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

                                   FORM 10-KSB

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

For the fiscal year ended: December 31, 2006     Commission File Number: 0-32323


                           MOTORSPORTS EMPORIUM, INC.
                 (Name of Small Business Issuer in Its charter)

           Nevada                                                20-1217659
(State or Other Jurisdiction of                               (I.R.S. Employer
 Incorporation or Organization)                              Identification No.)

7525 E. Williams Drive Suite B, Scottsdale, Arizona                85255
     (Address of Principal Executive Offices)                    (Zip Code)

                                 (480) 596-4002
                (Issuer's Telephone Number, including Area Code)

         Securities registered under Section 12(b) of the Exchange Act:

                                      None

         Securities registered under Section 12(g) of the Exchange Act:

                         Common Stock, $0.001 Par Value

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

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

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

     The Issuer's  revenues for the most recent  fiscal year ended  December 31,
2006, were approximately $196,814.

     The aggregate market value of the voting and non-voting  common equity held
by non-affiliates on March 21, 2007, based upon the average bid and ask price of
the common  stock on the Over the  Counter  Bulletin  Board for such  date,  was
approximately $255,491.

     The number of shares of the issuer's common stock issued and outstanding on
March 21,  2007,  was  4,368,768.  The  number of  shares of  issuer's  Series C
Preferred Stock issued and outstanding on March 21, 2007, was 200,000.

                   DOCUMENTS INCORPORATED BY REFERENCE: NONE

Transitional Small Business Disclosure Format. Yes [ ] No [X]
<PAGE>
                                TABLE OF CONTENTS

ITEMS                                                                       PAGE
-----                                                                       ----
                                     PART I

Item 1.     Description of Business                                            1
Item 2.     Description of Property                                            8
Item 3.     Legal Proceedings                                                  8
Item 4.     Submission of Matters to a Vote of Security Holders                8

                                    PART II

Item 5.     Market For Common Equity, Related Stockholder Matters and          8
             Small Business Issuer Purchases of Equity Securities
Item 6.     Management's Discussion and Analysis or Plan of Operation         10
Item 7.     Financial Statements                                              15
Item 8.     Changes in and Disagreements with Accountants on                  15
             Accounting and Financial Disclosure
Item 8A.    Controls and Procedures                                           15
Item 8A (T) Controls and Procedures                                           15
Item 8B.    Other Information                                                 15

                                    PART III

Item 9.     Directors, Executive Officers, Promoters, Control Persons
             and Corporate Governance; Compliance with Section 16(a) of
             the Exchange Act                                                 16
Item 10.    Executive Compensation                                            18
Item 11.    Security Ownership of Certain Beneficial Owners and               21
             Management and Related Stockholder Matters
Item 12.    Certain Relationships and Related Transactions, and Director
             Independence                                                     23
Item 13.    Exhibits                                                          24
Item 14.    Principal Accountant Fees and Services                            24

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                              CAUTIONARY STATEMENT

     This Form 10-KSB contains  "forward-looking  statements" within the meaning
of the Private Securities  Litigation Reform Act of 1995. Some of the statements
contained  in this Form  10-KSB for  Motorsports  Emporium,  Inc.  (  "Company")
discuss  future  expectations,  contain  projections  of results of operation or
financial  condition  or  state  other  "forward-looking"   information.   These
statements  are subject to known and  unknown  risks,  uncertainties,  and other
factors  that could  cause the actual  results to differ  materially  from those
contemplated  by the  statements.  The  forward-looking  information is based on
various factors and is derived using numerous assumptions.

     Management  expresses its  expectations,  beliefs and  projections  in good
faith  and  believes  the  expectations   reflected  in  these   forward-looking
statements  are based on  reasonable  assumptions;  however,  Management  cannot
assure current stockholders or prospective stockholders that these expectations,
beliefs  and  projections  will  prove  to  be  correct.   Such  forward-looking
statements  reflect the current views of Management  with respect to the Company
and anticipated future events.

     Management cautions current stockholders and prospective  stockholders that
such forward-looking statements,  including,  without limitation, those relating
to the Company's future business prospects,  demand for its products,  revenues,
capital needs, expenses, development and operation costs, wherever they occur in
this Form 10-KSB, as well as in the documents  incorporated by reference herein,
are not guarantees of future  performance or results,  but are simply  estimates
reflecting  the best  judgment of  Management  and involve a number of risks and
uncertainties  that could cause actual results to differ  materially  from those
suggested by such forward-looking statements.

      Important factors that may cause actual results to differ from projections
include, for example:

     *    the  success or failure of  management's  efforts to  implement  their
          business strategy;
     *    the  ability  of the  Company  to  raise  sufficient  capital  to meet
          operating requirements;
     *    the uncertainty of consumer demand for our product;
     *    the  ability  of the  Company  to protect  its  intellectual  property
          rights;
     *    the  ability  of  the  Company  to  compete  with  major   established
          companies;
     *    the effect of changing economic conditions;
     *    the ability of the Company to attract  and retain  quality  employees;
          and
     *    other risks which may be described in future filings with the SEC.

     Words such as "anticipates,"  "expects,"  "intends,"  "plans,"  "believes,"
"seeks,"  "estimates," and variations of such words and similar  expressions are
intended to identify such forward-looking  statements.  These statements are not
guarantees of future performance and are subject to certain risks, uncertainties
and  assumptions  that are difficult to predict.  Therefore,  actual results and
outcomes may differ  materially from what is expressed or forecasted in any such
forward-looking statements. Such risks and uncertainties include those set forth
herein under "Certain  Business  Risks" in Item 1, as well as those noted in the
documents incorporated herein by reference.  Unless required by law, the Company
undertakes  no  obligation to update  publicly any  forward-looking  statements,
whether as a result of new information, future events or otherwise.

                                       ii
<PAGE>
                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS.

BUSINESS DEVELOPMENT

     MotorSports Emporium, Inc. ("Company") was incorporated as Ten Stix Inc. on
January  10,  1996  under  the laws of the  State of  Colorado  to engage in the
design, development and marketing of unique card games and other gaming products
for the gaming  industry.  Ten Stix, Inc.  changed its domicile from Colorado to
Nevada in 2004.

     During 2004, the Company  amended its Articles of  Incorporation  to change
its name to Motorsports Emporium, Inc. in order to bring the name of the Company
in line with its new business focus, targeting motor sports enthusiasts.  During
2004,  the Company  divested  itself of all  interest  in Ten Stix Inc.  and the
gaming business.

     The Company's  principal  executive offices are located at 7525 E. Williams
Drive Suite B, Scottsdale, Arizona 85255. Its telephone number is (480) 596-4002
and its facsimile number is (480) 556-0831.

     The Company has  generated  limited  revenues and has incurred  substantial
selling,  general and  administrative  expenses.  The Company's  auditors,  HJ &
Associates, LLC, have expressed doubt about the Company's ability to continue as
a  going  concern,  as  evidenced  in the  auditor's  report  to  the  Financial
Statements. See "Part II. Item 7.
Financial Statements."

MATERIAL RECENT DEVELOPMENT

     On March 14,  2007,  the  Company  entered  into a Stock Sale and  Purchase
Agreement  with  David  W.  Keaveney,  the  Company's  Chief  Executive  Officer
("Keaveney") and Kenneth Yeung ("Yeung"), pursuant to which:

     a.   Keaveney sold 200,000 shares of the Company's Series C Preferred Stock
          ("Preferred  C") to Yeung for a purchase  price of $10,000  (the exact
          price previously exchanged for Preferred C shares for the cancellation
          of $10,000 in accrued, but unpaid, compensation due to Keaveney);
     b.   Yeung agreed to immediately pay off an aggregate of $200,627.02 of the
          Company's  liabilities,  which debt reductions were intended to reduce
          outstanding  liabilities,  including $48,787.70 owed by the Company to
          Keaveney  for  accrued  salary and  $38,115.35  owed by the Company to
          Rhonda Keaveney, the Company's Chief Operating Officer;
     c.   Keaveney  agreed  to  resign  from his  positions  as Chief  Executive
          Officer,  Chief  Financial  Officer  and as a Director  of the Company
          effective  on or about April 2, 2007.  (Although  it was not a term of
          the Stock Sale and Purchase  Agreement,  Keaveney  verbally  agreed to
          resign from the office of President of the Company effective March 14,
          2007,  and Yeung was elected  President  of the Company on such date);
          and
     d.   Rhonda  Keaveney also verbally  agreed to resign from her positions as
          Chief  Operating  Officer,  Secretary  and  Director  of  the  Company
          effective on or about April 2, 2007.

     Keaveney  and Yeung  agreed that it would be in the best  interests  of the
Company and its  shareholders  for Keaveney to stay with the Company in order to
finish and file the  Company's  Form  10-KSB  Annual  Report for the Fiscal year
Ended December 31, 2006.

     As a result  of the  Stock  Sale  and  Purchase  Agreement,  Yeung is now a
control person of the Company.

                                       1
<PAGE>
CHANGES IN CONTROL

     Since December 31, 2005, the Company has experienced three separate changes
in control of its voting securities:

     1.   On  August  28,  2006,  the  Company  completed  the  purchase  of all
          2,671,817 shares of its then issued and outstanding Series B Preferred
          Stock in three private  transactions.  On August 21, 2006, the Company
          acquired  1,421,897  shares of Series B  Preferred  Stock from  Robert
          Brehm and  Intercontinental  Assets  Corp in  exchange  for a $250,000
          Convertible  Note due August  30,  2007.  The  Company  also  acquired
          625,000  shares of Series B Preferred  Stock from its Chief  Executive
          Officer,  David W. Keaveney,  and 625,000 shares of Series B Preferred
          Stock from Tracey Baron,  when Messrs.  Keaveney and Baron surrendered
          such shares to the Company in return for an aggregate consideration of
          $1.00 paid to each of Messrs. Keaveney and Baron.
     2.   On September 13, 2006,  the Company  issued 200,000 shares of Series C
          Preferred Stock to its Chief Executive Officer,  David W. Keaveney, in
          exchange  for the  cancellation  of $10,000 in  accrued,  but  unpaid,
          compensation due to Mr.  Keaveney.  Since the Series C Preferred Stock
          carry 3,000 votes per share,  Mr. Keaveney was entitled to 600 million
          votes on matters submitted to the Company's shareholders for voting.
     3.   As discussed under "Material Recent  Development," above, on March 14,
          2007,  Mr.  Keaveney sold his 200,000  shares of Series C Preferred to
          Kenneth  Yeung  for a  purchase  price of  $10,000  (the  exact  price
          previously  exchanged by Mr.  Keaveney when he acquired such shares by
          cancelling  $10,000 of accrued,  but unpaid,  compensation  due to Mr.
          Keaveney from the Company).  As a result of Mr. Yeung's acquisition of
          the  Series  C  Preferred  Stock  from  Mr.  Keaveney,  Mr.  Yeung  is
          considered  a "control  person" of the Company  under  applicable  SEC
          regulations. Moreover, Mr.Yeung was elected to the office of President
          of the Company on March 14, 2007.  In addition,  David W. Keaveney has
          agreed to resign from his current offices as Chief Executive  Officer,
          Chief Financial  Officer and Director of the Company within a few days
          after this annual report on Form 10-KSB is filed with the SEC.  Rhonda
          Keaveney  has also agreed to resign from her current  offices as Chief
          Operating Officer,  Secretary and Director of the Company within a few
          days after this  annual  report on Form  10-KSB is filed with the SEC.
          Following such  resignations  and as a result of having voting control
          of the  Company,  Mr. Yeung will be in a position to elect all members
          of the  Company's  Board of  Directors  and elect all  officers of the
          Company.  As of the  date  of the  Form  10-KSB,  Mr.  Yeung  has  not
          indicated  whom he will elect to the Board of Directors or as officers
          of the Company.

BUSINESS OF ISSUER

     The  Company  and its wholly  owned  subsidiaries  are in the motor  sports
industry,  targeting  motor sports  enthusiasts  who  participate  in automobile
restoration,  automobile  racing and other motor  sports-related  ventures.  The
Company sells race related apparel,  automotive art and has the exclusive rights
to manufacture and sell GS610(TM)  Maximum  Performance  Brake  Fluid(TM).  With
exception of the brake fluid,  items are sold in their retail  storefront and on
line  through  various  web  sites  including  eBay(R).  The  GS610(TM)  Maximum
Performance Brake Fluid(TM) will be sold both online and through national retail
specialty shops.

     DriversDigs,  an  operational  division of the Company,  sells  autographed
authentic  apparel  including  racing suits,  helmets,  gloves and shoes worn by
professional race car drivers.

     PitStopStudios  is  another  working  division  of the  Company  that sells
automotive related pictures, lithographs, drawings and race related artwork.

     Quadriga MotorSports, Inc. specializes in high performance automotive parts
and accessories.  Under the Quadriga brand, the Company has an exclusive license
to manufacture and sell GS610(TM)  Maximum  Performance  Brake Fluid(TM) and has
developed a line of car care  products  under the brand name Arie  Luyendyk  Pro

                                       2
<PAGE>
Series (TM) named after  retired two time Indy 500 winner Arie  Luyendyk and his
son Arie Luyendyk, Jr., who is currently a racing professional.

     In 2007, the Company  discontinued its Scalecars.com  business and sold the
balance of its remaining inventory and website.

PRODUCTS AND SERVICES

     The  DriversDigs  division  of the  Company  sells and  promotes  authentic
memorabilia owned and autographed by racing drivers.

MARKETING AND DISTRIBUTION

     The Company has marketed its product line through racing  sponsorships  and
internet  advertising  since  2006.  The  Company  has many  well  known  racing
relationships  that have used  products of the Company and have  introduced  the
Company  to  potential   buyers.   Currently,   the  Company  has  an  exclusive
distribution  agreement with a brake and performance  company to sell and market
its GS610 racing brake fluid.  The Company also has two marketing  relationships
for  its  Arie   Luyendyk   car  care   product   line  that  entails  the  mass
wholesale/retail market, as well as television home shopping channels.

MARKETING STRATEGY

     Currently, the Company is engaged in sponsoring several high profile racing
drivers who display the Company's  subsidiaries and operational divisions' logos
on their race uniforms,  helmets and/or racing cars.  Additionally,  the Company
has participated in in-kind  sponsorship within NASCAR and IRL sanctioned racing
series. Additionally,  the Company has utilized television,  magazine, newspaper
and radio marketing for its specific industry.  Moving forward, the Company will
focus on both its GS610  racing  brake fluid and Arie  Luyendyk car care product
line by  means  of  marketing  consultants  and  mass  wholesale/retail  stores.
Additionally,  the  Company  will  continue  to market its  products  though its
business  relationships.  Traditional marketing will not be as prevalent and the
Company plans to focus more on network marketing.

COMPETITIVE BUSINESS CONDITIONS

     The Company competes with other automobile and  sports-related  collectible
and memorabilia  businesses.  The Company also competes with certain collectible
manufacturers  that sell their  products  directly  to  consumers.  The  Company
believes  that  its  competitive  strength  lies in its  relationships  with key
drivers and other individuals in the motor sports industry. However, the Company
is smaller and has fewer capital resources than many of its competitors.

RAW MATERIALS AND SUPPLIES

     The Company is a reseller of its collectible  products and is not dependent
on raw material or supply  agreements  for those  products.  With respect to its
brake fluid business,  the Company outsources all manufacturing and packaging to
third-party  suppliers.  While the  Company  has sole  source  arrangements  for
certain facets of its brake fluid production,  it attempts to minimize this risk
by engaging only large, well-established suppliers.

DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS

     The Company  believes  that the  diversity  of the products and services it
offers helps  alleviate  the  dependence on any one customer or limited group of
customers.  Through the widespread use of the Company's products and services in
the motor sports industries,  the Company will continue to increase its customer
base.

                                       3
<PAGE>
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

     The  company  owns  a  five-year   exclusive  license  to  manufacture  and
distribute  GS610(TM) Maximum  Performance Brake Fluid(TM).  The company has the
option to extend this  license an  additional  five years.  The Company  owns no
patents, franchises, royalty agreements or registered trademarks.

EFFECT OF EXISTING OR PROBABLE GOVERNMENTAL REGULATIONS

     The Company's  common stock is registered  pursuant to Section 12(g) of the
Securities  Exchange Act of 1934 ("1934 Act"). As a result of such registration,
the Company is subject to  Regulation  14A of the "1934  Act,"  which  regulates
proxy  solicitations.  Section  14(a)  requires all  companies  with  securities
registered  pursuant  to  Section  12(g)  thereof  to comply  with the rules and
regulations  of the Commission  regarding  proxy  solicitations,  as outlined in
Regulation 14A. Matters submitted to stockholders of the Company at a special or
annual meeting thereof or pursuant to a written consent will require the Company
to provide its  stockholders  with the information  outlined in Schedules 14A or
14C of Regulation 14;  preliminary  copies of this information must be submitted
to the Commission at least 10 days prior to the date that  definitive  copies of
this information are forwarded to stockholders.

