Titan Global 10QSB 2006 Q4 Quarterly report (small business)

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)

x	Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended May 31, 2006

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 333-72230

TITAN GLOBAL HOLDINGS, INC.

(Name of Small Business Issuer in Its Charter)

Nevada		87-0433444
(State of Incorporation)		(IRS Employer Identification No.)

44358 Old Warm Springs Blvd.

Fremont, California 94538-6148

(Address of Principal Executive Offices)

(510) 824-1200

(Issuer's Telephone Number)

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x

No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o

No x

As of May 31, 2006, the Company had 44,586,052 shares of its par value $0.001 common stock issued and outstanding.

Transitional Small Business Disclosure Format (check one):

Yes o

No x

STATEMENT REGARDING THIS REPORT

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 Titan Global Holdings, Inc. 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.

TITAN GLOBAL HOLDINGS, INC.

TABLE OF CONTENTS

		Page

PART I. FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements		4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3. Controls and Procedures		29

PART II. OTHER INFORMATION
Item 1. Legal Proceedings		30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		30
Item 3. Defaults upon senior securities		30
Item 4. Submission of matters to a vote of security holders		31
Item 5. Other information		31
Item 6. Exhibits		31

Signatures		32

TITAN GLOBAL HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
MAY 31, 2006
(In thousands except common stock share data)

ASSETS
Current assets:
Cash and cash equivalents	$	2,161
Restricted cash		750
Accounts receivable-trade, net of reserves of $69		10,985
Inventory, net		2,344
Prepaid expenses and other current assets		360
Total current assets		16,600

Equipment and improvements, net		2,233
Definite-lived intangible assets, net		22,558
Goodwill		4,439
Capitalized loan fees, net		737
Other assets		378
Total assets	$	46,945

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current portion of long-term debt, net of discounts of $1,197	$	2,517
Convertible short term debt - related parties		100
Line of credit		8,368
Accounts payable - trade		18,285
Accrued liabilities		551
Derivative financial instruments		4,081
Total current liabilities		33,902

Redeemable convertible preferred stock – 9,000 shares authorized, issued and outstanding (preference in liquidation of $9,081)		9,081
Long-term debt		6,780
Long-term debt – related parties		4,823
Total liabilities		54,586
Commitments and contingencies
Stockholders’ deficit:
Common stock, $0.001 par value, 950,000,000 shares
authorized, 44,586,052 shares issued and outstanding		45
Additional paid-in capital		22,638
Accumulated deficit		(30,324	)
Total stockholders’ deficit		(7,641	)
Total liabilities and stockholders' deficit	$	46,945

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

TITAN GLOBAL HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)

	Three Months Ended						Nine Months Ended
				(as restated)						(as restated)
	05/31/06			05/31/05			05/31/06			05/31/05

Sales	$	28,869		$	4,571		$	82,552		$	12,430
Cost of sales
(excluding depreciation of $156, $153, $467, and $312, respectively)		26,053			4,096			75,563			11,586

Operating expenses:
Sales and marketing		439			347			1,323			1,150
General and administrative expenses		2,434			680			7,087			1,797
Income/(loss) from operations		(57	)		(552	)		(1,421	)		(2,103	)

Other income (expenses):
Interest expense		(2,980	)		(525	)		(6,494	)		(1,991	)
Derivative instrument loss		(1,206	)		(2,493	)		(261	)		(780	)
Other		39			-			65			2

Loss before income taxes		(4,204	)		(3,570	)		(8,111	)		(4,872	)
Provision for income taxes		-			-			-			-
Net loss		(4,204	)		(3,570	)		(8,111	)		(4,872	)

Preferred stock dividends		-			-			(68	)		-

Net loss attributable to common shareholders	$	(4,204	)	$	(3,570	)	$	(8,179	)	$	(4,872	)

Net loss per common share:
Basic and Diluted	$	(0.09	)	$	(0.14	)	$	(0.20	)	$	(0.20	)

Weighted average number
of common shares outstanding:
Basic and Diluted		44,586,052			24,749,305			40,473,424			24,745,093

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

TITAN GLOBAL HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands, except number of shares)

					Additional
	Common Stock				Paid-In			Accumulated			Deferred
	Shares		Amount		Capital			Deficit			Compensation			Total

Balances, 8/31/05 (as restated)		35,332,638	$	35	$	22,124		$	(22,663	)	$	(7	)	$	(511	)

Net loss									(8,111	)					(8,111	)
Reclass of dividends												7			7
Adjustment						14									14
Reclass of dividends						(82	)								(82	)
Issuance of Common Stock		9,253,414		10		582									592
Debt discount									450						450

Balances, 5/31/06		44,586,052	$	45	$	22,638		$	(30,324	)	$	-		$	(7,641	)

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

TITAN GLOBAL HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

	Nine Months Ended
				(as restated)
	05/31/06			05/31/05

Cash flows from operating activities:
Net loss	$	(8,111	)	$	(4,872	)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Non-cash interest paid in common stock		96			20
Unrealized (gain)/loss on derivative instruments		261			780
Amortization of deferred compensation		-			178
Amortization of debt discounts and bank fees		6,192			1,576
Depreciation and amortization		3,414			477
Changes in operating assets and liabilities:
Accounts receivable		(2,378	)		(112	)
Inventory		754			(90	)
Prepaid expenses and other current assets		(287	)		(4	)
Other assets		(1,237	)		(114	)
Accounts payable and accrued liabilities		2,496			1,076
Net cash provided by (used in) operating activities		1,200			(1,085	)

Cash flows from investing activities:
Capital expenditures		(434	)		(65	)
Net cash used in investing activities		(434	)		(65	)

Cash flows from financing activities:
Proceeds from (repayments on) line of credit, net		3,259			574
Proceeds from issuance of note payable to related parties		-			583
Payments of long-term debt		-			(320	)
Payments of short-term debt		(3,356	)		(185	)
Restricted cash		(750	)		-
Net cash provided by (used in) financing activities		(847	)		652

Net decrease in cash		(81	)		(498	)
Cash and cash equivalents at beginning of period		2,242			797
Cash and cash equivalents at end of period	$	2,161		$	299

Supplemental disclosure of cash flow information:
Interest paid	$	2,385		$	394
Income tax paid	$	-		$	-

Non cash activities:
Issuance of common stock to pay accrued interest	$	-		$	20
Conversion of note payable – related party and accrued interest to common stock	$	591		$	-

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

TITAN GLOBAL HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share amounts)

Note 1. Basis of Presentation and Nature of Business Operations

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by Titan Global Holdings, Inc. (formerly Ventures-National Incorporated), (“Titan”, “We” 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 as amended for the fiscal year ended August 31, 2005 as filed with the Securities and Exchange Commission on January 23, 2006. All significant intercompany accounts and transactions have been eliminated in preparation of the condensed consolidated financial statements.

