Edgar Filing: Power Sports Factory, Inc

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________________________________

Form 10-Q

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

For the quarterly period ended June 30, 2009

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

For the transition period from ______ to ______

Commission file number 000-25385

POWER SPORTS FACTORY, INC..

(Exact Name of Registrant as Specified in Its charter)

Minnesota	41-1853993
(State or Other Jurisdiction of	(I.R.S. Employer Identification No.)
Incorporation or Organization)

6950 Central Highway, Pennsauken, NJ	08109
(Address of principal executive offices)	(Zip Code)

(856-488-9333)

(Registrant's Telephone Number, Including Area Code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a smaller reporting company. (Check One):


Large accelerated filer o	Accelerated filer o

Non-accelerated filer o	Smaller reporting company x

(Do not check if a smaller reporting company)

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

The number of shares outstanding the issuer's common stock, no par value, was 52,098,749 (not including shares of common stock representing conversion of preferred stock where the preferred certificate has not been surrendered) as of August 14, 2009.

Table of Contents

PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements	1

Item 2.	Management's Discussion and Analysis or Plan of Operation	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25

Item 4T.	Controls and Procedures	25

PART II

Item 6.	Exhibits	27

EXHIBIT INDEX		28

Item 1. Financial Statements

Power Sports Factory, Inc.

I N D E X

	Page No.

Consolidated Balance Sheets as at June 30, 2009 and December 31, 2008 (Unaudited)	2

Consolidated Statements of Operations for the Six and Three Months Ended
June 30, 2009 and 2008 (Unaudited)	3

Consolidated Statements of Stockholders' Deficiency
For the Period Ended June 30, 2009 (Unaudited)	4

Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2009 and 2008 (Unaudited)	5-6

Notes to Unaudited Consolidated Financial Statements	7-21

POWER SPORTS FACTORY, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

ASSETS

	June 30,			December 31,
	2009			2008
Current Assets:
Cash	$	14,638		$	117
Accounts receivable		48,841			67,749
Inventory		1,547,561			1,735,181
Prepaid expenses		20,806			97,363
Total Current Assets		1,631,846			1,900,410

Property and equipment-net		20,898			25,135

Other assets		8,800			9,876

TOTAL ASSETS	$	1,661,544		$	1,935,421

Current Liabilities:
Accounts payable	$	3,327,317		$	3,554,654
Accounts payable to related party		21,489			28,383
Notes payable to related party		12,008			22,863
Current portion of long-term debt		533,953			387,882
Convertible debt		368,645			501,356
Accrued expenses		1,683,563			1,226,211
Dividends Payable		673,176			673,176
Customer deposit payable		40,123			52,774

Total Current Liabilities		6,660,274			6,447,299

Long term liabilites:
Long-term debt - less current portion		-			7,370
Convertible debt - less current portion		-			24,323
Total Long-Term Liabilities		-			31,693

TOTAL LIABILITIES		6,660,274			6,478,992

Stockholders' Deficiency:
Preferred stock; no value - authorized
50,000,000 shares, Series B Convertible Preferred
Stock - outstanding -0- shares at June 30, 2009		-			-
and -0- shares at December 31, 2008
Common stock, no par value - authorized
100,000,000 shares
outstanding 52,774,339 shares at June 30, 2009 and
31,375,188 shares at December 31, 2008		6,470,979			5,476,228
Additional paid-in capital		456,000			456,000
Deposits on common stock to be issued		44,122			-
Deficit		(11,969,831	)		(10,475,799	)

Total Stockholders' Deficiency		(4,998,730	)		(4,543,571	)

TOTAL LIABILITIES AND
STOCKHOLDERS' Deficiency	$	1,661,544		$	1,935,421

See Notes to Unaudited Consolidated Financial Statements

POWER SPORTS FACTORY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Six Months Ended						Three Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
Net sales	$	350,367		$	1,410,135		$	218,177		$	917,047

Costs and Expenses:
Cost of sales		322,743			991,519			171,150			556,347
Selling, general and administrative expenses		1,280,380			2,112,796			393,993			717,837
Non-cash compensation		73,321			-			-			-
Bad debt expense		21,400			1,499			13,529			1,499
		1,697,845			3,105,814			578,672			1,275,683

Loss from operations		(1,347,478	)		(1,695,679	)		(360,494	)		(358,636	)

Other income and expenses:
Acretion of beneficial conversion feature		(24,323	)		-			(12,010	)		-
Interest expense		(122,230	)		(69,560	)		(50,477	)		(41,129	)
Interest income		-			802			-			792
		(146,553	)		(68,758	)		(62,488	)		(40,337	)

Loss before benefit from income taxes		(1,494,032	)		(1,764,437	)		(422,982	)		(398,973	)

Income tax benefit		-			-			-			-

Net loss	$	(1,494,032	)	$	(1,764,437	)	$	(422,982	)	$	(398,973	)

Loss per common share - basic and diluted	$	0.03		$	0.24		$	0.06		$	-
Weighted average common shares -
Basic and diluted		43,888,258			7,499,190			7,292,723			10,073,167

See Notes to Unaudited Consolidated Financial Statements

POWER SPORTS FACTORY, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

(Unaudited)

							Common Stock				Additional		Deposits On Stock
	Preferred			Stated					Stated		Paid-In		To Be
	Stock			Value			Shares		Value		Capital		Issued		(Deficit)			Total

Balance at January 1, 2008		2,303,216		$	2,687,450			4,925,213	$	2,216,485	$	355,000	$	-	$	(6,605,465	)	$	(1,346,530	)

Effect of one for twenty reverse stock split																			-

Issuance of preferred stock for services (valued at $2.50 to $7.00 per share)		39,103			63,543			-		-		-		-		-			63,543
										80000									80,000
Issuance of 200,000 warrants Conversion of preferred stock into common stock		(2,342,319	)		(2,750,993	)		23,423,190		2,750,993		-		-		-			-

Issuance of common stock for debt (valued at $.08 per share)		-			-			1,262,500		-		101,000		-		-			101,000

Issuance of common stock for services (valued at $.10 to $.70)		-			-			1,214,285		178,750		-		-		-			178,750

Conversion of debt for common stock (valued at $.08 to $.45)		-			-			550,000		250,000		-		-		-			250,000

Net loss for the twelve months ended December 31,2008		-			-			-		-		-		-		(3,870,334	)		(3,870,334	)

Balance at December 31,2008		-			-			31,375,188		5,476,228	$	456,000		-		(10,475,799	)		(4,543,571	)
																			165,000
Sale of common stock (valued at $.04 to $.05 per share)		-			-			3,428,570		165,000		-		-		-

Deposit on stock to be issued		-			-			-		-		-		44,122		-			44,122

Issuance of common stock for fees (valued at $.02 to $.05 per share)		-			-			260,000		12,800		-		-		-			12,800

Issuance of common stock for expenses (valued at $.02 per share)		-			-			526,000		10,521		-		-		-			10,521

Issuance of common stock for incentives (valued at $.05 per share)		-			-			1,000,000		50,000		-		-		-			50,000

Conversion of debt for common stock (valued at $.02 to $.08 per share)		-			-			16,184,581		756,430		-		-		-			756,430