     The  Company is also  required  to file  annual  reports on Form 10-KSB and
quarterly  reports on Form 10-QSB with the  Commission on a regular  basis,  and
will be required to disclose certain events in a timely manner, (e.g. changes in
corporate  control;  acquisitions  or  dispositions  of a significant  amount of
assets  other than in the  ordinary  course of business;  and  bankruptcy)  in a
Current Report on Form 8-K.

     Since the Company outsources the  manufacturing,  packaging and fulfillment
of its brake fluid and car care product lines, management is of the opinion that
the  Company  has no  exposure  to or from  environmental  laws and  regulations
(federal, state or local).

     Aside from  required  compliance  with federal and state  securities  laws,
regulations and rules,  and federal,  state and local tax laws,  regulations and
rules,  the Company is not aware of any other  governmental  regulations  now in
existence  or that may  arise in the  future  that  would  have an effect on the
business of the Company.

CERTAIN BUSINESS RISKS

     The risks and  uncertainties  described  below are not the only ones facing
the Company and there may be additional  risks that are not  presently  known or
are  currently  deemed  immaterial.  All of  these  risks  may  impair  business
operations.

RISK FROM THE COMPANY'S COMMON STOCK BEING DEEMED A "PENNY STOCK"

     The Company's  common stock is deemed to be a "penny stock" as that term is
defined in Rule 3a51-1 of the 1934 Act. Penny stocks are stocks (i) with a price
of less than five dollars per share;  (ii) that are not traded on a "recognized"
national  exchange;  (iii) whose  prices are not quoted on the NASDAQ  automated
quotation system  (NASDAQ-listed  stocks must still meet requirement (i) above);
or (iv) of an issuer with net tangible  assets of less than  $2,000,000  (if the
issuer has been in continuous  operation for at least three years) or $5,000,000
(if in continuous  operation for less than three years),  or with average annual
revenues of less than $6,000,000 for the last three years.

     A principal  exclusion  from the  definition  of a penny stock is an equity
security that has a price of five dollars ($5.00) of more,  excluding any broker
or dealer commissions,  markups or markdowns.  As of the date of this report the
Company's common stock has a price less than $5.00.

      If the Company's Common Stock is at any time deemed a penny stock, section
15(g) and Rule 3a51-1 of the 1934 Act would  require  broker-dealers  dealing in
the  Company's  Common  Stock to  provide  potential  investors  with a document
disclosing  the risks of penny stocks and to obtain a manually  signed and dated
written  receipt of the document  before  effecting any  transaction  in a penny
stock for the investor's  account.  Potential  investors in the Company's common

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<PAGE>
stock are urged to obtain and read such disclosure  carefully before  purchasing
any shares that are deemed to be "penny stock."

      Moreover,  Rule  15g-9 of the 1934 Act  requires  broker-dealers  in penny
stocks to approve the account of any  investor for  transactions  in such stocks
before  selling any penny stock to that investor.  This  procedure  requires the
broker-dealer to (i) obtain from the investor information  concerning his or her
financial  situation,  investment  experience  and investment  objectives;  (ii)
reasonably  determine,  based on that  information,  that  transactions in penny
stocks are  suitable  for the  investor  and that the  investor  has  sufficient
knowledge and experience as to be reasonably  capable of evaluating the risks of
penny stock  transactions;  (iii) provide the investor with a written  statement
setting forth the basis on which the  broker-dealer  made the  determination  in
(ii) above;  and (iv) receive a signed and dated copy of such statement from the
investor,  confirming  that it  accurately  reflects  the  investor's  financial
situation,  investment  experience and investment  objectives.  Compliance  with
these  requirements  may make it more  difficult  for investors in the Company's
common stock to resell their shares to third parties or to otherwise  dispose of
them.

COMPETITION

     To the  Company's  knowledge,  there  are  no  publicly  held  competitors;
however,  Speedgear and Exoticcar are privately  held  companies that sell items
that compete with the offerings of the Company. There are several competitors to
the  Company,  most of whom have  greater  financial,  technical  and  marketing
resources than the Company.  In the latter part of 2006, the Company experienced
significant  price increases and further  competition from online auction houses
and track side vendors.

VOLATILE AND LIMITED MARKET FOR COMMON STOCK

     As of December  31,  2005,  the  Company's  common  stock was quoted on the
"Bulletin  Board" under the symbol  "MSEP.OB" and in November 2006 as "MSEM.OB."
"OTC" or "Over The  Counter"  securities  are issued by  companies  that  either
choose not to, or are unable to, meet the standards for listing on the NASDAQ or
a  national  stock  exchange.  OTC equity  securities  can be quoted on the Pink
Sheets Electronic Quotation Service, or, if the companies meet the SEC reporting
requirements and eligibility  requirements  established by the NASD, such equity
securities may be quoted on the NASD OTC Bulletin Board Service.

     The market  price of the  Company's  Common Stock has been and is likely to
continue to be highly volatile and subject to wide  fluctuations  due to various
factors,  many of which may be beyond the Company's control,  including:  annual
variations in operating results;  announcements of technological  innovations or
new  products  by the  Company or its  competitors;  and  changes  in  financial
estimates and recommendations by securities  analysts.  In addition,  there have
been  large  price and  volume  fluctuations  in the stock  market,  which  have
affected  the  market  prices  of  securities  of many  small  companies,  often
unrelated to the operating  performance  of such  companies.  These broad market
fluctuations,  as  well  as  general  economic  and  political  conditions,  may
adversely  affect the market price of the Company's  Common Stock.  In the past,
volatility  in the  market  price of a  company's  securities  has  often led to
securities class action litigation.  Such litigation could result in substantial
costs and diversion of the Company's attention and resources, which could have a
material  adverse  effect on the  Company's  business,  financial  condition and
operating results.

DEPENDENCE ON KEY EMPLOYEES AND NEED FOR ADDITIONAL MANAGEMENT AND PERSONNEL

      The Company has been heavily  dependent  on the ability of David  Keaveney
who has contributed  essential  technical and management  experience.  Since Mr.
Keaveney  will be leaving  the  Company  within a few days of the filing of this
Form 10-KSB,  the Company will be dependent  upon Mr.  Kenneth  Yeung to recruit
good management for the Company. There can be no assurance that the Company will
be able to employ qualified persons on acceptable terms to replace Mr. Keaveney.

      In the event of future growth in administration,  marketing, manufacturing
and customer support  functions,  the Company may have to increase the depth and
experience of its management team by adding new members.  The Company's  success
will depend to a large degree upon the active  participation of its key officers
and employees, as well as, the continued service of its key management personnel

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and its ability to identify,  hire and retain  additional  qualified  personnel.
There  can be no  assurance  that  the  Company  will be able  to  recruit  such
qualified personnel to enable it to conduct its proposed business successfully.

RISKS ASSOCIATED WITH SIGNIFICANT FLUCTUATIONS IN ANNUAL OPERATING RESULTS

      The Company could  experience  significant  fluctuations  in future annual
operating  results that may be caused by many  factors,  including the timing of
introductions or enhancements to its products by the Company or its competitors;
market  acceptance of such newly  introduced or upgraded  products;  the pace of
development of the market for the Company's products;  changes in strategy;  the
success  of or costs  associated  with  acquisitions,  joint  ventures  or other
strategic relationships;  changes in key personnel;  seasonal trends; changes in
the level of  operating  expenses  to  support  projected  growth;  and  general
economic conditions.

RISKS ASSOCIATED WITH DELAYS IN INTRODUCTION OF NEW SERVICES AND PRODUCTS

     The Company's  future success  depends in part on the Company's  ability to
develop and enhance the  Company's  products.  There are  significant  technical
risks in the  development  of new  products  or  enhanced  versions  of existing
products.  There can be no  assurance  that the Company  will be  successful  in
achieving any of the following: effectively using new technologies; adapting the
Company's products to emerging industry standards;  developing,  introducing and
marketing  product  enhancements;  or developing,  introducing and marketing new
products.  The  Company  may also  experience  difficulties  that could delay or
prevent  the   development,   introduction   or  marketing  of  these  products.
Additionally, these new products may not adequately meet the requirements of the
marketplace  or achieve market  acceptance.  If the Company is unable to develop
and introduce  enhanced or new products  quickly  enough to respond to market or
customer  requirements,  or if  they  do  not  achieve  market  acceptance,  the
Company's business, financial condition and operating results will be materially
adversely affected.

RISKS ASSOCIATED WITH DEPENDENCE ON INTELLECTUAL PROPERTY RIGHTS

     The Company  presently holds no intellectual  property rights.  The Company
intends  to seek  copyright  and  trademark  protection  of its trade  names and
products. The Company's success and ability to compete are dependent to a degree
on the Company's  name and product  recognition.  Accordingly,  the Company will
primarily  rely on  copyright,  trade  secret and  trademark  law to protect its
product and brand names of  products  or under  which the Company  conducts  its
business.  Effective trademark protection may not be available for the Company's
trademarks.

      The  Company's  competitors  or others may adopt  product or service names
similar to the Company's,  thereby impeding the Company's ability to build brand
identity and possibly leading to customer confusion.  The Company's inability to
adequately  protect its product,  brand, trade names and trademarks would have a
material  adverse  effect on the  Company's  business,  financial  condition and
operating results.  Despite any precautions the Company takes, a third party may
be able to copy or  otherwise  obtain and use the  Company's  software  or other
proprietary  information  without  authorization  or to develop similar software
independently.

      Policing  unauthorized  use of the Company's  products are made especially
difficult by the global nature of the Internet and the difficulty in controlling
the  ultimate  destination  or security  of products or other data.  The laws of
other countries may afford the Company little or no effective protection for the
Company's intellectual property.

RISKS ASSOCIATED WITH ENTERING NEW MARKETS

     One element of the Company's  strategy is to leverage the  Company's  brand
names of products that the Company provides.  No assurance can be given that the
Company will be able to compete successfully in any such new markets.  There can
be no assurance that the Company's marketing efforts or the Company's pursuit of
any new  opportunities  will be  successful.  If the  Company's  efforts are not
successful,  the Company could realize less than expected  earnings,  which,  in
turn,  could  result in a decrease in the market value of the  Company's  Common
Stock.   Furthermore,   such   efforts  may  divert   management   attention  or
inefficiently utilize the Company's resources.

                                       6
<PAGE>
SUBSTANTIAL DOUBT THAT THE COMPANY CAN CONTINUE AS A GOING CONCERN

      The Company expects to continue to incur  significant  capital expenses in
pursuing its business  plan to market its products and expand its product  line,
while obtaining  additional  financing through stock offerings or other feasible
financing  alternatives.  In order for the Company to continue its operations at
its existing levels, the Company will require significant  additional funds over
the next twelve  months.  Therefore,  the Company is  dependent  on funds raised
through equity or debt offerings.  Additional  financing may not be available on
terms favorable to the Company,  if at all. If these funds are not available the
Company  may not be able to  execute  its  business  plan or take  advantage  of
business  opportunities.  The ability of the  Company to obtain such  additional
financing and to achieve its operating goals is uncertain. In the event that the
Company does not obtain additional  capital or is not able to increase cash flow
through the increase of sales, there is a substantial doubt of its being able to
continue as a going concern.

FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING

     No  assurance  can be given that the  Company  will be able to conduct  its
marketing  and  product  development  programs  as planned or that change in the
Company's marketing and product development plans or other changes affecting the
Company's operating expenses will not result in the expenditure of such proceeds
before  such time.  Contingencies  may arise that  require the Company to obtain
additional  funding before that time. The Company's future capital  requirements
will depend on many factors,  including continued product development  programs,
the magnitude of these programs,  the time and expense involved in obtaining new
customers, competing technological and market developments, the establishment of
additional  collaborative  arrangements,   the  costs  involved  in  filing  and
prosecuting and enforcing copyright and trademark claims, establishing marketing
programs and conducting  commercialization  activities and  arrangements for new
products and services.

SUBSTANTIAL FUTURE SALES OF STOCK; DILUTION

     There may be substantial  sales of the Company stock,  common or preferred,
as a result of stock option  exercises,  stock  bonuses,  public and/or  private
sales of the Company stock..  Sales of substantial amounts of stock could have a
material dilutive effect on stockholders.  Additionally,  it may be necessary to
offer  warrants  or  options  to  obtain  strategic  relationships  or to  raise
additional capital.  All of these issuances will dilute the holdings of existing
stockholders, thereby reducing such holder's percentage ownership.

NO DIVIDENDS

     The Company anticipates that it will use any funds available to finance its
growth  and  that  it  will  not  pay  cash  dividends  to  stockholders  in the
foreseeable future.

HISTORY OF LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY

      As of  December  31,  2006 the Company  had  accumulated  significant  net
losses. The development of the Company's products will require the commitment of
substantial resources to increase its advertising, marketing and distribution of
its existing products and to complete the testing, manufacturing,  marketing and
distribution  of new  products.  These  expenditures  are  expected to result in
substantial and increasing losses over the next several months.  There can be no
assurance that the Company will not incur  substantial and continuing net losses
beyond the next six months or that the  Company  will ever reach  profitability.
Furthermore,  there can be no assurance  the  Company's  products  will meet the
expectations and  effectiveness  required to be competitive in the market place,
that the  Company  will enter into  arrangements  for  product  development  and
commercialization,   successfully  market  its  products,  or  achieve  customer
acceptance.

EMPLOYEES

     As of December 31, 2006,  the Company had four  employees.  No union or any
other form of collective bargaining unit represents any employee.

                                       7
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY.

     The Company does not own any real estate. The Company's principal office is
maintained at 7525 E. Williams Drive Suite B,  Scottsdale,  Arizona  85255.  The
Company  leases its office  space at  $1,166.42  per month from an  unaffiliated
third party.  The  leasehold  consists of  approximately  650 square  feet.  The
current  lease is month to month and the Company has an option to terminate  the
lease upon 30 days' notice.  Management  believes that the Company's offices are
adequate for its reasonable  foreseeable  needs.  The Company does not intend to
acquire any properties at the current date. Additionally,  David W. Keaveney has
dedicated a fully operating  office within his primary  residency so that he may
conduct  business  after hours and on the  weekends.  This home office  contains
approximately 800 square feet and Mr.Keaveney receives $2,000 per month from the
Company.  This home  office  lease  arrangement  is  covered  in Mr.  Keaveney's
employment  agreement  with the Company  and will  terminate  when Mr.  Keaveney
leaves the Company shortly after this Form 10-KSB is filed with the SEC.

ITEM 3. LEGAL PROCEEDINGS.

     The Company is not currently  involved in any legal  matters.  However,  in
2006,  X-Clearing  Corporation  obtained  a  judgment  against  the  Company  as
described below.

CASE NUMBER 05CV5129 X-CLEARING CORPORATION V. MOTORSPORTS EMPORIUM, INC.

     During the third  quarter of 2005,  the Company was made a defendant in the
matter  of  X-Clearing  Corporation,   FKA  Global  Stock  Transfer  and  Global
Securities Transfer v. Ten Stix, Inc., NKA MotorSports Emporium,  Inc., filed on
July 1, 2005, in the District Court for the City and County of Denver  Colorado,
case number 05CV5129.  The plaintiff  alleged breach of contract,  collection of
debts owed and bad faith pertaining to activities of prior management and sought
damages in excess of $35,000.  In July 2006,  a judgment was entered in favor of
X-Clearing  Corporation against MotorSports Emporium for the principal amount of
$16,856.28  plus  prejudgment  interest of  $3,639.78,  in addition to costs and
reasonable attorney fees. On November 27, 2006, the judgment was domesticated in
Arizona (CV2006-018060 and CV2006-018061) for the amount of $20,496.06, costs of
$912 and attorney fees of $19,231. The judgment will accrue interest at the rate
of 8% per annum until paid.

     The  Company  is  not  aware  of  any  pending  or  threatened   claims  or
assessments,  other than the judgment described above, which may have a material
adverse impact on the Company's financial position or results of operations.

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

     No matter was  submitted  to a vote of our  shareholders  during the fourth
quarter of 2006.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
        ISSUER PURCHASES OF EQUITY SECURITIES.

