Titan Global 10QSB 2004 Q4 Quarterly report (small business)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended May 31, 2004

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the period to

Commission File Number: 000-32847

VENTURES-NATIONAL INCORPORATED
(Exact Name of Registrant as Specified in its Charter)

                   Utah                                                                                                  87-0433444
(State or Other Jurisdiction of                                                                  (I.R.S. Employer
Incorporation or Organization)                                                               Identification Number)

44358 Old Warm Springs Blvd.
Fremont, California 94538-6148
(Address of Principal Executive Offices, Including Zip Code)

Registrant's Telephone Number (including area code): (510) 824-1200

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 [ ]

Indicate by a check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) Yes [ ] No [x]

Number of shares of common stock, $0.001 par value, outstanding at June 23, 2004: 24,306,723

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VENTURES-NATIONAL INCORPORATED (dba TITAN GENERAL HOLDINGS, INC.) TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Controls and Procedures	3 15 26
PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 6. Exhibits and Reports on Form 8-K	28 28
Signatures Certifications	29 30
1 --------------------------------------------------------------------------------------------------------------------

VENTURES-NATIONAL INCORPORATED
(dba TITAN GENERAL HOLDINGS, INC.)

FORM 10-QSB

FOR THE QUARTER ENDED

MAY 31, 2004

FORWARD-LOOKING INFORMATION

Statements in this report concerning the future sales, expenses, profitability, financial resources, product mix, market demand, product development and other statements in this report concerning the future results of operations, financial condition and business of Ventures-National Incorporated are "forward-looking" statements as defined in the Securities Act of 1933 and Securities Exchange Act of 1934. Investors are cautioned that the Company's actual results in the future may differ materially from those projected in the forward-looking statements due to risks and uncertainties that exist in the Company's operations and business environment, including competition, need for increased acceptance of products, ability to continue to develop and extend our brand identity, ability to anticipate and adapt to a competitive market, ability to effectively manage rapidly expanding operations, amount and timing of operating costs and capital expenditures relating to expansion of our business, operations and infrastructure, ability to provide superior customer service, dependence upon key personnel and the like. The Company's most recent filings with the Securities and Exchange Commission, including Form 10-KSB, contain additional information concerning many of these risk factors, and copies of these filings are available from the Company upon request and without charge.

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VENTURES-NATIONAL INCORPORATED (dba TITAN GENERAL HOLDINGS, INC.) CONDENSED CONSOLIDATED BALANCE SHEET MAY 31, 2004 (In thousands) (Unaudited)
ASSETS
Current assets: Cash and cash equivalents Accounts receivable, net Inventory Prepaid expenses and other current assets Total current assets Equipment and improvements, net Intangible assets, net Capitalized loan fees Other assets Total assets	$ 154 3,325 560 175 4,214 2,519 27 401 176 $7,337
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: Current portion of long term debt Line of credit Short term debt Accounts payable - trade Accrued liabilities Warrant liability Total current liabilities Long-term debt, net of current portion Total liabilities Stockholders' equity: Common stock, $0.001 par value, 950,000,000 shares authorized, 23,751,043 shares issued and outstanding Additional paid-in capital Deferred compensation Accumulated deficit Total stockholders' equity Total liabilities and stockholders' equity	$ 336 564 233 1,242 672 133 3,180 424 3,604 24 18,104 (636) (13,759) 3,733 $ 7,337
The accompanying notes form an integral part of the condensed consolidated financial statements. 3 --------------------------------------------------------------------------------------------------------------------

VENTURES-NATIONAL INCORPORATED
(dba TITAN GENERAL HOLDINGS, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)
(Unaudited)

Three Months Ended

Nine Months Ended

05/31/04

05/31/03

05/31/04

05/31/03

Net sales
Cost of sales
Gross profit

Sales and marketing
General and administrative
Loss from operations

Interest expense
Miscellaneous
Loss before income taxes

Provision for income taxes

Net loss

$  4,727
    3,832
895

361
       364
170

(1,721)
             1
(1,550)

              -

$  (1,550)

$ 3,271
    2,937
334

369
       1,168
(1,203)

(185)
           2
(1,386)

            -

$ (1,386)

$  11,976
    10,451
1,525

1,057
    3,579
(3,111)

(2,642)
         203
(5,550)

                    -

$ (5,550)

$ 7,615
    7,037
578

922
   3,011
(3,355)

(299)
        87
(3,567)

            -

$ (3,567)

Net loss per share:
Basic and Diluted

$ (0.08)

$ (0.10)

$ (0.32)

$ (0.30)

Weighted average number of shares outstanding:
Basic and Diluted

18,481,067

14,187,708

17,042,738

11,707,797

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

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VENTURES-NATIONAL INCORPORATED (dba TITAN GENERAL HOLDINGS, INC.) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)

Nine Months Ended

05/31/04

05/31/03

Cash flows from operating activities:
  Net loss
  Adjustments to reconcile net loss to net cash
      used in operating activities:
    Non cash compensation
    Amortization of beneficial conversion feature and
      warrants and change in warrant valuation
    Accrued expenses to be converted to notes payable
    Depreciation
    Amortization
   Gain on debt extinguishment
    Changes in operating assets and liabilities:
      Accounts receivable
      Inventory
      Prepaid expenses and other current assets
      Capitalized loan fees
      Other assets
      Accounts payable
      Accrued liabilities
        Net cash used in operating activities

$(5,550)

2,369

1,641
418
460
10
(349)

(1,682)
(152)
(125)
73
(21)
(485)
(270)
(3,663)

$ (3,567)

1,080

-
-
297
11

(695)
2
8
-
(78)
756
153
(2,033)

Cash flows from investing activities:
  Capital expenditures
  Investments in Coesin, Inc.
  Acquisition, net of cash acquired
        Net cash used in investing activities

(228)
-
-
(228)

(427)
(5)
(500)
(932)

Cash flows from financing activities:
  Borrowings on line of credit, net of loan cost
  Borrowings on long-term debt, net of loan cost
  Proceeds from issuance of note payable to related parties
  Proceeds from issuance of common stock
  Proceeds from related parties
  Proceeds from issuance of short term debt
  Payments of long-term debt
  Payments of short-term debt
  Payments of capital lease obligations
  Payments to related parties
  Payments on former lines of credit
        Net cash provided by financing activities

2,516
2,690
-
667
751
135
(599)
(32)
(85)
(743)
(1,352)
3,948

282
400
768
1,752
-
-
(24)
-
(18)
(50)
-
3,110

Net (decrease) increase in cash
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

57
97
$ 154

145
77
$ 222

Supplemental disclosure of cash flow information:
Interest paid
Income tax paid

$ 442
$ -

$ 219
$ -

Non cash activities:
  Issuance of common stock for consulting fees
  Issuance of common stock to related party
    as prepaid financing cost
  Issuance of common stock for debt conversion

$ 3,520

$ -
$ 1,874

$ 1,001

$ 80
$ 2,144

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

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VENTURES-NATIONAL INCORPORATED
(dba TITAN GENERAL HOLDINGS, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Basis of Presentation and Nature of Business Operations:

Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared by Ventures-National Incorporated, doing business as Titan General Holdings, Inc. ("Titan" or the "Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which in the opinion of management, are necessary to present fairly the financial position, the results of operations and cash flows of Titan for the period presented.

These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report to Shareholders on Form 10-KSB for the fiscal year ended August 31, 2003 as filed with the Securities and Exchange Commission on December 10, 2003. All significant intercompany accounts and transactions have been eliminated in preparation of the condensed consolidated financial statements.

As of May 31, 2004, Titan had working capital of $1,034,000 and an accumulated deficit of $13,759,000.

The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.

Nature of Business We are a manufacturer of time sensitive, high tech, prototype and pre-production rigid and rigid flex printed circuit boards ("PCBs") providing time-critical printed circuit board manufacturing services to original equipment manufacturers and electronic manufacturing services providers through our wholly-owned subsidiaries Titan EMS, Inc. and Titan PCB East, Inc. Our prototype printed circuit boards serve as the foundation in many electronic products used in telecommunications, medical devices, automotive, military applications, aviation components, networking and computer equipment.