Net loss for the six months ended June 30, 2009		-			-			-		-		-		-		(1,494,032	)		(1,494,032	)

Balance at June 30, 2009		-		$	-			52,774,339	$	6,470,979	$	456,000	$	44,122	$	(11,969,831	)	$	(4,998,730	)

See Notes to Unaudited Consolidated Financial Statements

POWER SPORTS FACTORY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	For the Six Months
	Ended June 30,
	2009			2008
CASH FLOW FROM
OPERATING ACTIVITIES:
Net loss	$	(1,494,032	)	$	(1,764,437	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		4,238			4,885
Non cash compensation		73,321			63,543
Non -cash fair value of warrants		-			80,000
Accretion of beneficial conversion feature		24,323			63,810
Changes in operating assets and liabilities		1,009,983			1,157,697
Net cash (used in) operating activities		(382,167	)		(394,502	)

CASH FLOW FROM
INVESTING ACTIVITIES:
Securiy deposit		1,076			-
Purchase of equipment		-			(1,312	)

Net cash provided by investing activities		1,076			(1,312	)

CASH FLOW FROM
FINANCING ACTIVITIES:
Proceeds from notes payable related party		5,000			-
Payment to note payable related party		(15,855	)		(500	)
Proceeds from loan payable		547,500			379,667
Payments on loan		(350,155	)		(168,797	)
Deposits on common stock to be issued		44,122			-
Proceeds from sale of common stock		165,000			-
Proceeds from convertible debt		-			250,000

Net cash provided by financing activities		395,612			460,370

See Notes to Unaudited Consolidated Financial Statements

POWER SPORTS FACTORY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Unaudited)

	For the Six Months
	Ended June 30,
	2009			2008
Net increase in cash		14,521			64,556

Cash - beginning of year		117			11,146

Cash - end of year	$	14,638		$	75,702

Changes in operating assets and liabilities consists of:
Decrease (increase) in accounts receivable	$	18,907		$	(146,438	)
Decrease in inventory		187,620			411,894
Decrease (increase) in prepaid expenses		76,557			71,011
Increase in accounts payable		215,767			453,898
Increase in accrued expenses		523,782			301,537
(Decrease) in customer deposits		(12,651	)		65,795
	$	1,009,983		$	1,157,697

Supplementary information:
Cash paid during the year for:
Income taxes	$	-		$	-
Interest	$	37,924		$	14,559

Non-cash financing activities
Issuance of preferred stock for services	$	-		$	63,543
Issuance of warrants for services	$	-		$	80,000
Issuance of common stock for services	$	73,321		$	-
Issuance of common stock for debt	$	756,430		$	-

See Notes to Unaudited Consolidated Financial Statements

Power Sports Factory, Inc.

Notes to Unaudited Consolidated Financial Statements

June 30, 2009

1.	Description of Business and Summary of Significant Accounting Policies

ORGANIZATION

Power Sports Factory, Inc. (formerly Purchase Point Media Corp.), (the “Company”) was incorporated under the laws of the State of Minnesota.

The Company, through a reverse acquisition described below is in the business of marketing, selling, importing and distributing motorcycles and scooters. The Company principally imports products from China. To date the Company has marketed significantly under the Yamati and Andretti brands.

On May 1, 2009, the Company formed an Alternative Transportation Division named "BikeShareSource (TM)". This newly launched division will market bike sharing systems to municipalities and transit agencies, property managers and real estate developers, colleges and universities, hotels, parks and other transportation related businesses.

BASIS OF PRESENTATION

On September 5, 2007, the Company entered into a share exchange agreement with the shareholders of Power Sports Factory, Inc. (“PSF”). In connection with the share exchange, the Company acquired the assets and assumed the liabilities of PSF (subsidiary) as the acquirer. The financial statements prior to September 5, 2007 are those of PSF and reflect the assets and liabilities of PSF at historical carrying amounts.

As provided for in the share exchange agreement, the stockholders of PSF received 60,000,000 shares of the Company’s common stock and 1,650,000 of Series B Convertible Preferred Stock (“Preferred Stock”) of the Company (each share of preferred stock is convertible into 10 shares of common stock) representing 77% of the outstanding stock after the acquisition, in exchange for the outstanding shares of PSF common stock they held, which was accounted for as a recapitalization. The financial statements show a retroactive restatement of the Company’s historical stockholders’ deficiency to reflect the equivalent number of shares of common stock issued in the acquisition.

GOING CONCERN

The Company’s consolidated financial statements for the six months ended June 30, 2009 have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities in the normal course of business. Management recognizes that the Company’s continued existence is dependent upon its ability to obtain needed working capital through additional equity and/or debt financing and revenue to cover expenses as the Company continues to incur losses.

The Company presently does not have sufficient liquid assets to finance its anticipated funding needs and obligations. The Company’s continued existence is dependent upon its ability to obtain needed working capital through additional equity and/or debt financing and achieve a level of revenue and production adequate to support its cost structure. Management is actively seeking additional capital to ensure the continuation of its current operations, complete its proposed activities and fund its current debt obligations. However, there is no assurance that additional capital will be obtained. These uncertainties raise substantial doubt about the ability of the Company to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties should the Company be unable to continue as a going concern.

Power Sports Factory, Inc.

Notes to Unaudited Consolidated Financial Statements

June 30, 2009

SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The Company’s consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All inter-company transactions and balances have been eliminated.

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 period. Actual results could differ from those estimates.

CONCENTRATION OF CREDIT RISK

Financial instruments which potentially subject the Company to concentration of credit risk consist principally of accounts receivable. The Company grants credit to customers based on an evaluation of the customer’s financial condition, without requiring collateral. Exposure to losses on the receivables is principally dependent on each customer’s financial condition. The Company controls its exposure to credit risk through credit approvals.

INVENTORIES

Inventories are stated at the lower of cost or market.

REVENUE RECOGNITION

The Company recognizes revenue in accordance with the guidance contained in SEC Staff Accounting Bulletin No. 104 "Revenue Recognition Financial Statements" (SAB No. 104). Revenue is recognized when the product has been delivered and title and risk of loss have passed to the customer, collection of the receivables is deemed reasonably assured by management, persuasive evidence of an agreement exist and the sale price is fixed and determinable.

EARNINGS PER SHARE

Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the specified period. Diluted loss per common share is computed by dividing net loss by the weighted average number of common shares and potential common shares during the specified period. All potentially dilutive securities at June 30, 2009 and 2008 which include stock purchase warrants and convertible debt, are convertible into 8,150,000 and 1,000,000 common shares, respectively have been excluded from the computation as their effect is antidilutive.

EVALUATION OF LONG-LIVED ASSETS

The Company reviews property and equipment and finite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable in accordance with guidance in Statement of Financial Accounting Standards (SFAS) No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets." If the carrying value of the long-lived asset exceeds the present value of the related estimated future cash flows, the asset would be adjusted to its fair value and an impairment loss would be charged to operations in the period identified.

DEPRECIATION AND AMORTIZATION

Property and equipment are stated at cost. Depreciation is provided for by the straight-line method over the estimated useful lives of the related assets.

