UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 
 FORM 10-Q
 
  þQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
  For the quarterly period ended March 31, 2010
   ̈TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
  for the transition period from ______to _________.
  Commission file number 000-25385
  
 POWER SPORTS FACTORY, INC.
 (Exact name of registrant as specified in its charter)
 
 Minnesota
41-1853993(State or Other Jurisdiction

of Incorporation or Organization)
(I.R.S. Employer

Identification No.)
 
 300 Walnut Street, Philadelphia, PA 19106
 (Address of Principal Executive Office) (Zip Code)
  (267-546-9073)
 (Registrant’s Telephone number, Including Area Code)
  
 Check whether the issuer (1) filed all reports  required to be filed by Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter period that the registrant was required to file such reports),  and (2) has been subject to such filing requirements for the past 90 days. Yes  þ No  ̈
  Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ̈  No  ̈
  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a smaller reporting company.  (Check One):
  Large accelerated filer  ̈ Accelerated filer  ̈ Non-accelerated filer oSmaller reporting company þ
 (Do not check if a smaller reporting company)
  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.  Yes   ̈ No  þ
  The number of shares outstanding the issuer's common stock, no par value, was 100,000,000 as of June 22, 2010.
  
 
 
  Table of ContentsPART I FINANCIAL INFORMATIONItem 1.
Financial Statements
1Item 2.
Management's Discussion and Analysis or Plan of Operations
18Item 3.
Quantitative and Qualitative Disclosures About Market Risk
20Item 4T.
Controls and Procedures
20PART II OTHER INFORMATIONItem 1.
Legal Proceedings
21Item 1A.
Risk Factors
22Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
22Item 3.
Defaults Upon Senior Securities
22Item 4.
(Removed and Reserved)
23Item 5.
Other Information
23Item 6.
Exhibits
23EXHIBIT INDEX
25
  i
  Item 1.  Financial Statements
 Power Sports Factory, Inc.
  I N D E X
 
 Page No.Consolidated Balance Sheets as at March 31, 2010 and December 31, 2009 (Unaudited)
2Consolidated Statements of Operations for the Three Months EndedMarch 31, 2010 and 2009 (Unaudited)
3Consolidated Statements of Stockholders' DeficiencyFor the Period Ended March 31, 2010 (Unaudited)
4Consolidated Statements of Cash FlowsFor the Nine Months Ended March 31, 2010 and 2009 (Unaudited)
5-6Notes to Unaudited Consolidated Financial Statements
7
  
  PART I—FINANCIAL INFORMATION
  Item 1.
Financial Statements.
  Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America have been condensed or omitted from the following consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission.  It is suggested that the following consolidated financial statements be read in conjunction with the year-end consolidated financial statements and notes thereto included in the Company's Form 10-K for the year ending December 31, 2009.
  The results of operations for the three months ended March 31, 2010 and 2009 are not necessarily indicative of the results for the entire fiscal year or for any other period.
   1
 
 POWER SPORTS FACTORY, INC.
 
 FINANCIAL STATEMENTS
  CONSOLIDATED BALANCE SHEETS
 (UNAUDITED)
 
 ASSETS

March 31,


December 31,2010


2009Current Assets:Cash

$
947


$
-Accounts receivable - net of allowance of $46,362and $24,000


47,118



32,975Inventory


664,305



932,285Prepaid expenses


20,462



6,129Total Current Assets


732,832



971,389Property and equipment-net


8,770



9,918TOTAL ASSETS

$
741,602


$
981,307LIABILITIES AND STOCKHOLDERS' DEFICIENCYCurrent Liabilities:Accounts payable

$
2,685,425


$
2,840,622Account payable to related party


3,575



2,954Notes payable to related party


6,160



19,508Current portion of long-term debt


240,554



326,796Convertible debt


300,000



300,000Accrued expenses


1,178,404



1,099,404Dividends Payable


477,488



477,488Customer deposits


36,048



37,048Total Current Liabilities


4,927,654



5,103,820Stockholders' Deficiency:Preferred stock; stated at, as no par value - authorized50,000,000 shares, Series B Convertible PreferredStock - outstanding  -0- shares at March 31, 2010and December 31, 2009


-



-Common stock, stated at, as no par value - authorized100,000,000 shares;outstanding 83,359,490 shares at March 31, 2010and 77,725,647 shares at December 31, 2009


8,365,076



8,206,061Additional paid-in capital


456,000



456,000Stock to be issued


31,053



-Deficit


(13,038,181
)


(12,784,574
)Total Stockholders' Deficiency


(4,186,052
)


(4,122,513
)TOTAL LIABILITIES ANDSTOCKHOLDERS' DEFICIENCY

$
741,602


$
981,307
 
 See Notes To Unaudited Consolidated Financial Statements
 2
  POWER SPORTS FACTORY, INC.
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 For the Three Months EndedMarch 31,2010


2009Net sales

$
249,508


$
132,189Costs and Expenses:Cost of sales


287,496



151,593Selling, general and administrativeexpenses


164,720



967,580452,216



1,119,173Loss from operations


(202,708
)


(986,984
)Other income and  expenses:Acretion of beneficial conversion feature


-



(12,313
)Interest expense


(50,899
)


(71,753
)(50,899
)


(84,065
)Loss before benefitfrom income taxes


(253,607
)


