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


                                   FORM 10-QSB


          (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended: June 30, 2003

          ( ) 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.
                   f.k.a. Pacific International Holding, Inc.
               (Exact name of registrant as specified in charter)


                                     Indiana
         (State or other jurisdiction of incorporation or organization)

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

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

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


Indicate by checkmark  whether the Issuer:  (1) filed all reports required to be
filed by section 13 or 15 (d) of the  Exchange Act during the past 12 months (or
for such shorter  period that the registrant was required to file such reports),
and (2) has been subject to such filing  requirements  for the past 90 days. (1)
Yes [x] No [] (2) Yes [x] No []

Issuer's Revenues for its most recent fiscal year: $9,636,278.

As of December 31, 2002, the aggregate  market value of the voting stock held by
non-affiliates of the Issuer,  43,204,733  shares,  was $12,097,325.  The market
value of Common Stock of the Issuer,  par value $0.0001 per share,  was computed
by  reference to the average of the closing bid and asked prices of one share on
such date which was $0.28.

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the last practicable  date.  Class  outstanding as of August
15,  2003:  Common  Stock,  par value  $0.0001,  74,124,184  shares  issued  and
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: None


<PAGE>





                    INDEX TO QUARTERLY REPORT ON FORM 10-QSB



                                                                          Page
Section                                                                  Number
--------------------------------------------------------------------------------

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

                                     PART I

Item 1.  Condensed Financial Statements and Notes to Condensed Financial
          Statements
           Condensed Consolidated Balance Sheets at June 30, 2003 and
             December 31, 2002...............................................5
           Condensed Consolidated Statements of Operations for the
             Three Months Ended June 30, 2003 and 2002.......................6
           Condensed Consolidated Statements of Operations for the
             Six Months Ended June 30, 2003 and 2002.........................7
           Condensed Consolidated Statements of Changes in Shareholders'
             Equity for the Six Months Ended June 30, 2003 and 2002..........8
           Condensed Consolidated Statements of Cash Flows for the
             Six Months Ended June 30, 2003 and 2002.........................9
           Notes to Condensed Consolidated Financial Statements..............10
Item 2.  Management's Discussion and Analysis of Financial Condition and
          Results of Operations..............................................11
Item 3.  Qualitative and Quantitative Disclosures of Market Risk.............16
Item 4.  Internal Controls and Procedures....................................17


                                     PART II

Item 1.  Legal Proceedings...................................................17
Item 2   Changes in Securities. .............................................17
Item 3   Defaults Upon Senior Securities.....................................17
Item 4.  Submission of Matters to a Vote of Security Holders.................17
Item 5.  Other Information...................................................17
Item 6.  Exhibits and Reports on Form 8-K....................................17


SIGNATURES...................................................................18

CERTIFICATIONS...............................................................19





<PAGE>





                       NOTE ON FORWARD-LOOKING INFORMATION

This Form  10-QSB 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 receipt of a going concern
opinion from the Company's  independent  public  accountants  for the year ended
December 31, 2002;  (v) the ability of the Company to obtain capital and/or debt
financing to satisfy its  obligations  as of year end 2003 or the ability of the
Company to renegotiate the maturity of those  obligations to extend the maturity
date beyond year end; (vi) the ability of the Company to generate  revenues from
the sale of simulators within the Company's  existing  inventory;  and (vii) the
ability of the Company to control costs and execute its business plan.

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


<PAGE>




                              BASIS OF PRESENTATION

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

Subsequent to the merger and effective as of the same date, the Company acquired
pursuant to a Plan and  Agreement of Exchange all of the issued and  outstanding
shares of common stock and  preferred  stock of Perfect  Line,  Inc., an Indiana
corporation  ("Perfect Line"), from the Perfect Line shareholders in exchange on
a "share-for-share" basis for shares of the Company's common stock and preferred
stock. As a result of the share exchange,  the Perfect Line shareholders 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
until June 30, 2003.

All  information  in this  Form  10-QSB is  presented  from the  perspective  of
Interactive  Motorsports and  Entertainment  Corp. and its subsidiaries  Perfect
Line and Race Car Simulators, Inc. and not from the perspective of PIH.




<PAGE>


                                     PART I

Item 1. Condensed Financial Statements
<TABLE>
<CAPTION>


                         INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES
                             f.k.a. Pacific International Holding, Inc. and Subsidiary

                                       CONDENSED CONSOLIDATED BALANCE SHEETS
                               As of June 30, 2003 (Unaudited) and December 31, 2002

                                                                                 June 30,       December 31,
                                                                                   2003             2002
                                                                                   ----             ----
ASSETS
<S>                                                                              <C>            <C>
Cash and cash equivalents                                                        $   228,859    $   582,905
Trade accounts receivable                                                             40,229         86,734
Merchandise inventory                                                                 88,175        161,459
Prepaid insurance and other expenses                                                  30,542         29,706
                                                                                 -----------    -----------
         Total current assets                                                        387,805        860,804
                                                                                 -----------    -----------

Property and equipment, net of accumulated depreciation                              988,047      1,061,464
                                                                                 -----------    -----------