Power Sports Factory, Inc.

Notes to Unaudited Consolidated Financial Statements

June 30, 2009

STOCK BASED COMPENSATION

For the six months ended June 30, 2009 and 2008, the Company issued -0- and 200,000 warrants and recorded consulting expense of $-0- and $80,000, respectively, the fair value of the warrants at the time of issuance.

For the six months ended June 30, 2009 and 2008, the Company issued 1,786,000 and -0- shares of its common stock and recorded consulting expenses of $73,321 and $-0-, respectively, the fair value of the shares at the time of issuance.

For the six months ended June 30, 2009 and 2008, the Company issued -0- and 39,103 shares of preferred stock and recorded consulting expenses of $-0- and $63,543, respectively, the fair value of the shares at the time of issuance.

INCOME TAXES

The Company accounts for income taxes using an asset and liability approach under which deferred taxes are recognized by applying enacted tax rates applicable to future years to the differences between financial statement carrying amounts and the tax basis of reported assets and liabilities. The principal item giving rise to deferred taxes are future tax benefits of certain net operating loss carryforwards.

BENEFICIAL CONVERSION FEATURE

When debt or equity is issued which is convertible into common stock at a discount from the common stock market price at the date the debt or equity is issued, a beneficial conversion feature for the difference between the closing price and the conversion price multiplied by the number of shares issuable upon conversion is recognized. The beneficial conversion feature is presented as a discount to the related debt, with an offering amount increasing additional paid-in capital.

FAIR VALUE OF FINANCIAL INSTRUMENTS

For financial instruments including cash, accounts payable, accrued expenses, and loans payable, it was assumed that the carrying amount approximated fair value because of the short maturities of such instruments.

RECLASSIFICATIONS

Certain reclassifications have been made to prior period amounts to conform to the current year presentation. We made changes to dividends payable but it had no effect on the statement of operations.

NEW FINANCIAL ACCOUNTING STANDARDS

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which enhances existing guidance for measuring assets and liabilities using fair value. This Standard provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities. In February 2008, the FASB issued FASB Staff Position SFAS 157-1, “Application of SFAS No. 157 to SFAS No. 13 and Its Related Interpretative Accounting Pronouncements that Address Leasing Transactions” (“FSP SFAS 157-1”) and FASB Staff Position SFAS 157-2, “Effective Date of SFAS No. 157” (“FSP SFAS 157-2”). FSP SFAS 157-1 excludes SFAS No. 13 and its related interpretive accounting pronouncements that address leasing transactions from the requirements of SFAS No. 157, with the exception of fair value measurements of assets and liabilities recorded as a result of a lease transaction but measured pursuant to other pronouncements within the scope of SFAS No. 157. FSP SFAS 157-2 delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). FSP SFAS 157-1 and FSP SFAS 157-2 became effective for the Company upon adoption of SFAS No. 157 on January 1, 2008. See Note 4 of Notes to Condensed Consolidated Financial Statements for disclosures related to the Company’s financial assets accounted for at fair value on a recurring or nonrecurring basis. The Company completed its implementation of SFAS No. 157 effective January 1, 2009 and it did not have a material impact on its financial statements.

Power Sports Factory, Inc.

Notes to Unaudited Consolidated Financial Statements

June 30, 2009

In December 2007, the FASB issued SFAS No. 141(R), which replaces SFAS No. 141 “Business Combinations”. This Statement is intended to improve the relevance, completeness and representational faithfulness of the information provided in financial reports about the assets acquired and the liabilities assumed in a business combination. This Statement requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the Statement. Under SFAS No. 141(R), acquisition-related costs, including restructuring costs, must be recognized separately from the acquisition and will generally be expensed as incurred. That replaces SFAS No. 141’s cost-allocation process, which required the cost of an acquisition to be allocated to the individual assets acquired and liabilities assumed based on their estimated fair values. SFAS No. 141(R) shall be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual report period beginning on or after December 15, 2008. The Company has adopted SFAS No. 141(R) effective January 1, 2009 and it did not have a material impact on its financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States. The Company has adopted SFAS No. 162 effective January 1, 2009 and it did not have a material impact on its financial statements.

2.	Inventories

The components of inventories are as follows:

	June 30,		December 31,
	2009		2008
Motor bikes	$	1,171,223	$	1,339,802
Parts		126,338		145,379
Deposits on Inventory		250,000		250,000
	$	1,547,561	$	1,735,181

In October, 2007, the Company entered into a Manufacturing Agreement, and subsequently entered into an Amendment thereto, with Dickson International Holdings Ltd. for the manufacture of Andretti/Benelli branded motor scooters for the exclusive distribution thereof in the United States by the Company. The Manufacturing Agreement is for a term of two years and is renewable for successive two-year terms unless either party gives notice of termination in advance of the renewal period. The Company is required to use commercially reasonable efforts to purchase certain minimum quantities of motor scooters. As an initial deposit under the Manufacturing Agreement, the Company issued to Dickson Holdings Ltd. 500,000 shares of the Company’s common stock valued at $250,000.

On August 12, 2008, the Company entered into an interim inventory funding arrangement with a distributor whereby the distributor has agreed to acquire inventory of makes and models from the Company’s manufacturers under the Andretti brand and finance them exclusively for the Company over a ninety day period for an average cost of 3.333% per month. On August 26, 2008, the parties modified the agreement to four percent fixed plus interest of one and one-tenth percent per month after ninety days plus fees up to one hundred and eighty days. The Company also issued the distributor 250,000 shares of its common stock valued at $62,500 as an additional incentive. The Company may utilize this arrangement up to one million two hundred thousand dollars. The distributor has the right to acquire inventory at substantially favorable pricing if it desires to sell the product in territories that the Company has no dealers. These transactions must be approved by the Company. The Company maintains product liability and warranty responsibility on the entire inventory, as well as financing costs and warehousing costs. If the Company does not take possession of the inventory at the end of any ninety day period, the distributor has the right to sell them at cost. The agreement is personally guaranteed by a current officer of the Company.

Power Sports Factory, Inc.

Notes to Unaudited Consolidated Financial Statements

June 30, 2009

3.	Property and Equipment

	June 30,		December 31,
	2009		2008
Equipment	$	41,898	$	41,898
Signs		7,040		7,040
Software		-		-
		48,938		48,938
Less: accumulated depreciation		28,040		23,803
	$	20,898	$	25,135

Depreciation expense for the six and three months ended June 30, 2009 and 2008 amounted to $4,238 and $4,885 and $1,994 and $2,414, respectively.

Power Sports Factory, Inc.