     As of the date of this Annual Report,  the Company's Common Stock is quoted
on the  Over-the-Counter  Bulletin Board under the symbol  "MSEM.OB." The market
for the Company's  Common Stock is limited,  volatile and sporadic and the price
of the Company's Common Stock could be subject to wide  fluctuations in response
to  quarterly  variations  in operating  results,  news  announcements,  trading
volume, sales of Common Stock by officers,  directors and principal shareholders
of the Company,  general market trends, changes in the supply and demand for the
Company's shares, and other factors. The following table sets forth the high and
low sales prices for each quarter relating to the Company's Common Stock for the
last two fiscal years, and has been retroactively  adjusted to account for the 1
for 225 reverse stock split that occurred on October 31, 2006.  These quotations
reflect  inter-dealer prices without retail mark-up,  markdown,  or commissions,
and may not reflect actual transactions.

                                       8
<PAGE>
          Fiscal 2005                   High              Low
                                        ----              ---
          First Quarter (1)           $ 20.03           $ 0.68
          Second Quarter (1)          $  7.88           $ 2.70
          Third Quarter (1)           $  3.60           $ 1.80
          Fourth Quarter (1)          $  3.15           $ 1.13

          Fiscal 2006                   High              Low
                                        ----              ---
          First Quarter (1)           $  1.58           $ 0.90
          Second Quarter (1)          $  0.90           $ 0.45
          Third Quarter (1)           $  0.45           $ 0.23
          Fourth Quarter (1)          $  0.20           $ 0.05

----------
(1)  This  represents  the  closing  bid  information  for the  stock on the OTC
     Bulletin Board. The bid and ask quotations represent prices between dealers
     and do not  include  retail  markup,  markdown or  commission.  They do not
     represent  actual  transactions  and  have  not  been  adjusted  for  stock
     dividends or splits.

     All of the  above  information  was  listed  as  reported  by the  National
Association of Securities Dealers Composite feed or other qualified inter-dealer
quotation medium.

HOLDERS

     As of December 31,  2006,  there were  approximately  234  shareholders  of
record of the Company's Common Stock, 96 shareholders of record of the Company's
Series A Preferred  Stock, and one shareholder of record of the Company's Series
C Preferred Stock.

DIVIDENDS

     The Company has not declared any cash  dividends with respect to its common
stock or preferred stock during the last two fiscal years and does not intend to
declare dividends in the foreseeable future. There are no material  restrictions
limiting or that are likely to limit the  Company's  ability to pay dividends on
its outstanding securities.

     For information regarding the Company's Equity Compensation Plans, see Part
III, Item 11.

RECENT ISSUANCE OF UNREGISTERED SECURITIES

     On February 9, 2007, the Company issued 166,667 shares of restricted common
stock to David W. Keaveney in lieu of $5,000 in accrued salary.

     On March 1, 2007, the Company  issued  384,615 shares of restricted  common
stock to Mr. Nick Babyak based on a five day average  trading price of $.031 for
the week of February 5, 2007,  discounted by 20% due to restricted status of the
share of common stock, for a net price of $.026 per share.

     On March 9,  2007,  the  Company  issued an  additional  403,225  shares of
restricted  common stock to Mr. Babyak based on a five day average trading price
of $.0326 for the week of January 22, 2007,  discounted by 20% due to restricted
status of the shares of common stock, for a net price of $.0248 per share.

     The above shares of common stock were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended.

                                       9
<PAGE>
ISSUANCE OF UNREGISTERED SECURITIES DURING 2006

     The following  information has been  retroactively  adjusted to account for
the 1 for 225 reverse stock split that occurred on October 31, 2006.

     On January 4, 2006,  the  Company  issued  5,848  shares of its  restricted
common  stock to Tracy Baron in exchange for  services  valued at $7,500.  These
shares were issued  pursuant to the exemption  from  registration  under Section
4(2) of the Securities Act of 1933.

     On February 22, 2006,  the Company  authorized  and issued 11,111 shares of
its restricted  common stock to investors in exchange for cash totaling $10,000.
These  shares were issued  pursuant to the  exemption  from  registration  under
Section 4(2) of the Securities Act of 1933.

     On March 1, 2006,  the Company  authorized  and issued  5,556 shares of its
restricted  common  stock to an investor in exchange for cash  totaling  $5,000.
These  shares were issued  pursuant to the  exemption  from  registration  under
Section 4(2) of the Securities Act of 1933.

     On December 13, 2006,  the Company made a lump sum payment to Mr. Baron for
the  amount  of  his  consulting  compensation  by  issuing  312,500  shares  of
restricted  common stock to him valued at $25,000.  Mr. Baron is not currently a
consultant to the Company.

     The Company did not utilize or engage a principal underwriter in connection
with any of the above securities transactions.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

CAUTIONARY FORWARD - LOOKING STATEMENT

     The following  discussion  should be read in conjunction with our financial
statements and related notes.

     Certain matters  discussed  herein may contain  forward-looking  statements
that are  subject  to risks and  uncertainties.  Such  risks  and  uncertainties
include, but are not limited to, the following:

     *    the volatile and competitive nature of our industry,
     *    the uncertainties surrounding the rapidly evolving markets in which we
          compete,
     *    the uncertainties surrounding technological change of the industry,
     *    our dependence on its intellectual property rights,
     *    the success of marketing efforts by third parties,
     *    the changing demands of customers and
     *    the arrangements with present and future customers and third parties.

     Should one or more of these risks or  uncertainties  materialize  or should
any of the underlying assumptions prove incorrect, actual results of current and
future  operations  may vary  materially  from those  anticipated.  See also the
disclosures under "Cautionary Statement" following the Table of Contents in this
Annual Report.

GENERAL

     The  "Company,"  formally  known as "Ten Stix,  Inc.,"  changed its name to
"MotorSports Emporium, Inc." on December 1, 2004, under the laws of the State of
Nevada, to engage in the fast track motor sports industry targeting  enthusiasts
participating in die cast collecting,  automobile restoration,  high-performance
accessories,  motor sports-related  collectibles,  driver's apparel, race venues
and product licensing.

     Our shares of common stock are traded on the OTC  Bulletin  Board under the
symbol "MSEM.OB."

                                       10
<PAGE>
     Our principal  executive  offices are located at 7525 E Williams Road Suite
B,  Scottsdale,  AZ 85255.  Our telephone number is (480) 596-4002 and facsimile
number  is (480)  556-0831.  More  information  regarding  our  company  and our
products is available on our website at www.motorsportsemporium.com

EXECUTIVE OVERVIEW

     Since 2005, we transformed our business away from the gaming  operations of
Ten Stix,  Inc.  and began to  develop  a diverse  business  entity in the motor
sports industry, targeting enthusiasts who participate in automobile racing, die
cast collectible cars,  automobile  restoration,  high-performance  accessories,
motor  sports-related  collectibles,  automotive  and  racing  art,  as  well as
driver's apparel, race venues and product licensing.  We initiated operations by
selling die-cast collectibles in December 2004, under the name ScaleCars.com and
have  been  steadily  expanding  our  product  portfolio  to  include  race worn
memorabilia from well known professional  racing drivers and sell these products
through our  DriversDigs.com  division.  We sell our automotive and race related
art work through  PitStopStudios.com,  another division of the Company.  We also
have expanded our product portfolio through Quadriga  MotorSports,  Inc. with an
acquisition  of an exclusive  license to manufacture  and  distribute  GS610(TM)
Maximum  Performance  Brake Fluid(TM),  a high quality  performance brake fluid.
Finally,  we recently  launched  CleanCarCareKit.com,  our new car care  product
line, Arie Luyendyk Pro Series(TM), consisting of high performance specialty car
care products.

     We have begun to focus our efforts more on our high performance brake fluid
and specialty car care product lines through the Company's  subsidiary  Quadriga
MotorSports,  Inc. We began  generating  revenues  from these  businesses in the
current  fiscal year.  In regard to our high  performance  brake fluid,  we will
focus on orders from the race teams and  specialty  shops  rather than  internet
sales. The relationships within the racing community will play an important role
moving forward as will the relationship with our exclusive distributor.  The car
care product line began to get recognition  from an early test program.  We will
begin to focus more on the mass retail and wholesale stores with a suite of four
products.  Also, early interest from television  shopping network may lead us to
present  either a single  product or the four product  suite on a home  shopping
channel.

     We  have  been  incurring  selling,  general  and  administrative  expenses
primarily to develop our existing businesses, improve our current infrastructure
to address anticipated growth and identify and evaluate  complementary  business
development opportunities and marketing. The development of these businesses has
led to recent operating losses and cash outflows.

RECENT DEVELOPMENTS

REVERSE STOCK SPLIT

     Effective  October 31, 2006,  the Company  effected a reverse  split of our
common stock on a ratio of 1 share for every 225 shares of common stock, without
decreasing the number of authorized  shares of common stock and without changing
the par value of the common stock. All share counts included in this Form 10-KSB
have been retroactively restated for this stock split.

CHANGE IN DIRECTORS

     Effective  April 5,  2006,  Tracey  S.  Baron  resigned  from the  Board of
Directors of the Company.  On September  13, 2006,  David W. Keaveney and Rhonda
Keaveney were re-elected to the Board of Directors of the Company to serve until
the 2007  annual  meeting of  shareholders  or until their  successors  are duly
elected.  However,  David W. Keaveney and Rhonda  Keaveney have agreed to resign
their directorships within a few days of filing this form 10-KSB.

CHANGE IN CONTROL

     On September 13, 2006, we issued 200,000 shares of Series C Preferred Stock
to  David  W.  Keaveney,  our  then  President  and  CEO,  in  exchange  for the
cancellation  of  $10,000  in  accrued,  but  unpaid,  compensation  due  to Mr.
Keaveney.  On March 14, 2007, Mr.  Keaveney sold his Series C Preferred Stock to
Mr. Kenneth Yeung.

                                       11
<PAGE>
     The Series C Preferred Stock has the following voting powers, designations,
preferences, limitations, restrictions and relative rights:

     a.   Designation: Series C Preferred Stock
     b.   Authorized Shares of Series C Preferred Stock: 3,000,000
     c.   Liquidation Rights: None
     d.   Dividend Rights: None
     e.   Conversion Rights: None
     f.   Mandatory Redemption Rights: None
     g.   Voting Rights: 3,000 votes per share

     Since the Series C Preferred  Stock  carries  super-voting  rights of 3,000
votes per share, Mr. Yeung is entitled to 600 million votes on matters submitted
our  shareholders  for  vote.  As a  result  of Mr.  Yeung's  voting  power,  he
effectively  controls  the Company and is  considered a "control  person"  under
applicable SEC regulations.

RETIREMENT OF SERIES B PREFERRED STOCK IN EXCHANGE FOR NOTE PAYABLE

     On August 21, 2006, the outstanding Series B Preferred Stock, consisting of
shares held by our CEO, a former  director  and a  shareholder,  were retired in
exchange for cash compensation of $1 each to the CEO and a former director and a
convertible  note payable in the principal  amount of $250,000 to a shareholder.
The Company has  determined  that this  transaction  meets the  definition of an
extinguishment  based  on  the  guidance  contained  in  EITF  96-19:   DEBTOR'S
ACCOUNTING FOR A MODIFICATION OR EXCHANGE OF DEBT INSTRUMENTS,  and,  therefore,
the Company has recognized a loss on  extinguishment of debt of $116,405 related
to this transaction.

     Under  the  terms of the note  payable,  interest  accrues  at a rate of 10
percent per annum, with monthly principal payments of $5,000 per month beginning
sixty days from the date of the note. On March 14, 2007, the holders of the note
payable  executed an  amendment  to the note  payable,  which  provided  for the
deferral of payments  under the note payable  until June 2007,  and extended the
term of the note from August 2007, to August 2008.

     In the event  that the note is in  default  and such  default  has not been
cured by us within 30 days following notice of such default by the holders,  the
holders may convert all or part of the remaining principal balance, plus accrued
interest,  of this note into common  stock.  In the event of a conversion of the
amended  note,  the  number  of shares  of  common  stock to be issued  shall be
determined  by  dividing  (i) the  unpaid  principal  balance  plus any  accrued
interest by (ii) seventy-five  percent of the average of the lowest five closing
bid  prices  in  the  past  20  trading  days  immediately  preceding  any  such
conversion.

DISCONTINUED OPERATIONS

     In the fourth  quarter of 2006, the Company  continued  selling its diecast
inventory  and decided that it would not increase its  inventory  and decided to
discontinue the operations of its Scottsdale Diecast division.  The Company sold
the  balance of its  inventory  along with its fixed  assets  and  website.  The
Company decided to sell the balance of its inventory,  fixed assets and web site
primarily  because of increasing  inventory  costs and  declining  sales due, in
part, to the consolidation of the diecast industry. The Company has subsequently
disposed of all assets  related to this  division in the first  quarter of 2007.
Scottsale  Diecast's net revenues for the year ended  December 31, 2006 and 2005
were $138,962 and $221,975,  respectively.  Excluding general and administrative
costs that are not specifically identifiable to Scottsdale Diecast, the division
generated  pretax  income of $991 and $44,229 for the years ended  December  31,
2006 and 2005, respectively.  Prior year financial statements for 2005 have been
restated to present  the  operations  of the  Scottsdale  Diecast  division as a
discontinued operation.

RESULTS OF  OPERATIONS  - YEAR ENDED  DECEMBER  31, 2006  COMPARED TO YEAR ENDED
DECEMBER 31, 2005

     Our net  loss for the  year  ended  December  31,  2006  was  approximately
($1,189,711)  compared to a net loss of approximately  ($1,010,499) for the year
ended December 31, 2005 (an increase of $179,212).

     Net revenues from  continuing  operations  for the year ended  December 31,
2006 was $57,853,  consisting of sales of high performance brake fluid and other

                                       12
<PAGE>
automobile accessories. Revenues from the year ended December 31, 2005 consisted
of  retail  sales of die cash  collectible  cars that has been  reclassified  to
discontinued   operations  in  the  accompanying   consolidated   statements  of
operations.

     Cost of sales for the year ended  December 31, 2006 was $83,998  related to
sales of high performance brake fluid and other automobile accessories.  Cost of
sales from the year ended  December  31, 2005  consisted  of retail sales of die
cash collectible cars that has been  reclassified to discontinued  operations in
the accompanying consolidated statements of operations.

     Operating  expenses  for the years  ended  December  31, 2006 and 2005 were
$1,129,544 and $997,880,  respectively (an increase of $131,664).  This increase
was primarily related to increased consulting and branding costs associated with
trying  to  develop  the  Company's  motorsports  product  lines.  Approximately
two-thirds of the operating  expenses in 2006 consist of salaries,  professional
fees and  consulting  expenses.  Such expenses may vary  depending on the future
strategic direction of the business.

     Interest expense for the years ended December 31, 2006 and 2005 was $28,489
and $34,902, respectively (an decrease of $6,413), due to changes in our capital
structure.

     In 2006,  our other income  (expense)  included the  following  significant
items:

     *    An expense of $40,496  associated  with the  settlement of outstanding
          litigation
     *    A loss of $116,405  associated  with the  extinguishment  of long-term
          debt related to the Company's outstanding Preferred Series B Stock
     *    A gain of $150,057  associated with the release of certain  contingent
          liabilities for which payment is no longer expected.

LIQUIDITY AND CAPITAL RESOURCES

     Our future success and viability is primarily dependent upon our ability to
increase  operating cash flows and develop new business  opportunities.  We will
continue  marketing,  promoting and operating our die cast replica car business,
while seeking growth  opportunities  to develop a diverse business entity within
the motor sports  industry.  Our plan of operation  for the next 12 months is to
develop existing business lines and to seek the acquisition of assets,  property
or  businesses  that may benefit the Company and its  shareholders.  Because the
Company has minimal capital  resources,  management  anticipates that to achieve
any such  acquisition,  it may be  required  to  issue  shares  of its  stock as
consideration for such acquisition. In the event that the Company contacts or is
contacted  by a private  company or other  entity,  which may be  considering  a
merger  with or into the  Company,  it is  possible  that the  Company  would be
required to raise additional funds in order to accomplish the transaction.  Such
transactions would be evaluated on a case by case basis.

     During the next 12 months, the Company's foreseeable cash requirements will
relate to  continuing to develop the  operations of its wholly owned  subsidiary
and business divisions,  maintaining the Company in good standing and making the
requisite filings with the Securities and Exchange  Commission,  and the payment
of expenses  associated with reviewing or investigating  any potential  business
venture.  Because the Company has not identified any such venture as of the date
of this Report, it is impossible to predict the costs. Additionally, the Company
may  experience  a liquidity  predicament  and be  required to raise  additional
capital.  Historically,  the Company has relied upon internally  generated funds
and funds from the sale of shares of stock and loans from its  shareholders  and
private  investors to finance its  operations  and growth.  Management may raise
additional  capital  through future public or private  offerings of its stock or
through loans from private  investors,  although  there can be no assurance that
the Company will be able to obtain such financing.  The Company's  failure to do
so  would  have  a  material  and  adverse  affect  upon  the  Company  and  its
shareholders.

