Titan Global 10Q 2008 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(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, 2008

o	Transition report pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ____________ to ______________

Commission file number 000-32847

TITAN GLOBAL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Utah	87-0433444
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

1700 Jay Ell Drive, Suite 200

Richardson, Texas 75081

(Address of principal executive offices) (Zip Code)

(972) 470-9100

(Registrant’s telephone number, including area code)

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 o No x

Indicate by check march whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer o

Non-accelerated filer x

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 July 15, 2008 the Company had 53,430,652 shares of its par value $0.001 common stock outstanding.

TITAN GLOBAL HOLDINGS, INC.

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Unaudited Consolidated Financial Statements	4
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4.	Controls and Procedures	50
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	54
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61
Item 3.	Defaults Upon Senior Securities	61
Item 4.	Submission of Matters to a Vote of Security Holders	61
Item 5.	Other information	61
Item 6.	Exhibits	61
	Signatures	62

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.

Unaudited Consolidated Balance Sheets

(In thousands, except common stock share data)

	May 31,			August 31,
	2008			2007
ASSETS
Current assets:
Cash and cash equivalents	$	2,999		$	1,190
Restricted cash and short-term investments		617			750
Accounts receivable, trade (less allowance for doubtful accounts of $15,736 and $2,940 and allowance for sales returns of $3,672 and $888, respectively)		10,875			12,699
Universal service fund fees recoverable		-			1,406
Inventory, net		13,556			1,663
Prepaid expenses and other current assets		1,945			2,015
Assets of discontinued operations, current		4,680			-
Total current assets		34,672			19,723

Equipment and improvements, net		15,185			2,326
Definite-lived intangible assets, net		4,444			16,989
Goodwill and indefinite-lived intangible assets		17,848			6,661
Capitalized loan fees, net		898			412
Other assets		170			305
Assets of discontinued operations, non-current		4,389			-
Total assets	$	77,606		$	46,416

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
Accounts payable - trade	$	33,333		$	21,049
Accrued liabilities		6,848			2,911
Deferred revenue		-			12,009
Related party - notes payable		1,736			-
Short-term notes payable		426			72
Current portion of long-term debt		3,067			3,432
Seller-Financed Note		3,570			-
Liabilities of discontinued operations, current		12,454			-
Total current liabilities		61,434			39,473

Lines of credit		31,247			11,677
Long-term seller-financed note, net of discount of $0 and $122, respectively		-			1,301
Redeemable, convertible preferred stock, preference in liquidation of $12,435 and $4,743, respectively		12,090			4,743
Long-term debt, net of discount of $4,383 and $713, respectively		8,516			4,112
Long-term derivative liabilities		9,115			15,142
Other long-term liabilities		2,549			116
Liabilities of discontinued operations, non-current		8,841			-
Total liabilities		133,792			76,564
Stockholders' deficit:
Common stock-$0.001 par value; 950,000,000 shares authorized; 54,754,809 and 50,244,378 shares issued; 53,430,652 and 49,157,071 outstanding, respectively		55			50
Additional paid-in capital		30,830			21,968
Accumulated deficit		(85,357	)		(50,700	)
Treasury stock, at cost, 1,324,157 and 1,087,307 shares, respectively		(1,714	)		(1,466	)
Total stockholders' deficit		(56,186	)		(30,148	)
Total liabilities and stockholders' deficit	$	77,606		$	46,416

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

Titan Global Holdings, Inc.

