entertainment centers 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 Mark Martin, 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 network of NASCAR-themed, family-oriented, racing entertainment and retail merchandise centers. Many 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.

 

 

21

NSMS owned Racing Centers, 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 race cars, 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 $2.1 billion in 2004. The Company’s NSMS racing centers are the largest network of officially licensed, NASCAR-branded interactive entertainment stores in the world, and offer its customers the most popular NASCAR merchandise available. Although the Company’s owned locations provide its only direct means to generaterevenues from merchandise sales, the Company’s experience has been that increases in merchandise sales have a spillover effect on the level of simulator revenue each site generates.  The Company does not receive any payments from the revenue share sites for merchandise sales.  With these factors in place, the Company believes it is well-positioned to capitalize on this billion-dollar market. 

 

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

 

The Company first tested the revenue share business model with the Burroughs and Chapin Company of Myrtle Beach, South Carolina, by installing 6 simulators at their Smokey Mountain NASCAR SpeedPark in April of 2003, and 5 simulators at their Myrtle Beach Pavilion Amusement Park’s Ocean Front Arcade in May of 2003.  The results of these two revenue share racing centers inspired management to revise the Company’s business model beginning in July of 2003, changing the focus from Company owned and operated racing centers to revenue share racing centers located within malls, family entertainment centers, amusement parks, casinos, auto malls, etc.  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 befinanced through a third party leasing firm, although no agreements have been reached) and the host organization (owner-operator) provides the space, required site build-out, and day-to-day operations staffing. 

 

The Company and Checker Flag Lightning of Grandville, Michigan, tested the conversion of one of the Company’s mall racing centers to a Checker Flag Lightning retail merchandise and entertainment center beginning in November of 2003.  The lease at the racing center within RiverTown Crossing in Grandville, Michigan was assigned to Checker Flag Lightning and the store was remodeled by reducing the number of simulators to 8 from 10, and building out the retail merchandise space to fill nearly half of the 6100 square feet with NASCAR merchandise.  This model led to an agreement with Checker Flag Lightning in March of 2004 to assign six of the Company’s mall leases with the intent to convert each of them to the new mall model.  In addition, Checker Flag Lightning has opened a 3,500 square foot retail merchandise and entertainment center featuring 8 of the Company’s simulators in the new JordanCreek Town Center in West Des Moines, Iowa, and a 4000 square foot site featuring 6 simulators at Gurnee Mills, just north of Chicago, Illinois.

 

The Company recently established a new revenue stream through mobile leases that management believes will be beneficial to the Company in the future.  At the 2004 Daytona 500, Nextel debuted The Nextel Experience, a mobile fan interactive experience that features six of the Company’s race simulators.  The Nextel Experience has had and will have a prominent location at each of the NASCAR Nextel Cup events for at least through the 2006 season.  In 2004, Nextel also leased a Mini-Experience housed in a 53 foot trailer.  The Mini Experience features two of the Company’s racing simulators in a self contained package that Nextel uses at various promotional activities.  The Mini Experience has been such a success that Nextel ordered and is now leasing two additional trailers that they will use for promotional events around the country, each featuring two of the Company’s simulators.

 

 

22

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 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.  Other projects include a smaller version of our patented motion platform that will allow more customer throughput, a 3D version of our racing experience and a concept called Wheel to Real where we recreate actual NASCAR races in graphic form using data from the race cars for replay experiences and interactive features.  

 

In order to meet the ongoing demand for the Company’s simulators, the Company has submitted purchase orders for 50 new race car simulator bodies and motion base platforms with Elan Motorsports Technologies, and has taken delivery of 19 simulators as of March 31, 2005.  The manufacturing will be funded by a combination of advance deposits due from customers and the financing that the Company anticipates generating due to the Company’s recent financial improvements. 

 

**Overview of Financial Position and Results of Operations**

 

During the three months ended March 31, 2005, the Company had total revenues of $928,125 compared to $1,609,346 for the three months ended March 31, 2004, a 42% decrease.  Revenue from company store sales decreased by 56% as the company executed its revised business plan focusing on revenue share locations versus company owned locations.  On a per store basis, the Company generated an average of $161,347 per store on the nine company store locations in the first three months of 2004, compared with $214,682 per store on the three store locations operating in the comparable period in 2005.  Offsetting the decline in total company store sales in the first three months ending March 31, 2005 was a 150% increase in revenue share sales, and a $17,885 increase in sales of simulators as compared to the first three months ending March 31, 2004.  The Company recorded all or a portion of three sales transactions foreight simulators, and added a five simulator revenue share location in Mentor, OH during the three months ending March 31, 2005.