(1,071,049
)Income tax benefit


-



-Net  loss

$
(253,607
)

$
(1,071,049
)Loss per common share - basicand diluted

$
(0.00
)

$
(0.03
)Weighted average common shares -Basic and diluted


78,273,333



37,531,818
   3
   POWER SPORTS FACTORY, INC.
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
 (UNAUDITED)
 Common Stock


Additional


ValuePreferred


Stated





Stated


Paid-In


0f StockStock


Value


Shares


Value


Capital


to be Issued


Deficit


TotalBalance at January 1, 2009


-


$
-



31,385,188


$
5,476,228


$
456,000


$
-


$
(10,475,799
)

$
(4,543,571
)Proceeds from sale of common stock







9,075,190



456,000















456,000Issuance of common stock for debt(valued at $.02-$.09 per share)










27,383,032



1691492



-











1,691,492Issuance of common stock for servicesand fees (valued at $.10 to $.70)










4,361,000



214,446















214,446Conversion of debt for common stock







5,521,237



367,895















367,895Net loss for the twelve months endedDecember 31,2009


-























(2,308,775
)


(2,308,775
)Balance at December 31,2009


-



-



77,725,647



8,206,061



456,000



-



-12,784,574



-4,122,51331,053







31,053Issuance of common stock for debt(valued at $.03 per share)










4,633,843



139,015



-







-



139,015Issuance of common stock for servicesand fees (valued at $.02)










1,000,000



20,000



-







-



20,000Net loss


























(253,607
)


(253,607
)Balance, March 31, 2010


-


$
-



83,359,490


$
8,365,076


$
456,000


$
31,053


$
(13,038,181
)

$
(4,186,052
)
 
 4
 POWER SPORTS FACTORY, INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 
 
 For the Three Months EndedMarch 31,2010


2009CASH FLOW FROMOPERATING ACTIVITIES:Net loss

$
(253,607
)

$
(1,071,049
)Adjustments to reconcilenet loss  to net cashused in operatingactivities:Depreciation andamortization


1,148



2,244Non cash compensation


20,000



73,321Accretion of beneficial conversion feature


-



12,313Changes in operating assetsand liabilities


301,943



688,110Net cash used inoperating activities


69,484



(295,061
)CASH FLOW FROMINVESTING ACTIVITIES:Security deposit


-



(1,224
)CASH FLOW FROMFINANCING ACTIVITIES:Payment to related parties


(13,348
)


(7,000
)Proceeds from loans


4,500



522,500Payments on loans


(90,742
)


(219,221
)Proceeds from stock to be issued


31,053



-Net cash provided by financing activities


(68,537
)


296,279
   See Notes to Unaudited Consolidated Financial Statements
   5
 POWER SPORTS FACTORY, INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
 (UNAUDITED)
 
 
 For the Three Months EndedMarch 31,2010


2009Net increase (decrease) in cash


947



(6
)Cash - beginning of period


-



117Cash - end of period

$
947


$
111Changes in operating assetsand liabilities consists of:(Increase) decrease in accounts receivable

$
(14,143
)

$
15,903Decrease in inventory


267,980



104,569(Increase) decrease in prepaid expenses


(14,333
)


4,836Increase (decrease) in accounts payable


(15,561
)


207,224Increase in accrued expenses


79,000



356,724Decrease) in customer deposits


(1,000
)


(1,146
)$
301,943


$
688,110Supplementary information:Cash paid during the year for:Income taxes

$
-


$
-Interest

$
16,950


$
37,924Non-cash financing activitiesIssuance of common stock for services

$
20,000


$
73,321Issuance of common stock for debt

$
139,015


$
150,000
 See Notes to Unaudited Consolidated Financial Statements
  6
 POWER SPORTS FACTORY, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2010
 1.    Description of Business and Summary of Significant Accounting Policies
 
 ORGANIZATION
 
 Power Sports Factory, Inc. (formerly Purchase Point Media Corp.), (the “Company”) was incorporated under the laws of the State of Minnesota.
 
 The Company, through a reverse acquisition described below, is in the business of marketing, selling, importing and distributing motorcycles and scooters.  The Company principally imports products from China.  To date the Company has marketed the products significantly under the Yamati and Andretti brands.
 
 BASIS OF PRESENTATION
 
 On September 5, 2007, the Company entered into a share exchange agreement with the shareholders of Power Sports Factory, Inc. (“PSF”).  In connection with the share exchange, the Company acquired the assets and assumed the liabilities of PSF (subsidiary) as the acquirer.  The financial statements prior to September 5, 2007 are those of PSF and reflect the assets and liabilities of PSF at historical carrying amounts.
 
 As provided for in the share exchange agreement, the stockholders of PSF received 60,000,000 shares of the Company’s common stock and 1,650,000 of Series B Convertible Preferred Stock (“Preferred Stock”) of the Company (each share of preferred stock is convertible into 10 shares of common stock) representing 77% of the outstanding stock after the acquisition, in exchange for the outstanding shares of PSF common stock they held, which was accounted for as a recapitalization.  The financial statements show a retroactive restatement of the Company’s historical stockholders’ deficiency to reflect the equivalent number of shares of common stock issued in the acquisition.
 