The accompanying 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. As of May 31, 2006, Titan has a working capital deficit of $17,302. The Company continues to incur significant losses and has an accumulated deficit of $30,324 at May 31, 2006. The Company had a net operating loss of $57 for the quarter ended May 31, 2006, and its cumulative operating losses, high debt levels, defaults on debt covenants and negative working capital raise substantial doubt about its ability to continue as a going concern. Management plans to take the following steps that it believes will be sufficient to provide the Company with the ability to continue its operations: (1) raise additional capital through a combination of equity and non-equity financing as well as expanding the market for its products due to the additional certifications the Titan PCB facilities have received from the United States military; (2) use the proceeds of these transactions to expand its current product offerings to allow for additional processing services for its customers (3) the Company has become a mobile virtual network operator (“MVNO”) which allows it to expand its prepaid calling services into the wireless market (4) the Company is currently investigating financing alternatives to restructure its debt. Management anticipates revenues to grow as a result of additional customer offerings. Management believes that these financing options and new product offerings will enable the Company to generate positive operating cash flows and continue its operations; however no assurances of such outcomes can be given. The consolidated financial statements do not include any adjustments that might result from the outcome of the uncertainty.

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 technology concentric holding company operating in the prepaid communications services and prototype printed circuit board industries through our wholly owned subsidiaries, Oblio Telecom Inc., Titan PCB West, Inc. and Titan PCB East, Inc. Our prepaid communication service operations are headquartered in Richardson, Texas and our printed circuit board manufacturing facilities are located in Fremont, California and Amesbury, Massachusetts.

Our prepaid communication services division, Oblio Telecom, Inc. (“Oblio”), is engaged in the creation, marketing, and distribution of prepaid telecommunications products for the wire line and wireless markets and other related activities.

Oblio’s products are sold directly to wholesale distributors in 50 states and are available in approximately 60,000 retail locations nationwide. By strictly adhering to a “no hidden cost” philosophy, Oblio has earned a loyal customer base in an industry where uncertainty reigns and its TCC® registered trademark is a household name for hundreds of thousands of consumers nationwide.

Oblio’s prepaid international phone cards provide consumers with a competitive alternative to traditional post-paid long distance telecommunications services. Through agreements with large and medium sized carriers, Oblio offers products that target many of the country’s diverse 1st and 2nd generation Americans, providing end users with quality low cost international calling options. To leverage its brand recognition and loyal customer base, Oblio’s management team is preparing to enter additional prepaid market segments. Entering additional prepaid markets will optimize economies of scale and fuel organic growth. The most logical market to enter next is the prepaid wireless sector.

On August 19, 2005 Oblio announced its debut into the prepaid wireless sector when it became a Mobile Virtual Network Operator or "MVNO" through an agreement with a tier-one communications provider. As a MVNO, Oblio launched its new wireless product line, branded BRAVO Cellular, in September of 2005. This agreement positions Oblio in one of the fastest growing sectors in the telecommunications industry.

In our circuit board division, Titan PCB West, Inc. and Titan PCB East, Inc., we are a fabrication service provider 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. Our 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 14 day lead times at a competitive price.

Note 2. Acquisitions

The Company acquired Oblio Telecom, LLP on August 12, 2005.

Unaudited Pro Forma Summary Information

The following unaudited pro forma summary approximates the consolidated results of operations as if the Oblio Telecom, Inc. acquisition had occurred as of September 1, 2004. The pro forma financial information does not purport to be indicative of the results of operations that would have occurred had the transactions taken place at the beginning of the period presented or of future results of operations.

	For the three months ended, May 31, 2005		For the nine months ended, May 31, 2005

Revenue from services	$	32,908	$	108,162

Net income	$	944	$	2,870

Net income attributable to common stockholders	$	944	$	2,870

Net income per basic and diluted common share attributable to common stockholders	$	0.04	$	0.12

Weighted-average shares of basic and diluted common stock outstanding		24,749,305		24,745,093

Note 3. Loss Per Common Share

We compute net income or loss per share in accordance with Statement of Financial Accounting Standards No. 128 “Earnings per Share” (“SFAS 128”) and SEC Staff Accounting Bulletin No. 98 (“SAB 98”). Under the provisions of SFAS 128 and SAB 98, basic net income or loss per share is computed by dividing the net income or loss available to common stockholders for the period, after deducting preferred stock dividends, by the weighted average number of common shares during the period. Diluted net income or loss per share is computed by dividing the net income or loss for the period by the total number of common and common equivalent shares outstanding during the period. During the period when they would be anti-dilutive, common stock equivalents (which during the three and nine months ended May 31, 2006 consisted of options to purchase 1,045,000 common shares, debt convertible into 4,500,000 common shares, warrants to purchase 6,750,000 common shares, and preferred stock convertible into 6,054,500 common shares) are not considered in the computations as they are anti-dilutive.

Note 4. Inventory

Inventory consisted of the following:

Raw materials and finished subassemblies	$	441
Work in process		578
Finished goods		1,388
		2,407
Less inventory reserves		(63	)
Total	$	2,344

At May 31, 2006, the reserve for obsolescence was $63 principally related to raw material inventory in the Printed Circuit Board division and inventory obsolescence in the Oblio division.

Note 5. Notes Payable - Related Party

On December 30, 2005, the Company converted the $592 of outstanding debt to Farwell Equity Partners, LLC (“Farwell”) into 9,253,414 shares of the Company’s par value Common Stock pursuant to its agreement. This conversion included $18 in accrued interest. Farwell was issued the above-referenced stock for full satisfaction of the amounts outstanding under this agreement.

On March 24, 2006, the Company entered into a 10% Convertible Promissory Note agreement with Farwell. The note provides an available advance of funds up to a total of $450,000. As of May 31, 2006, the outstanding balance of the note was $450,000. The maturity date of the note is December 31, 2006. At any time prior to repayment, Farwell may elect to convert some or all of the principal and interest owed into the Company’s common stock at a rate of $0.10 per share. In addition, the agreement provided warrants for an addition 6,750,000 common shares at an exercise price of $0.23 per share. The warrants shall expire on March 24, 2013. Subsequent to quarter end, Farwell elected to convert the note payable into 4,500,000 shares of common stock. The Company recorded a $450 beneficial conversion feature associated with this note which is being amortized over the term of the note.