 

Revenues decreased by $681,221 for the three months ending March 31, 2005 as compared to the three months ending March 31, 2004, cost of good sold for the comparable periods increased by $177,591.  This was the result of the change in the mix of the Company’s revenue sources, with revenue from company stores and revenue share locations having a higher gross margin that revenue derived from simulator sales.  Consequently, gross profit for the three months ending March 31, 2005 fell by 56% as compared to the same period in 2004.

 

 

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Offsetting the decrease in gross profit was the decline in operating expenses by 39%, resulting in a $564,691 operating loss for the quarter ending March 31, 2005.  This operating loss represents a $97,287 increase from the $467,404 operating loss for the quarter ending March 31, 2004   The decline in operating expenses is a direct result of the implementation of the company’s revised business model, and is largely due to the closure, relocation, or conversion to a revenue share site of seven former company store locations.  Payroll expenses declined 40% and occupancy expenses declined 50% when comparing the first quarter 2005 to the first quarter 2004. Interest expense for the three months ending March 31, 2005 was $132,641 as compared to $52,973 for the comparable quarter in 2004.  The net loss for the quarter ending March 31, 2005 of $697,332 was $176,955 greater than the $520,377 loss for the samequarter one year ago.  EBITDA for the three months ending March 31, 2005 was negative $468,128 as compared to a negative $371,517 for the same period ending March 31, 2004.  Since inception on May 31, 2001 and through March 31, 2005, the Company has accumulated aggregate losses totaling $8,367,406. 

 

The Company’s cash flow from operations deteriorated during the quarter ending March 31, 2005 as compared to the comparable period in 2004.  Cash used from operations for the three months ending March 31, 2005 declined by $254,294 to $231,185 as compared to the same three month period in 2004.  The cash requirements from the increases in accounts receivable and inventory were partially offset by the increase in accounts payable.   Additionally, deposits on simulator sales decreased due to the recording of three simulator sales transactions in the quarter.  Cash flow from all sources (operations, investing activities and financing activities) was insufficient to fund the company during the three months ending March 31, 2005, and resulted in a $879,535 reduction in the Company’s cash position.  This compares with $85,401 in cash generated for all sources for the period ending March 31, 2004.  Ofnote is that $210,759 of cash in the quarter ending March 31, 2005 was used to purchase both merchandise and simulator inventory, which will help the Company meet market demand and generate earnings in future quarters.  Likewise, the company paid down its debt by $573,056, which in turn should reduce interest expense and increase net profits in future quarters as well, although there can be no assurance.

 

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, the $700,000 borrowed March 2003, $766,000 received from deposits for the purchase of race car simulators by third parties, $604,000 received in the first six months of 2004 from the net proceeds of Notes, and $1,057,000 by delaying payment to its vendors.  The Company is in the process of seeking additional debt financing to fund current operating deficits and the Company’s growth plan. See further discussion under the “Liquidity and Capital Resources” section below.

 

**Review of Consolidated Financial Position**

 

**Cash and Cash Equivalents**: The Company had $455,138 in cash and cash equivalents as of March 31, 2005 compared with $1,334,673 at December 31, 2004, a decrease of $879,535.  This decrease in the company’s position of cash during the first three months of 2005 was due principally to the purchase of both merchandise and simulator inventory, which will help the Company meet market demand and generate earnings in future quarters.  At March 31, 2005, the Company had taken delivery of 19 new simulators.  Additionally, the company paid down its debt by over half a million dollars, and completed the full or partial sale of three simulator sales transactions, resulting in the reduction of deposits on simulator sales of $245,510.  See further discussion under the “Liquidity and Capital Resources” section below.

 

 

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**Trade Accounts Receivable**:  At the three months ending March 31, 2005, Checker Flag Lightning was behind on payments in the amount of $502,557, and the Company has been negotiating with CFL to resolve this issue amicably.  At the time of this filing, there have been numerous discussions with Checker Flag and with the owner of the malls where most of the Checker Flag Lightning stores are located, and management believes a settlement will be reached in the near future to the benefit of all parties, although there can be no assurance.  