     The Company's financial statements have been prepared assuming that it will
continue  as a  going  concern  and,  accordingly,  do not  include  adjustments
relating to the recoverability and realization of assets and  classifications of
liabilities  that might be necessary should the Company be unable to continue in
operations.

                                       13
<PAGE>
YEAR ENDED DECEMBER 31, 2006

     As of December 31, 2006, the Company's  current assets were $20,064 and its
current  liabilities  were $754,374,  resulting in a working  capital deficit of
$734,310.  As of December 31, 2006,  current assets were comprised of (i) $7,200
in cash;  (ii) $267 in accounts  receivable;  (iii) $922 in  inventory  and (iv)
$11,675 in other  current  assets.  The Company sells all products for immediate
payment.

     As of December 31, 2006, current liabilities were comprised of (i) $366,920
in notes payable to stockholders;  (ii) $273,454 in accounts payable and accrued
expenses and $114,000 of other amounts due to shareholders.

     As of December 31, 2006,  the  Company's  total assets were $49,306 and its
total liabilities were $754,374, with a net stockholder's deficit of ($705,068).

     For the year ended  December  31,  2006,  net cash flows used in  operating
activities  were  ($435,211)  compared  to net  cash  flows  used  in  operating
activities of ($652,360)  for the year ended  December 31, 2005. The decrease of
$217,149  during the  twelve-month  period ended December 31, 2006 was primarily
due an increasing usage of non-cash stock based  compensation for consulting and
related  services  as well as the  liquidation  of  significant  amounts  of the
Company's inventory of die-cast collectibles and high performance brake fluid.

     For the year ended  December 31, 2006, net cash flows provided by investing
activities  was $1,171  compared  to net cash used by  investing  activities  of
($26,207)  during  the year ended  December  31,  2005.  Cash  outflows  in 2006
consisted of  expenditures  for fixed assets offset by proceeds from the sale of
fixed assets.

     For the  twelve-month  period  ended  December  31,  2006,  net cash  flows
provided  by  financing  activities  was  $417,280  compared  to net cash  flows
provided by financing  activities of $689,795 for the twelve-month  period ended
December 31, 2005.  Cash flows in 2006 consisted  primarily of proceeds from the
issuance of common stock and the exercise of stock options  partially  offset by
principal  repayments  on notes  payable.  During 2005,  the Company  utilized a
portion of its financing cash inflows  (consisting of proceeds from the issuance
of common  stock and the  exercise  of stock  options)  to repay  certain  notes
payable, with the remainder used for operating and investing activities.

     As of the date of this Annual  Report,  the Company  has  generated  little
revenue from operations,  has a working capital deficit and a retained  earnings
deficit.  Therefore,  the Company's  auditors have expressed  substantial  doubt
about the Company's ability to continue as a going concern.  Management believes
that it can maintain its status as a going concern based on its ability to raise
funds pursuant to future public and private offerings and to obtain advances and
minimize operating expenses by not duplicating or incurring needless expenses.

OFF-BALANCE SHEET ARRANGEMENTS

     As of the  date of this  Annual  Report,  the  Company  does  not  have any
off-balance  sheet  arrangements  that have or are  reasonably  likely to have a
current  or future  effect on the  Company's  financial  condition,  changes  in
financial  condition,  revenues or expenses,  results of operations,  liquidity,
capital  expenditures or capital  resources that are material to investors.  The
term "off-balance sheet arrangement" generally means any transaction,  agreement
or other  contractual  arrangement  to which an entity  unconsolidated  with the
Company is a party, under which the Company has (i) any obligation arising under
a guarantee,  contract,  derivative  instrument or variable interest;  or (ii) a
retained or contingent  interest in assets transferred to such entity or similar
arrangement  that serves as credit,  liquidity  or market risk  support for such
assets.

FUTURE COMMITMENTS

     As of the  date of this  Annual  Report,  the  Company  does  not  have any
material  commitments  nor  does  management  anticipate  any  further  material
commitments within the next twelve months.

                                       14
<PAGE>
ITEM 7. FINANCIAL STATEMENTS.

     The Financial  Statements of MotorSports  Emporium,  Inc. are listed on the
Index to Financial Statements as set forth on page F-2.

ITEM 8. CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
        FINANCIAL DISCLOSURE.

     None.

ITEM 8A. CONTROLS AND PROCEDURES.

(a) Evaluation of Disclosure Controls and Procedures.

     David Keaveney,  our Chief Executive  Officer and Chief Financial  Officer,
has  evaluated  the  effectiveness  of our  disclosure  controls and  procedures
controls  and  procedures  (as  such  term is  defined  in Rules  13a-15(e)  and
15d-15(e)  under the 1934 Act as of the end of the period covered by this annual
report  ("Evaluation  Date").  Based on such  evaluation,  our  Chief  Executive
Officer and Chief  Financial  Officer has concluded  that, as of the  Evaluation
Date,  our  disclosure  controls  and  procedures  were  ineffective  due  to an
insufficient  complement of personnel  with an  appropriate  level of accounting
knowledge,  experience  and  training in the general  application  of  generally
accepted  accounting  principles   commensurate  with  its  financial  reporting
requirements and the complexity of the Company's operations and transactions.

(b) Changes in Internal Controls.

     In addition, no change in our internal control over financial reporting (as
defined in Rule 13a-15(f)  under the 1934 Act occurred during the fourth quarter
of the year  ended  December  31,  2006,  that has  materially  affected,  or is
reasonably  likely to materially  affect,  our internal  control over  financial
reporting.

ITEM 8A (T) CONTROLS AND PROCEDURES

     This Item is not applicable to the Company's fiscal year ended December 31,
2006.

ITEM 8B. OTHER INFORMATION.

     None.

                                       15
<PAGE>
                                    PART III

ITEM 9. DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTERS AND CONTROL  PERSONS OF THE
        REGISTRANT AND CORPORATE  GOVERNANCE;  COMPLIANCE WITH SECTION 16(A) OF
        THE EXCHANGE ACT

Identity of Directors and Executive Officers as of March 27, 2007

    Name                 Age                  Position
    ----                 ---                  --------
Kenneth Yeung *           51     President
David Keaveney **         37     Director, Chief Executive Officer and Chief
                                 Financial Officer
Rhonda Keaveney ***       40     Director, Chief Operating Officer and Secretary

----------
*    On March 27, 2007,  Mr. Yeung was elected to the office of President of the
     Company.
**   On September 25, 2004, David Keaveney was elected to the Board of Directors
     and  to the  offices  of  President,  Chief  Executive  Officer  and  Chief
     Financial Officer of the Company.  On March 14, 2007, Mr. Keaveney resigned
     from his office of  President.  Mr.  Keaveney has agreed to resign from the
     offices of Chief Executive  Officer,  Chief Financial  Officer and Director
     within a few days of the filing of this Form 10-KSB.
***  On October 13,  2004,  Rhonda  Keaveney,  the wife of David  Keaveney,  was
     elected to the Board of  Directors  and to the office of  Secretary  of the
     Company. In March 2005, Rhonda was elected to the office of Chief Operating
     Officer of the Company.  Ms. Keaveney has agreed to resign from the offices
     of Chief Operating Officer, Secretary and Director within a few days of the
     filing of this Form 10-KSB.
**** All Company  officers serve at the pleasure of the Board of Directors.  All
     current members of the Board of Directors will serve as such until the next
     annual meeting of stockholders or until their  successors are duly elected.
     Mr.  Keaveney has an employment  agreement with the Company as described in
     Item 10 of this Form 10-KSB,  which will be  terminated  upon his scheduled
     resignation from office.

     KENNETH YEUNG- Mr. Yeung is currently the Chief  Executive  Officer of ia&d
consultants,  Inc.,  a Los Angeles  based  consulting  firm engaged in planning,
architectural  design,  engineering and business consulting.  As the CEO of ia&d
consultants,  Inc.,  Mr.  Yeung leads that  company by  developing  business and
providing services,  such as planning,  architectural  design and engineering to
its clients  worldwide  and  particularly  in China.  His company has  completed
numerous projects including commercial and residential developments,  hotels and
resorts,  schools and recreational facility development.  Currently, Mr. Yeung's
company has offices in three major cities in China. Mr Yeung received a Bachelor
of Arts and Sciences from the  University  of Hawaii.  From the  mid-1990s,  Mr.
Yeung has held  senior  executive  positions  with  companies  engaged  in civil
engineering, building material manufacturing, planning, architecture and design.

     DAVID W.  KEAVENEY  - Mr.  Keaveney  joined the  Company in 2004.  Prior to
joining  the  Company,  Mr.  Keaveney  was  founder  of a private  business  and
management   consulting  firm  where  he  functioned  as  a  strategic  business
consultant;  mentoring senior level  executives on core  competency,  marketing,
reengineering  and value  growth.  Early in his business  career,  Mr.  Keaveney
worked at Dean Witter and Merrill Lynch before  serving as Sr. Vice President of
Investments  for  a  private  financial   services  firm  in  Arizona  where  he
specialized in business structure, investment education and corporate valuation.
Mr. Keaveney has held senior  executive  positions with several private start-up
companies  and  consulted  extensively  in the public market place on marketing,
finance  and  management   development.   Mr.  Keaveney  earned  his  Management
Certificate  (mini-MBA)  from  Loyola  University  in  Chicago  where he studied
marketing,  financial  management  and  corporate  restructuring.  He is working
towards  a CPD  from  the  Wharton  School  of  Business  at the  University  of
Pennsylvania with a concentration in critical thinking, management, negotiations
and mergers and  acquisitions.  Mr.  Keaveney  studied  economics and finance at
Harvard University.

     RHONDA  KEAVENEY - Rhonda  Keaveney  joined the  Company in October  2004.,
Prior to joining the Company,  Ms Keaveney  functioned as Compliance Officer for
an Arizona Investment Banking firm and more recently as a director of operations

                                       16
<PAGE>
for a private  investment  partnership.  Rhonda has a strong  background in case
management,  office  administration and the securities industry where she's held
NASD Series 7, 63 and 24  licenses.  Rhonda  received a Masters  Certificate  in
Project  Management  from  Villanova  University.  She  attended  Arizona  State
University where she studied  Psychology and Business and is currently  studying
history and working towards a degree in law.

DIRECTORSHIPS

     No  Director  of the  Company  or  person  nominated  or chosen to become a
Director holds any other  directorship in any company with a class of securities
registered pursuant to Section 12 of the 1934 Act or subject to the requirements
of Section  15(d) of such Act or any other  company  registered as an investment
company under the Investment Company Act of 1940.

SIGNIFICANT EMPLOYEES

     No other significant employees exist.

FAMILY RELATIONSHIPS

     David Keaveney,  the Company's Chief Executive  Officer and Chief Financial
Officer,  and Rhonda  Keaveney,  the  Company's  Secretary  and Chief  Operating
Officer, are husband and wife.

INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

     During  the past five  years,  no  present  or former  director,  executive
officer or person nominated to become a director or an executive  officer of the
Company:

     (1)  was a general  partner or executive  officer of any  business  against
          which any  bankruptcy  petition  was filed,  either at the time of the
          bankruptcy or two years prior to that time;
     (2)  was  convicted in a criminal  proceeding or named subject to a pending
          criminal  proceeding  (excluding  traffic  violations  and other minor
          offenses);
     (3)  was  subject  to any  order,  judgment  or  decree,  not  subsequently
          reversed,   suspended   or   vacated,   of  any  court  of   competent
          jurisdiction,   permanently   or   temporarily   enjoining,   barring,
          suspending  or  otherwise  limiting  his  involvement  in any  type of
          business, securities or banking activities; or
     (4)  was found by a court of competent  jurisdiction  (in a civil  action),
          the  Securities  and  Exchange  Commission  or the  Commodity  Futures
          Trading  Commission to have violated a Federal or state  securities or
          commodities law, and the judgment has not been reversed,  suspended or
          vacated.

AUDIT COMMITTEE FINANCIAL EXPERT AND IDENTIFICATION OF AUDIT COMMITTEE

     The Company has no separately  designated standing audit committee or other
committee performing similar functions. The Board of Directors acts as the audit
committee.  None of the  directors  qualifies  as an Audit  Committee  Financial
Expert.

MATERIAL CHANGES TO THE METHOD BY WHICH THE SHAREHOLDERS MAY RECOMMEND  NOMINEES
TO THE BOARD OF DIRECTORS

     None.

                                       17
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive  officers,  directors and persons who own more than ten percent of the
Company's Common Stock, to file initial reports of beneficial  ownership on Form
3,  changes  in  beneficial  ownership  on  Form 4 and an  annual  statement  of
beneficial ownership on Form 5, with the SEC. Such executive officers, directors
and greater than ten percent  shareholders  are required by SEC rules to furnish
the Company with copies of all such forms that they have filed.

     Based  on its  review  of the  copies  of such  forms  filed  with  the SEC
electronically,  received  by  the  Company  and  representations  from  certain
reporting  persons,  the  Company  believes  that  during the fiscal  year ended
December 31, 2005,  all the  officers,  directors  and more than 10%  beneficial
owners have  complied with the above  described  filing  requirements.  However,
David Keaveney, a Director and President of the Company, inadvertently filed his
Form 5 a few days late in February 2006. Mr. Keaveney also inadvertently filed a
Form 4 a few days late for a  transaction  in February  2006.  Tracey  Baron,  a
Director  and 10% holder,  inadvertently  filed his Form 5 a few days late.  Mr.
Baron also  inadvertently  filed a Form 4 a few days late for a  transaction  in
February 2006.

CODE OF ETHICS

     The  Company  has  adopted a Code of  Ethics  applicable  to its  officers,
including  its  principal   executive  officer,   principal  financial  officer,
principal  accounting  officer or controller  and any other  persons  performing
similar  functions.  The Code of Ethics will be  provided  free of charge by the
Company to interested  parties upon request.  Requests should be made in writing
and directed to the Company at the following  address:  7525 E. Williams  Drive,
Suite B, Scottsdale, Arizona 85255

ITEM 10. EXECUTIVE COMPENSATION.

     The  following  table sets  forth the  aggregate  compensation  paid by the
Company for services rendered during the periods indicated:

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                         Non-Equity
                                                                         Incentive   Nonqualified
 Name and                                                                   Plan       Deferred    All other
 Principal                                           Stock     Option     Compen-      Compen-     Compen-
 Position            Year   Salary($)    Bonus($)   Awards($)  Awards($)  sation($)    sation($)   sation($)     Total($)
 --------            ----   ---------    --------   ---------  ---------  ---------    ---------   ---------     --------
<S>                 <C>    <C>          <C>         <C>        <C>        <C>         <C>         <C>           <C>
David W. Keaveney    2006   $186,000(1)       0        0          0          0           0         $55,565(2)   $241,565
President and CEO    2005   $114,000     11,000(3)     0          0          0           0         $52,801(4)   $177,801

Rhonda Keaveney      2006   $ 60,000(5)       0        0          0          0           0               0      $ 60,000
COO and Secretary    2005   $ 40,000     11,000(3)     0          0          0           0               0      $ 51,000
</TABLE>

----------
(1)  On September 25, 2004 David  Keaveney was elected to the Board of Directors
     and  to the  offices  of  President,  Chief  Executive  Officer  and  Chief
     Financial Officer of the Company. During the fiscal year ended December 31,
     2006 David  Keaveney  received a cash salary of  $116,230.82  and  received
     200,000 shares of the Company's Series C Preferred Stock in lieu of $10,000
     in  accrued,  but unpaid  salary  Included in this total is  $59,769.18  of
     accrued, but unpaid salary due to Mr. Keaveney as of December 31, 2006.

                                       18
<PAGE>
(2)  During the fiscal year ended  December 31, 2006,  David  Keaveney  received
     (pursuant  to his  employment  agreement  with the  Company) an  automobile
     allowance of $21,225.78,  $24,000 for renting a home office to the Company,
     $9,913.85 in medical  reimbursements  and a $425.28 life insurance premium.
     Rhonda Keaveney, as the wife of David Keaveney,  was an obvious beneficiary
     of  the  automobile  allowance,  home  office  rent  and  medical  expenses
     attributed to David Keaveney and as described in this footnote.
(3)  On September 7, 2005,  the Company  issued  1,000,000  shares of restricted
     common  stock to each of the  three  members  of the  Board  of  Directors,
     including David Keaveney and Rhonda  Keaveney.  These shares were valued at
     $.011 per share.
(4)  During the fiscal year ended  December 31, 2005,  David  Keaveney  received
     (pursuant  to his  employment  agreement  with the  Company) an  automobile
     allowance  of $17,310,  $24,000  for renting a home office to the  Company,
     $11,431  in medical  expense  reimbursements  and $60 for a life  insurance
     premium.
(5)  On October 13, 2004,  Rhonda Keaveney,  wife of President,  David Keaveney,
     was elected to the Board of Directors and to the office of Secretary of the
     Company. In March 2005, Rhonda was elected to the office of Chief Operating
     Officer of the  Company.  During the fiscal year ended  December  31, 2006,
     Rhonda  Keaveney  received a cash salary of  $36,923.04.  Additionally,  in
     2006, Ms. Keaveney  received  $15,000 of the $35,000 of accrued salary from
     2005.  Included in this total is  $44,226.90  of accrued,  but unpaid as of
     December 31, 2006.