Deposits                                                                             103,516        101,574
Other intangible assets, net of accumulated amortization                              11,667         13,667
                                                                                 -----------    -----------
         Total other assets                                                          115,183        115,241
                                                                                 -----------    -----------

Total assets                                                                     $ 1,491,035    $ 2,037,509
                                                                                 ===========    ===========

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Liabilities:
     Accounts payable                                                            $ 1,115,965    $   349,210
     Accrued payroll and payroll taxes                                               107,857        162,894
     Sales tax payable                                                                50,940         65,423
     Gift certificates and customer deposits, net                                    117,617        141,617
     Accrued expenses                                                                336,476        524,197
     Accrued property taxes                                                           46,134         43,192
     Accrued interest                                                                 28,000              -
     Notes payable - current                                                         553,137              -
                                                                                 -----------    -----------
Total liabilities                                                                  2,356,126      1,286,533
                                                                                 -----------    -----------

Shareholders' equity (deficit):
     Common stock; $0.0001 par value, 200,000,000 shares authorized,
    61,360,000 (2003) and 61,300,000 (2002) shares issued and
    outstanding                                                                        6,136          6,130
     Convertible  preferred stock,  $0.0001 par value,  5,000,000 shares
    authorized, 4,745,456 shares issued and outstanding (See Note 5)                     475            475
     Additional paid-in capital                                                    3,816,982      3,653,445
     Retained deficit                                                             (4,688,684)    (2,909,074)
                                                                                  -----------    -----------
Total shareholders' equity (deficit)                                                (865,091)       750,976
                                                                                  -----------    -----------

Total liabilities and shareholders' equity                                       $ 1,491,035    $ 2,037,509
                                                                                 ===========    ===========
</TABLE>

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


<PAGE>


        INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES
            f.k.a. Pacific International Holding, Inc. and Subsidiary

                      CONDENSED CONSOLIDATED STATEMENTS OF
                 OPERATIONS For the three months ended June 30,
                      2003 (Unaudited) and 2002 (Unaudited)

                                                2003            2002
                                                ----            ----

Net sales                                   $  1,860,750    $  2,199,589

Total operating expenses                       2,841,925       2,836,415
                                            ------------    ------------

Operating loss                                  (981,175)       (636,826)


Interest expense                                  42,000          37,800
                                            ------------    ------------

Loss before income tax                        (1,023,175)       (674,626)


Provision for income tax                               -               -
                                            ------------    ------------

Net loss                                    $ (1,023,175)   $   (674,626)
                                            =============   =============

Net loss per Common Share:
         Basic                                    $(0.02)
                                                  =======
         Diluted                                  $(0.02)
                                                  =======
Weighted average shares outstanding:
         Basic                                61,355,055
                                              ==========
         Diluted                              61,355,055
                                              ==========

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


<PAGE>


        INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES
            f.k.a. Pacific International Holding, Inc. and Subsidiary

                      CONDENSED CONSOLIDATED STATEMENTS OF
                  OPERATIONS For the six months ended June 30,
                      2003 (Unaudited) and 2002 (Unaudited)

                                                      2003            2002
                                                      ----            ----

Net sales                                           $3,981,064       $4,708,462

Total operating expenses                             5,701,242        5,340,790
                                                     ---------        ---------

Operating loss                                      (1,720,178)        (632,328)


Interest expense                                        59,432           62,594
                                                   -----------           ------

Loss before income tax                              (1,779,610)        (694,922)


Provision for income tax                                     -                -
                                                   -----------       ----------

Net loss                                           $(1,779,610)      $ (694,922)
                                                   ============      ===========

Net loss per Common Share:
         Basic                                          $(0.03)
                                                        =======
         Diluted                                        $(0.03)
                                                        =======
Weighted average shares outstanding:
         Basic                                      61,334,144
                                                    ==========
         Diluted                                    61,334,144
                                                    ==========

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


<PAGE>

<TABLE>
<CAPTION>


        INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES
            f.k.a. Pacific International Holding, Inc. and Subsidiary

                 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
                  SHAREHOLDERS' EQUITY For the six months ended
                 June 30, 2003 (Unaudited) and 2002 (Unaudited)




                                                                Member's        Member's         Total
                                                                Units and       Retained        Member's
                                                                 Dollars         Deficit         Deficit
                                                                 -------         -------         -------

<S>                                                              <C>           <C>            <C>
Balance at December 31, 2001                                     $650,000      $(719,854)     $(69,854)

Net loss                                                                -       (694,922)     (694,922)

Member contributions                                               39,393              -        39,393


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

Balance at June 30, 2002                                      $ 1,089,393    $(1,414,776)   $  (325,383)
                                                              ===========    ============   ============

</TABLE>
<TABLE>
<CAPTION>


                            Common Stock            Preferred Stock
                            ------------            ---------------      Additional                        Total
                                                                          Paid-In        Retained       Shareholders'
                          Shares      Dollars      Shares    Dollars      Capital         Deficit          Equity
                          ------      -------      ------    -------      -------         -------          ------


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

Net loss                         -          -            -        -               -      (1,779,610)    (1,779,610)

Issuance of
common stock for
consulting
services                    60,000          6            -        -          16,674               -         16,680