Our time sensitive and high quality manufacturing services enable our customers to shorten the time it takes them to get their products from the research and development phase to the production phase, thus increasing their competitive position. Our focus is on high quality niche printed circuit boards consisting of complex, multi-layered, fine-lines and high-performance materials with delivery cycles between 24 hours and standard 10 day lead times at a competitive price.

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Beginning in the year 2001, Titan began acquiring cutting edge technology equipment and processes from competitors unable to remain in business due to a severe market downturn and overwhelming debt.

Titan has also obtained customer lists and orders from several of these firms, resulting in new business opportunities.

Recent Accounting Pronouncements

In December 2003, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition." SAB No. 104 supersedes SAB No. 101, "Revenue Recognition in Financial Statements." SAB No. 104's primary purpose is to rescind accounting guidance contained in SAB No. 101 related to multiple element revenue arrangements, superseded as a result of the issuance of Emerging Issues Task Force ("EITF") No. 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." Additionally, SAB No. 104 rescinds the SEC's Revenue Recognition in Financial Statements Frequently Asked Questions and Answers ("FAQ") issued with SAB No. 101 that had been codified in SEC Topic No. 13, "Revenue Recognition." Selected portions of the FAQ have been incorporated into SAB No. 104. While the wording of SAB No. 104 has changed to reflect the issuance of EITF No. 00-21, the revenue recognition principles of SAB No. 101 remain largely unchanged by the issuance of SAB No. 104, which was effective upon issuance. The adoption of SAB No. 104 did not impact the condensed consolidated financial statements.

Note 2. Loss Per Common Share:

In accordance with SFAS No. 128, "Earnings Per Share," the basic loss per common share is calculated by dividing net loss available to common stockholders less preferred dividends by the weighted average number of common shares outstanding. Diluted loss per common share is computed similarly to basic loss per common share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were not antidilutive. Titan has excluded all outstanding options and convertible debt from the calculation of diluted net loss per share because these securities are anti-dilutive. The number of outstanding shares and weighted average shares reflect a stock split of 3,866.667 to 1 effected February 22, 2002. As of May 31, 2004, Titan had common stock equivalents of approximately 3,320,000 shares related to the options and warrants and approximately 13,372,200 shares related to shares to be issued upon conversion on the convertible debt.

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**Note 3. Inventory:** Inventory (in thousands) consisted of the following:
		05/31/04
	Raw materials and finished subassemblies Work in process Finished goods Total	$168 343 49 $560

Note 4. Loans and Notes Payable:

NOTES PAID OFF DURING NINE MONTHS ENDED MAY 31, 2004

On June 28, 2002, the Company entered into a loan and security agreement (the "Alco Agreement") with Alco Financial Services ("Alco"), an entity owned by an individual who subsequently became a member of its Board of Directors at the time, and paid a loan fee of $24,000 which is being amortized to interest expense at $2,000 per month. Under the terms of the Alco Agreement, the Company can borrow up to the sum of (1) 80% of the net face value of the Titan PCB West Inc.'s eligible accounts receivable, plus (2) the lesser of (i) $100,000 or (ii) 50% of eligible inventory. The Alco Agreement carries an interest rate of the greater of (a) 3.5% over the prime rate, which is defined as the prime rate stated on the Wall Street Journal, (b) interest rate at the date of the loan agreement, 8.25% or (c) a minimum monthly interest charge of $7,500. The Agreement originally matured on June 28, 2003 and extended to December 2003, and is secured by all accounts receivable and inventory of the Titan PCB West, Inc. The Company is subject to certain restrictions and covenants under the Alco Agreement. During the nine months ended May 31, 2004, this loan was retired and no balance remains.

On May 9, 2003, the Company entered into a loan and security agreement (the "Equinox Agreement") with Equinox Business Credit Corp. ("Equinox"), and paid a loan fee of $19,000 which was expensed during the year. Under the terms of the Equinox Agreement, the Company can borrow up to the sum of (1) 70% of the net face value of the Titan PCB East Inc.'s eligible accounts receivable, plus (2) $400,000 against the eligible property and equipment. The Equinox Agreement carries an interest rate of the greater of (a) 3.5% over the prime rate, which is defined as the prime rate stated on the Wall Street Journal, (b) interest rate at the date of the loan agreement, 8.25% or (c) a minimum monthly interest charge of $7,500. The Agreement matures on June 28, 2005 and is secured by all accounts receivable and inventory of the Titan PCB East, Inc. This loan was retired during the nine months ended May 31, 2004 and there is no remaining balance.

The company received $400,000 advances from a related party during the quarter ended November 30, 2003. As part of the agreement, the Company agreed to issue 600,000 shares to this related party. The Company expensed $414,000 as interest expense related to this issuance. The Company paid off the advances during the nine months ended May 31, 2004.

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REVOLVING LINE OF CREDIT

On November 20, 2003, we entered into a Security Agreement ("Security Agreement") with Laurus Master Fund, Ltd. ("Laurus"), pursuant to which we may borrow from Laurus such amount as shall equal to 85% of our eligible accounts receivable as prescribed by the terms of the Security Agreement up to a maximum of $4,000,000. Pursuant to the Security Agreement, we issued to Laurus a (i) Secured Revolving Convertible Note (the "Revolving Note") in the principal amount of up to $2,500,000 and (ii) Secured Convertible Minimum Borrowing Note (the "Initial Minimum Borrowing Note" and together with any other Minimum Borrowing Notes issued under the Security Agreement, the "Minimum Borrowing Notes") in the original principal amount of $1,500,000. Additional Minimum Borrowing Notes shall be issued as and when the Company is eligible and elects to make additional borrowings under the Revolving Note.

In connection with the issuance of the Revolving Note and the Initial Minimum Borrowing Note pursuant to the Security Agreement, we issued to Laurus a warrant (the "First Warrant") to purchase up to 600,000 shares of our common stock, par value $0.001 per share ("Common Stock"), having an exercise price of $0.83 per share for the first 250,000 shares of Common Stock acquired under such warrant, $0.90 per share for the next 200,000 shares of Common Stock acquired thereunder, and a price of $0.97 per share for any additional shares of Common Stock acquired thereunder. The First Warrant expires on November 20, 2010 and has a cashless exercise provision. The fair value of the these warrants totaling $190,300 was computed using the Black-Scholes model under the following assumptions: (1) expected life of 3 years; (2) volatility of 85% and (3) risk free interest of 4.17% and (4) dividend of 0%. The revolving lines mature on November 20, 2006. The Company can elect to pay the outstanding balance in shares of common stock at a fixed conversion price of $0.77 which was later amended to $0.60 per share retroactively to the date of the agreement. The conversion price was subsequently changed to $0.40 per share effective February 25, 2004. If the closing price of the Company's stock for any of the 10 trading days preceding the repayment date is less than 110% of the fixed conversion price, the Company shall pay cash instead. In addition, since this debt is convertible into equity at the option of the note holder at beneficial conversion rates, an embedded beneficial conversion feature was recorded as a debt discount and will be amortized utilizing the effective interest rate method over the life of the debt in accordance with Emerging Issues Task Force No. 00-27, "Application of Issue No. 98-5 to Certain Convertible Instruments.". During the quarter ended November 30, 2003, total cost of beneficial conversion feature of $475,000 and the relative fair value of the warrants of $190,000 were recorded as discounts of the lines of credit. During the quarter ended February 29, 2004, the conversion price was reduced to $0.40 and accordingly, a discount for the additional beneficial conversion feature of $1,092,800 was recorded. In addition, during the quarter ended February 29, 2004, the Company increased its net borrowings by $640,200 and recorded a discount for the additional beneficial conversion feature of approximately $416,100. During the quarter ended May 31, 2004, the Company increased its net borrowings by $179,700 and recorded a discount for the additional beneficial conversion feature of approximately $49,400. The Company recorded an interest expense for the amortization of discounts in the amount $46,400 during the three months ended May 31, 2004. As of May 31, 2004, outstanding loan balance approximated $2,720,000 and unamortized discounts for beneficial conversion feature and warrants totaled $2,156,000.