EMPLOYMENT CONTRACTS

     On October  25,  2004 the  Company  entered  into an  Executive  Employment
Agreement  with its  President,  Chief  Executive  Officer  and Chief  Financial
Officer,  David Keaveney. The initial term of the Agreement commenced on October
25, 2004, and continued in effect until October 25, 2005, when the Agreement was
renewed for two years ending in October 2007.  The Agreement  grants  Keaveney a
base  salary of $114,000  per year.  During the term of the  Agreement,  Company
agrees to pay all costs of Keaveney's medical/dental expenses up to a maximum of
$20,000 per year.  Company shall also provide an automobile  allowance of $1,000
per month.  Company  shall pay a monthly  rent of $2,000  while it  maintains an
offsite  operation  at  Keaveney's  place of  residency.  Not  withstanding  the
employment term, the Agreement may be terminated by either party. If the Company
desires to terminate the Agreement for any reason,  other than reasonable  cause
or event of  permanent  disability,  Keaveney  shall be  entitled to 100% of the
balance of payments due under the contract  payable,  at the  Company's  option,
either on a bi-weekly  basis or in a lump sum  discounted  by 10% and payable 30
days after said termination. By virtue of a that certain Stock Sale and Purchase
Agreement  executed on March 14, 2007, and discussed  under Item 1, above,  with
the  Company  and  Kenneth  Yeung,  Mr.  Keaveney  has agreed to resign from all
positions  with the  Company  within a few days of filing  this Form 10-KSB and,
therefore,  his employment  agreement with the Company will be terminated on the
date of such resignation.

OTHER CONTRACTS

     None.

STOCK OPTIONS AND WARRANTS

     THE FOLLOWING  INFORMATION HAS BEEN  RETROACTIVELY  ADJUSTED TO ACCOUNT FOR
THE 1 FOR 225 REVERSE STOCK SPLIT THAT OCCURRED ON OCTOBER 31, 2006.

     On January 18, 2006,  the  Motorsports  Emporium,  Inc. 2006 Employee Stock
Incentive  Plan was adopted and  approved  by the Board of  Directors.  The Plan
authorized  666,667  shares of common  stock of the  Company  to be  granted  to
employees, officers, consultants and directors of the Company. The Company filed
a Form S-8 on January 26, 2006, related to this Plan. All 666,667 shares covered
by the Plan have been  issued  and there are no  options  outstanding  under the
Plan.

                                       19
<PAGE>
     On July 14, 2006,  the  Motorsports  Emporium,  Inc.  2006  Employee  Stock
Incentive  Plan was amended to add an additional  318,613 shares of common stock
to the Plan.  The  Company  filed a Form S-8 on July 14,  2006,  related to this
Amended Plan.  All 318,613 shares covered by the Plan have been issued and there
are no options outstanding under the Plan.

     On November 24, 2006, the  Motorsports  Emporium,  Inc. 2006 Employee Stock
Incentive  Plan No. 2 was adopted and  approved by the Board of  Directors.  The
Plan  authorized  2,889  shares of common  stock of the Company to be granted to
employees, officers, consultants and directors of the Company. The Company filed
a Form S-8 on November 24, 2006,  related to this Plan. All 2,889 shares covered
by the Plan have been  issued  and there are no  options  outstanding  under the
Plan.

OPTION/SAR GRANTS TABLE

     There were no stock  options/SARS  granted under the Company's stock option
plans to executive officers and directors during fiscal 2005 or 2006.

AGGREGATE OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUE TABLE

     There were no exercises of stock  options/SAR by executive  officers during
fiscal 2005 or 2006.

LONG-TERM INCENTIVE PLAN AWARDS

     There were no long-term  incentive  plan awards made in the last two fiscal
years.

COMPENSATION OF DIRECTORS

     During 2006, the Company had no formal or standard compensation arrangement
with members of its Board of  Directors.  However,  the Company did enter into a
consulting  agreement  with  Tracy  S.  Baron,  while  he was on  the  Board  of
Directors,  that was to have paid him $7,500 through February 9, 2007, in return
for  advice  regarding   mergers,   acquisitions,   joint  ventures,   strategic
partnerships,  management,  marketing  and  expansion  of services  and business
opportunities.  Mr. Baron was not engaged in any capital raising  activities for
the Company or in any  promotion of the  Company's  securities.  On December 13,
2006,  the Company  made a lump sum  payment to Mr.  Baron for the amount of his
consulting  compensation by issuing 312,500 shares of restricted common stock to
him for an aggregate  value of $25,000.  Mr. Baron is not currently a consultant
to the Company.

REPRICING OPTIONS

     During the fiscal year ended December 31, 2006, the Company did not reprice
any stock options.

ITEM 11. SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS.

(a) Security Ownership of Certain Beneficial Owners

     The Company has three (3) classes of voting securities  outstanding (Common
Stock, Class A Preferred Stock and Class C Preferred Stock). The following table
sets forth security  ownership  information as of the close of business on March
27,  2007,  for any person or group,  known by the Company to own more than five
percent (5%) of the Company's common stock and Class C Preferred Stock. No table
is included for the Company's Series A Preferred Stock due to the fact that only
96 shares of same are outstanding and such shares  represent a DE MINIMUS number
of votes that could be cast on any matter presented for a vote of stockholders.

                                       20
<PAGE>
<TABLE>
<CAPTION>
                                                                Amount and
                                                                 Nature of
    Name and Address                      Title Of              Beneficial        Percent of
   of Beneficial Owner                      Class                  Owner            Class
   -------------------                      -----                  -----            -----
<S>                                   <C>                       <C>              <C>
Kenneth Yeung                          Series C Preferred         200,000            100% (1)
7525 E. Williams Drive, Suite B
Scottsdale, Arizona 85255

Nicholas C. Babyak, Jr.                Common Stock             1,011,487             34%
2600 West Ina Road
Apartment 251
Tucson, Arizona 85741

David Keaveney (3)                     Common Stock               198,680              7%
7525 E. Williams Drive Suite B,
Scottsdale, Arizona 85255

Rhonda Keaveney                        Common Stock                 5,334       Less than 1%
7525 E. Williams Road Suite B
Scottsdale, Arizona 85255
</TABLE>

----------
1.   The Series C Preferred Stock has voting rights of 3,000 votes per share, so
     that Mr. Yeung has the right to vote  600,000,000 of the 604,368,768  votes
     available to Mr. Yeung and the holders of our common stock,  thereby giving
     Mr. Yeung controlling voting rights in the Company.

(b) Security Ownership of Management

     The following  table sets forth  security  ownership  information as of the
close of business on March 27, 2007, of all directors and all executive officers
listed in the "Summary  Compensation  Table" set forth herein, and all directors
and executive officers as a group.

<TABLE>
<CAPTION>
                                                                Amount and
                                                                 Nature of
    Name and Address                      Title Of              Beneficial        Percent of
   of Beneficial Owner                      Class                  Owner            Class
   -------------------                      -----                  -----            -----
<S>                                   <C>                       <C>              <C>
Kenneth Yeung
7525 E. Williams Drive, Suite B       Series C Preferred          200,000          100.00%
Scottsdale, Arizona 85255             Common                            0               0%

David Keaveney                        Common                      198,680            4.55%
7525 E. Williams Drive, Suite B
Scottsdale, Arizona 85255

Rhonda Keaveney                       Common                        5,334      Less than 1%
7525 E. Williams Drive, Suite B
Scottsdale, Arizona 85255

Officers and Directors                Common                      204,014            4.67%
 as a Group (3 persons)               Series C Preferred          200,000          100.00%
</TABLE>

                                       21
<PAGE>
(c) Changes in Control

    Since December 31, 2005, the Company has experienced  three separate changes
in control of its voting securities:

     1.   On  August  28,  2006,  the  Company  completed  the  purchase  of all
          2,671,817 shares of its then issued and outstanding Series B Preferred
          Stock in three private  transactions.  On August 21, 2006, the Company
          acquired  1,421,897  shares of Series B  Preferred  Stock from  Robert
          Brehm and  Intercontinental  Assets  Corp in  exchange  for a $250,000
          Convertible  Note due August  30,  2007.  The  Company  also  acquired
          625,000  shares of Series B Preferred  Stock from its Chief  Executive
          Officer,  David W. Keaveney,  and 625,000 shares of Series B Preferred
          Stock from Tracey Baron,  when Messrs.  Keaveney and Baron surrendered
          such shares to the Company in return for an aggregate consideration of
          $1.00 paid to each of Messrs. Keaveney and Baron.
     2.   On September 13, 2006,  the Company  issued 200,000 shares of Series C
          Preferred Stock to its Chief Executive Officer,  David W. Keaveney, in
          exchange  for the  cancellation  of $10,000 in  accrued,  but  unpaid,
          compensation due to Mr.  Keaveney.  Since the Series C Preferred Stock
          carry 3,000 votes per share,  Mr. Keaveney was entitled to 600 million
          votes on matters submitted to the Company's shareholders for voting.
     3.   As discussed under "Material Recent  Development," above, on March 14,
          2007,  Mr.  Keaveney sold his 200,000  shares of Series C Preferred to
          Kenneth  Yeung  for a  purchase  price of  $10,000  (the  exact  price
          previously  exchanged by Mr.  Keaveney when he acquired such shares by
          cancelling  $10,000 of accrued,  but unpaid,  compensation  due to Mr.
          Keaveney from the Company).  As a result of Mr. Yeung's acquisition of
          the  Series  C  Preferred  Stock  from  Mr.  Keaveney,  Mr.  Yeung  is
          considered  a "control  person" of the Company  under  applicable  SEC
          regulations. Moreover, Mr.Yeung was elected to the office of President
          of the Company on March 14, 2007.  In addition,  David W. Keaveney has
          agreed to resign from his current offices as Chief Executive  Officer,
          Chief Financial  Officer and Director of the Company within a few days
          after this annual report on Form 10-KSB is filed with the SEC.  Rhonda
          Keaveney  has also agreed to resign from her current  offices as Chief
          Operating Officer,  Secretary and Director of the Company within a few
          days after this  annual  report on Form  10-KSB is filed with the SEC.
          Following such  resignations  and as a result of having voting control
          of the  Company,  Mr. Yeung will be in a position to elect all members
          of the  Company's  Board of  Directors  and elect all  officers of the
          Company.  As of the  date  of the  Form  10-KSB,  Mr.  Yeung  has  not
          indicated  whom he will elect to the Board of Directors or as officers
          of the Company.

(d) Securities Authorized for Issuance Under Equity Compensation Plans

<TABLE>
<CAPTION>
                                                                                   Number of securities
                                 Number of securities                            remaining available for
                                  to be issued upon        Weighted-average       future issuance under
                                     exercise of           exercise price of     equity compensation plans
                                 outstanding options,     outstanding options,     (excluding securities
                                 warrants and rights      warrants and rights     reflected in column (a))
                                 -------------------      -------------------     ------------------------
<S>                             <C>                      <C>                     <C>
Equity compensation plans
approved by security holders              0                       n/a                            0

Equity compensation plans not
approved by security holders              0                       n/a                    1,000,000

Total                                     0                       n/a                    1,000,000
</TABLE>

                                       22
<PAGE>
ITEM 12. CERTAIN   RELATIONSHIPS   AND  RELATED   TRANSACTIONS,   AND  DIRECTOR
         INDEPENDENCE.

     During 2006, the Company had no formal or standard compensation arrangement
with  members of its Board of  Directors.  However,  the Company  entered into a
consulting  agreement with one of its  directors,Tracey  S. Baron, on August 10,
2005,  that would have paid him $7,500 per month  through  February 9, 2007,  in
return for advice regarding  business related services,  including those related
to capital  raising  transactions.  On March 1, 2006,  the  Company  amended the
consulting  agreement with Mr. Baron whereby he would no longer provide services
related to capital raising  transactions.  On March 30, 2006, the Company signed
another  amendment whereby the Company and Mr. Baron agreed that Mr. Baron would
be paid the balance of his $75,000 in  consulting  fees with  registered  83,334
shares of the Company  common stock  (adjusted  for the 1 for 225 share  reverse
stock split) under the 2006 Employee Stock Incentive Plan..

     On December 13, 2006,  the Company made a lump sum payment to Mr. Baron for
the amount of his additional  consulting  compensation by issuing 312,500 shares
of restricted common stock to him valued at $25,000.  Mr. Baron is not currently
a consultant to the Company or member of our board of directors.

     On  September  13,  2006,  the Company  issued  200,000  shares of Series C
Preferred  Stock ("Pf C Shares") to David W. Keaveney,  the Company's  President
and CEO, in exchange  for the  cancellation  of $10,000 in accrued,  but unpaid,
compensation due to Mr. Keaveney.

     The  Pf  C  Shares  have  the  following   voting   powers,   designations,
preferences, limitations, restrictions and relative rights:

     a.   Designation: Series C Preferred Stock
     b.   Authorized Shares of Series C Preferred Stock: 3,000,000
     c.   Liquidation Rights: None
     d.   Dividend Rights: None
     e.   Conversion Rights: None
     f.   Mandatory Redemption Rights: None
     g.   Voting Rights: 3,000 votes per share

     Since the Pf C Shares issued to Mr. Keaveney carried super-voting rights of
3,000 votes per share, Mr. Keaveney was entitled to 600 million votes on matters
submitted to the Company's  shareholders for vote. As a result of Mr. Keaveney's
voting  power,  he  effectively  controlled  the  Company and was  considered  a
"control  person"  under  applicable  SEC  regulations.  On March 14, 2007,  Mr.
Keaveney sold his Pf C Shares to Mr.  Kenneth  Yeung,  who is now deemed to be a
"control person" of the Company.

     During the first  quarter  of fiscal  2006,  the  Company  renegotiated  an
outstanding note payable of $129,240 with a shareholder. See Note 6 to Financial
Statements..

     On August 21, 2006, the Company issued a $250,000  convertible note payable
to a  shareholder  and an entity owned by such  shareholder  in exchange for the
retirement of the shareholder's Series B Preferred Stock and all related accrued
interest. See Note 6 to Financial Statements.

     See Notes 8 and 10 to the Company's  Consolidated  Financial  Statements of
this Annual Report.

     During 2006 and as of the date of this annual  report,  the  Company's  two
directors,  David W. Keaveney and Rhonda Keaveney,  were and are not independent
directors.

                                       23
<PAGE>
ITEM 13. EXHIBITS.

     List of Exhibits attached or incorporated by reference pursuant to Item 601
of Regulation S-B.

EXHIBIT                             DESCRIPTION
-------                             -----------
 3.1 (1)   Amendment to Articles of Incorporation dated January 22, 2001
           and filed with the  Colorado  Secretary of State on January 22, 2001.
 3.2 (2)   Statement of Correction to the Articles of Incorporation dated
           and filed with the Secretary of State of Colorado on August 27, 2003.
 3.3 (1)   By-laws of the Company.
10.1 (3)   Stock Sale and Purchase Agreement dated March 14, 2007
14   (4)   Code of Ethics
21   **    Subsidiaries of the Company
31.1 **    Certification of Principal Executive Officer Pursuant to 18 U.S.C.
           Section 1350
31.2 **    Certification of Principal Financial Officer Pursuant to 18 U.S.C.
           Section 1350
32.1 **    906 Certification of Principal Executive Officer
32.2 **    906 Certification of Principal Financial Officer
99.1 (3)   Advisory Board Agreement with Arie Luyendyk, Jr. dated March 4, 2005
99.2 (3)   Advisory Board Agreement with Arie Luyendyk, Sr. dated March 14, 2005

----------
(1)  Incorporated  by  reference  to Form  10SB  filed  February 8, 2001.
(2)  Incorporated  by  reference  to  Form  8-K  filed  October  31, 2003.
(3)  Incorporated   by  reference  to  form  8-K  filed  March  27, 2007.
(4)  Incorporated  by  reference  to Form 10-KSB  filed April 1, 2005.
**   Filed Herewith

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

INDEPENDENT PUBLIC ACCOUNTANTS

     The  Company's  independent  accountants  during  the  fiscal  year  ending
December 31, 2006 were HJ & Associates, LLC

     (1) Audit Fees.  During the fiscal years ended  December 31, 2006 and 2005,
the aggregate fees billed by the Company's  auditors,  for services rendered for
the audit of our annual  financial  statements  and the review of the  financial
statements  included in our  quarterly  reports on Form 10-QSB and for  services
provided in connection with the statutory and regulatory  filings or engagements
for those fiscal years, was $24,000 and $29,000 respectively.