Note 6. CapitalSource

As of May 31, 2006, the Company currently has $8,000 in term notes payable (“Term Loan”), of which $1,220 is classified as current in the accompanying financial statements, and $4,883 in a revolving line of credit (“Revolving Loan”) with CapitalSource. On November 9, 2005, Oblio was notified by CapitalSource that certain events of default had occurred in connection with this Credit and Security Agreement. The default related to the Company not maintaining minimum EBITDA as stated in the loan covenants. Oblio was also advised that CapitalSource believed Oblio had defaulted on certain representations and covenants. Although, Oblio has met all monetary obligations to them, CapitalSource increased the interest rate on the Revolving Loan and the Term Loan by 4% per annum with Oblio being assessed an interest rate of 11.75% on the Revolving Loan and 14.75% on the Term Loans. CapitalSource changed the due date of their term loans to February 28, 2006 and as such the remaining unamortized capitalized loan fees of $331 were amortized in the quarter ended February 28, 2006.

The Company and CapitalSource amended the debt obligations in the quarter ended May 31, 2006 and the Company is no longer in default under this agreement. The amendment modified expected earnings targets, reduced interest rates on the revolver and term loans and extended the amortization of the Company’s Term Loan to CapitalSource through June 2007.

	May 31,
	2006

CapitalSource Revolver	$	4,883
Less: current portion		-
	$	4,883

CapitalSource Term A	$	3,733
Less: current portion		(900	)
	$	2,833

CapitalSource Term B	$	4,267
Less: current portion		(320	)
	$	3,947

The revolving credit facility provides for borrowings utilizing an asset based formula, using eligible receivables, inventory and fixed assets, less any reserves. The amount of available borrowings pursuant to the formula as follows:	$	7,179

Less: amount borrowed under minimum borrowing note		-
Less: amount borrowed under revolving credit facility		(4,883	)
		(4,883	)

Excess availability	$	2,296

Note 7. Laurus Master Fund

As of May 31, 2006, the Company currently has $3,517 in term notes payable of which $2,517 is classified as current in the accompanying financial statements, and $2,880 in a revolving credit facility with Laurus Master Funds. Additionally, the Company has recorded beneficial conversion features of $2,283 as of May 31, 2006 associated with the term notes payable and revolving credit facility. All amounts owed to Laurus are classified as current in the accompanying unaudited financial statements. The Company was in technical default of its Laurus agreement during the quarter ended February 28, 2006 due to the untimely filing of registration statements. The Company has not received a notice of default from Laurus and Laurus has chosen not to assess liquidated damages penalties at this time. However, Laurus reserves the right to assess these penalties in the future. The Company expects to rectify this technical default by filing a registration statement.

At May 31, 2006, the following amounts were outstanding. See Note 8 for information on the derivative instrument liabilities related to the warrants issued to Laurus and the bifurcated embedded derivative instruments related to the convertible notes.

	May 31,
	2006

Laurus Revolver (no additional borrowing availability)	$	2,500
Less: current portion		(2,500	)
	$	—

Laurus Overadvance	$	1,500
Less: current portion		(1,500	)
	$	—

Laurus Term # 1	$	1,817
Less: current portion		(1,817	)
	$

Laurus Term # 2	$	1,249
Less: current portion		(1,249	)
	$	—

The revolving credit facility provides for borrowings utilizing an asset based formula, using eligible receivables, inventory and fixed assets, less any reserves. The amount of available borrowings pursuant to the formula as follows:	$	2,500

Less: amount borrowed under minimum borrowing note		—
Less: amount borrowed under revolving credit facility		(2,500	)
		(2,500	)

Excess availability	$	—

Note 8. Derivative Financial Instrument Liability

The Company uses the Black-Scholes option pricing model to value options and warrants, and the embedded conversion option components of any bifurcated embedded derivative instruments that are recorded as derivative liabilities.

In valuing the options and warrants and the embedded conversion option components of the bifurcated embedded derivative instruments at the time they were issued and at May 31, 2006, the Company used the market price of our common stock on the date of valuation, an expected dividend yield of 0% and the remaining estimated life of the options or warrants or repayment date of the convertible debt instrument.

Because of the limited historical trading period of our common stock, the expected volatility of our common stock over the remaining life of the options and warrants has been estimated at 85%, based on a review of the volatility of entities considered by management as comparable. The risk-free rates of return used was 4.17%. This rate is based on constant maturity rates published by the U.S. Federal Reserve, applicable to the remaining life of the options, warrants or other embedded derivatives.

As of May 31, 2006, the Company has $3,915 of derivative financial instrument liability with respect to its debt to Laurus Master Fund (see Note 7) and Farwell Equity Partners (see Note 5). This derivative liability is recognized as follows:

Value of embedded derivatives:

Issue

Expiration

Instrument

Exercise

Value

Date

Price/Share

5/31/2006

11/20/2003

11/20/2006

Registration Rights Agreement

2,219

11/20/2003

11/20/2006

3% Cash Payment Premium

245

3/30/2004

3/30/2007

Registration Rights Agreement

377

3/24/2006

3/24/2013

Freestanding Warrants

1,074

Total Fair Value as of May 31, 2006

3,915

Note 9. 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 excess of quoted market price over the exercise price, if any, 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 for the nine months ended May 31, 2006.

During the three and nine month periods ended May 31, 2006 and 2005, the following table illustrates the effect on net loss and loss per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock based employee compensation:

	Three Months Ended,						Nine Months Ended,
	5/31/06			5/31/05			5/31/06			5/31/05

Net loss attributable to common shareholders, as reported	$	(4,204	)	$	(3,570	)	$	(8,111	)	$	(4,872	)
Add: Compensation recognized under APB No. 25		-			12			-			35
Deduct: Compensation recognized under SFAS No. 123		-			(19	)		(20	)		(97	)
Proforma, net loss attributable to common shareholders	$	(4,204	)	$	(3,577	)	$	(8,131	)	$	(4,934	)

Net loss per share:
Basic and diluted, as reported	$	(0.06	)	$	(0.04	)	$	(0.16	)	$	(0.17	)
Basic and diluted, proforma	$	(0.06	)	$	(0.04	)	$	(0.16	)	$	(0.17	)

In December 2004, FASB issued SFAS No. 123(R) (revised 2004), " Share-Based Payment," which is a revision of SFAS No. 123, “Accounting for Stock Based Compensation.” SFAS No. 123(R) supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees” and amends SAS No. 95, “Statements of Cash Flows.” Generally the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is not an alternative. SFAS No. 123(R) must be adopted no later than the first interim period for fiscal years beginning after December 15, 2005. The Company will adopt SFAS No. 123(R) on September 1, 2006. The effect of the adoption of SFAS No. 123(R) is approximated in the table included above.

Note 10. Federal Excise Tax Refund

On May 25, 2006, after a number of court cases held that the Internal Revenue Service (“IRS”) was improperly imposing the Federal Excise Tax (“FET”) upon toll charges that varied only with time and not distance, the Internal Revenue Service announced that it would no longer require providers of communications services to collect the FET on services such as prepaid telephone PINs. The IRS, in Notice 2006-50, announced that taxpayers may be entitled to request a refund of excise taxes paid in the taxpayer’s 2006 federal tax return. The Notice also specifies that non-fiscal year end taxpayers should request a refund in the period that includes December 31, 2006.