TERM NOTE

Also on November 20, 2003, we entered into a Securities Purchase Agreement ( "SPA") pursuant to which we issued and sold to Laurus (i) a Convertible Term Note ( "Convertible Term Note", together with the Revolving Note and the Minimum Borrowing Notes, the "Notes") in the principal amount of $2,100,000 and (ii) a warrant ("Second Warrant" together with the First Warrant, the "Warrants") to purchase up to 350,000 shares of Common Stock having an exercise price of $0.83 per share for the first 200,000 shares of Common Stock acquired thereunder, $0.90 per share for the next 100,000 shares of Common Stock acquired thereunder, and $0.97 per share for any additional shares of Common Stock acquired thereunder. The Second Warrant expires on November 20, 2010 and has a cashless exercise provision. The first payment on the Notes is due 90 days from the issue date thereof. The term note has a maturity date of November 20, 2006.

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The fair value of the these warrants totaling $117,548 was computed using the Black-Scholes model under the following assumptions: (1) expected life of 3 years; (2) volatility of 85%, (3) risk free interest of 4.17% and dividend rate of $0%. The term loan is payable in monthly payments. The Company can elect to pay all or a portion of the monthly amount in shares of common stock at a fixed conversion price of $0.77 which was amended to $0.60 per share retroactively to the date of the agreement. The conversion was subsequently reduced to $0.40 per share effective February 25, 2004. If the closing price of the Company's stock for any of the 10 trading days preceding the payment is less than 110% of the fixed conversion price, the Company shall pay cash instead. In addition, since this debt is convertible into equity at the option of the note holder at beneficial conversion rates, an embedded beneficial conversion feature was recorded as a debt discount and will be amortized using the effective interest rate method over the life of the debt in accordance with Emerging Issues Task Force No. 00-27, "Application of Issue No. 98-5 to Certain Convertible Instruments." During the quarter ended November 30, 2003, total cost of beneficial conversion feature of $433,000 and the relative fair value of the warrants of $118,000 were recorded as discounts of the term loan. During the quarter ended February 29, 2004, the conversion price was reduced to $0.40 and accordingly, a discount for the additional beneficial conversion feature of $1,207,000 was recorded. The Company paid off $63,600 and reduced the unamortized discount of $52,000 as interest expense during the quarter ended February 29, 2004. In addition, the Company recorded an interest expense for the amortization of discounts in the amount of $37,000 during the quarter ended February 29, 2004. During the quarter ended May 31, 2004, the Company paid off an additional $360,000 and reduced the unamortized discount of $265,000 as interest expense. In addition, the Company recorded an interest expense for the amortization of discounts in the amount of $73,000 during the quarter ended May 31, 2004. As of May 31, 2004, outstanding loan balance approximated $1,676,000 and unamortized discounts for beneficial conversion feature and warrants totaled $1,330,000.

ADDITIONAL TERM NOTE

On March 30, 2004, we entered into an additional $750,000 Convertible Term Note pursuant to which we issued and sold to Laurus (i) a Convertible Term Note ( "Convertible Term Note #2",) in the principal amount of $750,000 and (ii) a warrant ("Term Note #2 Warrant") to purchase up to 750,000 shares of Common Stock having an exercise price of $0.50 per share. The Term Note #2 Warrant expires on March 30, 2011 and has a cashless exercise provision. The first payment on the Notes is due July 1, 2004. This term note has a maturity date of March 30, 2007.

The fair value of the these warrants totaling $133,100 was computed using the Black-Scholes model under the following assumptions: (1) expected life of 3 years; (2) volatility of 85%, (3) risk free interest of 4.17% and dividend rate of $0%. The term loan is payable in monthly payments. The Company can elect to pay all or a portion of the monthly amount in shares of common stock at a fixed conversion price of $0.40. If the closing price of the Company's stock for any of the 10 trading days preceding the payment is less than 110% of the fixed conversion price, the Company shall pay cash instead. In addition, since this debt is convertible into equity at the option of the note holder at beneficial conversion rates, an embedded beneficial conversion feature was recorded as a debt

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discount and will be amortized using the effective interest rate method over the life of the debt in accordance with Emerging Issues Task Force No. 00-27, "Application of Issue No. 98-5 to Certain Convertible Instruments.". During the quarter ended May 31, 2004, total cost of beneficial conversion feature of $245,600 and the relative fair value of the warrants of $133,100 were recorded as discounts of the term loan. During the quarter ended May 31, 2004, the Company recorded an interest expense for the amortization of discounts in the amount of $6,800. As of May 31, 2004, outstanding loan balance approximated $750,000 and unamortized discounts for beneficial conversion feature and warrants totaled $371,800.

The Company is obligated, pursuant to a Registration Rights Agreement between the Company and Laurus dated March 30, 2004 to file a registration statement with the Securities and Exchange Commission to register the shares of Common Stock issuable upon conversion of the additional term loan of $750,000 and the 750,000 warrants on or before April 30, 2004 or, within 30 days following the issuance thereof, and to use our best efforts to cause such registration statement to become effective within 90 days following the relevant filing date. To the extent, subject to certain conditions set forth in the Registration Rights Agreements, either (i) we fail to make such initial filing, (ii) the relevant registration statement is not declared effective by the Commission within 90 days of such filing, (iii) such registration statement ceases to be effective as to the securities to have been covered thereby for a period of 20 consecutive trading days or 30 days total in any 365 day period commencing on the effective date of such registration statement, or (iv) our Common Stock ceases to be traded on any trading market for a period of three consecutive trading days which has not been cured within 30 days of notice thereof, then we shall be liable to pay to Laurus, as liquidated damages, for each 30-day period during which the relevant default remains uncured 1.0% of the original amount of the additional term loan. Pursuant to EITF 00-19, "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock", the relative fair values of the warrants of approximately $133,100 have been recorded as a short-term liability as of March 30, 2004 as the Company has not yet filed the registration statement. In addition, the Company is required to report a value of the warrant as a fair value and record the fluctuation to the fair value of the warrant liability to current operations. During the period from March 30, 2004 to May 31, 2004, the change of the relative fair value of the warrants is immaterial to the accompanying condensed consolidated financial statements.

GENERAL TERMS TO LAURUS NOTES

Each Note may be prepaid by us in cash by paying to the holder 115% of the principal and related accrued and unpaid interest thereon being prepaid. In addition, the Convertible Term Note may be prepaid at our option in shares of Common Stock if and to the extent the average closing price of the Common Stock is greater than 110% of the Fixed Conversion Price for at least 5 consecutive trading days, subject to certain limitations.

Our obligations under the Security Agreement, SPA and the Notes are secured by a pledge by us of shares representing 100% of the share capital of our wholly-owned subsidiaries Titan PCB East, Inc. and Titan PCB West, Inc. (collectively, the "Subsidiaries"), a guaranty of such obligations by each of the Subsidiaries, and the grant of a security interest by each of the Subsidiaries in their respective assets.

Laurus shall not be entitled to be issued shares of Common Stock in repayment of any portion of the Notes or upon exercise of either of the Warrants if and to the extent such issuance would result in Laurus and its affiliates beneficially owning more than 4.99% of the issued and outstanding Common Stock upon such issuance, unless Laurus shall have provided at least 75 days' prior written notice to us of its revocation of such restriction.