Issuance of
secured notes
with warrants                    -          -            -        -         146,863               -        146,863
                        ----------     ------    ---------     ----       ---------      -----------     ----------


Balance at June
30, 2003                61,360,000     $6,136    4,745,456     $475       3,816,982      (4,688,684)     $(865,091)
                        ==========     ======    =========     ====       =========      ===========     ==========

</TABLE>

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


<PAGE>
<TABLE>
<CAPTION>

                 INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES
                     f.k.a. Pacific International Holding, Inc. and Subsidiary

                               CONDENSED CONSOLIDATED STATEMENTS OF
                          CASH FLOWS For the six months ended June 30,
                              2003 (Unaudited) and 2002 (Unaudited)


                                                                          2003              2002
                                                                          ----              ----
<S>                                                                   <C>            <C>
  Cash flows from operating activities
     Net loss                                                         $(1,779,610)   $  (694,922)
      Adjustments to reconcile net loss to net cash provided by
       (used in) operations:
        Depreciation, amortization, and other                             184,624        169,899
        Common stock issued for consulting services                        16,680              -
        Provision for inventory obsolescence                               10,000              -
      Net changes in operating assets and liabilities:
       Trade accounts receivable                                           46,505        (30,710)
       Merchandise inventory                                               63,284       (111,381)
       Related party receivables                                                -         38,213
       Prepaid expenses and other current assets                             (836)        16,372
       Accounts payable                                                   766,755         18,029
       Accrued payroll and payroll taxes                                  (55,037)       (16,207)
       Sales tax payable                                                  (14,483)       (45,734)
       Gift certificates and customer deposits                            (24,000)       (39,375)
       Accrued expenses                                                  (187,721)        48,096
       Accrued property taxes                                               2,942         27,000
       Accrued interest                                                    28,000         42,900
       Other assets and liabilities                                             -         49,712
                                                                      -----------    -----------
         Net cash used in operations                                    (942,897)      (528,108)
                                                                      -----------    -----------

  Cash flows from investing activities:
     Decrease in deposits                                                 (1,942)       (27,013)
     Purchase of property and equipment                                 (109,207)       (42,974)
                                                                      -----------    -----------
         Net cash used in investing activities                          (111,149)       (69,987)
                                                                      -----------    -----------

  Cash flow from financing activities:
     Proceeds from issuance of secured notes with warrants               700,000              -
     Contributions by members                                                  -         39,393
     Net borrowings on bank loan                                               -         92,229
                                                                      -----------    -----------
         Net cash provided by financing activities:                      700,000        131,622
                                                                      -----------    -----------

  Decrease in cash and cash equivalents                                 (354,046)      (466,473)
  Cash and cash equivalents, beginning of period                         582,905        778,629
                                                                     -----------    -----------
  Cash and cash equivalents, end of period                           $   228,859    $   312,156
                                                                     ===========    ===========


  Supplemental disclosure of non-cash transactions:

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

</TABLE>

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




<PAGE>


        INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP. AND SUBSIDIARIES
            f.k.a. Pacific International Holding, Inc. and Subsidiary

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 June 30, 2003 and December 31, 2002,
     and the unaudited  consolidated  statements of operations for the three and
     six months ended June 30, 2003 and 2002 and the consolidated  statements of
     cash flows and  changes in  stockholder's  equity for the six months  ended
     June 30, 2003 and 2002, 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 make the
     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 and six months ended June
     30, 2003 are not necessarily indicative of the results that may be expected
     for the full year ending December 31, 2003 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.

NOTE 2 - DEBT AND CREDIT ARRANGEMENTS

During the first quarter 2003,  the Company was  successful in obtaining  bridge
financing  totaling   $700,000.   On  March  7,  2003,  Perfect  Line,  Inc.,  a
wholly-owned subsidiary of the Company, issued Secured Bridge Notes and warrants
due  December  31, 2003 (the "Bridge  Notes") in the  aggregate  total amount of
$700,000 to one institutional investor and three related-party investors.

Under  the  terms  of the  Bridge  Notes,  Ropart  Asset  Management  Fund,  LLC
("Ropart"),  Tampa Bay  Financial,  Inc.  (related-party),  William R. Donaldson
(related-party)  and Erik R.  Risman  (related-party),  are due to  receive  the
principal  sums of  $500,000,  $100,000,  $50,000 and $50,000,  respectively  on
December 31, 2003. Interest will be paid in cash on the unpaid principal balance
existing prior to maturity at an annual rate of twelve  percent (12%).  Interest
on the unpaid  principal under the Bridge Notes is due and payable in arrears on
the first day of each month,  commencing April 1, 2003. In addition,  the Bridge
Note  holders are  entitled to stock  payments in the amount of one percent (1%)
per month payable upon maturity of the Bridge Notes.

Ropart and Mr. Risman also received warrants entitling them to purchase from the
Company, at an exercise price of $0.17 per share,  2,941,176 and 294,118 shares,
respectively,  of the Company at any time before the earlier of June 30, 2004 or
six  months  following  payment  of the  Bridge  Note in  full.  Management  has
determined  the value of the  Ropart  and  Risman  warrants  to total  $146,863.
Accordingly,  the balance in notes payable on the accompanying condensed balance
sheet at June 30, 2003 is $553,137.