 

**Inventory:**  At March 31, 2005, inventory increased by $210,759 from December 31, 2004 levels due primarily to the delivery of new simulators from Elan Motorsports for deployment to new sites, coupled with the arrival of spring merchandise in the company’s stores.  Simulators in inventory increased by $172,562 from December 31, 2004 levels to $425,194 at March 31, 2005.  Likewise, merchandise inventory increased by $38,198 from December 31, 2004 levels during the period ending March 31, 2005 as the company moved to restore the merchandise stock in its stores after the Christmas season.  

 

**Notes Payable**: Between February and June, 2004 the Company sold secured notes which became due on February 2, 2005.  Per the terms of the agreement with the noteholders, $260,000 of the notes were paid in full at that time.  The noteholder of an additional $344,000 of the notes has elected to receive $16,000 in cash and exercise most of the options granted with the note purchase for full payment of the notes per the terms of the Agreement.  This transaction occurred in the quarter subsequent to March 31, 2005, and thus is not reflected in the financial statements as of March 31, 2005.  The noteholder of the final note in the amount of $146,000 has agreed to extend the maturity date of the note to August 2, 2005, with the accompanying option to expire on September 1, 2005.  

 

In March 2003, the company issued notes totaling $700,000, $500,000 of which was sold to Ropart Asset Management.  During the three months ending March 31, 2005, the Company reduced its indebtedness to Ropart Asset Management by $200,000, and the maturity of the note was extended to September 30, 2005.  

 

**Deposits on Simulator Sales**:  During the three month period ending March 31, 2005, the Company recorded all or a portion of three simulator sales transactions based on the percentage of completion method of accounting, and added a five simulator revenue share site.  This activity resulted in the increase of deposits on simulator sales of $586,873 to $2,160,851 as compared to the balance at December 31, 2004.

 

**Other Liabilities**: Accounts payable, 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. 

 

**Review of Consolidated Results of Operations**

 

During the three months ended March 31, 2005, the Company had total revenues of $928,125 compared to $1,609,346 for the three months ended March 31, 2004.  Revenue from company store sales decreased by 55.37% as the company executed its revised business plan focusing on revenue share sites versus company owned locations.  On a per store basis, the Company generated an average of $161,347 per store on the nine company store locations in the first three months of 2004, compared with $214,682 per store on the three store locations operating in the comparable period in 2005.  Offsetting the decline in total company store sales in the first three months ending March 31, 2005 was a 150% increase in revenue share sales, and a $17,885 swing in sales of simulators as compared to the first three months ending March 31, 2004.  The Company recorded three sales transactions for eight simulators, and added a fivesimulator revenue share location in Mentor, OH. during the three months ending March 31, 2005.

 

 

25

Sales decreased by 63.7% for the three months ending March 31, 2005 as compared to the three months ending March 31, 2004, cost of good sold for the comparable periods increased by $177,591.  This was the result of the change in the mix of the Company’s revenue sources, with revenue from company stores and revenue share locations having a higher gross margin that revenue derived from simulator sales.  Consequently, gross profit for the three months ending March 31, 2005 fell by 56.3% as compared to the same period in 2004.

 

Offsetting the decrease in gross profit was the decline in operating expenses by 38.23%, resulting in a $564,691 operating loss for the quarter ending March 31, 2005.  This operating loss represents a $97,287 decrease from the $467,404 operating loss for the quarter ending March 31, 2004   The decline in operating expenses is a direct result of the implementation of the company’s revised business model, and is largely due to the closure or conversion to a revenue share site of seven former company store locations.  Payroll expenses declined 40.5% and occupancy expenses declined 49.8% when comparing the first quarter 2005 to the first quarter 2004. Interest expense for the three months ending March 31, 2005 was $132,641 as compared to $52,973 for the comparable quarter in 2003.  The net loss for the quarter ending March 31, 2005 of $697,332 was $176,955 greater than the $520,377 loss for the samequarter one year ago.  EBITDA for the three months ending March 31, 2005 was negative $468,128 as compared to a negative $371,517 for the same period ending March 31, 2004.  