The Company estimates that it is entitled to a refund in the amount of $2,800 for FET amounts invoiced through May 31, 2006. However, the ultimate amount that will be collected is uncertain at this time. Additionally, this amount has not been recorded in the financial statements as of May 31, 2006. Once the amounts are specifically identified the Company will record the reduction to its cost of goods sold and the related receivable for a refund of paid FET.

Note 11. Litigation

On July 29, 2005, the Company was served with a summons from Hytek Services ("Hytek"); whereby Hytek alleged that it had lost an account as a result of Titan PCB West, Inc.'s ("Titan") negligence and defective boards and also alleges that Titan violated the Non-Disclosure Agreement by utilizing Hytek's confidential information and hiring an ex-Hytek employee. This lawsuit was filed seeking damages of approximately $400 after Titan attempted to collect an extremely old accounts receivable due Titan from Hytek in the amount of $145. The Company contends that Hytek's complaint is without merit and intends to defend itself vigorously. The outstanding accounts receivable has been written off prior to fiscal year 2006.

The Company also files suit against its customers in the ordinary course of business to collect amounts owed for products or services provided. No significant suits are pending as of May 31, 2006.

Note 12. Segment Information

	Three Months Ended,						Nine Months Ended,
	5/31/06			5/31/05			5/31/06			5/31/05
Sales:
PCB	$	5,723		$	4,571		$	14,835		$	12,430
Telecommunications		23,146			-			67,717			-
Totals	$	28,869		$	4,571		$	82,552		$	12,430

Interest expense:
PCB	$	2,200		$	525		$	4,693		$	1,991
Telecommunications		780			-			1,802			-
Totals	$	2,980		$	525		$	6,495		$	1,991

Net Loss:
PCB	$	(3,362	)	$	(3,570	)	$	(4,453	)	$	(4,872	)
Telecommunications		(842	)		-			(3,658	)		-
Totals	$	(4,204	)	$	(3,570	)	$	(8,111	)	$	(4,872	)

Assets:
PCB	$	7,748		$	6,944		$	7,748		$	6,944
Telecommunications		39,197			-			39,197			-
Totals	$	46,945		$	6,944		$	46,945		$	6,944

Equipment and improvements (Net):
PCB	$	1,979		$	2,346		$	1,979		$	2,346
Telecommunications		254			-			254			-
Totals	$	2,233		$	2,346		$	2,233		$	2,346

Capital expenditures:
PCB	$	77		$	65		$	115		$	65
Telecommunications		78			-			318			-
Totals	$	155		$	65		$	433		$	65

Depreciation expense:
PCB	$	153		$	153		$	462		$	312
Telecommunications		3			-			5			-
Totals	$	156		$	153		$	467		$	312

Goodwill and intangible assets (Gross):
PCB	$	-		$	-		$	-		$	-
Telecommunications		30,883			-			30,883			-
Totals	$	30,883		$	-		$	30,883		$	-

Intangible amortization expense:
PCB	$	263		$	6		$	263		$	11
Telecommunications		1,359			-			2,606			-
Totals	$	1,622		$	6		$	2,869		$	11

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OR PLAN 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. Factors that may cause such differences include, but are not limited to, availability and cost of financial resources, product demand, market acceptance and other factors discussed in this report under the heading “Business - Risk Factors.” 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, as amended, for the year ended August 31, 2005, to which overview we make reference. All numbers referenced below are stated in thousands unless otherwise noted.

Summary Corporate Background

We are a technology concentric holding company operating in the prepaid communications services and prototype printed circuit board industries through our wholly owned subsidiaries, Oblio Telecom, Inc, Titan PCB West, Inc. and Titan PCB East, Inc. Our prepaid service operations are headquartered in Richardson, Texas and our printed circuit board manufacturing facilities are located in Fremont, California and Amesbury, Massachusetts.

Our prepaid communication services division, Oblio Telecom, Inc., is engaged in the creation, marketing, and distribution of prepaid telephone products for the wire line and wireless markets and other related activities.

Oblio’s products are sold directly to wholesale distributors in 38 states and are available in approximately 60,000 retail locations nationwide. By strictly adhering to a “no hidden cost” philosophy, Oblio has earned a loyal customer base in an industry where uncertainty reigns and its TCC® registered trademark is a household name for hundreds of thousands of consumers nationwide.

Oblio’s prepaid international phone cards provide consumers with a competitive alternative to traditional post-paid long distance telecommunications services. Through agreements with large and medium sized carriers Oblio offers products that target many of the country’s diverse 1st and 2nd generation Americans, providing end users with quality low cost international calling options. To leverage its brand recognition and loyal customer base, Oblio’s management team is preparing to enter additional prepaid market segments. Entering additional prepaid markets will optimize economies of scale and fuel organic growth. The most logical market to enter next is the prepaid wireless sector.

Our wholly-owned subsidiary Titan PCB West (“Titan”) was incorporated on March 27, 2001. On August 30, 2002, we acquired Titan 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.

Beginning in 2001, Titan, through its predecessor SVPC Partners LLC, a Delaware limited liability company that commenced its operations in July 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.

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.

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

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

On July 28, 2005, Farwell Equity Partners, LLC, a Delaware limited liability company (“Farwell”) entered into an Asset Purchase Agreement (the “ Purchase Agreement”) with Oblio Telecom, Inc. (“Oblio”), a wholly owned subsidiary of Farwell, Oblio Telecom L.L.P., a Texas limited liability partnership (“Oblio Texas”), and Sammy Jibrin and Radu Achiriloaie, the sole owners of Oblio Texas. David Marks, the Company's Chairman, is the managing member of Farwell. The Purchase Agreement provided for the acquisition by Oblio of substantially all of Oblio Texas’ assets and assumption of certain liabilities, in total consideration of $29,302 consisting of $15,479 in cash, $2,323 in amounts due seller, the issuance of 9,000 shares of Oblio’s Series A Cumulative Convertible Preferred Stock with an initial value of $9,000, and the issuance of an 18-month promissory note in the principal amount of $2,500. On August 12, 2005, the Company completed the acquisition of all of the issued and outstanding shares of common stock of Oblio Telecom, Inc. from Farwell Equity Partners, LLC for no consideration. In addition, the Company issued to Sammy Jibrin and Radu Achiriloaie, 375,000 shares of its common stock, par value $0.001.