 On July 1, 2009, the Financial Accounting Standards Board ("FASB") established Accounting Standards Codification ("ASC") as the primary source of authoritative generally accepted accounting principles ("GAAP") recognized by the FASB to be applied by nongovernmental entities.  Although the establishment of the ASC did not change current GAAP, it did change the way we refer to GAAP throughout this document to reflect the updated referencing convention.
 
 Recent Accounting Pronouncements
 
 The Company’s significant accounting policies are summarized in Note 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.  There were no significant changes to these accounting policies during the three months ended March 31, 2010 and the Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements.
 
 GOING CONCERN
  The Company’s consolidated financial statements for the three months ended March 31, 2010 have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities in the normal course of business.  Management recognizes that the Company’s continued existence is dependent upon its ability to obtain needed working capital through additional equity and/or debt financing and revenue to cover expenses as the Company continues to incur losses.
 
 The Company presently does not have sufficient liquid assets to finance its anticipated funding needs and obligations.  The Company’s continued existence is dependent upon its ability to obtain needed working capital through additional equity and/or debt financing and achieve a level of revenue and production adequate to support its cost structure.  Management is actively seeking additional capital to ensure the continuation of its current operations, complete its proposed activities and fund its current debt obligations.  However, there is no assurance that additional capital will be obtained.  These uncertainties raise substantial doubt about the ability of the Company to continue as a going concern.  The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties should the Company be unable to continue as a going concern.
  7
 POWER SPORTS FACTORY, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2010
  
 2.    EARNINGS PER SHARE
 
 Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the specified period.  Diluted loss per common share is computed by dividing net loss by the weighted average number of common shares and potential common shares during the specified period.  All potentially dilutive securities at March 31, 2010 and 2009 which include stock purchase warrants and convertible debt, are convertible into 8,150,000 and 8,150,000 common shares, respectively have been excluded from the computation as their effect is antidilutive.
 
 3.    FAIR VALUE MEASUREMENT
 
 The Company utilizes the accounting guidance for fair value measurements and disclosures for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the condensed consolidated financial statements on a recurring basis or on a nonrecurring basis during the reporting period.  The fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based upon the best use of the asset or liability at the measurement date.  The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability.  The accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.  These tiers are defined as follows:
  Level 1 -  Observable inputs such as quoted market prices in active markets
 Level 2 -  Inputs other than quoted prices in active markets that are either directly or indirectly observable Level 3- Unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions
  As of March 31, 2010, the Company held certain financial assets that are measured at fair value on a recurring basis.  These consisted of cash and cash equivalents.  The fair values of the cash and cash equivalents is determined based on quoted market prices in public markets and is categorized as Level 1.  The Company does not have any financial assets measured at fair value on a recurring basis as Level 2 or 3 and there were no transfers in or out of Level 2 or Level 3 during the three months ended March 31, 2010 and 2009.
  The following table sets forth by level, within the fair value hierarchy, the Company’s financial assets accounted for at fair value on a recurring basis as of March 31, 2010 and December 31, 2009.
 Assets at Fair Value as of March 31, 2010 and

December 31, 2009 UsingTotal


Quoted Prices in
Active Markets
for Identical Assets
(Level 1)


Significant Other
Observable Inputs
(Level 2)


Significant
Unobservable Inputs

(Level 3)March 31, 2010Cash and cash equivalents

$
947


$
947


$
-


$
-December 31, 2009Cash and cash equivalents

$
-


$
-


$
-


$
-
 The Company has other financial instruments, such as receivables, accounts payable and other liabilities which have been excluded from the tables above.  Due to the short-term nature of these instruments, the carrying value of receivables, accounts payable and other liabilities approximate their fair values.  The Company did not have any other financial liabilities with the scope of the fair value disclosure requirements as of March 31, 2010.
   8
 POWER SPORTS FACTORY, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2010
  4.
Inventories
 
 The components of inventories are as follows:
  March 31,


December 31,2010


2009Motor bikes

$
414,305


$
684,209Deposits on Inventory


250,000



250,000$
664,305


$
934,209
 
 In August 12, 2008, the Company entered into a Manufacturing Agreement, and subsequently entered into an Amendment thereto, with Dickson International Holdings Ltd. For the manufacture of Andretti/Benelli branded motor scooters for the exclusive distribution thereof in the United States by the Company.  The Manufacturing Agreement is for a term of two years and is renewable for successive two-year terms unless either party gives notice of termination in advance of the renewal period.  The Company is required to use commercially reasonable efforts to purchase certain minimum quantities of motor scooters.  As an initial deposit under the Manufacturing Agreement, the Company issued to Dickson International Holdings Ltd. 500,000 shares of the Company’s common stock valued at $250,000.  The Company will begin to amortize this deposit in the second quarter of 2010.
 