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Note 5. Going Concern:

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Through May 31, 2004, the Company has not been able to generate sufficient sales from its operations to cover its costs and operating expenses. Although the Company has been able to issue its common stock through private placements to raise capital in order to fund its operations, it is not known whether the Company will be able to continue this practice, or be able to obtain other types of financing or if its sales will increase significantly to be able to meet its cash operating expenses. This, in turn, raises substantial doubt about the Company's ability to continue as a going concern. Management anticipates sales to grow as a result of additional products offered to its customers after the move to its new facility. Management believes that the private equity financing and new product offerings will enable the Company to generate positive operating cash flows and continue its operations. However, no assurances can be given as to the success of these plans. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

*Note 6. Proforma Loss under FASB 148:* The Company uses the intrinsic value method (APB Opinion 25) to account for its stock options granted to officers, directors, and employees. Under this method, compensation expense is recorded over the vesting period based on the difference between the exercise price and quoted market price on the date the options are granted. Since, the Company has granted all its stock options at or above the quoted market on the date of measurement date, no compensation expense related to grants of stock option to employees has been recorded. Had the Company chosen the fair value method of accounting for transactions involving stock option issuance to employees pursuant to SFAS No. 123, the Company would have recorded $33 and $9 in compensation costs for the three months ended May 31, 2004 and 2003, respectively, and $100 and $39 for nine months ended May 31, 2004 and 2003, respectively, as presented by the proforma loss statement, as follows:
	Three Months Ended May 31,
	2004	2003
Net loss: As reported Compensation recognized under APB 25 Compensation recognized under SFAS 123 Proforma net loss Net loss per common share - basic and diluted: As reported Proforma	$ (1,550) 12 (33) $ (1,571) $ (0.08) $ (0.08)	$ (1,386) - (9) $ (1,395) $ (0.10) $ (0.10)

	Nine Months Ended May 31,
	2004	2003
Net loss: As reported Compensation recognized under APB 25 Compensation recognized under SFAS 123 Proforma net loss Net loss per common share - basic and diluted: As reported Proforma	$ (5,550) 40 (100) $ (5,610) $ (0.32) $ (0.33)	$ (3,567) 35 (39) $ (3,571) $ (0.30) $ (0.31)
12 -----------------------------------------------------------------------------------------------------------------

Note 7. Gain on Extinguishment of Debt:

During the nine months ended May 31, 2004, the Company settled an unpaid capital lease obligation with a gain of approximately $349,000 which is included in miscellaneous income in the accompanying condensed consolidated statements of operations.

Note 8. Litigation:

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. In September 2002, a former employee filed a complaint against the Company alleging wrongful termination. During the quarter ended November 30, 2003, we settled this case for $85,000 and during the quarter ended February 29, 2004, we have completely paid this amount. However, litigation is subject to inherent uncertainties, and an adverse result in this or other matters could arise from time to time that may harm Titan's business, financial condition and results of operations.

Note 9. Settlement Agreements:

During the quarter ended February 29, 2004, the Company reached informal agreements with both our immediate past President and Chief Executive Officer to cancel their existing warrants, each consisting of the right to purchase from our largest shareholder 1,000,000 shares at $0.50 each in exchange for 350,000 shares of common stock each to be issued by our largest shareholder. This has further been amended and they were both paid $60,000 each in lieu of common stock from our largest shareholder. The value of this new agreement is measured based on the sum of (1) the remaining unamortized fair value of the warrants; (2) the amount by which (a) the fair value of the new equity instrument measured at the modification date is greater than (b) the fair value of the old equity instrument immediately before its terms were modified. Since the $120,000 payment and an additional amount to be paid by the Company which has yet to be determined (which at most will be $100,000) is far less than the fair value of the warrants of $1,537,600, the Company expensed the remaining unamortized value of the warrants in the amount of $933,000 during the quarter ended February 29, 2004. As of June 22, 2004, the Company is in negotiations with these two individuals for a final settlement.

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Note 10. Other Convertible Notes Payable:

In the three months ended May 31, 2004, the Company issued convertible notes to our major stockholder and other parties to settle certain outstanding obligations of the Company and for future cash infusions into the Company. These notes totaling $1.6 million were issued as convertible notes with a conversion price of $0.32 per share and carry an interest rate of 10% per annum. The Company received a waiver from its lender of the lines of credit and term loans for such issuance. The Company's largest shareholder converted the outstanding notes balance of $1,450,000 into 4,531,250 shares effectiveMay 31, 2004. The Company has recorded a beneficial conversion feature on these notes of $1,182,000 and have expensed the full amount upon the conversion during the quarter ended May 31, 2004.

Note 11. Stock Option Repricing:

During the nine month period ended May 31, 2004, the Company re-priced approximately 520,000 stock options from $1.50 to $0.79 under the Company's 1992 Stock Option Plan. In accordance with FASB Interpretation, FIN 44, Accounting for Certain Transactions Involving Stock Transactions, these options have subsequently been accounted for as variable from May 3, 2004 through the nine month period ended May 31, 2004. Since the stock price has been much less than the re-priced option price, the Company has not recorded any compensation expense in its financial statements for the nine month period ended May 31, 2004.

Note 12. Subsequent Event:

On June 29, 2004, Laurus Master Fund Ltd. advanced the Company an additional $1,500,000. This advance was in the form of an amendment to the $750,000 term note advanced on March 30, 2004. This note is convertible at $0.40 per share, with detached warrants to purchase up to 1,800,000 shares of the Company's common stock at a price of $0.50 per share. The Company is obligated to make monthly repayments or settle with issuance of common stock beginning on September 1, 2004. This note matures on March 30, 2007, and is mainly to be used for future capital expenditures. As part of this advance the Company must file a registration statement by August 15, 2004.

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

This Management's Discussion and Analysis of Financial Condition and Results of Operations and Plan of Operations and other portions of this report contain forward-looking information that involve risks and uncertainties. Our actual results could differ materially from those anticipated by the forward-looking information. This Management's Discussion and Analysis of Financial Condition and Results of Operations and Plan of Operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this report.

Overview

A detailed overview of our business and history is set forth in our Annual Report on Form 10-KSB for the year ended August 31, 2003, to which overview we make reference.

Summary Corporate Background

We are a manufacturer of time sensitive, high tech, prototype and pre-production PCBs. We provide time-critical, PCB manufacturing services to original equipment manufacturers and electronic manufacturing services providers. The Company's prototype PCBs serve as the foundation in many electronic products used in telecommunications, medical devices, automotive, military applications, aviation components, networking and computer equipment. The Company's focus is on niche PCBs consisting of complex, high layer count, fine-lines and high-performance materials with capabilities to deliver in 24 hours, at premium pricing, as compared to standard 10 day lead time.

The Company's wholly-owned subsidiary, Titan PCB West ("Titan"), was incorporated on March 27, 2001. On August 30, 2002, Titan was acquired by us through the merger of Titan EMS Acquisition Corp. with and into Titan. In connection with the Merger, the stockholders of Titan received shares of our common stock. For financial reporting purposes, the Merger has been treated as a reverse-merger, where Titan was the acquirer. Because the Merger is treated as a purchase of Ventures-National Incorporated, the historical financial statements of Titan became our historical financial statements after the Merger.

On August 6, 2002, Titan acquired all of the non-real estate assets and assumed all of the non-term loan liabilities of SVPC in exchange for the issuance to SVPC of 800,000 shares of Titan common stock, pursuant to the terms and conditions of a Contribution Agreement and Assignment and Assumption of Liabilities dated August 6, 2002.

Beginning in 2001, SVPC began acquiring cutting edge technology equipment, processes, customer lists and orders from competitors unable to remain in business principally due to a severe market downturn and excessive levels of indebtedness. On July 16, 2001, SVPC acquired all of the assets of SVPC Circuit Systems, Inc. and certain assets of CSI pursuant to a combined approved bankruptcy court sale. After these acquisitions, Titan acquired certain system integration division assets out of bankruptcy from creditors of Paragon Electronic Systems, Inc.

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On August 6, 2002, Titan acquired certain intangible assets contributed by Louis George, a former executive officer and director, in exchange for 50,000 shares of Titan common stock valued at $1.50 per share, pursuant to the terms and conditions of a Contribution Agreement and Assignment and Assumption of Liabilities dated August 6, 2002.

Effective August 30, 2002, through the Company's wholly-owned subsidiary Titan EMS Acquisition Corp. ("Acquisition Co"), a Delaware corporation, we acquired all of the capital stock of Titan through an exchange of the Company's common stock pursuant to an Agreement and Plan of Merger. In connection with the Merger, the Company's fiscal year was also changed from June 30 in each year to August 31 in each year.