NOTE 3 - LICENSING AND CONSULTING AGREEMENTS

The Company has an exclusive licensing  agreement with the National  Association
for Stock Car Auto Racing,  Inc.  ("NASCAR") for  location-based  entertainment,
which  allows  the  Company  to use the  NASCAR  name and  logo.  The  Company's
confidential licensing agreement with NASCAR required annual royalty payments in
2002 and  requires  quarterly  royalty  payments in 2003  through  2009 based on
simulator,  merchandise,  food,  beverage,  sponsor, and remote site revenues at
varying percentages.  The licensing agreement has been extended through December
31,  2009 as of July 24,  2003 and the  exclusivity  has  broadened  to  include
"operator assisted" sites such as amusement parks, family entertainment centers,
casinos, auto malls, and other similar venues.

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



<PAGE>


NOTE 4 - MANAGEMENT'S PLANS

For the year ended  December 31, 2002,  the first full year of operations  since
the Company's acquisition of the racing centers, the Company's 12 racing centers
generated revenue of approximately $9.6 million. Operating without the necessary
capital to properly market and merchandise these stores,  sales performance fell
short of expectations, resulting in a net loss of approximately $2.2 million for
the year ended December 31, 2002.  Losses have continued in the first and second
quarters  of  2003  with  a  net  operating  loss  of  $1,779,610  on  sales  of
approximately $4.0 million for the first half of 2003. If the Company is able to
obtain proper  funding,  which cannot be assured,  the Company plans to increase
the revenue  from the existing  centers by  increasing  the average  transaction
value,  the percentage of sales  generated from group events,  and improving the
retention level of existing  customers by enhancing the gaming  experience.  The
Company anticipates accomplishing this through marketing initiatives and systems
and  technology  improvements.  In  addition,  the Company  plans to continue to
deploy its simulator assets in revenue sharing  arrangements  with third parties
and to sell its excess inventory of simulators.

As previously  reported,  the equity financing of $2,610,050  received in August
2002 has been depleted.  The Company  received net proceeds of $687,500 from the
issuance of $700,000 of Secured  Bridge  Notes and  warrants in March 2003 which
has also  been  depleted.  The  Company  believes  the  projected  level of cash
receipts from simulator and merchandise sales will not be sufficient to fund the
daily operations of the business through 2003.  Management is seeking additional
sources of short-term funds to continue  operations  until additional  long-term
equity and/or debt financing can be established.  Management  believes that some
combination  of  simulator   sales  (from   existing   inventory  of  owned  and
unencumbered simulators),  equity financing and/or collateralized debt financing
will generate  enough capital to sustain the business,  although there can be no
assurances.

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

NOTE 5 - SUBSEQUENT EVENT

On August 2, 2003, the Company's  Preferred Stock issued and outstanding at that
date  converted  to Common  Stock based on the average of the average of the bid
and ask prices for the ten  trading  days prior to August 2, 2003 which  average
price was $0.147 per common share. Prior to the conversion,  the Company reached
an  agreement  with  two  of  the  major  holders  of the  Preferred  Stock  who
collectively held 96% of the outstanding  Preferred Shares. Mr. James M. Matheny
who held 2,272,728  shares of Preferred  Stock agreed to a conversion rate based
on $0.20 per Common Share which resulted in his Preferred Stock  converting into
11,363,640  shares of Common Stock. Ms. Vikki Cook agreed to defer conversion of
her  Preferred  Stock until January 1, 2004 at which time the  conversion  price
will be $1.00 per share unless the Company is unsuccessful in obtaining at least
$1,500,000  in debt  financing  by January 1, 2004 in which case the  conversion
rate will be $0.20 per share  consistent with Mr. Matheny.  The remainder of the
holders of preferred  stock holding a total of 200,000 shares of Preferred Stock
converted at $0.147 per share into 1,360,543 shares of common stock.  Therefore,
the conversion of the Preferred  Stock on August 2, 2003 has resulted in a total
of 12,724,184  additional shares of Common Stock outstanding as of the filing of
this Form 10-QSB. Including 40,000 shares issued to Mr. Tony Stewart in July and
August 2003 for consulting  services,  the total common shares outstanding as of
the filing of this quarterly report on Form 10-QSB is 74,124,184.

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 on August 2, 2002.

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

For the year ended  December 31, 2002,  the first full year of operations  since
the  Company's  acquisitions  of the racing  centers,  the  Company's  12 racing
centers generated revenue of approximately  $9.6 million.  Operating without the
necessary  capital  to  properly  market and  merchandise  these  stores,  sales
performance fell short of expectation,  resulting in a net loss of approximately
$2.2 million for the year ended December 31, 2002.  Losses have continued in the
first  half  of 2003  with a net  operating  loss  of  $1,779,610  on  sales  of
approximately  $4.0 million.  If the Company is able to obtain  proper  funding,
which  cannot be assured,  the Company  plans to increase  the revenue  from the
existing centers by increasing the average transaction  dollars,  the percentage
of sales  generated  from group events,  and  improving  the retention  level of
existing customers by enhancing the gaming experience.  The Company will do this
through marketing initiatives and systems and technology improvements.