 5.
Property and Equipment
 
 Property and equipment consist of furniture and equipment used in the ordinary course of business and are recorded at cost less accumulated depreciation.
 March 31,


December 31,2010


2009Equipment

$
20,924


$
20,924Signs


7,040



7,04027,964



27,964Less: accumulated depreciation


19,194



18,046$
8,770


$
9,918
 Depreciation expense for the three months ended March 31, 2010 and 2009 amounted to $1,148 and $2,244, respectively.
  9
 POWER SPORTS FACTORY, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2010
  
  
 March 31,


December 31,2010


2009Note payable due April 30, 2008;interest at 10% payable atmaturity (1)

$
68,645


$
68,645Note payable to BankDirectdue January 12, 2010; interest at 8%Monthly payments of $2,333(2)


-



2,333Note payable to Crossroads Financial dueJanuary 9, 2010, interest 21% plus fees,monthly payments variable(3)


144,409



232,818Note payable due May 24, 2009, interest@ 10% per anum (4)


23,000



23,000Note payable due September 10, 2010, interest@ 10% per anum (5)


4,500



-240,554



326,796Less amounts due within one year


240,554



326,796$
-


$
-
  
  
   10
 POWER SPORTS FACTORY, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2010
   
  
  
  
  
 The aggregate amounts of all long-term debt to be repaid for the year following December 31, 2009 is:
 2010

$
240,5542011


-2012


-240,554Current portion


-$
240,554
 7.
Convertible Debt
 
   11
 POWER SPORTS FACTORY, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2010
   
 
 8.
Note Receivable/Note Payable - Related Party
 
  
 9.
Accrued Expenses
 
  
 March 31,


December 31,2010


2009Payroll expense

$
385,177


$
342,117Payroll tax expense


416,575



419,812Penalties


202,479



164,245Professional fees


5,000



20,006Interest expense


169,173



153,224$
1,178,404


$
1,099,404
 10.
Stockholders’ Equity
 Common Stock
  12
 POWER SPORTS FACTORY, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2010
   
  
  
         Preferred Stock
  
 11.
Income Taxes
 
  
   13
 POWER SPORTS FACTORY, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2010
   12.
Warrants
  
 WeightedWeighted

Average

AggregateAverage

Remaining

IntrinsicWarrants

Shares


Exercise Price

Contractual Term

ValueOutstanding at January 1, 2010


200,000


$
0.01

8.5  YearsGranted


-



-



$
-Exercised


-



-Forfeited, expired or cancelled


-



-



$
-Outstanding at March 31, 2010


200,000


$
0.01

8.25 YearsExercisable at March 31, 2010


200,000


$
0.01

8.25 Years
  13.
Dividend Payable
 
  
  
   14
 POWER SPORTS FACTORY, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2010
  
 15.
Legal Proceedings
 Yellow Transportation v. Power Sports Factory, Inc.
  Liberty Mutual Insurance Company v. Power Sports Factory, Inc.
 Business Technology Partners, Inc. v. Power Sports Factory, Inc. The plaintiff in this case has sued the Company in the Superior Court of New Jersey, Camden County, for the sum of $137,634 for goods and/or services rendered.  On October 15th, 2009 BTP and PSF reached a settlement agreement. The agreement states that PSF will pay BTP $75,000 in payments beginning on November 5th, 2009 and ending April 5th, 2010. Business Technology Partners filed a final judgment on December 7th in this case against us in the amount of $137,634, all of which is included in accounts payable.
  Fedex Customer Information Services, Inc. v. Power Sports Factory, Inc.  The Company was sued in April 2009 by Fedex Customer Information Services for $9,470 in the Superior Court of New Jersey. Power Sports Factory has not answered this claim as a result of cash flow constraints and expects Fedex to obtain a judgment against us in the amount of $11,788, all of which is included in accounts payable.
 Advanstar Commnications, Inc. v. Power Sports Factory, Inc. & Shawn Landgraf
   15
 POWER SPORTS FACTORY, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2010
 Aicco, Inc. v. Power Sports Factory, Inc.  The Company was sued on September 23rd, 2009 by Aicco Inc for $22,397 in the Superior Court of New Jersey, all of which is included in accounts payable. Power Sports Factory has not answered this claim as a result of cash flow constraints and expects Aicco to obtain a judgment against us in the amount of $22,397.
  RR Donnelly and Sons. v. Power Sports Factory, Inc.RR Donnelly and Sons filed suit against us in the Superior Court of New Jersey on September 25, 2009, for $7,855 for printing services, all of which is included in accounts payable.  The Company intends to settle this lawsuit.
  Cananwill Inc. v. Power Sports Factory, Inc.Cannanwill Inc. filed suit against us in the Superior Court of New Jersey on October 1, 2009, for $20,457 for financing services, all of which is included in accounts payable. Power Sports Factory has not answered this complaint as a result of cash flow constraints and expects Cananwill to obtain a judgment against us in the amount of $20,457.
  5WPR v. Power Sports Factory, Inc.5WPR. filed suit against us in the Superior Court of New York on October 21, 2009, for $33,000 for Public Relations services.  The Company intends to contest this lawsuit as 5WPR never performed any services under the contract.
  1stPriority1st Priority filed suit against us in the Superior Court of New Jersey on October 22, 2009, for $41,538 for shipping services, all of which is included in accounts payable. Power Sports Factory has not answered this complaint as a result of cash flow constraints and expects 1st Priority to obtain a judgment against us in the amount of $41,538.
  USA MotorToys v. Power Sports Factory, Inc.On November 9, 2009 the Company received a notice of entry of judgment against Power Sports Factory in the fourth judicial district Court of Utah for $22,085.  The Company intends to contest this lawsuit as Power Sports Factory was never served with a complaint or summons.
  Highroad Press filed suit against us on March 17th, 2010, in the Superior Court of New Jersey for the amount of $14,353, for printing services, all of which is included in accounts payable.  We intend to settle this lawsuit.
  Proxy Expressfiled suit against us on March 30th, 2010, in the Superior Court of New Jersey for the amount of $3233.20, for printing services.  We intend to settle this lawsuit.
  Netsuitefiled suit against us on April 30th, 2010, in the Superior Court of New Jersey for the amount of $37,566 plus interest for software.  We intend to fight this lawsuit as PSF never received any software or services from Netsuite.
  Andretti IV, LLC filed suit against us on May 16th, 2010, which has licensed to us, pursuant to Licensing Agreements, certain rights to use the “Andretti” name in connection with the branding and sale of our “Andretti Benelli” and “Yamati” lines of scooters. We have been in default of our obligations under the Licensing Agreements at various points in the last several years, and have been engaged in settlement agreement negotiations with Andretti IV, LLC at various times up to recently.  Andretti IV, LLC terminated the Licensing Agreements on February 1, 2010. The lawsuit names the Company, Shawn Landgraf (our Chief Executive Officer) and Steve Rubakh (our President) as defendants, and seeks payments owed under the Exclusive Licensing Agreement, damages for fraudulent inducement, misrepresentations, damages to the Andretti IV name, goodwill and reputation, and preliminary injunctive relief to prevent further use by us of Andretti IV licensed rights.
  16
 POWER SPORTS FACTORY, INC.
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2010
  