Notes to Unaudited Consolidated Financial Statements

June 30, 2009

4.	Long-term debt

Long-term debt consists of the following:

	June 30,		December 31,
	2009		2008
Note payable to Five Point
Capital Inc. due May 2011;
interest at 18.45%; monthly
payments of $397	$	-	$	10,461

Note payable due April 30, 2008;
interest at 10% payable at
maturity (1)		65,000		68,645

Note payable to Cananwill, Inc due
August 1, 2009, interest at 8.84%;
monthly payments of $7,027		-		54,393

Note payable to Cananwill, Inc. due
August 1, 2009, interest at 8.59%
monthly payments of $2,807		-		21,753

Note payable to BankDirect
due January 12, 2010; interest at 8%
Monthly payments of $2,333		18,119		-

Note payable to Crossroads Financial due
January 9, 2010, interest 21% plus fees,
monthly payments variable		425,834		-

Note payable due May 24, 2009,
10.0% simple interest with a private investor		25,000

Note payable due June 15, 2008;
interest at 20.0% simple interest with a
private investor(s) (5)		-		240,000
		533,953		395,252
Less amounts due within one year		533,953		387,882
	$	-	$	7,370

For the six and three months ended June 30, 2009 and 2008, the Company recorded interest expense of $122,230, $69,660 and $50,477and $41,129, respectively.

Power Sports Factory, Inc.

Notes to Unaudited Consolidated Financial Statements

June 30, 2009

On July 31, 2007, the Company borrowed $80,000 from an investor. The note matured on April 30, 2008 at which time the principal amount plus ten percent interest was due. The maturity date was extended to May 30, 2008 and then extended to October 1, 2008. The Company issued 10,000 shares of the Company’s common stock valued at $3,000, as additional consideration with the loan, subsequent to March 31, 2008. On June 30, 2009 the balance on this note is $68,645. This note is currently in default.

On April 15, 2008, the Company entered into a short term promissory note with a private investor in the amount of $300,000. The interest rate is a simple twenty percent and the note matures on June 15, 2008. The balance on this note is -0-. On March 12, 2009, the Company issued 250,000 shares to the investor as compensation valued at $12,500 for an extension on this loan until July 1, 2009. On May 11, 2009 the $240,000 balance of the note and the accrued interest in the amount of $46,430 was converted to 4,163,487 shares of common stock.

3)	On March 26, 2009, the Company entered into a premium finance Agreement with Bank Direct Capital Finance for the purchase of insurance. The total amount financed was $22,500, with and annual percentage rate of 8% and monthly payments of $2,333.

On January 9, 2009, the Company entered into a revolving credit loan (the “Credit Facility”) with Crossroads Debt LLC, a private investment company (the “Lender”). The loan is for a term of one year which is renewable under certain conditions and in the amount of $1,000,000. Terms under the agreement include and origination fee of one and one-half percent, interest of one and three-quarters percent per month, a collateral management fee of one-half percent a month, an advance rate of fifty percent of cost, which includes supplier invoice, freight and customs, with a maturity on advances of one hundred and twenty days, audit fees, a minimum outstanding balance requirement of three hundred and fifty thousand dollars and an early termination fee of seven thousand five hundred dollars per month for every month still outstanding in the term. The Lender has a first security interest in all accounts, chattel paper, goods (including inventory and equipment), instruments, investment property, documents, and general intangibles, letter of credit rights, commercial tort claims, deposit accounts, and the proceeds thereof via Uniform Commercial Code Filing Position. As of June 30, 2009, the outstanding balance on this line is $425,834.

On April 24, 2009, the Company borrowed $25,000 from an investor on a short term basis. The interest rate is ten percent. The loan was due on May 24, 2009. This loan is in default and the lender has instituted legal action. The loan is personally guaranteed by an officer and director of the company.

Power Sports Factory, Inc.

Notes to Unaudited Consolidated Financial Statements

June 30, 2009

The aggregate amounts of all long-term debt to be repaid for the year following December 31, 2009 is:

2009	$	533,953
2010		-
2011		-
		533,953
Current portion		533,953
	$	-

5.	Convertible Debt

On September 7, 2007, the Company issued four convertible promissory notes for a total of $150,000 with interest at twelve (12.0%) percent. The notes mature October 1, 2009. The notes are convertible, at the option of the holders, into 300,000 shares of the Company’s common stock. Quarterly interest and principal payments are $5,812.50 per note. Total interest due June 30, 2009 is $35,115. Payments due under the note for are currently in default.

On November 2, 2007, the Company issued a convertible promissory note for $250,000 with interest at twelve (12%) percent. The note matured on April 30, 2008. The maturity date had been extended to October 1, 2008. The note is convertible, at the option of the holder, into 250,000 shares of the Company’s common stock. On August 6, 2008, this note and accrued interest of $25,000 were converted in to 550,000 common shares.

On January 4, 2008, the Company entered into a short term secured convertible promissory note with a private investor for $250,000 at an annual simple interest rate of 15%. The note originally matured on March 1, 2008 and was extended to August 15, 2008. This note is currently in default. The note has the option to convert into common shares @ $1.00 per share. The Company granted the investor a security interest in all of the Company’s right, title and interest in all inventory of motorcycles, motor scooters, parts accessories and all proceeds of any and all of same including insurance payments and cash. On December 9, 2008, the investor executed an agreement with the Company’s new inventory financier in which the private investor accepted a $100,000 payment towards principal, subordinated his security interest to the new inventory financier and agreed to a stand still subject to written authorization from the new financier.

On October 1, 2008, the Company borrowed $150,000 on a short term basis at fifteen percent interest compounded monthly and 125,000 shares of common stock valued at $22,500. The note and interest were due on November 30, 2008. On January 7, 2009, the Company was granted an extension until May 1, 2009 at which time the note was modified to include a conversion feature at $.02 a share for all, or any part, of the principal and interest due. Principal payments of $85,000 have been made and the outstanding principal balance is $65,000. This note has been extended to September 1, 2009.

The Company has evaluated the conversion feature under applicable accounting literature, including SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” and EITF 00-19 “Accounting for Derivative Financial Instruments indexed to, and Potentially Settled in, a Company’s Owned Stock” and concluded that none of these features should be respectively accounted for as derivatives. The difference between the conversion of $650,000 and the fair value of the common stock into which the debt is convertible of $470,000 was included as additional paid in capital based on the conversion discount. The beneficial conversion factor in the amount of $180,000 is being accreted over the lives of the outstanding debt. Accretion expense of the beneficial conversion feature for the six months ended June 30, 2009 amounted to $24,323. For the six months ended June 30, 2009, and 2008, the Company recorded interest expense of $23,481 and $43,684 respectively on the convertible notes of which $36,492 is included in accrued expenses on the Company’s balance sheet.

Power Sports Factory, Inc.

Notes to Unaudited Consolidated Financial Statements

June 30, 2009

6.	Note Receivable/Note Payable - Related Party

During 2008 and 2007, certain officers of the Company made advances to the Company. After repayment to the officers, the balance due the officers as of June 30, 2009, and December 2008, were $12,008 and $22,863, respectively. Two of the advances are interest free and all are due upon demand. Interest expense for the six months ended June 30, 2009, and 2008 were $270 and $240, respectively.

7.	Accrued Expenses

Accrued expenses consist of the following:

	June 30,		December 31,
	2009		2008
Payroll expense	$	252,149	$	167,902
Payroll tax expense		472,471		379,572
Penalties		804,651		486,903
Professional fees		11,000		50,438
Interest expense		143,292		141,296
	$	1,683,563	$	1,226,111

8.	Stockholders’ Equity

Common Stock

The Company is authorized to issue 100,000,000 shares of no par value common stock. All the outstanding common stock is fully paid and non-assessable. The total proceeds received for the common stock is the value used for the common stock.