     (2)  Audit-Related  Fees.  During fiscal years ended  December 31, 2006 and
2005 our auditors did not receive any fees for any audit-related  services other
than as set forth in paragraph (a) above.

     (3) Tax Fees. During the fiscal years ended December 31, 2006 and 2005, the
aggregate  fees  billed  by the  Company's  auditors  for tax  related  services
amounted to $2,120 and $1,500 respectively.

     (4) All Other Fees. None.

     (5) Audit Committee's Pre-Approval Policies and Procedures. The Company had
no audit  committee  during the fiscal  years ended  December 31, 2006 and 2005;
hence,  there were no pre-approval  policies or procedures in effect during such
fiscal years.

                                       24
<PAGE>
                                   SIGNATURES

     In accordance  with 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.

                               Motorsports Emporium, Inc.


Dated: April 6, 2007                /s/ David W. Keaveney
                                    --------------------------------------------
                               By:  David W. Keaveney
                               Its: Chief Executive Officer

     In accordance  with the  Securities  Exchange Act 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.


Dated: April 6, 2007                /s/  David W. Keaveney
                                    --------------------------------------------
                                By:  David W. Keaveney
                               Its:  Chief Executive Officer, Treasurer Director
                                     (Principal Executive Officer, Principal
                                     Financial Officer and Principal Accounting
                                     Officer)


Dated: April 6, 2007                /s/ Rhonda Keaveney
                                    --------------------------------------------
                               By:  Rhonda Keaveney
                               Its: Chief Operating Officer, Secretary and
                                    Director

                                       25
<PAGE>




                   MOTORSPORTS EMPORIUM INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2006




                                      F-1
<PAGE>
                                    CONTENTS

Report of Independent Registered Public Accounting Firm .................. F-3

Consolidated Balance Sheet................................................ F-4

Consolidated Statements of Operations..................................... F-5

Consolidated Statements of Stockholders' Equity (Deficit)................. F-6

Consolidated Statements of Cash Flows..................................... F-7

Notes to the Consolidated Financial Statements............................ F-9



                                      F-2
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
Motorsports Emporium, Inc. & Subsidiaries
Scottsdale, Arizona

We have  audited the  accompanying  consolidated  balance  sheet of  Motorsports
Emporium,  Inc.  and  Subsidiaries,  as of December  31,  2006,  and the related
statements of operations,  stockholders' equity (deficit) and cash flows for the
years ended December 31, 2006 and 2005. These consolidated  financial statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an  opinion  on these  consolidated  financial  statements  based on our
audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material  respects,  the  financial  position  of  Motorsports
Emporium,  Inc.  and  Subsidiaries,  as of December  31, 2006 and 2005,  and the
results of their  operations  and their cash flows for the years then ended,  in
conformity with United States generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 3 to the
consolidated  financial  statements,  the Company has suffered  recurring losses
from operations and has a working capital deficit that raises  substantial doubt
about its ability to continue as a going concern.  Management's  plans in regard
to those  matters are also  described  in Note 3 to the  consolidated  financial
statements. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.


/s/ HJ & Associates, LLC
--------------------------------
Salt Lake City, Utah
April 3, 2007

                                      F-3
<PAGE>
                   MOTORSPORTS EMPORIUM, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET

                                                                    December 31,
                                                                       2006
                                                                    -----------
                                     ASSETS

Cash                                                                $     7,200
Accounts receivable                                                         267
Inventory                                                                   922
Other current assets                                                     11,675
                                                                    -----------
      Total current assets                                               20,064
                                                                    -----------
Fixed assets, net                                                         6,578
Assets held for sale                                                     11,914
Intangible assets, net                                                   10,750
                                                                    -----------
      Total assets                                                  $    49,306
                                                                    ===========

                       LIABILITIES & STOCKHOLDERS' DEFICIT

Accounts payable and accrued expenses                               $   273,454
Accrued expenses - related parties                                      114,000
Notes payable to shareholders                                           366,920
                                                                    -----------
      Total current liabilities                                         754,374
                                                                    -----------
      Total liabilities                                                 754,374
                                                                    -----------
Preferred A stock, $250 par value, 100,000 shares authorized;
 96 shares issued and outstanding                                        24,000
Preferred C stock, no par value, 3,000,000 shares authorized;
 200,000 shares issued and outstanding                                   10,000
Common stock; $.001 par value, 500,000,000 shares authorized;
 2,979,355 issued and outstanding                                         2,979
Additional paid-in capital                                            4,623,949
Stock subscription receivable                                            (1,305)
Accumulated deficit                                                  (5,364,691)
                                                                    -----------
      Total stockholders' deficit                                      (705,068)
                                                                    -----------
      Total liabilities and stockholders' deficit                   $    49,306
                                                                    ===========

          See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>
                   MOTORSPORTS EMPORIUM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                       Year Ended December 31,
                                                                  ---------------------------------
                                                                     2006                  2005
                                                                  -----------           -----------
<S>                                                               <C>                   <C>
Retail sales                                                      $    57,853           $        --
Cost of sales                                                          83,998                    --
                                                                  -----------           -----------
Gross profit                                                          (26,145)                   --
                                                                  -----------           -----------
Operating expenses:
  Selling, general and administrative                               1,121,756               992,976
  Depreciation and amortization                                         7,788                 4,904
                                                                  -----------           -----------
       Total operating expenses                                     1,129,544               997,880
                                                                  -----------           -----------
Operating loss                                                     (1,155,689)             (997,880)

Other income (expense):
  Interest income                                                          48                    15
  Interest expense                                                    (28,489)              (34,902)
  Legal settlement expense                                            (40,496)                   --
  Gain on reversal of contingency accrual                             150,057                    --
  Loss on extinguishment of debt                                     (116,405)                   --
  Other income (expense)                                                 (228)                 (750)
                                                                  -----------           -----------
      Total other income (expense)                                    (35,513)              (35,637)
                                                                  -----------           -----------
Loss from continuing operations                                    (1,191,202)           (1,033,517)

Discontinued operations:
  Income (loss) from operations of discontinued business                  991                23,018
  Income (loss) on disposal of assets                                     500                    --
                                                                  -----------           -----------
Income (loss) on discontinued operations                                1,491                23,018
                                                                  -----------           -----------
Net loss                                                          $(1,189,711)          $(1,010,499)
                                                                  ===========           ===========
Net loss per common share - basic and diluted
  Continuing operations                                           $     (0.66)          $     (1.20)
                                                                  ===========           ===========
  Discontinued operations                                         $      0.00           $      0.03
                                                                  ===========           ===========
  Net loss per common share                                       $     (0.65)          $     (1.17)
                                                                  ===========           ===========

Weighted average common shares outstanding:
  Basic                                                             1,816,896               863,590
                                                                  ===========           ===========
  Diluted                                                           1,816,896               863,590
                                                                  ===========           ===========
</TABLE>

     See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>
                           MOTORSPORTS EMPORIUM, INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                              Common Stock         Preferred Stock A        Preferred Stock C
                                                           --------------------    -----------------       -------------------
                                                           Shares        Amount    Shares     Amount       Shares       Amount
                                                           ------        ------    ------     ------       ------       ------
<S>                                                       <C>           <C>          <C>    <C>                      <C>
Balance, December 31, 2004                                 604,495       $ 604        96     $ 24,000           --    $      --
  Common stock issued for services                          25,524          26
  Common stock issued for repayment of debt                 86,420          86
  Common stock issued for stock option grants              243,111         243
  Sale of stock for cash                                   128,621         129
  Stock issued to executives, officers and directors        17,172          17
  Amortization of expenses prepaid with common stock
  Net loss
                                                        ----------     -------      ----     --------     --------    ---------
Balance, December 31, 2005                               1,105,343       1,105        96       24,000           --           --
                                                        ----------     -------      ----     --------     --------    ---------
  Common stock issued for services                         802,080         802
  Preferred stock C issued for services                                                                    200,000       10,000
  Common stock issued for repayment of debt                 95,000          85
  Preferred stock issued for repayment of debt
  Common stock issued for stock option grants              740,754         741
  Sale of stock for cash                                   213,678         214
  Stock issued to executives, officers and directors        22,500          22
  Net loss
                                                        ----------     -------      ----     --------     --------    ---------

Balance, December 31, 2006                               2,979,355     $ 2,979        96     $ 24,000      200,000    $  10,000
                                                        ==========     =======      ====     ========     ========    =========

                                                                                        Stock
                                                          Paid-In        Deferred    Subscriptions      Retained
                                                          Capital      Compensation   Receivable        Earnings         Total
                                                          -------      ------------   ----------        --------         -----
Balance, December 31, 2004                              $ 2,416,716     $ (19,520)     $     --       $(3,164,481)    $  (742,681)
  Common stock issued for services                          132,462                                                       132,488
  Common stock issued for repayment of debt                 206,960                                                       207,046
  Common stock issued for stock option grants               787,895                      (26,775)                         761,363
  Sale of stock for cash                                    244,871                                                       245,000
  Stock issued to executives, officers and directors         44,761                                                        44,778
  Amortization of expenses prepaid with common stock                       19,520                                          19,520
  Net loss                                                                                     -       (1,010,499)     (1,010,499)
                                                        -----------     ---------       --------      -----------     -----------
Balance, December 31, 2005                                3,833,665            --        (26,775)      (4,174,980)       (342,985)
                                                        -----------     ---------       --------      -----------     -----------
  Common stock issued for services                          301,578                                                       302,380
  Preferred stock C issued for services                                                                                    10,000
  Common stock issued for repayment of debt                   6,555                                                         6,650
  Common stock issued for stock option grants               444,198                       25,470                          470,409
  Sale of stock for cash                                     33,924                                                        34,138
  Stock issued to executives, officers and directors          4,029                                                         4,051
  Net loss                                                                                             (1,189,711)     (1,189,711)
                                                        -----------     ---------       --------      -----------     -----------

Balance, December 31, 2006                              $ 4,623,949     $      --      $ (1,305)      $(5,364,691)    $  (705,068)
                                                        ===========     =========      ========       ===========     ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>
                           MOTORSPORTS EMPORIUM, INC.
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                             Year Ended December 31,
                                                                        ---------------------------------
                                                                            2006                  2005
                                                                        -----------           -----------
<S>                                                                     <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss from continuing operations                                   $(1,191,202)          $(1,033,518)
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Depreciation and amortization                                             7,788                 4,904
    Amortization of debt discounts                                            3,531                10,594
    Non-cash loss on extinguishment of debt                                 116,405                 7,618
    Gain on reversal of contingency accrual                                (150,057)                   --
    Employee stock based compensation                                        71,318               162,999
    Officer stock based compensation                                         10,000                    --
    Common stock issued to third parties for services                       302,380               152,008
    Gain on disposal of equipment                                               277                    --
  Changes in assets and liabilities:
    Accounts receivable                                                       1,000                  (312)
    Inventory                                                                89,203               (90,124)
    Prepaid expenses                                                         (4,130)               (6,182)
    Accounts payable and accrued expenses                                   237,362               (80,569)
    Accrued expenses - related parties                                       12,500               101,500
                                                                        -----------           -----------
        Net cash used in continuing operations                             (493,625)             (771,082)
        Net cash provided by discontinued operations                         58,414               118,722
                                                                        -----------           -----------
        Net cash used in operating activities                              (435,211)             (652,360)
                                                                        -----------           -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Expenditures for intangible assets                                             --               (15,000)
  Purchases of fixed assets                                                  (2,029)              (11,207)
                                                                        -----------           -----------
        Net cash used in continuing operations                               (2,029)              (26,207)
        Net cash provided by (used in) discontinued operations                3,200                    --
                                                                        -----------           -----------
        Net cash used in investing activities                                 1,171               (26,207)
                                                                        -----------           -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from related party accounts payable
  Repayments of notes payable                                               (20,000)             (198,347)
  Proceeds from issuance of common stock                                     34,138               245,000
  Proceeds from exercise of stock options                                   403,142               643,142
                                                                        -----------           -----------
        Net cash provided by financing activities                           417,280               689,795
                                                                        -----------           -----------

INCREASE (DECREASE) IN CASH                                                 (16,760)               11,228

CASH, beginning of period                                                    23,960                12,732
                                                                        -----------           -----------
CASH, end of period                                                     $     7,200           $    23,960
                                                                        ===========           ===========
</TABLE>
          See accompanying notes to consolidated financial statements.

                                      F-7
<PAGE>
                   MOTORSPORTS EMPORIUM, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>
                                                                                Year Ended December 31,
                                                                               --------------------------
                                                                                 2006              2005
                                                                               --------          --------
<S>                                                                            <C>               <C>
SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES:
  Cash paid for interest                                                       $     --          $     --
  Cash paid for income taxes                                                   $     --          $     --

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
  Common stock issued for services                                             $302,380          $152,008
  Common stock issued for extinguishment of debt and other liabilities         $  6,650          $207,046
  Preferred stock issued for conversion of note payable                        $     --          $  8,595
</TABLE>



          See accompanying notes to consolidated financial statements.


                                      F-8
<PAGE>
                   MOTORSPORTS EMPORIUM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

Motorsports Emporium,  Inc. ("The Company") was incorporated on January 10, 1996
under the laws of the State of Colorado.  During 2004,  the Company  changed its
name  and  stock-trading  symbol  to  Motorsports   Emporium,   Inc.  and  MSEP,
respectively.  On  February  6, 2004,  Ten Stix  Gaming,  Inc.,  a wholly  owned
subsidiary of the Company was formed.  On November 10, 2004,  the Company formed
Scottsdale  Diecast,  Inc., a wholly owned  subsidiary.  In September  2006, the
Company formed Quadriga  MotorSports,  Inc, a Nevada Corporation.  The Company's
business is selling  auto racing  memorabilia  and high  performance  automobile
products.

PRINCIPLES OF CONSOLIDATION

The accompanying  consolidated  financial statements include the accounts of the
Company  and  its  wholly-owned  subsidiaries.  All  intercompany  accounts  and
transactions have been eliminated.

CONCENTRATIONS OF CREDIT RISK

The Company  maintains all cash in deposit  accounts,  which at times may exceed
federally insured limits.

CASH AND CASH EQUIVALENTS

Cash and cash  equivalents  include cash on hand and  investments  with original
maturities of three months or less.

INVENTORY

Inventory  is valued at the  lower of cost or  market.  At  December  31,  2006,
inventory  consisted  of  motorsports  accessories  and brake  fluid and related
packaging materials.

FIXED ASSETS

Fixed assets consists of furniture,  fixtures and equipment.  Total depreciation
expense (including depreciation expense on discontinued  operations) was $44,898
and $6,001 for the years ended  December  31, 2006 and 2005,  respectively.  The
costs  and  accumulated  depreciation  of assets  retired,  sold,  or  otherwise
disposed of were eliminated from the accounts and any resulting gain or loss was
credited or charged to income, or applied to equity, as appropriate.

INTANGIBLE ASSETS

Intangible  assets  consist  of a website  development  costs and a  capitalized
license agreement. The website is being amortized over a three year life and the
license agreement is being amortized over its contractual life.

ASSETS HELD FOR SALE

Assets held for sale include assets related to the Company's  discontinued  line
of business. All assets held for sale are carried at the lower of carrying value
(cost less accumulated depreciation or amortization) or market.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company  evaluates its  long-lived  assets in accordance  with  Statement of
Financial  Accounting  Standard  No.  144,  "Accounting  for the  Impairment  or
Disposal  of Long Lived  Assets" by  measuring  the  carrying  amounts of assets
against the estimated  undiscounted  future cash flows  associated with them. At
the time  the  carrying  value of such  assets  exceeds  the fair  value of such
assets,  impairment is recognized. To date, no adjustments to the carrying value
of the assets have been made.

ADVERTISING EXPENSE

The Company expenses advertising costs as incurred.  Advertising expense for the
years ended December 31, 2006 and 2005 was $31,032 and $120,668, respectively.

                                      F-9
<PAGE>
                   MOTORSPORTS EMPORIUM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REVENUE RECOGNITION

Revenues  derived  from retail sales are  recognized  when shipped and title has
passed to the customer. The Company's sales are executed at its retail location,
through its website, and at certain motor sports events.

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 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
and assumptions.

INCOME TAXES

The Company recognizes income taxes under the liability method.  Deferred income
taxes are recognized  for  differences  between the financial  reporting and tax
bases of assets and liabilities at enacted statutory tax rates in effect for the
years in which the differences are expected to reverse.  Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management,  it is more
likely than not that some  portion or all of the deferred tax assets will not be
realized.  Deferred tax assets and  liabilities  are adjusted for the effects of
changes in tax laws and rates on the date of enactment.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash,  accounts  payable,  accrued  expenses,  and notes
payable approximate fair value because of the short maturity of these items.