 
 Ellenoff Grossman Schole filed suit against us on June 9th, 2010, in the Civil Court of New York for the amount of $11,636.34 for legal services.  We intend to settle this lawsuit.
 16.
Subsequent Events
 We entered into a Loan Agreement (the “Loan Agreement”), dated May 25, 2010, by and between Juggernaut Financial Group, LLC (“Lender”) and Power Sports Factory, Inc., pursuant to which the Lender advanced a loan of $100,000 (the “Loan”) to us. The Loan bears interest at the rate of ten (10%) percent per annum, and is due 90 days after delivery of the funds to us, which took place on June 1, 2010. We can prepay the Loan at any time prior to maturity without penalty. We paid a loan origination fee of $7,000, plus two of our bikes from inventory.
 
 An event of default will occur under the Loan documents if any of the following events occurs: (a) failure to pay any principal or interest hereunder on the day it becomes due without notice from the Lender; (b) if any representation or warranty made by the Company in the Loan Agreement or in connection with any borrowing or request for an advance thereunder, or in any certificate, financial statement, or other statement furnished by the Company to the Lender is untrue in any material respect at the time when made; (c) default by the Company in the observance or performance of any other covenant or agreement contained in the Loan Agreement, other than a default constituting a separate and distinct event of default under Paragraph 8 of the Loan Agreement; (d) filing by the Company of a voluntary petition in bankruptcy seeking reorganization, arrangement or readjustment of debts, or any other relief under the Bankruptcy Code as amended or under any other insolvency act or law, state or federal, now or hereafter existing; or (e) filing of an involuntary petition against the Company in bankruptcy seeking reorganization, arrangement or readjustment of debts, or any other relief under the Bankruptcy Code as amended, or under any other insolvency act or law, state or federal, now or hereafter existing, and the continuance thereof for ninety (90) days undismissed, unbonded, or undischarged.
 
 In connection with the Loan, we pledged 12,500,000 treasury shares of our common stock, which shares have piggyback rights if we file a registration statement under the Securities Act of 1933, as amended. During the term of the pledge agreement, if our common stock closes at $.009 per share on any trading day, the Company is required immediately to pledge and deliver 20,000,000 shares as additional collateral under the pledge agreement. If our common stock closes at $.007 per share on any trading day, the Company is required immediately to pledge and deliver an additional 10,000,000 shares, for a total of 30,000,000 additional shares, as additional collateral under the pledge agreement. We also issued the Lender a two-year warrant to purchase 3,000,000 shares of our common stock, at an exercise price of $.03 per share, which shares have similar registration rights.
 
 Subsequent events have been evaluated through June 22, 2010.
  17
  ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND  RESULTS OF OPERATIONS
  The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and notes thereto and the other financial information included elsewhere in this report.  Certain statements contained in this report, including, without limitation, statements containing the words “believes,” “anticipates,” “expects” and words of similar import, constitute “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements involve known and unknown risks and uncertainties.  Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including our ability to create, sustain, manage or forecast our growth; our ability to attract and retain key personnel; changes in our business strategy or development plans; competition; business disruptions; adverse publicity; and international, national and local general economic and market conditions.
  Overview
  The Company was organized under the laws of the State of Minnesota on June 28, 1996. The Company, through the acquisition in 1997 of a Nevada corporation acquired the trademark, patent and exclusive marketing rights to, and invested in the development of a grocery cart advertising display device.
  On April 24, 2007, we entered into the Share Exchange Agreement with Power Sports Factory, Inc. (“PSF”) and the shareholders of PSF. The Share Exchange Agreement provided for our acquiring all of the outstanding shares of PSF in exchange for shares of the Company’s Common Stock. On May 14, 2007, we issued 60,000,000 shares of Common Stock to Steve Rubakh, the major shareholder of PSF, and on August 31, 2007, entered into an amendment (the “Amendment”) to the Share Exchange Agreement, that provided for a completion of the acquisition of PSF at a closing (the “Closing”) which was held on September 5, 2007. At the Closing the Company issued 1,650,000 shares of a new Series B Convertible Preferred Stock  to the shareholders of PSF, to complete the acquisition of PSF by us.  Each share of Preferred Stock was converted into 10 shares of our Common Stock, effective June 9, 2008, following approval by the shareholders at a shareholders meeting held on May 28, 2008, of a 1:20 reverse split of our common stock and changing our name from Purchase Point Media Corp. to Power Sports Factory, Inc.
  Through PSF’s manufacturing relationships in China, it began to import and sell Power Sports products in the United States. Our products have been marketed mainly under the “Yamati” and “Andretti”, brands. At the beginning of 2007, we made the determination to focus primarily on the sales and distribution of motor scooters. We now sell the motor scooters that we import primarily to power sports dealers and a small portion through the internet.
  Recent Developments
  On May 1, 2009, we formed an Alternative Transportation Division named "BikeShareSource" (TM). This newly launched division will provide sustainable transportation solutions to municipalities and transit agencies, property managers and real estate developers, colleges and universities, hotels, parks and other transportation related businesses. We are, developing, distributing and operating solar powered Bike Sharing Stations, enabling bicycle sharing to be an integral part of the transportation system. In addition, we intend to partner with major universities, municipalities, transit agencies, real estate developers, hotels, parks and other transportation related businesses companies to facilitate our bike sharing solution. Our services will include sustained transportation consulting and customized solutions development, software licensing, equipment manufacturing and distribution.
 