In June 2008, the Company’s shareholders approved a 1 for 20 reverse stock split. Except for the presentation of common shares authorized and issued on the consolidated balance sheet, all shares and per share information has been revised to give retroactive effect to the reverse stock split.

During 2007, certain officers of the Company contributed $175,000 to the Company, which is included in Additional paid-in capital on the Company’s consolidated balance sheet.

On August 6, 2008, the Company converted a $250,000 note payable and accrued interest of $25,000 into 550,000 common shares.

On August 20, 2008, the company retained a consultant to provide equity research services. The Consultant was compensated 75,000 common shares for these services valued at $18,750.

On August 26, 2008, the Company issued a distributor 250,000 shares of common stock valued at $62,500.

On August 28, 2008, the Company paid compensation to a staffing company for providing sales personnel for a total of $20,000, which was paid $10,000 in cash and 14,285 shares of common stock valued at $10,000.

On September 25, 2008, the Company retained a consultant to provide long range investor relations planning. The consultant was compensated 250,000 shares of common stock valued at $25,000 for these services.

Power Sports Factory, Inc.

Notes to Unaudited Consolidated Financial Statements

June 30, 2009

On September 29, 2008, an officer and director of the company, converted $40,000 of debt into 500,000 shares of common stock.

On September 29, 2008, an officer and director of the company, converted $21,000 of debt into 262,500 shares of common stock.

On September 29, 2008, a consultant of the Company converted $40,000 of debt into 500,000 shares of common stock.

On October 1, 2008, the Company issued 125,000 shares of common stock to a lender valued at $22,500.

On October 21, 2008, the Company entered into an agreement with a firm to provide the Company with capital restructuring and corporate financing advice. The firm was compensated 500,000 shares of common stock valued at $40,000.

On January 7, 2009, a creditor converted $90,000 of debt into 4,500,000 shares of common stock.

On January 7, 2009, an officer and director converted $10,520 into 526,000 shares of common stock.

On January 7, 2009, a creditor converted $20,000 of debt into 1,000,000 shares of common stock.

On February 12, 2009, an officer converted $21,000 into 666,666 shares of common stock.

On March 9, 2009, the company issued 1,000,000 shares of common stock to a senior sales executive as a retention incentive package valued at $50,000.

On March 30, 2009, the Company sold 428,750 shares of common stock to an investor for $15,000.

On April 6, 2009 the Company sold 2,000,000 shares of common stock to an investor for $100,000

On April 24, 2009, the Company sold 1,000,000 shares of common stock to an investor for $50,000.

On April 28, 2009, the Company converted $90,000 of debt into 1,250,000 shares of common stock.

On May 11, 2009, the Company converted $286,430 comprised of $240,000 in principal and $46,430 in accrued interest into 4,163,487 shares of common stock.

On May 11, 2009, the Company converted $250,000 of accounts payable due to its manufacturing supplier into 4,604,428 shares of common stock.

Power Sports Factory, Inc.

Notes to Unaudited Consolidated Financial Statements

June 30, 2009

Preferred Stock

The Company is authorized to issue 50,000,000 shares of no par value preferred stock. The Company has designated 3,000,000 of these authorized shares of preferred stock as Series B convertible Preferred Stock. The Board of Directors has the authority, without action by the stockholders, to designate and issue the shares of preferred stock in one or more series and to designate the rights, preferences and each series, any or all of which may be greater than the rights of the Company’s common stock.

During 2007, the Company sold 54,000 shares of Series B Convertible Preferred Stock and received proceeds of $270,000.

During 2007, the Company issued 333,316 shares of Series B Convertible Preferred Stock in exchange for the liquidation of $1,663,000 of Company debt.

During 2007, the Company issued 265,900 shares of Series B Convertible Preferred Stock for services with a fair value of $726,950.

On January 18, 2008, the Company retained a firm to provide management consulting, business advisory, shareholder information and public relation services. The term of the agreement is one year. The Company issued 35,000 Series B Convertible shares for services to be performed with a fair value $43,750 and pays $2,500 per month as compensation under the agreement.

On March 24, 2008, the Company issued 389 shares of Series B Convertible Preferred Stock for services valued at $1,712.

On April 1, 2008, the Company retained a marketing consultant for $15,000. On April 21, 2008, the consultant agreed to convert his payable into 3,000 shares of Series B Convertible Shares.

On April 24, 2008, the Company paid compensation to staffing company for providing permanent accounting personnel for a total of $10,272, which was paid $7,191 in cash and 514 shares of Series B Convertible Preferred Shares.

On May 16, 2008, the Company issued MCMC, LLC. 200 shares of Series B Convertible Preferred Shares.

In June 2008, the Board of Directors converted all shares of Series B Convertible Preferred shares outstanding on that date into shares of common stock at the rate of 10 shares for each share of Series B Convertible Preferred Stock.

9.	Income Taxes

The Company adopted the provisions of financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”) on January 1, 2007. As a result of the implementation of FIN 48, the Company recognized no adjustment in the net liability for unrecognized income tax benefits.

10.

Warrants

During January 2008, the Company issued a warrant to purchase 200,000 common shares at an exercise price of $0.01 per share. The warrant expires December 31, 2017. The fair value of the warrant is estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for the warrant in 2008: dividend yields of 0%, expected volatility of 218% and expected life of 10 years.

Power Sports Factory, Inc.

Notes to Unaudited Consolidated Financial Statements

June 30, 2009

Summary of warrant activity as of June 30, 2009 and the changes during the six months ended June 30, 2009:

					Weighted
			Weighted		Average		Aggregate
			Average		Remaining		Intrinsic
Warrants	Shares		Exercise Price		Contractual Term		Value
Outstanding at January 1, 2009		200,000	$	0.01		9.5
Granted		-		-			$	-
Exercised		-		-
Forfeited, expired or cancelled		-		-			$	-

Outstanding at June 30, 2009		200,000	$	0.01		9.5

Exercisable at June 30, 2009		200,000	$	0.01		9.5

Dividend Payable

In September 2007, the Company entered into a share exchange agreement with the shareholders of PSF. Following the share exchange, the Company would transfer its existing business relating to the development of lastword® to its subsidiary, The Last Word Inc. To distribute the existing business of the Company to the shareholders, the Board of Directors of PPMC declared a dividend, payable in common stock of our subsidiary holding the lastword® technology, at the rate of one share of common stock of the subsidiary for each share of common stock of PPMC owned on the record date. The Board of Directors of PPMC used May 2, 2007, as the record date for this share dividend, with a payment date as soon as practicable thereafter. Prior to the payment of this dividend, our subsidiary holding the lastword® technology will have to file a registration statement under the Securities Act of 1933 with, and have the filing deemed effective by the SEC. As of December 31, 2008 and June 30, 2009, the dividend payable in the amount of $673,176 represents the net liabilities that would be assumed by The Last Word Inc.