On February 27, 2003, through the Company's wholly-owned subsidiary Titan PCB East, we acquired certain assets of Eastern Manufacturing Corporation, for approximately $500,000 in a foreclosure sale from Eastern Manufacturing Corporation's secured lender Eastern Bank. The results from Eastern Manufacturing Corporation's operations were reflected in our financial statements from the date of acquisition. No goodwill resulted from this acquisition.

Effective March 5, 2003, we purchased shares of common stock of Coesen representing 33.3% of its issued and outstanding shares of common stock from Mr. Howard Doane, the principal stockholder and an officer and director of Eastern Manufacturing Corporation, in exchange for 30,000 shares of common stock and $5,000 in cash.

Management has devoted substantial time since the Merger to the integration and reorganization of the Company's various business units. The Company anticipates that this integration and reorganization of our business will continue to require substantial management resources for much of the fiscal year ending August 31, 2004 and that, as a result, we may not realize the anticipated economies of scale and scope, as well as the attendant improvements in our operating results, until possibly the next fiscal year.

Plan of Operations

The Company's business strategy is:

to target potential customers and industries needing prototype boards with required turnaround times of between 24 hours and the industry standard 10-days as well as preproduction needs requiring numerous types of materials;

to aggressively market specialty manufacturing services for time sensitive, high-tech prototype and pre-production PCBs to the high technology industry and cater to customers who need time sensitive delivery of low to medium production runs with high quality and superior design and customer service interface whether for production or research and development;

to expand our services to include flexible circuits and rigid-flex combinations in order to diversify sources of sales;

to expand our sales through the marketing and manufacture of rigid-flex PCBs using the patented HVR Flex process available;

to acquire and integrate strategic assets of companies producing time sensitive, high tech prototype and pre-production PCBs with other unique customers, technology or processes in order to accelerate entry into our target market; and

to acquire manufacturing facilities that have military certification and achieve military certification for our current facilities.

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The Company plans to add and is in the process of adding additional independent sales representatives to extend our selling capacity. Commission costs therefore will fluctuate depending on the origin of sales orders with our internal sales team or our independent sales representative organization. We also plan to increase our marketing expenditures. There are no assurances that additional independent sales representatives or increased marketing expenditures will increase our sales.

Accounting Principles; Anticipated Effect of Growth

Below we describe a number of basic accounting principles, which we employ in determining our recognition of sales and expenses, as well as a brief description of the effects that we believe that our anticipated growth will have on our sales and expenses in the future.

Sales

We recognize sales upon shipment to our customers. We record net sales as our gross sales less an allowance for returns. At May 31, 2004, we had approximately 360 customers. We provide our customers a limited right of returns for defective PCBs and record an allowance against gross sales for estimated returns at the time of sale based on our historical results. Because our customers quickly test the PCBs we manufacture for them, the majority of returns for defects occur within the first 15 days following shipment. At May 31, 2004, we provided an allowance against gross sales for returns of $10,000. Actual returns may differ materially from our estimates, and revisions to the allowances may be required from time to time.

We expect the number and complexity of PCBs we sell to fluctuate with the changes in demand from our customers and, the prices we charge our customers to fluctuate as a result of intense competition in the PCB industry and the current economic situation and its impact on the high technology market. Until industry conditions improve and demand increases, we expect that decreased average pricing will continue to negatively affect our sales.

Future demand and product pricing will depend on many factors including product mix, levels of advanced technology, capacity utilization, competitive pressure in the PCB industry, and economic conditions affecting the markets we serve and the electronics industry in general. The current uncertainty regarding the level and timing of an economic recovery in our product markets and volatility in our customer forecasts continue to make our forecasting less reliable than in prior periods.

In each case, our plan of operations anticipates that our internal growth, as well as acquisitions of competitors, shall materially contribute to our ability to increase our sales as described above.

Through the time of our acquisition of EMC, the Company's primary source of sales were from rigid bare-board manufacturing that provides time sensitive, high technology, and superior quality PCB's to the electronics industry at a competitive price. In the future, Titan expects to receive sales from customers who need rigid-flex and flex bare-board manufacturing that provides time sensitive, high technology, and superior quality PCBs. In addition, after an initial inspection and certification period, Titan intends to expand its sales focus to the military market place, which includes those vendors supplying the U.S. military with products in our target market.

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Cost of Sales

Cost of sales consists of materials, labor, outside services and overhead expenses incurred in the manufacture and testing of our products. Many factors affect our gross margin, including, but not limited to, capacity utilization, production volume and yield. We do not participate in any long-term supply contracts and we believe there are a number of high quality suppliers for the raw materials we use. Our cost of goods, as a percentage of sales, varies depending on the complexity of the PCBs we manufacture in any given period.

Based upon our plan of operations, we anticipate that our cost of sales will increase as our sales increase, but that cost of sales as a percentage of net sales shall generally decrease as our sales increase. We believe that the amount of the decrease of this percentage over the next several fiscal periods will be dependent in large part upon the source of the increase in sales. For example, an increase in our penetration in the existing market for our goods and services will permit us to increase sales at a low cost in part by causing us to utilize a greater portion of our existing manufacturing capacity, an expense which we already incur. On the other hand, an increase in our sales attributable to our offering a greater portfolio of products and services may result in less of a decrease in such percentage as such activities may initially be less efficient than our existing operations.

Included in cost of sales is overhead which is relatively fixed. Materials and labor are semi-variable and are influenced by the complexity of orders as well as the quantity of orders. As our business is continually changing with regard to the type of product produced, we plan to implement broader use of production systems to control the overtime in production as well as the use of materials in production. We anticipate that these systems will assist in the pricing of its products with the objective to be more competitive and profitable in our target market.

We intend to continue to expand and upgrade our production capability as well as our production systems and the financial systems interface in order to better manage material, labor and overhead costs.

Operating Expenses

Our operating expenses for the three and nine month periods ended May 31, 2004 and 2003 are comprised of costs for sales and marketing, general and administrative, non-recurring costs and costs related to mergers and acquisitions, as well as the cost of developing operating facilities.

Sales and marketing expenses consist primarily of salaries and commissions paid to our internal sales team, commissions paid to independent sales representatives and costs associated with advertising and marketing activities. We expect our selling and marketing expenses to fluctuate as a percentage of sales as we add new personnel, develop new independent sales representative channels and advertise our products.

We intend to expand our direct, indirect and distributed sales plan in order to best utilize our newly acquired rigid-flex manufacturing capability as a result of its acquisition of the assets from Eastern Manufacturing Corporation as well as our geographic expansion.

General and administrative expenses include all corporate and administrative functions that serve to support our current and future operations and provide an infrastructure to support future growth. Major items in this category include management and staff salaries and benefits, travel, network administration and systems/data processing, training, rent/leases and professional services. We intend to slightly expand our customer and sales support operation in order to support the increased complexity and volume of our PCB business and our anticipated use of indirect sales. We do not expect a material increase in sales and marketing expense that is not consistent with an increase in sales.

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Interest expense, including finance charges, relates primarily to an accounts receivable and inventory lines of credit with two lending institutions, Alco and Equinox, convertible lines of credit and term loans with Laurus, and amortization of discounts on convertible debt. We expect interest expense to fluctuate as a percentage of sales based on the timing of borrowings under our lines of credit.

Results of Operations

The following table sets forth income statement data for the three and nine month periods ended May 31, 2004 and 2003 and should be read in conjunction with our consolidated financial statements and the related notes appearing elsewhere in this report.


	Three Months Ended		Nine Months Ended
	05/31/04	05/31/03	05/31/04	05/31/03
Net sales Cost of sales Gross profit Operating expenses: Sales and marketing General and administrative Total operating expenses Operating income/(loss) Interest expense Miscellaneous Net loss	100.0% 81.1 18.9 7.6 7.7 15.3 3.6 (36.4) 0.0 (32.8)	100.0% 89.8 10.2 11.3 35.7 47.0 (36.8) (5.6) 0.0 (42.4)	100.0% 87.3 12.7 8.8 29.9 38.7 (26.0) (22.0) 1.7 (46.3)	100.0% 92.4 7.6 12.1 39.5 51.6 (44.0) (3.9) 1.1 (46.8)

Three Months Ended May 31, 2004 Compared to the Three Months Ended May 31, 2003.