 Bike Sharing (also known as Community Bicycle Programs) as it exists today is an emerging form of environmentally friendly public transportation that incorporates information technology with shared bicycles, which allows for an alternative form of one-way transit for residents and visitors of a region. Imagine a service that gives citizens the convenience of a bike without all the hassles of storage, maintenance, etc. The main focus of the division will be on Bicycle Sharing Market, which is an emerging form of environmentally friendly public transportation that is growing at a significant pace. The number of bike sharing programs worldwide nearly doubled over the last 12 months, according to research information provided by CityRyde, LLC. Continued growth is expected primarily due to increased environmental impact awareness, increased usage of public transit systems and greater need for decreased traffic congestion.
 
 
   18
  Results of Operations
  Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009
  During the three months ended March 31, 2010, we had sales of $249,508, as compared with $132,189 in the comparable period in 2009.  Cost of sales was $287,496 in 2010, as compared with $151,593 in 2009.  We incurred a net loss of $(253,607) in the three months ended March 31, 2010, as compared with a net loss of $(1,071,049) for the comparable period in 2009, the decreased loss being primarily attributable to a decrease in our selling, general and administrative costs from $967,580 in 2009 to $164,720 in 2010, as well as the increase in net sales from $132,189 in 2009 to 249,508.  Interest expense decreased from $84,065 for the three months ended March 31, 2009, to $50,899 for the three months ended March 31, 2010.
  Liquidity and Financial Resources
  Since the acquisition of Power Sports Factory, we have operated at a loss.  We rely significantly on the private placement of debt and equity to pay operating expenses.
  As of March 31, 2010, the Company had $947 of cash on hand. The Company has incurred a net loss of $(253,607) in the three months ended March 31, 2010, and has working capital and stockholders' deficiencies of $4,194,822 and $4,186,052, respectively, at March 31, 2010.  The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  These conditions raise substantial doubt about the Company's ability to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
  During the three months ended March 31, 2010, we received proceeds of $31,053 from, and made net repayments on, outstanding loans payable of $86,242.  We made payments to related parties of $13,348. On March 23, 2010, we  issued 4,633,843 shares of common stock in payment of $139,015 of outstanding debt to our manufacturing partner, and also issued 1,000,000 shares to a consultant as compensation valued at $20,000 for merger and acquisition consulting services.
  We will require substantial additional financing to maintain operations at Power Sports Factory, and to expand our operations to continue entry into the alternative transportation area.
  We are in litigation with Andretti IV LLC. We are in the process of liquidating our obligations with Crossroads Financial.  The principal balance of this loan was $144,409 at March 31, 2010, and $232,818 as at December 31, 2009.  We also have in excess of approximately $470,000 in collection litigation against us, in addition to the Andretti litigation, for which we will require capital in the near term.  Our obligations to the Internal Revenue Service total approximately $700,000, including employment taxes through March 31, 2010, which includes interest and penalties.
  We expect that sale of our inventory bikes will provide us working capital of approximately $200,000; however, we will need to raise additional capital to meet the above obligations. There is no assurance that we will be able raise additional required capital to meet obligations arising from the litigation with Andretti IV LLC and settlement with Crossroads Financial, as well as planned settlement in other litigation matters and with the Internal Revenue Service.  If we are unable to meet one or more of these obligations, we could be forced to file under the Federal Bankruptcy Code for protection from creditors.
  Critical Accounting Policies
  The Securities and Exchange Commission recently issued "Financial Reporting Release No.  60 Cautionary Advice Regarding Disclosure About Critical Accounting Policies" ("FRR 60"), suggesting companies provide additional disclosures, discussion and commentary on those accounting policies considered most critical to its business and financial reporting requirements.  FRR 60 considers an accounting policy to be critical if it is important to the Company's financial condition and results of operations, and requires significant judgment and estimates on the part of management in the application of the policy.  For a summary of the Company's significant accounting policies, including the critical accounting policies discussed below, please refer to the accompanying notes to the financial statements.
  The Company assesses potential impairment of its long-lived assets, which include its property and equipment and its identifiable intangibles such as deferred charges under the guidance of SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". The Company must continually determine if a permanent impairment of its long-lived assets has occurred and write down the assets to their fair values and charge current operations for the measured impairment.
   19
  