On August 12, 2005, the Company issued to Farwell 66,000,000 shares of its common stock as consideration for the issuance of 1,000 shares of Oblio representing all of the issued and outstanding shares of Oblio pursuant to a Stock Purchase Agreement dated August 12, 2005. On December 31, 2005, the Company entered into an agreement with Farwell for the Rescission of the Stock Purchase Agreement. Pursuant to the terms of the Rescission Agreement, the Company returned to Farwell the shares of Oblio and Farwell returned to the Company, the 66,000,000 shares of our common stock. Farwell simultaneously agreed to make a capital contribution to the Company of the 1,000 shares of Oblio, without consideration. The transaction was structured in this way since the Company did not have adequate time to solicit other financing to meet the seller’s timelines.

Plan of Operations

Our 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;

aggressively market specialty manufacturing services for time sensitive, high-tech prototype and pre-production Rigid and HVR Flex (rigid-flex) 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;

expand its services to include rigid-flex combinations in order to diversify sources of revenue;

expand its sales through the marketing and manufacture of rigid-flex PCBs using the patented HVR Flex process available as a result of its acquisition of assets from Eastern Manufacturing Corporation in February 2003;

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 its target market;

acquire manufacturing facilities that have military certification or add value to its current time sensitive manufacturing service business;

develop and continuously improve fabrication and sales processes in order to improve margin and competitive pricing;

increase Oblio’s direct sales of its prepaid phone services to large retailers;

explore opportunities to market and sell Oblio’s prepaid phone cards, some of which are capable of foreign origination, directly to overseas distributors;

integrate switch operations to terminate calls generated from Oblio’s prepaid phone services;

acquire facilities based telecommunications businesses which will increase Oblio’s capacity to handle a larger number of simultaneous calls, provide established interconnects with other major telecommunications providers and offer established prepaid distribution channels in other states where Oblio has not fully penetrated;

explore opportunities to market and sell Oblio’s prepaid phone cards, some of which are capable of foreign origination, directly to overseas distributors; and

implement new prepaid calling card programs utilizing emerging technologies.

We plan to add and are 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.

We expect our general and administrative costs to increase in future periods due to our operating as a public company whereby we will incur added costs for filing fees, increased professional services and insurance costs.

ACCOUNTING PRINCIPLES; ANTICIPATED EFFECT OF GROWTH

Below the Company describes a number of basic accounting principles which the Company employs in determining its recognition of revenues and expenses, as well as a brief description of the effects that the Company believes that its anticipated growth will have on its revenues and expenses in the future.

Sales. The Company recognizes sales in its PCB division upon shipment to the Company's customers and recognizes sales in its Telecommunications division upon shipment and activation of prepaid phone cards and upon activation for prepaid wireless services. The Company records net sales as the Company’s gross sales less an allowance for returns and discounts. At May 31, 2006 the Company had approximately 500 customers in its PCB division and approximately 200 customers in its Telecommunications division. In its PCB division, the Company provides its customers a limited right of return for defective PCBs and records an allowance against gross revenues for estimated returns at the time of sale based on its historical results. Because the Company’s customers quickly test the PCBs the Company manufactures for them, the majority of returns for defects occur within the first 15 days following shipment. At May 31, 2006, the Company had an allowance for doubtful accounts of $69. Revisions to the allowances may be required from time to time.

The Company expects the number and complexity of PCBs the Company sells to fluctuate with the changes in demand from the Company’s customers and, the prices it charges its 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. The Company is beginning to experience improving conditions in pricing and requests for its PCBs. However, it is uncertain that conditions will continue to improve and result in demand increases.

The Company expects sales to grow in its PCB division as it develops its reputation in its target market and the Company expands upon its receiving Military Specification 31032 in its Amesbury, Massachusetts facility. Additional acquisitions will also increase sales as well as cause disruption as facilities, employees, and processes are integrated. The Company expects these fluctuations to be relatively short lived while expecting the sales growth to be more permanent with the variable of market demand as a condition. The Company also expects sales to grow in its Telecommunications division as it continues to grow its prepaid card services through geographical expansion. Additionally, the Company expects continued growth in its Bravo Cellular wireless service. The Bravo Cellular has been distributed in limited markets and the Company plans on expanded distribution in future periods.

Future demand and product pricing will depend on many factors in the PCB division including product mix, levels of advanced technology, capacity utilization, competitive pressure in the PCB industry, and economic conditions affecting the markets the Company serves and the electronics industry in general. The current uncertainty regarding the level and sustained nature of the improvements in market conditions continue to make the Company’s forecasting difficult. The Company expects demand to remain strong and pricing to remain consistent in its Telecommunications segment as the number of first generation American’s continues to grow.

In each case the Company's plan of operations anticipates that its internal growth, as well as acquisitions of competitors, shall materially contribute to its ability to increase its revenues as described above.

Through August 12, 2005, the Company's primary source of sales was from rigid bare-board manufacturing that provides time sensitive, high technology, and superior quality PCB's to the electronics industry at a competitive price. The Company is focused on higher layer counts and finer line production. The Company's sales have been derived from different areas including delivery of prototype/pre-prototype boards from 24 hours to 14-day standard time as well as pre-production with numerous types of materials. The essential element of the Company's success, current and future, will be to service those customers who need time sensitive delivery of low to medium production runs with high quality and superior design and customer service interface. Effective August 12, 2005, the Company’s primary source of sales is projected to be from its new telecommunications segment. These sales are from prepaid phonecard services and wireless services offered to cash consumers, generally first and second generation Americans.

In the future, Titan PCB West expects to receive sales from customers who need rigid-flex and increasingly complex rigid bare-board manufacturing that provides time sensitive, high technology, and superior quality PCBs. In addition, after an initial inspection and certification period, Titan PCB East and Titan PCB West intend to expand their sales focus to the military market place, which includes those vendors supplying the U.S. military with products in its target market.

In June 2004, the Company completed the certification process of Military P31032 standards. The Company then joined a group of only eight companies qualified to build rigid-flex military product. The Company believes that this opened up a new market and is currently aggressively pursuing new business as a result of this certification.

Cost of Sales. In the Company's PCB division, cost of sales consists of materials, labor, outside services and overhead expenses incurred in the manufacture and testing of its products. Many factors affect its gross margin, including, but not limited to, capacity utilization, production volume, production quality and yield. The Company does not participate in any long-term supply contracts and the Company believes there are a number of high quality suppliers for the raw materials the Company uses. The Company's cost of goods, as a percentage of revenues, varies depending on the complexity of the PCBs the Company manufactures in any given period. In the Company's telecommunications segment cost of sales is mainly the cost of time purchased from telecommunications distributors utilized in its products.

Based upon the Company's plan of operations, the Company anticipates that its cost of sales will increase as its sales increase, but that cost of sales as a percentage of net sales shall generally decrease for a period of time as its sales increase. The Company believes 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 the Company's penetration in the existing market for its goods and services will permit us to increase sales at a low cost in part by causing the Company to utilize a greater portion of its existing manufacturing capacity, an expense which the Company already incurs. On the other hand, an increase in its sales attributable to its offering a greater portfolio of products and services or an increase in the technology or complexity of products and services may result in less of a decrease in such percentage as such activities may initially be less efficient than its existing operations.