Net Sales

Net sales increased by $1,456,000 or 44.5% from $3,271,000 in the three months ended May 31, 2003 to $4,727,000 in the three months ended May 31, 2004. This increase resulted primarily from the additional sales achieved from our ability to produce quick turn circuit boards in our West operation. The West operations increased their sales by $1,111,000 or 60.7% while the East operations increased their sales $345,000 or 23.9% while increasing customer base. The Company expects to continue this year over year trend as we increase our customer satisfaction index and become one of the few shops qualified under the new military P31032 specification. The Company was notified on June 17, 2004 that it has received this qualification.

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Cost of Sales

Cost of sales increased $895,000, or 30.5%, from $2,937,000 in the three months ended May 31, 2003 to $3,832,000 in the three months ended May 31, 2004. As a percentage of sales, these costs decreased from 89.8% in the three months ended May 31, 2003 to 81.1% in the three months ended May 31, 2004. The decrease in cost of sales % resulted from a 1.6% greater direct margin received from products sold as well as the 44.5% increase in volume. This decrease as a percent of sales is expected to favorably increase as there are a number of fixed costs that will not adjust at the same rate as the projected increase in sales.

Gross Profit

Gross profit increased by $561,000 or 168.0%, from $334,000 in the three months ended May 31, 2003 to $895,000 in the three months ended May 31, 2004. The increase in gross profit resulted primarily from the higher margin products being shipped from the West. In the West, most of our products are quick turn (3 - 5 business day turnaround) and as such normally carry higher margins. The material costs in these products decreased from 27.2% in the three months ended May 31, 2003 to 22.7% in the three months ended May 31, 2004 and the direct labor costs also decreased from 23.3% in the three months ended May 31, 2003 to 22.9% in the three months ended May 31, 2004. The Company also experienced a disproportional increase in fixed overhead costs, although they increased $258,000, as a percentage of sales these costs decreased from 40.5% of sales in the quarter ended May 31, 2003 to 33.5% of sales in the quarter ended May 31, 2004.

Operating Expenses

Sales and marketing expenses remained in line with the prior year slightly decreasing from $369,000 in the three months ended May 31, 2003 to $361,000 in the three months ended May 31, 2004. As a percentage of sales, however, the Company experienced a dramatic decrease from 11.3% of sales in the quarter ended May 31, 2003 to 7.6% of sales in the quarter ended May 31, 2004.

General and administrative expenses decreased by $804,000 or 68.8%, from $1,168,000 in the three months ended May 31, 2003 to $364,000 in the three months ended May 31, 2004. . The decrease was due in part to the lower amortization of professional fees issued as stock in the prior fiscal year. Additional cost also incurred during the three months ended May 31, 2003 due to high turnover of the senior management team, which became stabilized during the three months ended May 31, 2004.

Interest Expense

Interest expense increased by $1,536,000, or 830.3%, from interest expense of $185,000 in the three months ended May 31, 2003 to $1,721,000 in the three months ended May 31, 2004. As a percentage of sales, interest expense increased from 5.6% in the three months ended May 31, 2003 to 36.4% in the three months ended May 31, 2004. In the three months ended May 31, 2004, interest expense relates primarily to interest expense on the convertible notes the Company issued to our largest shareholder and others as well as the Laurus transaction with the associated amortization of the related warrants and beneficial conversion features of the Laurus funding.

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Miscellaneous

Miscellaneous income remained relatively constant on a year over year basis with no major change in the components.

Nine Months Ended May 31, 2004 Compared to the Nine Months Ended May 31, 2003.

Net Sales

Net sales increased by $4,361,000 or 57.3% from $7,615,000 in the nine months ended May 31, 2003 to $11,976,000 in the nine months ended May 31, 2004. This increase resulted primarily from the sales achieved from our acquisition of Eastern Manufacturing Corporation ("EMC"), which occurred in February 2003. Due to the timing of this acquisition the sales during this time period is non-comparable. On a comparable basis the Company's sales increased $1,505,000 or 24.4% during the nine month period ended May 31, 2004 as compared to the nine month period ended May 31, 2003. This increase is mainly due to an increase in customers as we aggressively seek an enhanced customer base.

Cost of Sales

Cost of sales increased $3,414,000, or 48.5%, from $7,037,000 in the nine months ended May 31 2003 to $10,451,000 in the nine months ended May 31, 2004. As a percentage of sales, these costs decreased from 92.4% of sales in the nine months ended May 31, 2003 to 87.3% of sales in the nine months ended May 31, 2004. The decrease in cost of sales % resulted from a greater direct margin received from products sold, partially offset from higher overhead costs associated with the EMC acquisition mentioned above. This decrease as a percent of sales is expected to favorably increase as there are a number of fixed costs that will not adjust at the same rate as the projected increase in sales.

Gross Profit

Gross profit increased by $947,000 or 163.8%, from $578,000 in the nine months ended May 31, 2003 to $1,525,000 in the nine months ended May 31, 2004. The increase in gross profit resulted primarily from the higher margin products being shipped from the West. In the West, most of our products are quick turn (3 - 5 business day turnaround) and as such normally carry higher margins. The direct margin increased from 53.2% in the nine months ended May 31, 2003 to 54.8% in the nine months ended May 31, 2004. This increase in direct margin coupled with the 57.3% sales increase greatly contributed to the gross profit increase.

Operating Expenses

Sales and marketing expenses increased by $135,000, or 14.6%, from $922,000 in the nine months ended May 31, 2003 to $1,057,000 in the nine months ended May 31, 2004. As a percentage of sales, sales and marketing expense decreased from 12.1% of sales in the nine months ended May 31, 2003 to 8.8% of sales in the nine months ended May 31, 2004. The dollar increase was due to the addition of sales personnel in our West division as well as additional sales personnel acquired with the purchase of EMC.

General and administrative expenses increased by $568,000 or 18.9%, from $3,011,000 in the nine months ended May 31, 2003 to $3,579,000 in the nine months ended May 31, 2004. . This increase was due to the amortization of the unamortized portion of the fair value of warrants granted to the former Chief Executive Officer and President in the amount of $1,373,000 who departed during the quarter ended February 29, 2004. This was offset by the $541,000 lower amortization of stock issued for professional services in the nine months ended May 31, 2003. This was also offset by the $140,000 expense incurred in the nine months ended May 31, 2003 related to a lawsuit filed by a former employee. This lawsuit was settled for $85,000 in the nine months ended May 31, 2004.

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Interest Expense

Interest expense increased by $2,343,000, or 783.6%, from interest expense of $299,000 in the nine months ended May 31, 2003 to $2,642,000 in the nine months ended May 31, 2004. As a percentage of sales, interest expense increased from 3.9% of sales in the nine months ended May 31, 2003 to 22.1% of sales in the nine months ended May 31, 2004. In the nine months ended May 31, 2004, interest expense related primarily to interest expense of $540,000 associated with a loan from a shareholder on extremely high interest and related financing cost which was retired as part of the Laurus transaction, the expense of $1,759,000 related to the beneficial conversion costs and warrant amortization of the convertible debt issued during the nine months ended May 31, 2004.

Miscellaneous

Miscellaneous income increased by $116,000 from $87,000 in the nine months ended May 31, 2003 to $203,000 in the nine months ended May 31, 2004. In the nine months ended May 31, 2004, the Company recorded a gain on settlement of an existing capitalized lease obligation offset by penalties incurred in the early retirement of existing debt when the Company entered into the favorable Laurus transaction.

Liquidity and Capital Resources

Our principal sources of liquidity have been cash provided by a private placement, an infusion of capital from our largest shareholder, and borrowings under our new agreement with Laurus Funds described below. Our principal uses of cash have been for operations, to meet debt service requirements, and to finance capital expenditures. We anticipate these uses will continue to be our principal uses of cash in the future.