13.	Commitments and Contingencies

On April 1, 2007, the Company hired two consultants to provide transition management services, business planning, managerial systems analysis, sales and distribution assistance and inventory management systems services. Both contracts are each $15,000 per month and can be terminated at will when the Company decides that the services have been completed and/or are no longer necessary. One contract ceased on May 15, 2008. The other contract ceased on August 15 2008.

On May 15, 2007, the Company entered into an exclusive licensing agreement with Andretti IV, LLC, a Pennsylvanian limited liability company to brand motorcycles and scooters. The term of the agreement is through December 31, 2017. Royalties under the agreement are tied to motorcycle and scooter sales branded under the “Andretti line”. The agreement calls for a minimum annual guarantee. After year two of the agreement, if the Company does not sell a certain minimum number of motorcycles and scooters under the “Andretti Line” it may elect to terminate the licensing agreement. A minimum payment of $250,000 was due under the agreement on March 31, 2008. A minimum payment of $250,000 was also due on July 31, 2008. These two payments totaling $500,000 represent the minimum annual guarantee owed to Andretti IV LLC for 2008. In addition, after certain volume targets are met, Andretti IV LLC receives a per bike fee. A consultant working for the Company co-guaranteed the minimum annual guarantee for the first two years and receives a 4.1667% of the license fees as a fee throughout the life of the license related to that work. The consultant subsequently became an officer and director of the Company. On January 1, 2008, the Company issued a warrant to Andretti IV, LLC, pursuant to their May 15, 2007 agreement, to purchase 200,000 common shares following the effectiveness of the Reverse Split at an exercise price equal to $.01 per share. The warrant expires December 31, 2017. The Company issued the warrant as part of the consideration to Andretti IV LLC in connection with the original license agreement signed in May 2007. The Company paid $50,000 as a licensing fee in 2007. The Company has paid $50,000 in 2008. The warrant has been accounted for in the financial statements.

Power Sports Factory, Inc.

Notes to Unaudited Consolidated Financial Statements

June 30, 2009

On June 1, 2007, the Company hired Steven A. Kempenich as its Chief Executive Officer and a director of the Company. His contract is a two-year agreement at $16,666 per month. On August 14, 2008, he was terminated for cause.

On October 11, 2007, the Company retained a firm to provide corporate communications and investor relations. The agreement is for one year which automatically renews unless either party elects to terminate the agreement with a notice of termination no later than sixty days prior to the end of the term. Fees for these services are $5,000 per month and 20,000 shares of common stock. Fees are earned but deferred until the seventh month at which time the deferred fees are paid in equal amounts along with the current fees as they are incurred. The Company paid $24,000 as consulting fees in 2007 of which $14,000 was paid with 1,000 shares of preferred stock.

Effective January 1, 2008, the Company entered into a monthly agency retainer agreement with a marketing and advertising firm to provide the company with services at a fee of $25,000 per month. This agreement ceased at the end of May, 2008.

On January 18, 2008, the Company retained a firm to provide management consulting, business advisory, shareholder information and public relation services. The term of the agreement is one year. The Company issued 35,000 Series B Convertible shares and pays $2,500 per month as compensation under the agreement.

On May 14, 2008, the Company signed an agreement with Road America Motor Club, Inc., to provide a 24 hour road-side assistance program to Andretti motorbike owners. The agreement commenced as of April 1, 2008 and continues for an initial term of two years, or until terminated by either party according to the terms of the agreement. The Company pays for the enrollment of each bike properly entered into the company warranty program for a period of one year subject to term and conditions.

On June 27, 2008, the Company entered into a second licensing agreement with Andretti IV, LLC, to further utilize the name Andretti in the branding and sale of its Yamati brand line. The term of the agreement is through December 31, 2018. Royalties under the agreement are tied to motorcycle and scooter sales branded under the “Andretti Yamati line”. The agreement calls for a Minimum Annual Guarantee. Minimum payment of $45,000 was due on September 30, 2008. A minimum payment of $45,000 is also due on December 31, 2008. These payments have not been made. After year two of the agreement, if the Company does not sell a certain minimum number of motorcycles and scooters under the “Andretti Yamati Line” it may elect to terminate the licensing agreement.

Power Sports Factory, Inc.

Notes to Unaudited Consolidated Financial Statements

June 30, 2009

On July 16, 2008, the Company entered into contracts with a storage company to provide warehousing and logistics services on the west coast of the United States. This contract requires fees for storage and handling of our motor bike inventory which are incurred monthly on a per bike basis.

On August 15, 2008, the Company hired Shawn Landgraf as the chief executive officer. His salary is $156,000 per year. He does not have a contract at this time. Landgraf is also the president of Magnus Partners, Inc., which has provided services to the Company in the past and is currently owed $33,250.

On October 1, 2008, the Company entered into a premium finance agreement with Cananwill Inc., for the purchase of additional insurance. The total amount financed was 67500, with an annual percentage rate of 8.84% and monthly payments of $7,026.50. This contract was terminated on March 1, 2009. There is an outstanding balance of $54,393.

On October 1, 2008, the Company entered into a premium finance agreement with Cananwill Inc., for the purchase of additional insurance. The total amount financed was $27,000 with an annual percentage rate of 8.59% and monthly payments of $2,807.44. This contract was terminated on March 1, 2009. There is an outstanding balance of $21,753.

On October 23, 2008, the Company entered into an exclusive distribution agreement with Eurospeed, Inc., to distribute its Andretti product line to new and used automotive dealers in the U. S. and Canada. The agreement calls for an initial purchase of six hundred units before November 30, 2008 and a minimum of seventy-five hundred units over the first twelve months of the agreement. The Company’s manufacturer has agreed to supply Eurospeed with product in the event that the Company defaults under its manufacturing agreement. The initial purchase date had been extended to December 30, 2008. As of April, 2009 Eurospeed has not placed an initial order due to financing constraints. This agreement has expired.

On January 20, 2009, the Company entered into a modification of its licensing agreement with Andretti IV, LLC, for payments due for the year 2008. As of December 31, 2008, PSF had a balance of $540,000 due to Andretti IV, LLC. Under the restructuring agreement, PSF made a commitment to pay $250,000 by February 6, 2009, agreed to execute a note for $87,000 due March 30, 2009, and convert $58,000 into 1,000,000 shares of common stock. Upon receipt of the payments, and payment in full of the note, Andretti IV, LLC, agreed to forgive the remaining balance due for 2008. On April 24, 2009, the Company made a $50,000 payment towards this agreement. The balance of the agreement is pending. On August 15, 2009, the Company and Andretti IV agreed to restructure its accrued payments of $1.34MM for a one-time payment of $150,000 by September 6th, 2009. The payments due under the agreement in the future shall be on per bike basis to be paid quarterly.

On March 31, 2009, the Company subleased a portion of its warehouse space at its headquarters, structured with the landlord and the subtenant as a reduction in the Company’s rent. The sublease is on a month-to-month basis for 6,000 square feet at a monthly rate including CAM charges of $3,250.

14.	Subsequent Events

On May 25, 2009, the Company entered into a Joint Venture Agreement with CityRyde LLC, a premier Bike Share Consulting Company. Under the agreement CityRyde will provide Power Sports Factory with product design, RFP development, and assistance in the development of PSF’s “Bike Share Source’ Division. Under the agreement, the parties shall split net profits equally after all costs.