EARNINGS PER COMMON SHARE

The computation of basic loss per share of common stock is based on the weighted
average number of shares outstanding during the period.

STOCK-BASED COMPENSATION

The Company's  stock options  awarded to employees  contain a variable  exercise
price that is dependent  upon the market price of the Company's  common stock at
the date of exercise  and,  therefore,  are  accounted  for as variable  awards.
During the years ended  December 31, 2006 and  December  31,  2005,  the Company
recognized   $383,698  and  $315,007,   respectively  of  compensation   expense
associated  with  stock-based  compensation.  Under FASB Statement  123(R),  the
expense  recognition  for variable  awards is the same under the intrinsic value
and the fair value  methods.  Accordingly,  the pro forma  disclosures  required
under FASB Statement 123 are not applicable.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In December 2004, the Financial  Accounting Standards Board ("FASB") issued SFAS
No.  123R,  "Share-Based  Payment"  ("SFAS  123R").  Under  this  new  standard,
companies  will no  longer  be  able to  account  for  share-based  compensation
transactions  using the  intrinsic  method in accordance  with APB 25.  Instead,
companies will be required to account for such  transactions  using a fair-value
method and to recognize the expense over the service  period.  SFAS 123R will be
effective  for periods  beginning  after  December  15, 2005.  As the  Company's
share-based  compensation  transactions  consist  of  variable  awards  that are
treated  the same under the  intrinsic  method and the  fair-value  method,  the
adoption  of SFAS 123R did not  impact  its  financial  condition  or results of
operations.

In May 2005,  the FASB issued FASB  Statement No. 154,  "Accounting  Changes and
Error  Corrections."  This new standard replaces APB Opinion No. 20, "Accounting
Changes,  and FASB  Statement  No. 3,  Reporting  Accounting  Changes in Interim
Financial  Statements,"  and  represents  another  step  in the  FASB's  goal to
converge  its  standards  with those  issued by the IASB.  Among other  changes,
Statement  154  requires  that a voluntary  change in  accounting  principle  be

                                      F-10
<PAGE>
                   MOTORSPORTS EMPORIUM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

applied  retrospectively with all prior period financial statements presented on
the new accounting principle, unless it is impracticable to do so. Statement 154
also  provides  that (1) a change in  method of  depreciating  or  amortizing  a
long-lived  non-financial  asset  be  accounted  for  as a  change  in  estimate
(prospectively) that was effected by a change in accounting  principle,  and (2)
correction of errors in previously issued financial  statements should be termed
a  "restatement."  The new  standard is  effective  for  accounting  changes and
correction  of errors made in fiscal years  beginning  after  December 15, 2005.
Early  adoption  of this  standard  is  permitted  for  accounting  changes  and
correction  of errors made in fiscal  years  beginning  after June 1, 2005.  The
adoption of SFAS 154 did not have an impact to the Company's  overall results of
operations or financial position.

In February of 2006,  the FASB  issued  SFAS No.  155,  "Accounting  for Certain
Hybrid Financial Instruments",  which is intended to simplify the accounting and
improve the financial  reporting of certain hybrid financial  instruments (i.e.,
derivatives embedded in other financial instruments).  The statement amends SFAS
No. 133,  "Accounting for Derivative  Instruments and Hedging  Activities",  and
SFAS No. 140,  "Accounting  for Transfers and Servicing of Financial  Assets and
Extinguishments  of Liabilities--a  replacement of FASB Statement No. 125." SFAS
No. 155 is effective for all financial  instruments issued or acquired after the
beginning of an entity's first fiscal year that begins after September 15, 2006.
The  Company is  currently  evaluating  the impact SFAS No. 155 will have on its
consolidated financial statements, if any.

In March of 2006,  the FASB issued SFAS No. 156,  "Accounting  for  Servicing of
Financial  Assets,  an amendment of FASB Statement No. 140" (SFAS 156). SFAS 156
amends SFAS 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments  of  Liabilities a replacement  of FASB Statement No. 125," with
respect  to the  accounting  for  separately  recognized  servicing  assets  and
servicing  liabilities.  SFAS 156  requires  an entity to  recognize a servicing
asset or servicing  liability each time it undertakes an obligation to service a
financial  asset by entering  into a servicing  contract in any of the following
situations:  (a) a transfer of the  servicer's  financial  assets that meets the
requirements  for sale  accounting,  (b) a transfer of the servicer's  financial
assets  to  a  qualifying   special-purpose  entity  in  a  guaranteed  mortgage
securitization in which the transferor  retains all of the resulting  securities
and  classifies  them  as  either   available-for-sale   securities  or  trading
securities,  and (c) an  acquisition or assumption of an obligation to service a
financial asset that does not relate to financial  assets of the servicer or its
consolidated  affiliates.  SFAS 156 is effective  for all  servicing  assets and
liabilities  as of the  beginning  of an entity's  first fiscal year that begins
after  September 15, 2006. The effect of adoption of SFAS 156 is not anticipated
to have a material impact on the Company's consolidated financial statements.

In July 2006,  the FASB  issued  FASB  Interpretation  No. 48,  "Accounting  for
Uncertainty in Income Taxes (FIN 48) - an  interpretation  of FASB Statement No.
109,  Accounting for Income Taxes (SFAS No. 109)" (FIN 48). FIN 48 clarifies the
accounting for  uncertainty in income taxes  recognized in accordance  with SFAS
No. 109 and prescribes a recognition threshold and measurement attribute for the
financial  statement  recognition  and  measurement  of a tax position  taken or
expected to be taken in a return.  Guidance is also provided on  de-recognition,
classification,   interest  and  penalties,   accounting  in  interim   periods,
disclosure and transition.  FIN 48 is effective for fiscal years beginning after
December 15, 2006. The effect of adoption of FIN 48 is not anticipated to have a
material impact on the Company's consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS
157).  SFAS 157 defines fair value,  establishes a framework for measuring  fair
value and expands disclosures about fair value  measurements.  Where applicable,
SFAS 157 clarifies and codifies related guidance within other generally accepted
accounting  principles.  SFAS 157 is effective for fiscal years  beginning after
November 15, 2007. The effect of adoption of SFAS 157 is not anticipated to have
a material impact on the Company's consolidated financial statements.

In September  2006,  the FASB issued SFAS No. 158, " Employers'  Accounting  for
Defined Benefit  Pension and Other  Postretirement  Plans--an  amendment of FASB
Statements  No. 87, 88,  106,  and  132(R)"  (SFAS  158).  SFAS 158  requires an
employer to recognize the overfunded or underfunded  status of a defined benefit
postretirement  plan as an asset or  liability  in its  statement  of  financial
position and to recognize changes in that funded status in the year in which the
changes occur through  comprehensive income. SFAS 158 also eliminates the option
in SFAS 87 to measure  plan assets and  obligations  up to three months prior to
the  financial  statement  date.  SFAS 158 is effective  for fiscal years ending
after  December 15, 2006. The adoption of SFAS 158 did not have an impact to the
Company's overall results of operations or financial position.

                                      F-11
<PAGE>
                   MOTORSPORTS EMPORIUM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In February  2007,  the FASB issued  SFAS No.  159,  "The Fair Value  Option for
Financial Assets and Financial  Liabilities,  Including an Amendment to SFAS No.
115" (SFAS 159).  SFAS 159 permits  entities to elect to measure many  financial
instruments and certain other items at fair value. Upon adoption of SFAS 159, an
entity may elect the fair  value  option  for  eligible  items that exist at the
adoption  date.  Subsequent  to the initial  adoption,  the election of the fair
value  option  should  only be made  at  initial  recognition  of the  asset  or
liability or upon a remeasurement event that gives rise to new-basis accounting.
The  decision  about  whether  to elect the fair  value  option is applied on an
instrument-by-instrument  basis, is irrevocable and is applied only to an entire
instrument  and not only to  specified  risks,  cash flows or  portions  of that
instrument.  SFAS 159 does not affect any  existing  accounting  standards  that
require  certain assets and  liabilities to be carried at fair value nor does it
eliminate disclosure  requirements included in other accounting standards.  SFAS
159 is effective for fiscal years beginning after November 15, 2007. The Company
is  currently  evaluating  the impact of adopting  SFAS 159 on its  consolidated
financial position and results of operations.

In November  2004, the FASB issued SFAS No. 151 (SFAS 151),  "Inventory  Costs".
SFAS 151 amends ARB No. 43, Chapter 4. This  statement  clarifies the accounting
for abnormal  amounts of idle facility  expense,  freight,  handling costs,  and
wasted  material  (spoilage).  SFAS 151 is the result of a broader effort by the
FASB and the IASB to improve financial  reporting by eliminating  certain narrow
differences  between their  existing  accounting  standards.  This  statement is
effective for inventory  costs incurred during fiscal years beginning after June
15, 2005. The adoption of SFAS 151 did not have a material impact on the results
of operations or financial position of the Company.

NOTE 2: MATERIAL EVENTS

REVERSE STOCK SPLIT

Effective  October 31, the Company  initiated a reverse  split of the  Company's
common stock on a ratio of 1 share for every 225 shares of common stock, without
decreasing the number of authorized  shares of common stock and without changing
the par value of the common stock. All share counts included in this Form 10-KSB
have been retroactively restated for this stock split.

CHANGE IN DIRECTORS

Effective April 5, 2006, Tracey S. Baron resigned from the Board of Directors of
the Company.  On September 13, 2006,  David W. Keaveney and Rhonda Keaveney were
re-elected  to the Board of  Directors  of the  Company to serve  until the 2007
annual meeting of shareholders or until their successors are duly elected.

CHANGE IN CONTROL

On July 20, 2006, the Company  established and authorized up to 3,000,000 shares
of no par value Series C Preferred Stock ("Pf C Shares").

On September 13, 2006, the Company issued 200,000 shares of Pf C Shares to David
W. Keaveney,  the Company's  President and CEO, in exchange for the cancellation
of $10,000 in accrued, but unpaid, compensation due to Mr. Keaveney.

The Pf C Shares have the following  voting  powers,  designations,  preferences,
limitations, restrictions and relative rights:

     a.   Designation: Series C Preferred Stock
     b.   Authorized Shares of Series C Preferred Stock: 3,000,000
     c.   Liquidation Rights: None
     d.   Dividend Rights: None
     e.   Conversion Rights: None
     f.   Mandatory Redemption Rights: None
     g.   Voting Rights: 3,000 votes per share

                                      F-12
<PAGE>
                   MOTORSPORTS EMPORIUM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Since the Pf C Shares  issued to Mr.  Yeung carry  super-voting  rights of 3,000
votes per share,  Mr.  Keaveney  is  entitled  to 600  million  votes on matters
submitted to the Company's  shareholders for vote. As a result of Mr. Keaveney's
voting power,  he effectively  controls the Company and is considered a "control
person" under applicable SEC regulations.

DISCONTINUED OPERATIONS

In the fourth  quarter  of 2006,  the  Company  discontinued  operations  of its
Scottsdale  Diecast  division due to increased  manufacturer's  prices,  slowing
retail sales and increased competition from online auction sites.  Subsequent to
December 31, 2006,  the Company sold the balance of its inventory and a website.
The  Company  decided to no longer  focus its  efforts in the die cast  business
primarily  because of increasing  inventory  costs and  declining  sales due, in
part, to the consolidation of the diecast industry. The Company has subsequently
disposed of all assets  related to this  division in the first  quarter of 2007.
Scottsdale  Diecast's net revenues for the year ended December 31, 2006 and 2005
were $138,962 and $221,975,  respectively.  Excluding general and administrative
costs that are not specifically  identifiable to Scottsdale Diecast,  the income
from discontinued  operations were $991 and $23,018 for the years ended December
31, 2006 and 2005, respectively. No income tax expense has been recorded related
to  the   discontinued   operations  given  the  Company's  net  operating  loss
carryforwards and related valuation allowances.  Prior year financial statements
for 2005 have been restated to present the operations of the Scottsdale  Diecast
division as a discontinued operation.

The Company disposed of a portions of its fixed assets related to the Scottsdale
Diecast  division and  recognized a gain of $500.  The  remaining  assets of the
discontinued  operations  consist of inventory  of $2,500,  fixed assets (net of
accumulated  depreciation)  of  $937  and  website  development  costs  (net  of
accumulated amortization) of $8,478 that are presented under the caption "Assets
held for sale" in the accompanying consolidated balance sheet as of December 31,
2006. These assets were sold subsequent to year end for $15,000.

NOTE 3:  GOING CONCERN

The Company's  financial  statements  are prepared using  accounting  principles
generally  accepted  in the  United  States  of  America  applicable  to a going
concern,  which  contemplates  the  realization  of assets and  satisfaction  of
liabilities in the normal course of business.  The Company's  continuation  as a
going  concern is dependent  upon its ability to generate  sufficient  cash flow
from  operations  to meet  its  obligations  on a  timely  basis  and/or  obtain
financing  as  may be  required.  The  Company  has  incurred  net  losses  from
operations  since  inception and has an accumulated  deficit of $5,364,691 and a
working capital deficit of $734,310 as of December 31, 2006.

Although the Company has obtained  short-term loans, in the absence of long-term
financial  support,  there can be no assurance that additional  financing can be
obtained from conventional sources.

NOTE 4: FIXED ASSETS

Fixed assets consists of the following at December 31, 2006:

                                                            2006
                                                          --------
     Furniture, fixtures and equipment (at cost)          $ 14,836
     Less accumulated depreciation                          (8,258)
                                                          --------
     Fixed assets, net                                    $  6,578
                                                          ========

Depreciation expense for continuing  operations for the years ended December 31,
2006 and 2005 was $4,788 and $3,654, respectively.

NOTE 5: INTANGIBLE ASSETS

Intangible assets consists of the following at December 31, 2006:

     License                                              $ 15,000
     Less accumulated amortization                          (4,250)
                                                          --------
                                                          $ 10,750
                                                          ========

                                      F-13
<PAGE>
                   MOTORSPORTS EMPORIUM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amortization expense from continuing operations for year ended December 31, 2006
and 2005 was $3,000 and $1,250, respectively.

As a part of the purchase of Scalecars.com,  the company issued 21,778 shares of
common  stock,  with a market  value of $25,480.  The value of these  shares was
attributed to the website  obtained by the Company.  Capital  expenditures  have
increased the value of this website. Both the website and the improvements to it
are being amortized over a three year life and were reclassified to "Assets held
for sale" in connection with the Company's decision to discontinue operations of
its Scottsdale Diecast division. See Note 2.

During 2005, the Company  acquired a license for the exclusive rights to produce
and distribute a high performance  brake fluid.  This license was capitalized at
cost and is being amortized over its estimated useful life of ten years.

NOTE 6: NOTES PAYABLE TO SHAREHOLDERS

During the first quarter of fiscal 2006, the Company renegotiated an outstanding
note payable with a shareholder. Under the terms of the renegotiated instrument,
the Company is obligated to make quarterly  principal  payments of $7,500,  with
the remaining  principal due February 16, 2007. The Company has determined  that
these modified terms are not substantially  different than the original terms as
defined in EITF 96-19:  DEBTOR'S  ACCOUNTING FOR A  MODIFICATION  OR EXCHANGE OF
DEBT  INSTRUMENTS,  and,  therefore,  this  renegotiation  did not result in the
recognition  of a gain or loss.  During the third and  fourth  quarter of fiscal
2006, the Company did not make its quarterly  required  principal  payment.  The
amount  outstanding  under this note is $121,920  and was in default at December
31,  2006.  The  Company is  currently  in verbal  discussions  to  resolve  the
outstanding note.

On August 21, 2006, the Company issued a $250,000  convertible note payable to a
shareholder  and an  entity  owned  by  such  shareholder  in  exchange  for the
retirement of the shareholder's Series B preferred stock and all related accrued
interest. See Note 8. Under the terms of the note payable, interest accrues at a
rate of 10 percent  per annum,  with  monthly  principal  payments of $5,000 per
month  beginning  sixty days from the date of the note. The note may be extended
at the option of the Company two times as follows:

     1.   In the event the note is not fully paid on or before  August 30, 2007,
          the Company  may extend the note  payments  an  additional  six months
          until  February 28, 2008 however the note  principal  balance shall be
          increased  $25,000 as of September 1, 2008 and shall bear  interest at
          the  same  rate as the  original  principal  and the  minimum  monthly
          payment shall be increased to $7,500 per month.
     2.   In the  event the note is not fully  paid on or  before  February  28,
          2008,  the Company  may extend the note  payments  an  additional  six
          months until August 30, 2008 however the note principal  balance shall
          be  increased  $50,000 as of March 1, 2008 and shall bear  interest at
          the  same  rate as the  original  principal  and the  minimum  monthly
          payment shall be increased to $10,000 per month.