We will require additional financing in order to implement our business plan. We currently anticipate capital expenditures of at least $1.3 million during the next 12 months. If the anticipated cash generated by our operations are insufficient to fund requirements and losses, we will need to obtain additional funds through third party financing in the form of equity, debt or bank financing. Particularly in light of our limited operating history and losses incurred, there can be no assurance that we will be able to obtain the necessary additional capital on a timely basis or on acceptable terms, if at all. In any of such events, our business, prospects, financial condition, and results of operations would be materially and adversely affected. As a result of any such financing, the holders of our common stock may experience substantial dilution. In addition, as our results may be negatively impacted and thus delayed as a result of political and economic factors beyond our control, including the potential war in the Middle East and its impact on the high technology market and the economy in general, our capital requirements may increase.

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The following factors, among others, could cause actual results to differ from those indicated in the forward-looking statements included in this Form 10Q-SB: pricing pressures in the industry; the loss of any of our major customers; a continued downturn in the economy in general or in the technology sector; a further decrease in demand for electronic products or continued weak demand for these products; our ability to attract new customers; our ability to reduce costs, including those associated with our restructuring plan; an increase in competition in the market for electronic interconnect solutions; and the ability of some of our new customers to obtain financing. These factors or additional risks and uncertainties not known to us or that we currently deem immaterial may impair business operations and may cause our actual results to differ materially from any forward-looking statement.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of this report to conform them to actual results or to make changes in our expectations.

In the nine months ended May 31, 2004, net cash used by operations was $3,663,000 while in the nine months ended May 31, 2003 cash used in operating activities was $2,033,000, an increase of $1,630,000. This increase was primarily the result of a pay down of accounts payable and accrued liabilities of $755,000 for the nine months ended May 31, 2004 as compared to an increase in similar items of $909,000 in the nine months ended May 31, 2003. In addition, the Company's accounts receivable increased by $1,682,000 during the nine months ended May 31, 2004 reflecting the increased sales volume the Company is experiencing compared to increase of $695,000 during the nine months ended May 31, 2003.

In the nine months ended May 31, 2004, we utilized $228,000 for the purchase of fixed assets compared to $427,000 used for the purchase of fixed assets in the nine months ended May 31, 2003, a decrease of $199,000, or 46.6%. As we achieve greater positive operating cash flow, we expect our spending on capital expenditures to increase during the fourth quarter of this fiscal year.

As of May 31, 2004, we raised a total of $742,000 from certain private investors which we received $75,000 in the quarter ended August 31, 2003 and $667,000 in the nine months ended May 31, 2004. We have also received $751,000 was our largest shareholder in the nine months ended May 31, 2004 which we have utilized to pay down our outstanding accounts payable and accrued liabilities as well as to help finance the Company's expanded operations.

�� On November 20, 2003, we entered into a Security Agreement (the "Security Agreement") with Laurus Master Fund, Ltd. ("Laurus"), pursuant to which we may borrow from Laurus such amount as shall equal 85% of our eligible accounts receivable and inventory as prescribed by the terms of the Security Agreement up to a maximum of $4,000,000. Pursuant to the Security Agreement, we issued to Laurus a (i) Secured Revolving Convertible Note (the "Revolving Note") in the principal amount of up to $2,500,000 and (ii) Secured Convertible Minimum Borrowing Note (the "Initial Minimum Borrowing Note" and together with any other Minimum Borrowing Notes issued under the Security Agreement, the "Minimum Borrowing Notes") in the original principal amount of $1,500,000. Additional Minimum Borrowing Notes shall be issued as and when the Company is eligible and elects to make additional borrowings under the Revolving Note. As of May 31, 2004, we had borrowed an aggregate of approximately $2.7 million under the Security Agreement.

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In connection with the issuance of the Revolving Note and the Initial Minimum Borrowing Note pursuant to the Security Agreement, we issued to Laurus a warrant (the "First Warrant") to purchase up to 600,000 shares of our common stock, par value $0.001 per share ("Common Stock"), having an exercise price of $0.83 per share for the first 250,000 shares of Common Stock acquired under such warrant, $0.90 per share for the next 200,000 shares of Common Stock acquired thereunder, and a price of $0.97 per share for any additional shares of Common Stock acquired thereunder. The First Warrant expires on November 20, 2010 and has a cashless exercise provision.

Also on November 20, 2003, we entered into a Securities Purchase Agreement (the "SPA") pursuant to which we issued and sold to Laurus (i) a Convertible Term Note (the "Convertible Term Note", together with the Revolving Note, the Minimum Borrowing Notes, the "Notes") in the principal amount of $2,100,000 and (ii) a warrant (the "Second Warrant", and together with the First Warrant, the "Warrants") to purchase up to 350,000 shares of Common Stock having an exercise price of $0.83 per share for the first 200,000 shares of Common Stock acquired thereunder, $0.90 per share for the next 100,000 shares of Common Stock acquired thereunder, and $0.97 per share for any additional shares of Common Stock acquired thereunder. The Second Warrant expires on November 20, 2010 and has a cashless exercise provision.

Also on March 30, 2004, we entered into additional financing with Laurus pursuant to which we issued and sold to Laurus (i) a Convertible Term Note (the "Convertible Term Note #2", together with the Revolving Note, the Minimum Borrowing Notes and Convertible Term Note, the "Notes") in the principal amount of $750,000 and (ii) a warrant (the "Third Warrant", and together with the First Warrant and Second Warrant, the "Warrants") to purchase up to 750,000 shares of Common Stock having an exercise price of $0.50 per share of Common Stock acquired thereunder. The Third Warrant expires on March 30, 2011 and has a cashless exercise provision. As of May 31, 2004, we had an outstanding payable of approximately $2.4 million related to this convertible term note.

Each of the Notes accrues interest at a rate per annum equal to the greater of (i) the prime rate published in The Wall Street Journal plus three (3%) percent and (ii) seven (7%) percent, subject to possible downward adjustment if (x) we shall have registered the shares of our Common Stock underlying the conversion of such Note and the related Warrant, and (y) the volume weighted average price of the Common Stock as reported by Bloomberg, L.P. on the principal market for any of the trading days immediately preceding an interest payment date under such Note exceeds the then applicable Fixed Conversion Price by twenty five (25%) percent, in which event the interest rate for the succeeding calendar month shall automatically be reduced by twenty five (25%) percent. The first payment under the Notes is due 90 days from the issue date thereof. Each of the Notes has a maturity date of November 20, 2006.

The outstanding principal and accrued interest under each Notes is convertible, at the holder's option, into shares of our Common Stock at a conversion price equal to $0.40 per share (the "Fixed Conversion Price"), subject to certain adjustments upon reclassifications, stock splits, combinations, stock dividends and similar events as well as downward adjustment upon an issuance of shares of Common Stock by the Company at a price per share below the then current Fixed Conversion Price, upon which issuance the Fixed Conversion Price shall be adjusted to equal such lower issue price.

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Our obligations under the Security Agreement, SPA and the Notes are secured by a pledge by us of shares representing 100% of the share capital of our wholly-owned subsidiaries Titan PCB East, Inc. and Titan PCB West, Inc. (collectively, the "Subsidiaries"), a guaranty of such obligations by each of the Subsidiaries, and the grant of a security interest by each of the Subsidiaries in their respective assets.

As of May 31, 2004, we had borrowed a total of approximately $5.2 million from Laurus, of which approximately $3.0 million was used to repay outstanding indebtedness, $513,000 was used to pay transaction fees relating to the borrowing facility, approximately $814,000 was used to satisfy outstanding trade payables, $700,000 was utilized to finance the sales growth and the remainder has been utilized for current working capital purposes.