Included in cost of sales is overhead which is relatively fixed on an annual basis. Materials are variable and labor is semi-variable and are influenced by the complexity of orders as well as the quantity of orders. As the company's business is continually changing with regard to the type of product produced, the Company plans to implement broader use of production systems to control the overtime in production as well as the use of materials in production. The Company anticipates that these systems will assist in the pricing of its products with the objective to be more competitive and profitable in its target market.

The Company intends to continue to expand and upgrade the Company's production capability as well as its production systems and processes and the financial systems interface in order to better manage material, labor and overhead costs.

Operating and Non-Operating Expenses. The Company's operating expenses for the periods ended May 31, 2006 and 2005 are comprised of marketing, general and administrative, non-recurring costs and costs related to mergers and acquisitions, as well as the cost of developing operating facilities.

Selling and marketing expenses consist primarily of salaries and commissions paid to its internal sales team, commissions paid to independent sales representatives and costs associated with advertising and marketing activities. The Company intends to expand its customer and sales support operation in order to support the increased complexity and volume of its PCB segment as well as its newly acquired telecommunications segment and its anticipated use of indirect sales. The Company does not expect a material increase in sales and marketing expense that is not consistent with an increase in sales over a reasonable period of time. Additionally, the Company anticipates its sales and marketing costs to fluctuate as a percentage of sales due to the addition of sales personnel and various marketing activities planned throughout the year.

The Company intends to expand its direct, indirect and distributed channels sales plan in order to best utilize its HVR Flex (rigid-flex) manufacturing capability as a result of its acquisition of the assets from Eastern Manufacturing Corporation as well as its geographic expansion in rigid bare board products.

General and administrative expenses include all corporate and administrative functions that serve to support its current and future operations and provide an infrastructure to support future growth. Additionally, general and administrative expenses include the amortization of identifiable intangible assets acquired in the Company’s purchase of its telecommunications division. Other 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. The Company expects certain general and administrative expenses to grow as each business segment is developed. However, as a percentage of sales, general and administrative expenses are expected to decrease.

Non-cash compensation includes all stock based compensation given to current and past employees of the Company. This category also includes amortization of stock based compensation provided to consultants and amortization of options and warrants granted to employees and consultants for less than fair value on the date of issuances. For the three and nine months ended May 31, 2006, no non-cash compensation has been incurred.

Interest Expense. Interest expense, includes, in addition to amounts accruing currently under outstanding debt, finance charges relating to the Company's beneficial conversion features of its convertible loans with Laurus and other convertible debt that carry beneficial conversion features as well as the amortization of debt issuance costs.

Results of Operations

The following table sets forth statement of operations data for the three month and nine month periods ended May 31, 2006 and 2005 and should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations and Plan of Operations” and our consolidated financial statements and the related notes appearing elsewhere in this report.

	Three Months Ended						Nine Months Ended
	5/31/2006			5/31/2005			5/31/2006			5/31/2005
Net sales		100.0	%		100.0	%		100.0	%		100.0
Cost of sales		90.2			89.6			91.5			93.2

Operating expenses:
Sales and marketing		1.5			7.6			1.6			9.3
General and administrative		8.4			14.9			8.6			14.4
Total operating expenses		9.9			22.5			10.2			23.7

Operating loss		(0.1	)		(12.1	)		(1.7	)		(16.9	)
Interest expense		(10.3	)		(11.5	)		(7.8	)		(16.0	)
Derivative instrument expense		(4.2	)		(54.5	)		(0.3	)		(6.3	)
Miscellaneous		0.1			-			-			-
Net income/ (loss)		(14.5	)		(78.1	)		(9.8	)		(39.2	)

Three Months Ended May 31, 2006 Compared to the Three Months Ended May 31, 2005.

Net Sales

Net sales increased by $24,298 or 532% from $4,571 in the three months ended May 31, 2005 to $28,869 in the three months ended May 31, 2006. This increase resulted primarily from our newly acquired Oblio division of $23,416. Additionally, net sales increased 25% in our PCB division. This increase is due to more favorable market conditions and an expansion in our sales force that includes commission-only representatives with more geographic coverage.

Cost of Sales

Cost of sales increased $21,957, or 536%, from $4,096 in the three months ended May 31, 2005 to $26,053 in the three months ended May 31, 2006. As a percentage of sales, these costs increased from 89.6% in the three months ended May 31, 2005 to 90.2% in the three months ended February 28, 2006. The increase in cost of sales resulted from: the gross profit generated from our newly acquired Oblio division and a 15% increase in raw materials cost. Raw materials cost increased due to increases in the market conditions for gold, copper and laminate.

Operating Expenses

Sales and marketing expenses increased $92 from $347 in the three months ended May 31, 2005 to $439 in the three months ended May 31, 2006 and as a percentage of sales decreased from 7.6% of sales in the quarter ended May 31, 2005 to 1.5% of sales in the quarter ended May 31, 2006. This was primarily due to the nature of the Oblio acquisition. Revenues added from the Oblio acquisition are largely driven by the Company’s distributor model that requires minimal direct sales and marketing expenses.

General and administrative expenses increased by $1,754 or 257%, from $680 in the three months ended May 31, 2005 to $2,434 in the three months ended May 31, 2006. The increase was due in major part to the additional amortization incurred by our Oblio division regarding the intangible assets acquired as well as the additional costs incurred in the Oblio division expenses. As a percentage of sales, these costs decreased from 14.9% in the three months ended May 31, 2005 to 8.4% in the three months ended May 31, 2006.

Interest (Income) Expense

Interest expense increased by $2,455, or 468%, from $525 in interest expense in the three months ended May 31, 2005 to $2,980 in interest expense the three months ended May 31, 2006. The increase in interest expense is primarily related to the adjustment in the valuation of the effective interest expense of the derivative liabilities (see note 8) and due to the increase in outstanding debt to CapitalSource (see note 6). The outstanding debt with CapitalSource in the three months ended May 31, 2005 was $0 compared to the debt in the three months ended May 31, 2006 which was $8,000.

Derivative Instruments (Income) Expense

Derivative instruments expense was $1,206 for the three months ended May 31, 2006 compared to derivative instrument expense of $2,493 for the three months ended May 31, 2005. This represents a net, unrealized (non-cash) change during the quarter of our derivative instrument liabilities related to certain options, warrants, registration rights agreements and prepayment penalties that have been bifurcated and accounted for separately.

Net Loss

Net Loss increased $634 from a net loss of $3,570 in the three months ended May 31, 2005 to a net loss of $4,204 in the three months ended May 31, 2006. The increase in the net loss resulted primarily from interest expense in the printed circuit board division and the addition of the Oblio acquisition.