  CRITICAL ACCOUNTING ISSUES
  The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the financial statements, requires the Company to make estimates and judgments that effect the reported amount of assets, liabilities, and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to intangible assets, income taxes and contingencies and litigation. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
  Recent Accounting Pronouncements
 
 The Company’s significant accounting policies are summarized in Note 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.  There were no significant changes to these accounting policies during the three months ended March 31, 2010, and the Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements.
  ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 We are primarily exposed to foreign currency risk, interest rate risk and credit risk.
 Foreign Currency Risk - We import products from China into the United States and market our products in North America. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or, if we initiate our planned international operations, weak economic conditions in foreign markets. Because our revenues are currently denominated in U.S. dollars, a strengthening of the dollar could make our products less competitive in foreign markets that we plan to enter.  If the Chinese Yuan strengthened against the dollar, our cost of imported products could increase and make us less competitive.  We have not hedged foreign currency exposures related to transactions denominated in currencies other than U.S. dollars. We do not engage in financial transactions for trading or speculative purposes.
 Interest Rate Risk - Interest rate risk refers to fluctuations in the value of a security resulting from changes in the general level of interest rates. Investments that are classified as cash and cash equivalents have original maturities of three months or less. Our interest income is sensitive to changes in the general level of U.S. interest rates.  We do not have significant short-term investments, and due to the short-term nature of our investments, we believe that there is not a material risk exposure.
 Credit Risk - Our accounts receivables are subject, in the normal course of business, to collection risks. We regularly assess these risks and have established policies and business practices to protect against the adverse effects of collection risks. As a result we do not anticipate any material losses in this area.
  ITEM 4T.
CONTROLS AND PROCEDURES.
 The Company's Chief Executive Officer and its Chief Financial Officer are primarily responsible for the accuracy of the financial information that is presented in this quarterly Report.  These officers have as of the close of the period covered by this Quarterly Report, evaluated the Company's disclosure controls and procedures (as defined in Rules 13a-4c and 15d-14c promulgated under the Securities Exchange Act of 1934) and determined that such controls and procedures were effective in ensuring that material information relating to the Company was made known to them during the period covered by this Quarterly Report.  In their evaluation, no changes were made to the Company's internal controls in this period that have materially affected, or are reasonably likely materially to affect, the Company’s internal control over financial reporting.
  
  20
  PART II—OTHER INFORMATION
  ITEM 1.
LEGAL PROCEEDINGS.
  The Company is a party to the following lawsuits.
  Yellow Transportation v. Power Sports Factory, Inc. The Company was sued in December, 2008, by Yellow Transportation for the sum of $28,838, plus lawful interest, attorneys’ fees and the costs of the suit, in the Superior Court of New Jersey, Camden County, for transportation services rendered by the plaintiff. The company received an entry of Judgment on November 7th, 2009 for $31,592, all of which is included in accounts payable. The Company entered into a forbearance agreement with Yellow Transportation on January 7th, 2010. The agreement requires PSF to pay $5,000 per month to Yellow for 5 months starting in January. PSF failed to make the any payment on this forbearance agreement.
  Liberty Mutual Insurance Company v. Power Sports Factory, Inc. The plaintiff in this case has sued the Company in the Superior Court of New Jersey, Camden County, for the sum of $45,096 for goods and/or services rendered, all of which is included in accounts payable.
  Business Technology Partners, Inc. v. Power Sports Factory, Inc. The plaintiff in this case has sued the Company in the Superior Court of New Jersey, Camden County, for the sum of $137,634 for goods and/or services rendered.  On October 15th, 2009 BTP and PSF reached a settlement agreement. The agreement states that PSF will pay BTP $75,000 in payments beginning on November 5th, 2009 and ending April 5th, 2010. Business Technology Partners filed a final judgment on December 7th in this case against us in the amount of $137,634, all of which is included in accounts payable.
  Fedex Customer Information Services, Inc. v. Power Sports Factory, Inc.  The Company was sued in April 2009 by Fedex Customer Information Services for $9,470 in the Superior Court of New Jersey. Power Sports Factory has not answered this claim as a result of cash flow constraints and expects Fedex to obtain a judgment against us in the amount of $11,788, all of which is included in accounts payable.
  Advanstar Commnications, Inc. v. Power Sports Factory, Inc. & Shawn LandgrafAdvanstar Communications filed suit against us in the Superior Court of New Jersey on August 19, 2009, for $43,955 for advertising services, all of which is included in accounts payable.  The Company intends to settle this lawsuit.
  Aicco, Inc. v. Power Sports Factory, Inc.  The Company was sued on September 23rd, 2009 by Aicco Inc for $22,397 in the Superior Court of New Jersey, all of which is included in accounts payable. Power Sports Factory has not answered this claim as a result of cash flow constraints and expects Aicco to obtain a judgment against us in the amount of $22,397.
  RR Donnelly and Sons. v. Power Sports Factory, Inc.RR Donnelly and Sons filed suit against us in the Superior Court of New Jersey on September 25, 2009, for $7,855 for printing services, all of which is included in accounts payable.  The Company intends to settle this lawsuit.
  Cananwill Inc. v. Power Sports Factory, Inc.Cannanwill Inc. filed suit against us in the Superior Court of New Jersey on October 1, 2009, for $20,457 for financing services, all of which is included in accounts payable. Power Sports Factory has not answered this complaint as a result of cash flow constraints and expects Cananwill to obtain a judgment against us in the amount of $20,457.
  5WPR v. Power Sports Factory, Inc.5WPR. filed suit against us in the Superior Court of New York on October 21, 2009, for $33,000 for Public Relations services.  The Company intends to contest this lawsuit as 5WPR never performed any services under the contract.
  1stPriority1st Priority filed suit against us in the Superior Court of New Jersey on October 22, 2009, for $41,538 for shipping services, all of which is included in accounts payable. Power Sports Factory has not answered this complaint as a result of cash flow constraints and expects 1st Priority to obtain a judgment against us in the amount of $41,538.
  USA MotorToys v. Power Sports Factory, Inc.On November 9, 2009 the Company received a notice of entry of judgment against Power Sports Factory in the fourth judicial district Court of Utah for $22,085.  The Company intends to contest this lawsuit as Power Sports Factory was never served with a complaint or summons.
   21
  Highroad Press filed suit against us on March 17th, 2010, in the Superior Court of New Jersey for the amount of $14,353, for printing services, all of which is included in accounts payable.  We intend to settle this lawsuit.
  Proxy Expressfiled suit against us on March 30th, 2010, in the Superior Court of New Jersey for the amount of $3233.20, for printing services.  We intend to settle this lawsuit.
  Netsuitefiled suit against us on April 30th, 2010, in the Superior Court of New Jersey for the amount of $37,566 plus interest for software.  We intend to fight this lawsuit as PSF never received any software or services from Netsuite.
  Andretti IV, LLC filed suit against us on May 16th, 2010, which has licensed to us, pursuant to Licensing Agreements, certain rights to use the “Andretti” name in connection with the branding and sale of our “Andretti Benelli” and “Yamati” lines of scooters. We have been in default of our obligations under the Licensing Agreements at various points in the last several years, and have been engaged in settlement agreement negotiations with Andretti IV, LLC at various times up to recently.  Andretti IV, LLC terminated the Licensing Agreements on February 1, 2010. The lawsuit names the Company, Shawn Landgraf (our Chief Executive Officer) and Steve Rubakh (our President) as defendants, and seeks payments owed under the Exclusive Licensing Agreement, damages for fraudulent inducement, misrepresentations, damages to the Andretti IV name, goodwill and reputation, and preliminary injunctive relief to prevent further use by us of Andretti IV licensed rights.
 Ellenoff Grossman Schole filed suit against us on June 9th, 2010, in the Civil Court of New York for the amount of $11,636.34 for legal services.  We intend to settle this lawsuit.
 