In March, 2009, our former Chief Executive Officer, Steven Kempenich, who was terminated August 14, 2008, sued the Company, and our directors and executives, Shawn Landgraf and Steven Rubakh (collectively, the “Defendants”), in the U.S. District Court for the District of New Jersey for, inter alia, unpaid compensation, unpaid expense reimbursements, allegedly owing to Mr. Kempenich. We filed an answer and counterclaim against Mr. Kempenich on April 13, 2009. On July 24, 2009 (the “Settlement Date”), we agreed to settle all matters involved in this case on the following basis: the Defendants would pay to Mr. Kempenich $10,000 within 30 days of the Settlement Date and would deliver to Mr. Kempenich shares of the Company’s common stock from certificates issued to an existing shareholder in September 2007 worth $15,000, the number of shares to be calculated by averaging the market prices of our common stock over the 30 days prior to the Settlement Date (such payments guaranteed jointly and severally by all Defendants); Mr. Kempenich would be removed as a guarantor on two corporate loans, and the Defendants jointly and severally agreed to indemnify Mr. Kempenich against any liability under these loans; the parties agreed to mutual non-disparagement and non-defamation and that any public representations would be consistent therewith; the Company would file a current report on Form 8-K disclosing that Mr. Kempenich’s termination in August 2008 has been determined by the Company not to have been for cause, but that the parties have elected not to resume their relationship; and mutual releases were agreed to by the parties.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and notes thereto and the other financial information included elsewhere in this report. Certain statements contained in this report, including, without limitation, statements containing the words “believes,” “anticipates,” “expects” and words of similar import, constitute “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including our ability to create, sustain, manage or forecast our growth; our ability to attract and retain key personnel; changes in our business strategy or development plans; competition; business disruptions; adverse publicity; and international, national and local general economic and market conditions.

Overview

The Company was organized under the laws of the State of Minnesota on June 28, 1996. the Company, through the acquisition in 1997 of a Nevada corporation acquired the trademark, patent and exclusive marketing rights to, and invested in the development of a grocery cart advertising display device.

On April 24, 2007, we entered into the Share Exchange Agreement with Power Sports Factory, Inc. (“PSF”) and the shareholders of PSF. The Share Exchange Agreement provided for our acquiring all of the outstanding shares of PSF in exchange for shares of the Company’s Common Stock. On May 14, 2007, we issued 60,000,000 shares of Common Stock to Steve Rubakh, the major shareholder of PSF, and on August 31, 2007, entered into an amendment (the “Amendment”) to the Share Exchange Agreement, that provided for a completion of the acquisition of PSF at a closing (the “Closing”) which was held on September 5, 2007. At the Closing the Company issued 1,650,000 shares of a new Series B Convertible Preferred Stock to the shareholders of PSF, to complete the acquisition of PSF by us. Each share of Preferred Stock was converted into 10 shares of our Common Stock effective June 9, 2008, following approval by the shareholders at a shareholders meeting held on May 28, 2008, of a 1:20 reverse split of our common stock and changing our name from Purchase Point Media Corp. to Power Sports Factory, Inc.

Through PSF’s manufacturing relationships in China, it began to import and sell Power Sports products in the United States. Our products have been marketed mainly under the “Strada” and “Yamati”, and recently under the “Andretti”, brands. At the beginning of 2007, we made the determination to focus primarily on the sales and distribution of motor scooters. We now sell the motor scooters that we import primarily to power sports dealers and a small portion through the internet.

Recent Developments

On May 1, 2009, we formed an Alternative Transportation Division named "BikeShareSource (TM)". This newly launched division will provide sustainable transportation solutions to municipalities and transit agencies, property managers and real estate developers, colleges and universities, hotels, parks and other transportation related businesses. We intend to plan, develop, distribute and operate solar powered Bike Sharing Stations, enabling bicycle sharing to be an integral part of the transportation system. In addition, we intend to partner with major car sharing companies to facilitate our bike sharing solution. Our services will include sustained transportation consulting and customized solutions development, software licensing, equipment manufacturing and distribution. In May, 2009, we announced that we entered into a Joint Venture Agreement with CityRyde LLC, the premier Bike Share Consulting Company. CityRyde will provide us with product design, RFP development, and help grow our “Bike Share Source” Division. In August, 2009, we placed an order for Bike Sharing Systems to be deployed at a major educational facility on the East Coast. Each solar powered station consists of 14 bicycles and features fully automated bike release, activated by cell phone technology. Through our Bike Share Source Division, we will deploy our first installation at a university in conjunction with our joint venture with CityRyde LLC.

Results of Operations

Six Months Ended, June 30, 2009 Compared to Six Months Ended June 30, 2008

During the six months ended June 30, 2009, we incurred a net loss of $1,494,032, as compared with a net loss of $1,764,437 for the comparable period in 2008, the decreased loss being primarily attributable to a decrease in our selling, general and administrative costs from $2,112,796 in 2008 to $1,280,380 in 2009, coupled with a decrease in net sales from $1,410,135 in 2008 to $350,367 in 2009, with cost of sales being $991,519 and $322,743, respectively, for these periods. Non-cash compensation increased in 2009 to $73,321 from $-0- in 2008. Interest expense increased from $69,560 for the six months ended June 30, 2008, to $122,230 for the six months ended June 30, 2009.

Three Months Ended, June 30, 2009 Compared to Three Months Ended June 30, 2008

During the three months ended June 30, 2009, we incurred a net loss of $422,982, as compared with a net loss of $398,973 for the comparable period in 2008, the increased loss being primarily attributable to a decrease in our selling, general and administrative costs from $717,837 in 2008 to $393,993 in 2009, offset by a decrease in net sales from $917,047 in 2008 to $218,177 in 2009, with cost of sales being $556,347 and $171,750, respectively in these periods. Interest expense increased from $41,129 for the three months ended June 30, 2008, to $50,477 for the three months ended June 30, 2009.

Liquidity and Financial Resources

Since the acquisition of Power Sports Factory, we have operated at a loss. We rely significantly on the private placement of debt and equity to pay operating expenses.

As of 2009, the Company had $14,638 of cash on hand. The Company has incurred a net loss of $1,494,032 in the six months ended June 30, 2009, and has working capital and stockholders' deficiencies of $5,028,428 and $4,998,730, respectively, at June 30, 2009. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

During the six months ended June 30, 2009, we received proceeds of $165,000 from an equity financing and proceeds net of repayments from loans payable of $197,345. We received proceeds of $5,000 from a loan from a related party, and made a payment of $15,855 on a note to a related party. We will require substantial additional financing to maintain operations at Power Sports Factory, and to expand our operations to continue the launch of our new Andretti brand.

For the six months ended June 30, 2009, cash increased approximately $14,000. The increase in cash is primarily due to proceeds from borrowings of $552,500 and the sale of common stock of $209,122, offset in part by the repayment of debt of $366,010 and cash used in operating activities of approximately $382,000 (primarily due to a net loss of approximately $1.5 million, offset in part by an increase in operating assets and liabilities of approximately $1.0 million).

