Execute Sports said it cut losses 15% to $570,823 in the quarter ended March 31, but had burned through most of its cash and did not have enough to continue operating the next 12 months.

The Torrance, CA. maker of vests, wet suits, gloves and other gear for power  sports and water sports, said its operating results “give rise to concerns about the company’s ability to generate cash flow from operations sufficient to sustain ongoing viability.”

Since its inception to March 31, 2008, the company has incurred an accumulated deficit of $13,397,232, and expects to incur additional losses for the foreseeable future.


“If future cash flows and capital resources are insufficient to meet the company's commitments, the company may be forced to reduce or delay activities and capital expenditures or obtain additional equity capital,” the company reported in a 10Q filed with the Securities & Exchange Commission. “In the event that the company is unable to do so, the company may be left without sufficient liquidity.”

Execute Sports said net sales for the three months ended March 31, 2008 and 2007 were $1,804,954 and $553,482, respectively, representing a $1,251,472, or 226% increase. The increase is due to $1,475,731 of sales related to Sugar Sand boats that were not part of the company's product portfolio during the same period in the previous year. Watersports sales decreased $224,259, or 41% from the previous year due to production delays that pushed deliveries in to the first quarter compared to the first quarter of 2007.

Gross margin for the three months ended March 31, 2008 and 2007 was $153,700 or 9% of revenue and $212,535, or 38% of revenue, respectively. The $58,835 decrease in gross margin over the previous year was primarily due to Sugar Sand sales which have approximately a 5% gross margin compared to watersports whose gross margin is higher than Sugar Sand boats at 24% and 38% during the three months ended March 31, 2008 and 2007, respectively.

Selling, General and Administrative expenses for the three months ended March 31, 2008 and 2007 was $401,442 and $363,828, respectively, representing a $37,614 or 10% increase. The year-over-year increase was due to an increase of $100,100 related to depreciation and amortization of Sugar Sand offset by a decrease of $65,826 primarily related to less stock based compensation expense in the current quarter compared to the same quarter in the prior year.