Nine Months Ended May 31, 2006 Compared to the Nine Months Ended May 31, 2005.

Net Sales

Net sales increased by $70,122 or 564% from $12,430 in the nine months ended May 31, 2005 to $82,552 in the nine months ended May 31, 2006. This increase resulted primarily from increases of $67,717 from our newly acquired Oblio division and a 19% increase in sales in our PCB division.

Cost of Sales

Cost of sales increased $63,977 or 552%, from $11,586 in the nine months ended May 31, 2005 to $75,563 in the nine months ended May 31, 2006. As a percentage of sales, these costs decreased from 93.2% in the nine months ended May 31, 2005 to 91.5% in the nine months ended May 31, 2006. The decrease in cost of sales percent resulted from the addition of our Oblio division and operational improvements in our PCB division.

Operating Expenses

Sales and marketing expenses increased $173 from $1,150 in the nine months ended May 31, 2005 to $1,323 in the nine months ended May 31, 2006 and as a percentage of sales decreased from 9.3% of sales in the nine months ended May 31, 2005 to 1.6% of sales in the nine months ended May 31, 2006. This was primarily due to the Company utilizing more representatives on a commissions-only basis and the acquisition of our Oblio division. Revenues added from the Oblio acquisition are largely driven by the Company’s distributor model that requires minimal direct sales and marketing expenses.

General and administrative expenses increased by $5,290 or 294%, from $1,797 in the nine months ended May 31, 2005 to $7,087 in the nine months ended May 31, 2006. The increase was due in major part to the additional amortization incurred by our Oblio division regarding the intangible assets acquired as well as the additional costs incurred in the Oblio division expenses. As a percentage of sales, these costs decreased from 14.4% in the nine months ended May 31, 2005 to 8.6% in the nine months ended May 31, 2006.

Interest (Income) Expense

Interest expense increased by $4,503 from interest expense of $1,991 in the nine months ended May 31, 2005 to interest expense of $6,494 in the nine months ended May 31, 2006. The increase in interest expense is primarily related to the adjustment in the valuation of the effective interest expense of the derivative liabilities (see note 8) and due to the increase in outstanding debt to CapitalSource (see note 6). The outstanding debt with CapitalSource in the nine months ended May 31, 2005 was $0 compared to the debt in the nine months ended May 31, 2006 which was $8,000.

Net Loss

Net Loss increased by $3,239 from $4,872 in the nine months ended May 31, 2005 to $8,111 in the nine months ended May 31, 2006. The increase in net loss resulted primarily from the impact of effective interest recorded on derivative liabilities.

Derivative Instruments (Income) Expense

Derivative instruments expense was $261 for the nine months ended May 31, 2006 compared to derivative instrument expense of $780 for the nine months ended May 31, 2006. This represents a net, unrealized (non-cash) change during the quarter of our derivative instrument liabilities related to certain options, warrants, registration rights agreements and prepayment penalties that have been bifurcated and accounted for separately.

Liquidity and Capital Resources

Our principal sources of liquidity have been cash provided by operations, an infusion of capital from related parties (see note 5) and the borrowings incurred in our acquisition of Oblio. As of May 31, 2006, we were in technical default in our Laurus agreement due to the untimely filing of registration statements. We have not received a notice of default from Laurus and Laurus has chosen not to assess liquidated damages penalties at this time. However, Laurus reserves the right to assess these penalties in the future. We expect to rectify this technical default by filing a registration statement. Our principal uses of cash have been for operations, debt service requirements, and 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 in the PCB division. We currently anticipate working capital needs and capital expenditures of at least $500 during the next 12 months. If the anticipated cash generated by our operations are insufficient to fund requirements and losses in the circuit board division, we will need to obtain additional funds through third party financing in the form of equity, debt or bank financing or evaluate other alternatives for the circuit board division. Particularly in light of our limited operating history in the telecommunications division 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.

The following factors, among others, could cause actual results to differ from those indicated in the forward-looking statements included in this Form 10-QSB: pricing pressures in the industry; the loss of any of our major customers; a downturn in the economy in general or in the technology or telecommunications sectors; a decrease in demand for electronic products or continued weak demand for these products; our ability to attract new customers; our ability to reduce costs, 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, 2006, net cash provided by operations was $1,200 while in the nine months ended May 31, 2005 cash used in operating activities was $1,085. This increase was primarily the result of cash provided from operations of the Oblio division and extended payment terms with key vendors.

In the nine months ended May 31, 2006, we utilized $434 for the purchase of fixed assets compared to $65 used for the purchase of fixed assets in the nine months ended May 31, 2005, an increase of $369, or 568%. The increase occurred mainly in our Oblio division as we incurred set-up costs for our switched platform rollout and other capitalized charges in relation to the rollout of our wireless telecommunications program.

In the nine months ended May 31, 2006, we utilized $847 in financing activities compared to $652 provided from financing activities for the nine months ended May 31, 2005. The increase occurred mainly in our Oblio division as we began payment of term debt related to the acquisition of Oblio.

Quantitative And Qualitative Disclosures About Market Risk

The Company’s exposure to market risk for changes in interest rates relates primarily to the increase or decrease in the amount of interest expense the Company incurs in its debt obligations to Laurus and CapitalSource for its prime plus percent interest rates. The Company does not believe that changes in interest rates will have a material effect on its 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.

Seasonality

The Company has 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.

Critical Accounting Policies

Revenue Recognition. The Company recognizes revenues when the following criteria are met: (1) the Company has persuasive evidence of an arrangement, such as contracts, purchase orders or written requests; (2) the Company has completed delivery and no significant obligations remain; (3) its price to its customer is fixed or determinable and (4) collection is probable. The Company derives its revenue primarily from the sale of PCBs using customers' design plans and recognizes revenues when products are shipped to customers. Effective August 12, 2005, a larger portion of the Company’s revenues are from the sale of prepaid telecommunications services in which revenues are recognized for prepaid phone cards upon shipment and activation and for prepaid wireless services when activated. These sales are reported net of returns and discounts. Provisions for discounts to customers, estimated returns and allowances are provided for in the same period the related revenue is recorded by using an estimate based on a percent of Accounts Receivable which is consistent with its historical activity and its industry peers policy. This allowance is also checked against the percentage of Accounts Receivable that are over 90 days and Accounts Receivable that may be in dispute due to a change in customer specifications. Given the current market conditions that percent is approximately eight percent of outstanding accounts receivable in its PCB segment and zero percent in its prepaid telecommunications segment. The percentage used may fluctuate as market conditions for its customers change over time.