Our planned capacity expansions involve risks. We may encounter construction delays, equipment delays, labor shortages or disputes and production start-up problems that could prevent us from meeting our customers' delivery schedules. We expect to incur new fixed operating expenses associated with our expansion efforts, including increases in depreciation expenses and lease expenses. The current unfavorable economic conditions affecting major customers or the electronics industry in general may affect our ability to successfully utilize our additional manufacturing capacity in an effective manner. If our sales do not increase sufficiently to offset increased expenses, our operating results may be adversely affected.

Quantitative And Qualitative Disclosures About Market Risk

Our exposure to market risk for changes in interest rates relates primarily to the increase or decrease in the amount of interest income we can earn on our available funds for investment. We ensure the safety and preservation of our invested principal funds by limiting default risk, market risk and reinvestment risk. We mitigate default risk by investing in high quality, short-term securities. We do not believe that changes in interest rates will have a material effect on our liquidity, financial condition or results of operations.

Impact of Inflation

We believe that our results of operations are not dependent upon moderate changes in inflation rates as we expect we will be able to pass along component price increases to our customers.

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Seasonality

We have experienced sales fluctuations due to customer business shut downs over December holidays and the slow down of purchasing activities in the summer during peak vacation months.

Contractual Obligations

The following table presents the Company's contractual obligations as of May 31, 2004 for the remaining of this fiscal year as well as over the next five fiscal years. The Company does not have any contractual obligations that extend beyond five fiscal years:

		Payment by period
Contractual Obligations Employment agreements Short-term debt Long-term debt Revolving line of credit Operating leases Short-term agreements Total Contractual Obligations		Amount $ 527,500 135,000 2,463,677 2,719,771 2,664,519 5,775 $8,516,242		During current fiscal year $ 56,250 - 146,403 2,719,771 168,209 5,775 $ 3,096,408		1 - 3 years $ 435,000 135,000 2,317,274 - 1,873,946 - $ 4,761,220		4 - 5 years $ 36,250 - - - 622,364 - $ 658,614

ITEM 3. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures An evaluation was performed under the supervision and with the participation of our management, including the chief executive officer and the chief financial officer, of the effectiveness of the design and operation of our disclosure procedures. Based on management's evaluation as of as of the end of the period covered by this Annual Report, our principal executive officer and chief financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) were sufficiently effective to ensure that the information required to be disclosed by us in the reports that we file under the Exchange Act is gathered, analyzed and disclosed with adequate timeliness, accuracy and completeness.

Change in Internal Controls There were no significant changes in the Company's internal controls or in other factors that could significantly affect those controls since the most recent evaluation of such controls.

Critical Accounting Policies The U.S. Securities and Exchange Commission ("SEC") recently issued Financial Reporting Release No. 60, "CAUTIONARY ADVICE REGARDING DISCLOSURE ABOUT CRITICAL ACCOUNTING POLICIES" ("FRR 60"), suggesting companies provide additional disclosure and commentary on their most critical accounting policies. In FRR 60, the SEC defined the most critical accounting policies as the ones that are most important to the portrayal of a company's financial condition and operating results, and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, our most critical accounting policies include: inventory valuation, which affects our cost of sales and gross margin; and allowance for doubtful accounts, which affects the general and administrative expenses. The methods, estimates and judgments we use in applying these most critical accounting policies have a significant impact on the results we report in our consolidated financial statements.

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Inventory Valuation Our policy is to value inventories at the lower of cost or market on a part-by-part basis. This policy requires us to make estimates regarding the market value of our inventories, including an assessment of excess or obsolete inventories. We determine excess and obsolete inventories based on an estimate of the future demand for our products within a specified time horizon, generally 12 months. The estimates we use for demand are also used for near-term capacity planning and inventory purchasing and are consistent with our sales forecasts. If our demand forecast is greater than our actual demand we may be required to take additional excess inventory charges, which will decrease gross margin and net operating results in the future. In addition, as a result of the downturn in demand for our products, we have excess capacity in our manufacturing facilities. Currently, we are not capitalizing any inventory costs related to this excess capacity as the recoverability of such costs is not certain. The application of this policy adversely affects our gross margin.

Allowance for doubtful accounts We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. Our allowance for doubtful accounts is based on our assessment of the collectibility of specific customer accounts, the aging of accounts receivable, our history of bad debts, and the general condition of the industry. If a major customer's credit worthiness deteriorates, or our customers' actual defaults exceed our historical experience, our estimates could change and impact our reported results.

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PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 8 to the Company's Condensed Consolidated Financial Statements (above).

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

On March 30, 2004, we entered into a $750,000 Convertible Term Note pursuant to which we issued and sold to Laurus Master Fund LTD. (i) a Convertible Term Note ("Convertible Term Note #2"), in the principal amount of $750,000 and (ii) a warrant ("Term Note #2 Warrant") to purchase up to 750,000 shares of Common Stock having an exercise price of $0.50 per share. On June 29, 2004, this Convertible Term Note was restated and an additional $1,500,000 was sold to Laurus Master Fund, LTD. In connection with this amendment, we issued an additional warrant ("Term Note #2 Warrant #2") to purchase up to 1,800,000 shares of Common Stock having an exercise price of $0.50. The first payment of this amended Note is due September 1, 2004. This amended note has a maturity date of March 30, 2007.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

10.1 - Amendment No. 1 to Robert Ciri Separation Agreement

10.2 - Amendment No. 2 to Andrew Glashow Separation Agreement

10.3 - Form of 10% Convertible Notes issued

10.4 - Lease between HD Realty Trust and Titan PCB East, Inc. dated March 1, 2004

10.5 - Disbursement Letter regarding the disbursements of the $750,000 Convertible
Term Note advanced by Laurus Master Fund, Ltd. dated March 30, 2004

               10.6 - Funds Escrow Agreement between Laurus Master Fund, LTD and the company
                         dated March 30, 2004

               10.7 - Ventures National Incorporated parent Security Agreement dated March 30, 2004

10.8 - Registration Rights Agreement dated March 30, 2004

10.9 - Common Stock Purchase for 750,000 shares dated March 30, 2004

10.10 - Securities Purchase Agreement dated March 30, 2004

10.11 - Subsidiary Guaranty dated March 30, 2004

10.12 - Subsidiary Security Agreement dated March 30, 2004

10.13 - Convertible Term Note dated March 30, 2004

10.14 - Disbursement Letter regarding the disbursements of the $1,500,000 Convertible
Term Note advanced by Laurus Master Fund, LTD.

10.15 - Funds Escrow Agreement dated June 29, 2004

10.16 - Amendment No. 1 to Registration Rights Agreement dated June 29, 2004

10.17 - Amended and Restated Convertible Term Note dated June 29, 2004

10.18 - Common Stock Purchase for 1,800,000 shares dated June 29, 2004

31.1 - Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule
15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended

31.2 - Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d
14(a), promulgated under the Securities and Exchange Act of 1934, as amended

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

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

(b) Reports on Form 8-K

NONE

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S I G N A T U R E S

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized

Dated: July 7, 2004

VENTURES-NATIONAL INCORPORATED
(Registrant)

/s/ Kenneth Shirley
President, CEO, and Director
(Principal Executive Officer)

/s/ Daniel Guimond
Daniel Guimond
Chief Financial Officer
(Principal Financial Officer)

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CERTIFICATIONS

I, Kenneth Shirley, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of VENTURES-NATIONAL INCORPORATED

2. Based on my knowledge, this quarterly report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The small business issuer's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(d)) and internal control for financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the small business issuer and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

b) evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5. The small business issuer's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting

Date: July 7, 2004

                                                                    /s/ Kenneth Shirley .
                                                                    Kenneth Shirley
                                                                    Chairman of the Board, Chief
                                                                    Executive Officer, and Director
                                                                    (Principal Executive Officer)

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CERTIFICATIONS

I, Daniel Guimond, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of VENTURES-NATIONAL INCORPORATED

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting

Date: July 7, 2004

                                                                    /s/ Daniel Guimond .
                                                                    Daniel Guimond
                                                                    Chief Financial Officer
                                                                    (Principal Financial Officer)

Titan Global (TTGH) Inactive 10QSB2004 Q4 Quarterly report (small business)