IMTS's 14 racing centers are located in high traffic, high profile locations.
<TABLE>
<CAPTION>
           Location                      Market              Sq. Ft.          Simulators
      -------------------         ------------------      -----------         ----------
<C>    <C>                        <C>                       <C>               <C>
1)     Mall of America            Minneapolis, MN           5,899             12 racecars
2)     Concord Mills              Charlotte, NC             7,875             14 racecars
3)     Mall of Georgia            Atlanta, GA               5,895             12 racecars
4)     Katy Mills                 Houston, TX               6,048             12 racecars
5)     RiverTown Crossing         Grand Rapids, MI          6,101             10 racecars
6)     Crossgates Mall            Albany, NY                4,167              8 racecars
7)     Riverchase Galleria        Birmingham, AL            6,188             10 racecars
8)     Universal CityWalk         Los Angeles, CA           5,067             12 racecars
9)     Opry Mills                 Nashville, TN             5,992             12 racecars
10)    Woodfield                  Chicago, IL               6,044             12 racecars
11)    Palisades Center           Nyack, NY                 5,700             12 racecars
12)    Arbor Place (1)            Douglasville, GA          5,055             10 racecars
13)    NASCAR SpeedPark (2)       Sevierville, TN                              6 racecars
14)    Pavilion Arcade (2)(3)     Myrtle Beach, SC                             5 racecars
</TABLE>
       (1)  Please note that the Arbor Place location was closed in July 2003.
       (2)  Denotes a revenue share racing center.
       (3)  This revenue share location was opened July 3, 2003.

History

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

NSMS  racing   centers   were   originally   owned  and   developed  by  Silicon
Entertainment,  Inc.  ("SEI").  SEI opened its first site in August  1997 at the
Mall of  America  in  Bloomington,  Minnesota,  the  largest  mall in the United
States.  SEI raised large sums of initial  capital,  of which,  according to SEI
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  re-opened  12 of the racing  centers,  which  utilize  136 of the
simulators,  between July 2001 and August 2002.  The Company has  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
simulation of the sights, sounds and motions experienced by driving in an actual
NASCAR race. The proprietary motion-based platform that the racecar simulator is
mounted on is among the other assets that were  acquired and licensed as part of
the transaction.

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

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

The  Company's  primary  focus  is to own  and  operate  the  largest  chain  of
officially-licensed,   NASCAR-branded  entertainment  and  retail  merchandising
stores in the world. The Company  believes that with the correct  combination of
marketing, location, and product upgrades, it can build a national following and
a profitable enterprise.

NASCAR racing is currently the #1 spectator sport in America. The Company has an
exclusive license agreement with NASCAR for location-based and operator-assisted
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 Winston Cup teams
and drivers,  ranging from established  stars such as Dale Earnhardt,  Jr., Tony
Stewart,  and Dale  Jarrett,  to rising  stars like Matt Kenseth and Kurt Busch.
These  licensing  agreements and the use of NASCAR related  identities and marks
provide immediate name recognition, credibility, and authenticity to NSMS.

The  Company  has  integrated  these  license   agreements  with   sophisticated
proprietary  racing  simulator  technology  to create a chain of  NASCAR-themed,
family-oriented,  racing  entertainment  and  retail  merchandise  centers.  The
Company's  facilities are in some of America's premier shopping malls, giving us
access to over 178 million annual site visits from potential customers.

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

NSMS Racing  Centers are operated as combined  racing  entertainment  and retail
merchandise  stores. In addition to providing  customers with the opportunity to
drive  Winston Cup  racecars,  NSMS Racing  Centers  also feature a selection of
officially-licensed  NASCAR  merchandise.  Independent  research  indicates that
NASCAR fans buy more  merchandise than fans from almost any other sport and they
are also the most  brand-loyal.  These  characteristics  helped boost  worldwide
NASCAR-branded  retail  sales  from  approximately  $82  million in 1990 to $1.5
billion in 2002.  The  Company's  NSMS racing  centers are the largest  chain of
officially  licensed,  NASCAR-branded  interactive  entertainment  stores in the
world, and offer its customers the most popular NASCAR merchandise available.

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

The Company has entered into an agreement,  through its wholly owned subsidiary,
Perfect Line,  Inc.,  with Burroughs and Chapin  Company of Myrtle Beach,  South
Carolina  for  the  installation  of 10  proprietary  simulators  at the  NASCAR
SpeedPark Smoky Mountains and the Myrtle Beach Pavilion  Amusement  Park's Ocean
Front Arcade.  Together,  both companies are studying  further  opportunities to
install these unique NASCAR simulators in other Burroughs and Chapin properties.
As of the date of this  filing,  both  the  Myrtle  Beach  and  Smoky  Mountains
locations  are open for racing and the  Company  and  Burroughs  and Chapin have
announced  plans for six simulators to be placed within the NASCAR  SpeedPark at
the St. Louis Mills Mall to open in November 2003.

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  what the  Company
believes will be  significant  revenue  enhancing  game features that target the
Company's core customers.