Inventory Valuation Our policy is to value raw material inventories at the lower of cost or market on a part-by-part basis on a first in first out basis ("FIFO") . We also value work-in-process and finished goods at the lower of cost or market utilizing a standard cost system which management believes approximates cost on a FIFO 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 revenue 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.

Long-lived Assets. Pursuant to SFAS No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets ", the Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. An impairment loss is recognized when expected cash flows are less than the asset's carrying value. Accordingly, when indicators of impairment are present, the Company evaluates the carrying value of such assets in relation to the operating performance and future undiscounted cash flows of the underlying assets. The Company’s policy is to record an impairment loss when it is determined that the carrying amount of the asset may not be recoverable. No impairment charges were recorded in the periods ended May 31, 2006 and 2005, respectively.

Derivative financial instruments. We reviewed the terms of convertible debt and equity instruments issued to determine whether there are embedded derivative instruments, including embedded conversion features, that are required to be bifurcated and accounted for separately as derivative financial instruments.

Generally, where the ability to settle the conversion option is deemed to be not within the control of the Company, the embedded conversion option is required to be bifurcated and accounted for as a derivative financial instrument liability.

In connection with the sale of convertible debt and equity instruments, we may also issue freestanding options or warrants. Additionally, we may issue options or warrants to non-employees in connection with consulting or other services they provide. Although the terms of the options and warrants may not provide for net-cash settlement, in certain circumstances, physical or net-share settlement is deemed to not be within our control and, accordingly, we are required to account for these freestanding options and warrants as derivative financial instrument liabilities, rather than as equity.

Certain instruments, including convertible debt and equity instruments and freestanding options and warrants, may be subject to registration rights agreements, which impose penalties for failure to register the underlying common stock. The existence of these potential cash penalties may require that the embedded conversion option and the freestanding options or warrants be accounted for as derivative instrument liabilities.

Derivative financial instruments are initially measured at their fair value. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based derivative financial instruments, we use the Black-Scholes Option Pricing Model to value the derivative instruments.

To the extent that the initial fair values of the bifurcated and/or freestanding derivative instrument liabilities exceed the total proceeds received, an immediate charge to income is recognized, in order to initially record the derivative instrument liabilities at their fair value. The discount from the face value of the convertible debt resulting from allocating part or all of the proceeds to the derivative instruments, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to income, using the effective interest method. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.

Stock-based compensation. We record stock-based compensation to outside consultants at a fair market value in general and administrative expense. We do not record expense relating to stock options granted to employees with an exercise price greater than or equal to market price at the time of grant. We report pro-forma net loss and loss per share in accordance with the requirements of SFAS 148. This disclosure shows net loss and loss per share as if we had accounted for our employee stock options under the fair value method of those statements. Pro-forma information is calculated using the Black-Scholes pricing method at the date of the grant. This option valuation model requires input of highly subjective assumptions.

ITEM 3. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures: As of the end of the period covered by this report, the Company’s management carried out an evaluation, under the supervision of the Company’s Chief Executive Officer and the Chief Financial Officer of the effectiveness of the design and operation of the Company’s system of disclosure controls and procedures pursuant to the Securities and Exchange Act, Rule 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon the Controls Evaluation, our CEO and CFO have concluded that, as of the end of the period covered by this Annual Report, our Disclosure Controls are not effective to provide reasonable assurance that our financial statements are fairly presented in conformity with generally accepted accounting principles for the reasons discussed below.

During our 2005 audit, our independent registered public accounting firm reported to our Board of Directors certain conditions involving internal controls which they believe represent material weaknesses in our internal control environment. These matters are with regard to insufficient personnel resources within the accounting function, based on the size and complexity of the organization, to affect timely financial close process and to effectively evaluate and resolve non-routine and/or complex accounting transactions. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Significant deficiencies are control issues that could have a significant adverse effect on the ability to record, process, summarize and report financial data in the financial statements.

Our management and the Board of Directors agreed with our independent registered public accounting firm on the matter raised in their report and agreed to address the material weakness.

To address this internal control weakness, management implemented the following measures: The Company, led by its Chairman, conducted a national search for a Chief Financial Officer at the holding company level. The search has included individuals with the experience and training necessary to provide the requisite enhanced internal controls, systems and management. The Company completed this search and hired a Chief Financial Officer during January 2006. Subsequent to the quarter ended February 28, 2006 the Chief Financial Officer has assessed the internal controls and is implementing a plan to strengthen the Company’s internal controls. However at May 31, 2006, the Company still had certain conditions involving internal controls which they believe represent material weaknesses in the internal control environment.

Changes in internal controls: During the Company's fourth quarter of 2005, the Company acquired the business of Oblio Telecom, LLP and added another business segment to the Company's portfolio. Initially, the financial and accounting duties were being divided utilizing as many internal controls as possible in a 12 employee operation. However, the Company hired a new Chief Financial Officer in January 2006. The new Chief Financial Officer is currently located in the Company’s newly acquired telecommunications division thus strengthening the internal controls in that division. For the nine months ended May 31, 2006, the telecommunications division represented over 82% of the total revenue of the Company. There were no additional changes in internal controls over financial reporting, known to the Chief Executive Officer or Chief Financial Officer that occurred during the period covered by this report that has materially affected, or is likely to materially effect, the Company’s internal control over financial reporting.

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse affect on our business, financial condition or operating results.

On July 29, 2005, the Company was served with a summons from Hytek Services ("Hytek"); whereby Hytek alleged that it had lost an account as a result of Titan PCB West, Inc.'s ("Titan") negligence and defective boards and also alleges that Titan violated the Non-Disclosure Agreement by utilizing Hytek's confidential information and hiring an ex-Hytek employee. This lawsuit was filed seeking damages of approximately $400,000 after Titan attempted to collect an extremely old accounts receivable due Titan from Hytek in the amount of $145,000. The Company contends that Hytek's complaint is without merit and intends to defend itself vigorously.

The Company also files suit against its customers in the ordinary course of business to collect amounts owed for products or services provided. No significant suits are pending as of May 31, 2006.

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

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

The Company is in technical default with Laurus due to its failure to have a registration statement which includes shares issuable to Laurus upon conversion of the convertible notes and shares issued to Laurus in August 2005 declared effective within 90 days of the closing of our acquisition of Oblio. Laurus has not issued a default notice to the Company and has cooperated with the Company and is not imposing default interest rates or liquidated damages. Laurus maintains the right to charge liquidated damages in the future.

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 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)

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.



	Titan Global Holdings, Inc.

Date: July 14, 2006	By:	/s/ Curtis Okumura
		Curtis Okumura
		President and CEO (Principal Executive Officer)



	By:	/s/ Bryan M. Chance
		Bryan M. Chance
		Chief Financial Officer
		(Principal Financial Officer)

Titan Global (TTGH) Inactive 10QSB2006 Q4 Quarterly report (small business)