 

**Liquidity and Capital Resources**

 

The primary source of funds available to the Company are receipts from customers for simulator and merchandise sales in its owned and operated racing centers, percentage of gross revenues from simulator races and minimum guarantees from revenue share sites, the sale of simulators, proceeds from equity offerings including the $2,610,050 received in August 2002, proceeds from debt offerings including the $700,000 in Secured Bridge Notes and warrants issued in March 2003, and the $604,000 in net proceeds from Notes and options issued between February and June, 2004, loans from shareholders, credit extended by vendors, and possible future financings.  

 

As of the filing of this Form 10-QSB, the net proceeds of $1,593,708 from the December 31, 2004 and March 31, 2005 sale of simulators to Race Car Simulation Corp. have been depleted.  The Company believes that it has generated a significant interest in its simulators, and that some combination of revenue share agreements, lease agreements and simulator sales agreements will be sufficient to fund the daily operations of the business, although there can be no assurances.  Additionally, the Company continues to seek the financing required to fully implement the desired level of growth its revised business model is capable of generating.  The Company’s ability to raise the desired financing will depend on many factors.  Management believes the culmination of the recent negotiations with Checker Flag Lightning into an agreement allowing for cash flow to again be generated from the Checker Flag sites,combined with some combination of simulator sales and the increased revenues that come from additional third party revenue share agreements will allow the Company to maintain and increase positive EBITDA and regain profitability.  While management is pursuing various forms of financing, there can be no assurance that additional financing will be available or, if available, that it will be on terms acceptable to the Company.

 

On December 31, 2004, the Company entered into an Asset Purchase Agreement pursuant to which it sold thirty-four (34) of its race car simulators that were located in existing revenue share locations.  The Purchase Agreement is accounted for as a borrowing in accordance with the guidance provided in paragraphs 21-22 of SFAS 13.  While this transaction generated an aggregate purchase price of $1,536,600, it also depleted monthly revenue share payments to the Company generated by the 34 simulators that were sold.  Management intends to contract with revenue share partners and install simulators within its inventory to replenish the cash flow lost from 34 simulators that were sold in a timely manner, although there can be no assurances.

 

 

26

During the three months ended March 31, 2005, the operating activities of the Company used net cash of $231,185 compared to net cash generated of $23,109 for the comparable period in 2004. The cash requirements from the increases in accounts receivable and inventory were partially offset by the increase in accounts payable.   Additionally, deposits on simulator sales decreased due to the recording of three simulator sales transactions in the period ending March 31, 2005.

 

During the three months ended March 31, 2005, the Company used $145,506 of cash in investing activities compared with $77,708 of cash used in investing activities during the comparable period in 2003. The purchases in property and equipment relates primarily to the construction in progress on the eight new sites where we have begun the process of obtaining components, beginning assembly, or installing simulators.  The first 3 months of 2005 also saw the sale of $382,270 worth of equipment in three separate transactions.

 

During the three months ended March 31, 2005, the Company used $502,844 of net cash in financing activities, compared with the $140,000 the Company generated in the comparable period in 2004.  As detailed above, the Company repaid $502,844 in debt obligations during the quarter ending March 31, 2005. The Company will continue to use the debt markets to raise sufficient financing to fund its growth opportunities as it continues to focus on revenue share and simulator sales opportunities. 

 

The Company’s current debt financing includes the extension of $350,000 of the Secured Bridge Notes and Warrants initiated in March of 2003 until September 30, 2005, and an extension of a Note and Option Agreement of $146,000 until August 2, 2005.

 

As of March 31, 2005, the Company had cash and cash equivalents totaling $455,138 compared to $1,334,673 at December 31, 2004. Current assets totaled $1,553,669 at March 31, 2005 compared to $2,058,820 on December 31, 2004. Current liabilities totaled $5,172,542 on March 31, 2005 compared with $4,718,288 on December 31, 2004. As such, these amounts represent an overall increase in working capital of $959,405 for the three months ending March 31, 2005. 

 

**ITEM 3. INTERNAL CONTROLS AND PROCEDURES**

 

The Principal Executive Officer (“PEO”) and the Principal Financial Officer (“PFO”) of the Company (currently one individual) have 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 and PFO have concluded that the Company’s disclosure controls and procedures are adequate and effective. There have been no significant changes in the Company’s internal controls, or in factors that could significantly affect internal controls, subsequent to the most recent evaluation of such controls.  