The Company is pursuing  additional  revenue  sharing  agreements  such as those
entered into with  Burroughs  and Chapin as described  above and plans to expand
this  activity,  assuming  the  appropriate  level of  financing  is obtained as
discussed  above.  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 will
provide the  simulators at cost  (expected to be financed  through a third party
leasing firm) and the host organization (owner-operator) will provide the space,
required site build-out, and day-to-day operations staffing. The Company's first
installation  with Burroughs and Chapin opened in mid-April 2003 in Sevierville,
Tennessee and the second in Myrtle Beach, South Carolina in early July 2003.

The Company has established a subsidiary, Race Car Simulators, Inc., which, upon
the receipt of future funding will develop, manufacture, and sell its
motion-based simulators to the commercial entertainment/amusement market.
Exploiting this opportunity may create another attractive revenue stream for the
Company. Race Car Simulators, Inc. has hired an experienced sales manager, Mr.
Rich Wheeler, and has a representation agreement with veteran international
amusement park executive Mr. Alain Baldacci for several international markets
including Brazil, Japan, Australia, Argentina, Chile, and Korea.

Within its existing  racing  centers,  the Company  plans to improve each racing
center's  profitability  include increasing the average price per transaction by
encouraging customers to select multiple race packages, increasing the amount of
traffic in the stores through advertising, increasing the amount of group sales,
and improving the retention level of existing  customers by enhancing the gaming
experience through  technology  initiatives and the addition of game parameters.
Through this strategy  IMTS believes it will be less reliant on the  acquisition
of new customers.

Overview of Financial Position and Results of Operations

The Company has not generated a profit nor has it generated sufficient cash flow
since inception to fund operations.  Since inception on May 31, 2001 and through
June  30,  2003,  the  Company  has   accumulated   aggregate   losses  totaling
$(4,688,684).

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,  and  $700,000  received  in March 2003 from the sale of  Secured  Bridge
Notes. The Company is in the process of soliciting additional debt and/or equity
financing to fund current operating  deficits and the Company's growth plan. See
further discussion under "Liquidity and Capital Resources" below.

During the three months ended June 30, 2003,  the Company had total  revenues of
$1,860,750  compared to $2,199,589 for the three months ended June 30, 2002. The
decrease in revenue of 15.4% is attributed to  deterioration  in the economy and
the related impact on  discretionary  consumer  spending and the lack of capital
available to the Company for marketing and the purchase of  merchandise.  During
the second quarter of 2003, the Company has experienced a decline in the average
sales per week per store on a  comparable  basis  from  $15,354  for the  second
quarter  of 2002 to an average of  $12,504  for the  second  quarter of 2003,  a
decrease of 18.6%.

Review of Consolidated Financial Position

Cash and Cash Equivalents: The Company had $228,859 in cash and cash equivalents
as of June 30, 2003  compared  with $582,905 at December 31, 2002, a decrease of
$354,046.  This  decrease  in cash  was  caused  principally  by the net loss of
$1,023,175 for the first half of 2003 offset by the increase in accounts payable
of $766,755 from December 31, 2002 to June 30, 2003.  See further  discussion of
the cash position of the Company in "Liquidity and Capital Resources" below.

Trade Accounts  Receivable:  These are primarily credit card receivables and the
lower balance of $40,229 at June 30, 2003 versus $86,734 at December 31, 2002 is
due to the lower volume of business  transacted  in June 2003 versus the holiday
shopping season in December 2002 when sales are at their seasonal peak.

Merchandise  Inventory:  At June 30, 2003,  merchandise  inventory  decreased by
$73,284 from December 31, 2002 levels due primarily to insufficient capital with
which to purchase merchandise.

Accounts  Payable and Accrued  Expenses:  Trade accounts  payable have increased
$766,755 to  $1,115,965  at June 30, 2003 from a balance of $349,210 at December
31, 2002.  This increase is due to the  non-payment  of rent and other  expenses
caused by the  decline in sales in the first and  second  quarters  of 2003.  In
addition,  certain items were moved from accrued expenses to accounts payable as
the exact amounts became known.

Notes Payable:  The Company  issued  secured bridge notes and warrants  totaling
$700,000  in  March  2003  as  further  discussed  in  Note 2 to  the  Condensed
Consolidated  Financial  Statements.  For accounting  purposes, a portion of the
total amount  received of $146,863 was  attributed to warrants and the remainder
of $553,137 was  attributed to the bridge notes,  although the total amounts due
under the bridge notes is $700,000 plus all associated interest.  The notes bear
interest at a rate of 12% per annum. All amounts due under the notes are due and
payable December 31, 2003.

Other  Liabilities:  Accrued  payroll and payroll  taxes,  sales taxes  payable,
unearned  revenue,  and other  accrued  expenses  fluctuate  with the  volume of
business, timing of payments, and the day of the week on which the period ends.

Review of Consolidated Results of Operations

Sales for the three  months  ended June 30,  2003 were  $338,839  lower than the
comparable  period in 2002 due  primarily to continued  softening of the economy
and  the  associated  impact  on  consumer  spending  and to  minimal  marketing
expenditures  by the  Company  due to the lack of  adequate  capital  resources.
During the second quarter of 2003, the Company has  experienced a decline in the
average  sales per week per store on a  comparable  basis from  $17,862  for the
second  quarter of 2002 to an average of $14,501 for the second quarter of 2003,
a decrease of 18.8%. Management believes this decrease is primarily attributable
to a lack of funding  which  resulted in  decreased  merchandise  inventory  and
decreased  marketing  initiatives  and  to the  difficult  consumer  and  retail
environment in 2003.