  ITEM 1A.
RISK FACTORS.
  Not applicable.
  ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
  The following table sets forth the sales of unregistered securities since the Company’s last report filed under this item.
 
 Date
Title and Amount  (1)
Purchaser
Principal

Underwriter
Total Offering Price/

Underwriting DiscountsMarch 3, 2010
300,000 shares of Common Stock
Account payable conversion.
NA
$.04 per share/NAMarch 23, 2010
4,533,843 shares of Common Stock.
Manufacturing partner.
NA
$.03 per share/NAMarch 23, 2010
1,000,000 shares of Common Stock
Consultant.
NA
$.02 per share/NA
 
 (1) The issuances to suppliers, lenders, consultants, investors and employees are viewed by the Company as exempt from registration under the Securities Act of 1933, as amended (“Securities Act”), alternatively, as transactions either not involving any public offering, or as exempt under the provisions of Regulation D or Rule 701 promulgated by the SEC under the Securities Act.
  ITEM 3.
DEFAULTS UPON SENIOR SECURITIES.
  Not applicable.
   22
 
  ITEM 4.
(REMOVED AND RESERVED).
  ITEM 5.
OTHER INFORMATION.
  Not applicable. ITEM 6.
EXHIBITS.
   31.1

Certification of Chief Executive Officer Pursuant to Section 302 of The  Sarbanes Oxley Act of 200231.2

Certification of Chief Financial Officer Pursuant to Section 302 of The Sarbanes Oxley Act of 2002.32.1

Certification of Chief Executive Officer Pursuant to 18  U.S.C.  Section  1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Oxley Act of 200232.2

32.2   Certification of Chief Financial Officer Pursuant to 18  U.S.C.  Section  1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Oxley Act of 2002.
 
   23
  SIGNATURES
  Pursuant to the requirements of Section 13 or 15(d) 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.
 
  POWER SPORTS FACTORY, INC.By:
/s/ Shawn LandgrafShawn Landgraf

Chief Executive Officer
 Date: June 23, 2010
   
 24
 
   EXHIBIT INDEX
 
 31.1

Certification of Chief Executive Officer Pursuant to Section 302 of The  Sarbanes Oxley Act of 200231.2

Certification of Chief Financial Officer Pursuant to Section 302 of The Sarbanes Oxley Act of 2002.32.1

Certification of Chief Executive Officer Pursuant to 18  U.S.C.  Section  1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Oxley Act of 200232.2

32.2   Certification of Chief Financial Officer Pursuant to 18  U.S.C.  Section  1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Oxley Act of 2002.