 

 

27

 

**PART II**

 

**ITEM 1. LEGAL PROCEEDINGS** 

 

From time to time, the Company may be party to various legal actions and complaints arising in the ordinary course of business. As of March 31, 2005 and as of the filing of this Interim Report on Form 10-QSB, the Company is not aware of any material legal actions directed against the Company.

 

**ITEM 2. CHANGES IN SECURITIES**

 

None, not applicable.

 

**ITEM 3. DEFAULTS UPON SENIOR SECURITIES**

 

None, not applicable.

 

**ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

None, not applicable.

 

**ITEM 5. OTHER INFORMATION**

 

None, not applicable.

 

 

 

28

**ITEM 6. EXHIBITS AND REPORTS ON FORM 8-Kxhibits and Reports on Form 8-K** 

 

| A. | Exhibits. |
|----|-----------|

 

|   | 10.1 | Form of Note and Option Purchase Agreement and Security Agreement ** |
|--------|------|----------------------------------------------------------------------|

|   | 10.2 | Form of Procurement Contract ** |
|--------|------|---------------------------------|

|   | 10.3 | Form of Master Revenue Sharing Agreement** |
|--------|------|--------------------------------------------|

|   | 10.4 | Asset Purchase Agreement with Race Car Simulation Corporation, a portfolio company of Dolphin Direct Equity Partners, LP *** |
|--------|------|------------------------------------------------------------------------------------------------------------------------------|

|   | 11.1 | Computation of Earnings (Loss) Per Share |
|--------|------|------------------------------------------|

|   | 31.1 | Certification of William R. Donaldson as Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14 of the Security Exchange Act of 1934. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 32.1 | Certification of William R. Donaldson as Chief Executive Officer pursuant to 18 U.S.C. Section 1350. |
|--------|------|------------------------------------------------------------------------------------------------------|

|   | 32.2 | Certification of William R. Donaldson as Chief Financial Officer and Treasurer pursuant to 18 U.S.C. Section 1350. |
|--------|------|--------------------------------------------------------------------------------------------------------------------|

 

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

|   | ** | Incorporated by reference from Form 10-QSB filed on May 17, 2004 |
|--------|----|------------------------------------------------------------------|

|   | ***  Incorporated by reference from Form 8-K filed on January 6, 2005 |
|--------|-----------------------------------------------------------------------|

 

 

| B. | Reports on Form 8-K. |
|----|----------------------|

 

|   | 99.1 | Announcement dated January 8, 2005 of the entry into a Material Definitive Agreement with Race Car Simulation Corporation and Dolphin Direct Equity Partners, LP |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | 99.2 | Announcement of the results of operations and financial condition for the year ending December 31, 2004 dated March 11, 2005. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------|

 

 

29

**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: November 20, 2006 | 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: November 20, 2006 | By: | */s/ William R. Donaldson* |
|--------|-------------------------|-----|----------------------------|

*-----------------------------------------------*

William R. Donaldson

Chairman of the Board and Chief Executive Officer

|   | (Principal Executive Officer) |
|--------|-------------------------------|

 

|   | Date: November 20, 2006 | By: | */s/ William R. Donaldson* |
|--------|-------------------------|-----|----------------------------|

*-----------------------------------------------*

William R. Donaldson

Chairman of the Board and Chief Executive Officer

|   | (Principal Financial Officer) |
|--------|-------------------------------|

 

 

30

**EXHIBIT INDEX**

 

Exhibits:

 

|   | 11.1 | Computation of Earnings (Loss) Per Share |
|--------|------|------------------------------------------|

|   | 31.1 | Certification of William R. Donaldson as Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14 of the Security Exchange Act of 1934. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 32.1 | Certification of William R. Donaldson as Chief Executive Officer pursuant to 18 U.S.C. Section 1350. |
|--------|------|------------------------------------------------------------------------------------------------------|

|   | 32.2 | Certification of William R. Donaldson as Chief Financial Officer and Treasurer pursuant to 18 U.S.C. Section 1350. |
|--------|------|--------------------------------------------------------------------------------------------------------------------|

 

 

 

31