Operating  expenses for the three months ended June 30, 2003 were  approximately
153% of net sales,  compared to approximately  129% for the comparable period in
2002.  The primary  reasons for the  increase in 2003 are the large  decrease in
sales  which  results in a higher  percentage,  as most costs are fixed,  and an
increase in corporate  overhead  expenses which were  established  following the
funding of the business in August 2002.

Sales for the six  months  ended  June 30,  2003 were  $727,398  lower  than the
comparable  period in 2002 again due  primarily  to  continued  softening of the
economy and the associated  impact on consumer spending and to minimal marketing
expenditures by the Company and reduced merchandise  inventory levels due to the
lack of adequate capital  resources.  During the first half of 2003, the Company
has  experienced  a  decline  in the  average  sales  per  week  per  store on a
comparable  basis  from  $16,604  for the first  half of 2002 to an  average  of
$13,503  for the first half of 2003,  a decrease of 18.7%.  Management  believes
this decrease is primarily attributable to a lack of funding which resulted in a
lack of  promotion  and the ability to  purchase  merchandise  coupled  with the
difficult consumer and retail environment in 2003.

Operating  expenses  for the six months  ended June 30, 2003 were  approximately
143% of net sales,  compared to approximately  113% for the comparable period in
2002.  The primary  reasons for the  increase in 2003 are the large  decrease in
sales  which  results in a higher  percentage,  as most costs are fixed,  and an
increase in corporate  overhead  expenses which were  established  following the
funding of the business in August 2002.

The Company is currently in  negotiations  with its landlords to reduce rents in
its  poor  performing  locations  and has  reduced  certain  corporate  overhead
expenses in an effort to return to monthly profitability and improved cash flow.
In order to cut overhead  expenses,  the President and Chief Operating  Officer,
Mr.  Erik  Risman,  resigned  effective  July 1, 2003.  In  addition,  the Chief
Financial Officer,  Chief Marketing  Officer,  and Chief Technology Officer have
gone on reduced work  schedules and the Company has  eliminated  its group sales
division  which  resulted  in the  elimination  of  six  positions.  The  salary
reductions  above  have  netted a  monthly  savings  beginning  in July  2003 of
approximately $60,000.

Although  no written  agreements  have been  executed,  the  Company has reached
definitive  agreements  with  several  of its  landlords  to defer past due rent
amounts owed at June 30, 2003 and to begin paying rent based on a percentage  of
gross sales for the month of July 2003 forward.  Upon the  finalization of these
agreements,  the  Company  anticipates  its  rent  expense  will be  reduced  by
approximately $85,000 per month over the next twelve months.

Assuming the Company is successful at raising the next level of investment,  the
Company plans to develop the next generation  simulator and begin  production by
the end of the year. The Company is exploring selling its existing  inventory of
excess simulators both domestically and  internationally  which will benefit the
company's  revenue and bottom line. Mobile units and open wheel simulators (Indy
or F-1 style) are also being  considered  in order to meet the market demand for
such products.


<PAGE>


Liquidity and Capital Resources

The primary source of funds available to the Company are receipts from customers
for simulator and merchandise  sales,  proceeds from equity offerings  including
the $2,610,050  received in August 2002,  proceeds from debt offerings including
the $700,000 in Secured  Bridge Notes and warrants  issued in March 2003,  loans
from  shareholders,  sale of simulators  from existing  inventory,  and possible
future financings.

As of the filing of this Form  10-QSB,  the net  proceeds of  $687,500  from the
Secured  Bridge  Notes and  warrants  financing  received in March 2003 has been
depleted and the Company  believes the  projected  level of cash  receipts  from
simulator  and  merchandise  sales  will not be  sufficient  to fund  the  daily
operations  of the  business  through  2003.  A  difficult  consumer  and retail
environment  and the lack of  merchandise  in the stores  have  created  further
challenges at increasing the sales volume in July and August 2003. Management is
seeking  additional  sources of short-term  funds to continue  operations  until
additional long-term equity and/or debt financing can be established.

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

Since  inception,  the Company's  short-term  and long-term  plans have included
raising a level of  investment  adequate to  accomplish  the  objectives  of the
business.  The required  level of financing  has not yet been  achieved.  Absent
additional funding, the Company believes it may not have sufficient resources to
satisfy cash  requirements  for the next twelve  months or even the remainder of
2003. The Company's ability to raise the necessary financing will depend on many
factors,  including  the economic and market  conditions  prevailing at the time
financing is sought.  Management  believes that the investment climate since the
Company  commenced  operations has generally been  unfavorable,  particularly to
newer  enterprises,  which has hindered the Company in obtaining  its  financing
goals.  Nonetheless,  management  believes  that the recently  reduced labor and
occupancy  expenses,  combined with some  combination  of simulator  sales (from
existing  inventory  of owned and  unencumbered  simulators),  equity  financing
and/or  collateralized debt financing will allow the Company to achieve improved
cash flow and monthly  profitability;  however,  there can be no assurance  that
additional  financing  will be available  or, if  available,  that it will be on
terms acceptable to the Company.