In the event that the note is in default and such  default has not been cured by
the Company  within 30 days  following  notice of such default to the Company by
the  holders,  the holders may  convert all or part of the  remaining  principal
balance,  plus accrued interest, of this note into common stock. In the event of
a  conversion,  the  number  of shares  of  common  stock to be issued  shall be
determined  by  dividing  (i) the  unpaid  principal  balance  plus any  accrued
interest  by (ii) eighty  percent of the average of the lowest five  closing bid
prices in the past 20 trading days immediately preceding any such conversion.

The Company was unable to make November and December Note payments and though no
formal  letter of default  was issued,  the Company was in default.  However the
Company made  arrangements  with the holder for payment in the first  quarter of
2007 and is current with all payments. The Company did not receive any notice of
default in 2006. The amount  outstanding under this note is $245,000 at December
31, 2006.

NOTE 7: PREFERRED STOCK CLASSIFIED AS A LIABILITY

The holders of Series B Preferred Stock shall be entitled to receive  cumulative
dividends at the rate of ten percent (10%) per annum on the face value ($.05 per
share).  All  dividends  when paid shall be payable in cash unless any holder of
the Series B Preferred  Stock elects to have the dividends paid in shares of the
Series B  Preferred  Stock.  Each  share  of  Preferred  Series  B Stock  can be

                                      F-14
<PAGE>
                   MOTORSPORTS EMPORIUM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

converted  into  common  stock.  The rate at  which  they  can be  converted  is
determined  by dividing the face value plus the amount of any accrued but unpaid
fees  thereon by $0.0005.  No dividends  had been  declared by the Company as of
September 30, 2006.

At December 31, 2005 the Company  classified the Series B Preferred  shares as a
liability  in  accordance  with the  provisions  of EITF 00-19,  Accounting  for
Derivative  Financial  Instruments  Indexed  to, and  Potentially  Settled in, a
Company's Own Stock, as it did not have sufficient  authorized  shares of common
stock to provide  for the  conversion  of all  Series B  Preferred  shares.  All
accrued  dividends have been recognized as interest  expense in the accompanying
consolidated statements of operations.

On August 21, 2006,  the  outstanding  Preferred  Series B stock,  consisting of
shares held by the CEO, a director  and a  shareholder  were retired in exchange
for cash  compensation  of $1 each to the CEO and a director  and a  convertible
note payable of $250,000 to the shareholder The Company has determined that this
transaction  meets the  definition  of an  extinguishment  based on the guidance
contained in EITF 96-19:  DEBTOR'S  ACCOUNTING FOR A MODIFICATION OR EXCHANGE OF
DEBT  INSTRUMENTS,  and,  therefore,  the  Company  has  recognized  a  loss  on
extinguishment  of  debt  of  $116,405  related  to  this  transaction.   See  a
description of the debt instrument at Note 6.

NOTE 8: STOCKHOLDERS' EQUITY

PREFERRED STOCK

Each  share of  Preferred  A Series  stock may be  converted  into 200 shares of
common stock. No dividend has been designated to preferred shares.

On September 13, 2006, the Company issued 200,000 shares of Pf C Shares to David
W. Keaveney,  the Company's  President and CEO, in exchange for the cancellation
of $10,000  in  accrued,  but  unpaid,  compensation  due to Mr.  Keaveney.  The
Preferred C stock has no liquidation  rights, no dividend rights, no conversions
rights or no redemption rights. Each share of the Preferred C stock has a voting
right of 3,000 votes per share granting 600,000,000 votes total See Note 2.

COMMON STOCK

During 2006,  the Company  issued  shares to third  parties and  consultants  in
exchange for services. The Company issued an aggregate of 3,988 shares valued at
$309,030  (including  426,694  shares  issued  to a former  director  valued  at
$135,280)  based on quoted stock prices on the date of grant.  During 2006,  the
Company also issued 22,500 shares to employees  valued at $4,050 in lieu of cash
compensation.

During  2006,  the Company  issued  shares of  restricted  common  stock to four
investors in exchange for proceeds totaling  $34,138.  No underwriters were used
for  either  of these  offerings.  These  shares  were  issued  pursuant  to the
exemption from registration under Section 4(2) of the Securities Act of 1933.

On August 10, 2005, the Company issued 117,648 shares of restricted common stock
to an entity controlled by a former Director of the Company for an investment of
$225,000.

On September 27, 2005,  the Company  issued  10,974 shares of restricted  common
stock to an Investor for an investment of $20,000. No underwriters were used for
either of these  offerings.  These shares were issued  pursuant to the exemption
from registration under Section 4(2) of the Securities Act of 1933.

During 2005, the Company  entered into various  transactions  with third parties
and  related  parties,  whereby  the Company  issued  shares of common  stock to
satisfy amounts owed. The Company issued an aggregate of 86,420 shares of common
stock  (including  32,616 to the Company's CEO) to satisfy  $30,000 of long-term
debt and $169,428 of accrued expenses. The Company recorded the shares of common
stock based on the  closing  price on the  transaction  date and  recognized  an
aggregate loss of $7,618  (including a $544 related to the transaction  with the
Company's  CEO) that is included in other income  (expense) in the  consolidated
statement of operations.

                                      F-15
<PAGE>
                   MOTORSPORTS EMPORIUM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During 2005, the Company issued an aggregate of 13,334 shares of common stock to
the  Company's  board of  directors as  compensation  for services and issued an
additional  3,839  shares  of common  stock to the  Company's  CEO for  services
rendered.  The Company also issued an aggregate of 25,524 shares of common stock
to various  third  parties and related  parties  (including  12,191  shares to a
Director of the Company) for services  rendered to the Company.  The Company has
recorded  expense  associated  with these  grants equal to the fair value of the
common stock based on the closing price on the date of grant.

NOTE 9: INCOME TAXES

Net deferred tax assets  consist of the following  components as of December 31,
2006 and 2005:

                                             2006                  2005
                                         -----------           -----------
     Deferred tax assets:
       NOL Carryover                     $   814,500           $ 1,030,901
     Deferred tax liabilities:
       Depreciation                               --                    --
     Valuation allowance                    (814,500)           (1,030,901)
                                         -----------           -----------

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

The income tax  provision  differs from the amount of income tax  determined  by
applying  the U.S.  federal and state  income tax rates of 39% to pretax  income
from continuing operations for the years ended December 31, 2006 and 2005 due to
the following:

                                           2005                  2005
                                         ---------             ---------
     Book income                         $(463,986)            $(394,095)
     Stock for services/option expense     117,928                    --
     Settlement                             61,191                    --
     Beneficial conversion                      --                    --
     Other                                   1,288                 3,331
     Valuation allowance                   283,579               390,764
                                         ---------             ---------

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

At December  31,  2006,  the Company had net  operating  loss carry  forwards of
approximately  $2,000,000  that may be offset against future taxable income from
the year 2006 through 2026. No tax benefit has been reported in the December 31,
2006  financial  statements  since  the  potential  tax  benefit  is offset by a
valuation allowance of the same amount.

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

NOTE 10: RELATED PARTY TRANSACTIONS

On September 13, 2006, the Company issued 200,000 shares of Pf C Shares to David
W. Keaveney,  the Company's  President and CEO, in exchange for the cancellation
of $10,000 in accrued, but unpaid, compensation due to Mr. Keaveney.

The Pf C Shares have the following  voting  powers,  designations,  preferences,
limitations, restrictions and relative rights:

     a.   Designation: Series C Preferred Stock
     b.   Authorized Shares of Series C Preferred Stock: 3,000,000

                                      F-16
<PAGE>
                   MOTORSPORTS EMPORIUM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     c.   Liquidation Rights: None
     d.   Dividend Rights: None
     e.   Conversion Rights: None
     f.   Mandatory Redemption Rights: None
     g.   Voting Rights: 3,000 votes per share

Since the Pf C Shares issued to Mr. Keaveney carry super-voting  rights of 3,000
votes per share,  Mr.  Keaveney  is  entitled  to 600  million  votes on matters
submitted to the Company's  shareholders for vote. As a result of Mr. Keaveney's
voting power,  he effectively  controls the Company and is considered a "control
person" under applicable SEC regulations.

During the first quarter of fiscal 2006, the Company renegotiated an outstanding
note payable of $129,240 with a shareholder. See Note 6.

On August 21, 2006, the Company issued a $250,000  convertible note payable to a
shareholder  and an  entity  owned  by  such  shareholder  in  exchange  for the
retirement of the shareholder's Series B preferred stock and all related accrued
interest. See Note 6.

The Company obtained loans from stockholders in totaling $7,600 during 2004. The
notes entered into during 2004 were interest  bearing and principal and interest
was  convertible  into  Preferred  Series  B Stock.  The  Company  recognized  a
beneficial  conversion  feature of $7,262  associated with these loans which was
expensed in 2004. During 2005, the Company issued 171,897 shares of common stock
upon conversion of these loans.

During 2005, the Company issued an aggregate of 32,616 shares of common stock to
David  Keaveney,  the Company's  President and CEO, for payment of debt totaling
$80,304. A loss of $544 was recorded on this transaction based on the difference
between the fair market  value of the stock and the debt  balance on the date of
the transactions.

During 2005, the Company issued an aggregate of 33,378 shares of common stock to
an existing  shareholder for payment of debt totaling $66,243.  A loss of $2,171
was recorded on this transaction based on the difference between the fair market
value of the stock and the debt balance on the date of the transactions.

During 2005, the Company issued an aggregate of 12,191 shares of common stock to
a member of the Board of Directors in exchange for non-director  services valued
at  $23,088  based on the  fair  market  value  of the  stock on the date of the
transactions. Such amounts were expensed as incurred.

During 2005,  the Company  incurred  expenses  totaling  $90,000 for  consulting
services  rendered by a  significant  shareholder,  of which $56,000 was paid by
December 31, 2005.

NOTE 11: COMMITMENTS AND CONTINGENCIES

ROYALTIES

Under the terms of the  license  agreement  described  in Note 4, the Company is
obligated  to pay  Michael  Wachholz  a  royalty  equal  to 7% of  all  revenues
generated  through  the  sale of  GS610  brake  fluid  as per the  terms  of the
Licensing Agreement. No significant royalties were generated in 2006.

LITIGATION

The Company is not currently involved in any legal matters. Based on information
currently available, management does not believe that the ultimate resolution of
these matters will have a material  adverse  effect on our financial  condition,
results of operations or cash flows.

CASE NUMBER 05CV5129 X-CLEARING CORPORATION V. MOTORSPORTS EMPORIUM, INC.

During the third quarter of 2005, the Company was made a defendant in the matter
of  X-Clearing  Corporation,  FKA Global Stock  Transfer  and Global  Securities
Transfer v. Ten Stix,  Inc., NKA MotorSports  Emporium,  Inc.,  filed on July 1,
2005,  in the District  Court for the City and County of Denver  Colorado,  case

                                      F-17
<PAGE>
                   MOTORSPORTS EMPORIUM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

number 05CV5129.  The plaintiff alleged breach of contract,  collection of debts
owed and bad faith  pertaining  to  activities  of prior  management  and sought
damages in excess of $35,000.  In July 2006,  a judgment was entered in favor of
X-Clearing  Corporation against MotorSports  Emporium (f/k/a Ten Stix, Inc.) for
the principal  amount of $16,856.28 plus prejudgment  interest of $3,639.78,  in
addition to costs and reasonable  attorney  fees,  which we are estimating to be
$20,000.  Such  amounts  have been  accrued  in other  income  (expense)  in the
accompanying consolidated income statement for the year ended December 31, 2006.
On November 27, 2006 the judgment was domesticated in Arizona (CV2006-018060 and
CV2006-018061)  for the  Principal  amount  of  $20,496.06,  Costs  of $912  and
Attorney Fees of $19,231.

CASE NUMBER: CV-2005-052607 MOTORSPORTS EMPORIUM, INC. VS. MICHAEL WACHHOLZ

On October 6, 2005, the Company filed an Application for Preliminary  Injunction
and Order to Show Cause against Mr. Michael  Wachholz with the Superior Court in
Maricopa  County  Arizona  for breach of  contract,  breach of  fiduciary  duty,
intentional  interference with existing and prospective business  relationships,
bad faith,  failure to repay a loan and preliminary  and permanent  injunctions.
MotorSports  Emporium  settled  its  lawsuit  against  Michael  G.  Wachholz  in
September  2006. In the  settlement,  no party admitted fault or liability.  The
$5,000 loan owed to MSEP by Wachholz, has been written off and will no longer be
collected. The license agreement between MSEP and Wachholz remains in full force
and effect with  MotorSports  Emporium  having  exclusive  control and ownership
rights  of the  web  site  www.gs610.com  during  the  balance  of  the  license
agreement.

The Company is not aware of any  pending  claims or  assessments,  other than as
described  above,  which may have a  material  adverse  impact on the  Company's
financial  position  or  results  of  operations.   GAIN  ON  REVERSAL  OF  LOSS
CONTINGENCIES

The Company has historically  carried  contingent  liability accruals of $76,500
related to disputed  amounts with two former vendors.  During the fourth quarter
of 2006, the Company has determined that the payment of such amounts is unlikely
to occur as the Company  believes  all amounts  owed to such  parties  have been
satisfied. Accordingly, the Company reversed these contingent accruals resulting
in a gain of $76,500 in the  accompanying  statement of operations  for the year
ended December 31, 2006.

NOTE 12:  STOCK OPTIONS

A summary  of the  status  of the  Company's  outstanding  stock  options  as of
December  31, 2006 and  December  31, 2005 and changes  during the periods  then
ended is presented below:

                                            2006                    2005
                                     -------------------     -------------------
                                                Weighted                Weighted
                                                Average                 Average
                                                Exercise                Exercise
                                     Shares      Price       Shares      Price
                                     ------      -----       ------      -----

Outstanding, beginning of period          --                      --
Granted                              740,754     $ 0.51      243,111     $ 2.76
Expired/Cancelled                         --                      --
Exercised                           (740,754)    $ 0.51     (243,111)    $ 2.76
                                   ---------                --------
Outstanding, end of period                --                      --
                                   =========                ========

NOTE 14: SUBSEQUENT EVENTS

On February 9, 2007,  the Company  issued  166,667  shares of restricted  common
stock to David W. Keaveney in lieu of $5,000 in accrued salary.

On March 1, 2007, the Company  issued 384,615 shares of restricted  common stock
to Mr. Nick Babyak  based on a five day average  trading  price of $.031 for the
week of  February 5, 2007,  discounted  by 20% due to  restricted  status of the
share of common stock, for a net price of $.026 per share.

                                      F-18
<PAGE>
                   MOTORSPORTS EMPORIUM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On March 9, 2007, the Company issued an additional  403,225 shares of restricted
common stock to Mr.  Babyak based on a five day average  trading price of $.0326
for the week of January 22, 2007,  discounted by 20% due to restricted status of
the shares of common stock, for a net price of $.0248 per share.

On March 14, 2007, Mr. Keaveney sold his 200,000 shares of Series C Preferred to
Kenneth  Yeung for a purchase  price of  $10,000  (the  exact  price  previously
exchanged by Mr.  Keaveney when he acquired such shares by canceling  $10,000 of
accrued,  but unpaid,  compensation due to Mr. Keaveney from the Company).  As a
result of Mr.  Yeung's  acquisition  of the  Series C  Preferred  Stock from Mr.
Keaveney,  Mr.  Yeung is  considered  a "control  person" of the  Company  under
applicable  SEC  regulations.  Moreover,  Mr.Yeung  was elected to the office of
President of the Company on March 14, 2007.  In addition,  David W. Keaveney has
agreed to resign  from his current  offices as Chief  Executive  Officer,  Chief
Financial  Officer  and  Director  of the  Company  within a few days after this
annual  report on Form 10-KSB is filed with the SEC.  Rhonda  Keaveney  has also
agreed to resign from her current offices as Chief Operating Officer,  Secretary
and Director of the Company  within a few days after this annual  report on Form
10-KSB is filed with the SEC.  Following  such  resignations  and as a result of
having voting  control of the Company,  Mr. Yeung will be in a position to elect
all members of the  Company's  Board of Directors  and elect all officers of the
Company.  As of the date of the Form 10-KSB, Mr. Yeung has not indicated whom he
will elect to the Board of Directors or as officers of the Company.

The remaining assets of the discontinued operations that are presented under the
caption "Assets held for sale" in the accompanying consolidated balance sheet as
of December 31, 2006 were sold in 2007 for cash proceeds of $15,000.

                                      F-19