For the six months ended June 30, 2009, inventory decreased to $1.5 million from $1.8 million at December 31, 2008, due primarily to the sale of bikes from the current inventory. Accounts payable decreased to $3.3 million from $3.6 million at December 31, 2008, due primarily to the conversion of debt to common stock. Long-term debt and convertible debt remained approximately the same, due to the net increased borrowings offset by debt conversions into common stock. Accrued expenses increased to $1.7 million from $1.2 million at December 31, 2008, due primarily to the license agreement fee due upon the sale of bikes that has been accrued during the period.

Critical Accounting Policies

The Securities and Exchange Commission recently issued "Financial Reporting Release No. 60 Cautionary Advice Regarding Disclosure About Critical Accounting Policies" ("FRR 60"), suggesting companies provide additional disclosures, discussion and commentary on those accounting policies considered most critical to its business and financial reporting requirements. FRR 60 considers an accounting policy to be critical if it is important to the Company's financial condition and results of operations, and requires significant judgment and estimates on the part of management in the application of the policy. For a summary of the Company's significant accounting policies, including the critical accounting policies discussed below, please refer to the accompanying notes to the financial statements.

The Company assesses potential impairment of its long-lived assets, which include its property and equipment and its identifiable intangibles such as deferred charges under the guidance of SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". The Company must continually determine if a permanent impairment of its long-lived assets has occurred and write down the assets to their fair values and charge current operations for the measured impairment.

CRITICAL ACCOUNTING ISSUES

The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the financial statements, requires the Company to make estimates and judgments that effect the reported amount of assets, liabilities, and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to intangible assets, income taxes and contingencies and litigation. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

NEW FINANCIAL ACCOUNTING STANDARDS

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are primarily exposed to foreign currency risk, interest rate risk and credit risk.

Foreign Currency Risk - We import products from China into the United States and market our products in North America. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or, if we initiate our planned international operations, weak economic conditions in foreign markets. Because our revenues are currently denominated in U.S. dollars, a strengthening of the dollar could make our products less competitive in foreign markets that we plan to enter. If the Chinese Yuan strengthened against the dollar, our cost of imported products could increase and make us less competitive. We have not hedged foreign currency exposures related to transactions denominated in currencies other than U.S. dollars. We do not engage in financial transactions for trading or speculative purposes.

Interest Rate Risk - Interest rate risk refers to fluctuations in the value of a security resulting from changes in the general level of interest rates. Investments that are classified as cash and cash equivalents have original maturities of three months or less. Our interest income is sensitive to changes in the general level of U.S. interest rates. We do not have significant short-term investments, and due to the short-term nature of our investments, we believe that there is not a material risk exposure.

Credit Risk - Our accounts receivables are subject, in the normal course of business, to collection risks. We regularly assess these risks and have established policies and business practices to protect against the adverse effects of collection risks. As a result we do not anticipate any material losses in this area.

ITEM 4T. CONTROLS AND PROCEDURES.

The Company's Chief Executive Officer and its Chief Financial Officer are primarily responsible for the accuracy of the financial information that is presented in this quarterly Report. These officers have as of the close of the period covered by this Quarterly Report, evaluated the Company's disclosure controls and procedures (as defined in Rules 13a-4c and 15d-14c promulgated under the Securities Exchange Act of 1934) and determined that such controls and procedures were effective in ensuring that material information relating to the Company was made known to them during the period covered by this Quarterly Report. In their evaluation, no changes were made to the Company's internal controls in this period that have materially affected, or are reasonably likely materially to affect, the Company’s internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS.

The Company is a party to the following lawsuits.

Yellow Transportation v. Power Sports Factory, Inc. The Company was sued in December, 2008, by Yellow Transportation for the sum of $28,838, plus lawful interest, attorneys’ fees and the costs of the suit, in the Superior Court of New Jersey, Camden County, for transportation services rendered by the plaintiff. The case is in discovery. The Company intends to settle this lawsuit.

Liberty Mutual Insurance Company v. Power Sports Factory, Inc. The plaintiff in this case has sued the Company in the Superior Court of New Jersey, Camden County, for the sum of $45,096 for goods and/or services rendered. We have answered the complaint denying that the Company owes any amounts to plaintiff, and the case is in discovery.

Business Technology Partners, Inc. v. Power Sports Factory, Inc. The plaintiff in this case has sued the Company in the Superior Court of New Jersey, Camden County, for the sum of $134,965.12 for goods and/or services rendered. The parties to this case are in discovery, and we have been served with interrogatories by the plaintiff.

Justin Gasarch v. Power Sports Factory, Inc. The plaintiff in this case filed suit against the Company, Shawn Landgraf, our Chief Executive Officer, and a Company consultant on July 9, 2009. On April 24, 2009 loaned the Company $25,000 with a maturity date of May 24, 2009. Shawn Landgraf and the consultant sued in this case had personally guaranteed the loan. The Company intends to settle this lawsuit.

Steven Kempenich v. Power Sports Factory, Inc. In March, 2009, our former Chief Executive Officer, Steven Kempenich, who was terminated August 14, 2008, sued the Company, and our directors and executives, Shawn Landgraf and Steven Rubakh (collectively, the “Defendants”), in the U.S. District Court for the District of New Jersey for, inter alia, unpaid compensation, unpaid expense reimbursements, allegedly owing to Mr. Kempenich. We filed an answer and counterclaim against Mr. Kempenich on April 13, 2009. On July 24, 2009 (the “Settlement Date”), we agreed to settle all matters involved in this case on the following basis: the Defendants would pay to Mr. Kempenich $10,000 within 30 days of the Settlement Date and would deliver to Mr. Kempenich shares of the Company’s common stock from certificates issued to an existing shareholder in September 2007 worth $15,000, the number of shares to be calculated by averaging the market prices of our common stock over the 30 days prior to the Settlement Date (such payments guaranteed jointly and severally by all Defendants); Mr. Kempenich would be removed as a guarantor on two corporate loans, and the Defendants jointly and severally agreed to indemnify Mr. Kempenich against any liability under these loans; the parties agreed to mutual non-disparagement and non-defamation and that any public representations would be consistent therewith; the Company would file a current report on Form 8-K disclosing that Mr. Kempenich’s termination in August 2008 has been determined by the Company not to have been for cause, but that the parties have elected not to resume their relationship; and mutual releases were agreed to by the parties.

ITEM 1A. RISK FACTORS.

Not applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

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

Not applicable.

ITEM 5. OTHER INFORMATION.

Not applicable.

ITEM 6. EXHIBITS.

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of The Sarbanes Oxley Act of 2002.

31.2	Certification of Chief Financial Officer Pursuant to Section 302 of The Sarbanes Oxley Act of 2002.

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

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

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	POWER SPORTS FACTORY, INC. (Registrant)

	By:	/s/ Shawn Landgraf
		Shawn Landgraf, Chief Executive Officer

Dated: August 19, 2009

EXHIBIT INDEX

Exhibit Number		Description
31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Oxley Act of 2002.
32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Oxley Act of 2002.