During the six months  ended June 30,  2003,  the  operating  activities  of the
Company used net cash of $942,897  compared to net cash used of $528,108 for the
comparable  period  in  2002.  The  majority  of the  increase  in cash  used in
operations  was  due to an  increase  in net  operating  loss  before  taxes  of
approximately $1,084,688 offset by the large increase in accounts payable.

During the six months ended June 30, 2003, the Company used $111,149 of net cash
in  investing  activities  compared  with  $69,987 of net cash used in investing
activities  during the  comparable  period in 2002.  In 2003,  the net cash used
relates primarily to the capitalization of internally developed software for the
new  Indianapolis  Motor  Speedway  racetrack  and  other  enhancements  to  the
Company's proprietary racing simulation software.

The  Company  intends  to use the debt and equity  markets  to raise  sufficient
capital to fund its operating  deficits  while it refines its business model and
technology  and then market the new offering to  customers.  All of the $700,000
cash provided through financing  activities during the six months ended June 30,
2003  represents the receipt of proceeds from the issuance of the Secured Bridge
Notes and warrants in March 2003.

As of June 30, 2003, the Company had cash and cash equivalents totaling $228,859
compared to $582,905 at December 31, 2002.  Current assets  totaled  $387,805 at
June 30, 2003  compared to $860,804 on December  31, 2002.  Current  liabilities
totaled  $2,356,126 on June 30, 2003  compared  with  $1,286,533 on December 31,
2002. As such, these amounts represent an overall decrease in working capital of
$1,542,592 from December 31, 2002.

ITEM 3. Qualitative and Quantitative Disclosures about Market Risk

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



<PAGE>


ITEM 4. Internal Controls and Procedures

     (a)  Evaluation of disclosure controls and procedures: The term "disclosure
          controls and procedures" is defined in the Securities  Exchange Act of
          1934.  These rules refer to the  controls  and other  procedures  of a
          company  that are designed to ensure that  information  required to be
          disclosed  by a  company  in  the  reports  that  it  files  with  the
          Securities  and  Exchange  Commission  (SEC) is  recorded,  processed,
          summarized and reported within required time periods.  The Company has
          controls and  procedures  in place for the  gathering and reporting of
          business,  financial and other  information in SEC filings.  The Chief
          Executive  Officer and Chief  Financial  Officer  have  evaluated  the
          effectiveness of the disclosure controls and procedures at the Company
          and its  subsidiaries  as of the  end of the  period  covered  by this
          Quarterly  Report.  Based  on this  evaluation,  our  Chief  Executive
          Officer  and  Chief  Financial   Officer  have  concluded  as  of  the
          evaluation  date that such  controls  and  procedures  were  operating
          effectively.   Further,   they  have   concluded  that  there  are  no
          significant  deficiencies  in the  design  or  operation  of  internal
          controls  that  could  significantly  affect  our  ability  to record,
          process,  summarize or report  financial data.
     (b)  Changes  in  internal  controls:  Subsequent  to the  evaluation  date
          referred to above, there have been no significant  changes in internal
          controls or in other  factors  that could  significantly  affect those
          controls.

                                     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 June 30, 2003 and
as of the filing of this  Quarterly  Report on Form  10-QSB,  the Company is not
aware of any material legal actions directed against the Company.

Item 2.  Changes in Securities

In April 2003,  30,000 shares of common stock were issued under a Form S-8 filed
on February 13, 2003 for consulting services.

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.

Item 6.   Exhibits and Reports on Form 8-K

A.   Exhibits.

     31.1 Certification  of  the  principal   executive   officer,   William  R.
          Donaldson,  pursuant to 15 U.S.C.  Section 10A, as adopted pursuant to
          Section 302 of the  Sarbanes-Oxley  Act of 2002.
     31.2 Certification  of the  principal  financial  officer,  Mark  A.  Paul,
          pursuant to 15 U.S.C.  Section 10A, as adopted pursuant to Section 302
          of the Sarbanes-Oxley Act of 2002.
     32.1 Certification  of  the  principal   executive   officer,   William  R.
          Donaldson,  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
          Section 906 of the Sarbanes-Oxley Act of 2002

     32.2 Certification  of the  principal  financial  officer,  Mark  A.  Paul,
          pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
          of the Sarbanes-Oxley Act of 2002.

B.   Reports on Form 8-K.

     The Registrant  reported on June 6, 2003 on Form 8-K that Mr.  Frederick C.
     Treadway had resigned from the Company's Board of Directors,  effective May
     27, 2003.


                                   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: August 19, 2003              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: August 19, 2003              By:  /s/ William R. Donaldson
                                             -----------------------------------
                                             William R. Donaldson
                                             Chairman of the Board and
                                             Chief Executive Officer
                                             (Principal Executive Officer)

     Date: August 19, 2003              By:  /s/ Mark A. Paul
                                             -----------------------------------
                                             Mark A. Paul
                                             Vice President, Chief Financial
                                             Officer and Treasurer
                                             (Principal Financial Officer)