Unaudited Consolidated Statements of Operations

(In thousands, except share and per share amounts)

	Three Months Ended						Nine Months Ended
	5/31/2008			5/31/2007			5/31/2008			5/31/2007

Sales - Energy division	$	120,336		$	-		$	312,881		$	-
Sales - Communications division		42			24,627			34,897			80,138
Sales - Electronics and homeland security division		6,977			6,174			22,168			16,726
Sales - Global brands division		957			-			2,358			-
Total sales		128,312			30,801			372,304			96,864

Cost of sales - Energy division		113,687			-			296,738			-
Cost of sales - Communications division		20			15,742			24,392			64,333
Cost of sales - Electronics and homeland security division		7,094			5,826			21,379			16,014
Cost of sales - Global brands division		640			-			1,981			-
Total cost of sales		121,441			21,568			344,490			80,347

		6,871			9,233			27,814			16,517

Operating expenses:
Sales and marketing		593			406			1,859			1,481
General and administrative expenses		10,388			3,210			30,135			8,055
Bad debt expense		1,071			2,008			9,869			2,130
Impairment of intangibles		-			-			14,572			-
Amortization of intangibles		494			1,369			2,452			4,038

Loss from operations		(5,675	)		2,240			(31,073	)		813

Other income (expenses):
Other income		402			22			1,583			43
Interest expense		(2,075	)		(953	)		(5,716	)		(3,184	)
Gain on disposal of assets		(25	)		-			2,004			-
Gain (loss) on value of derivative instruments		1,247			3,462			10,999			(4,630	)
Gain on extinguishment of debt		-			-			-			7,790

Income (loss) before income taxes		(6,126	)		4,771			(22,203	)		832
Provision for income taxes		-			-			-			-

Net income (loss) from continuing operations		(6,126	)		4,771			(22,203	)		832
Loss from discontinued operations		(1,139	)		-			(12,454	)		-

Net income (loss)	$	(7,265	)	$	4,771		$	(34,657	)	$	832

Accrual of preferred stock dividend		(34	)		(34	)		(101	)		(101	)
Net income (loss) applicable to common stockholders	$	(7,299	)	$	4,737		$	(34,758	)	$	731

Net income (loss) applicable to common stockholders per share:
Basic
Continuing operations	$	(0.11	)	$	0.10		$	(0.42	)	$	0.02
Discontinued operations		(0.02	)		-			(0.24	)		-
Net income (loss)	$	(0.13	)	$	0.10		$	(0.66	)	$	0.02

Diluted
Continuing operations	$	(0.11	)	$	0.03		$	(0.42	)	$	0.01
Discontinued operations		(0.02	)		-			(0.24	)		-
Net income (loss)	$	(0.13	)	$	0.03		$	(0.66	)	$	(0.08	)

Number of weighted-average common shares outstanding:
Basic		53,430,652			49,113,900			52,503,890			49,121,801
Diluted		53,430,652			59,935,688			52,503,890			49,848,417

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

Titan Global Holdings, Inc.

Unaudited Consolidated Statements of Cash Flows

(In thousands)

	Nine Months Ended
	5/31/2008			5/31/2007
Cash flows from operating activities:
Net income (loss) from continuing operations	$	(22,203	)	$	832
Adjustments to reconcile net income (loss) to net cash (used in) generated by operating activities:
Depreciation		3,084			578
Bad debt and sales return allowances		12,693			2,137
Gain on disposal of assets		(2,004	)		-
Non-cash compensation		(33	)		187
Non-cash asset retirement obligation accretion expense		68			6
Non-cash interest expense		1,425			344
Amortization of debt discounts and bank fees		289			444
Amortization of intangibles		2,452			4,038
Goodwill and intangible assets impairment charge		14,572			-
Loss (gain) on fair value of derivative liabilities		(10,999	)		4,630
Gain on debt extinguishment		-			(7,790	)
Warrants issued for services		-			621
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable		(1,581	)		(3,618	)
Inventory		689			283
Prepaid expenses and other current assets		1,147			(130	)
Other assets		(16	)		3
Universal service fund fee recoverable		1,406			(638	)
Federal excise tax recoverable		-			(243	)
Accounts payable and accrued liabilities		952			8,412
Deferred revenue		(12,009	)		-
Other liabilities		(624	)		-
Total adjustments		11,511			9,264
Net cash (used in) generated by operating activities of continuing operations		(10,692	)		10,096
Net cash generated by operating activities of discontinued operations		844			-
Net cash (used in) generated by operating activities		(9,848	)		10,096

Cash flows from investing activities:
Equipment and improvements expenditures		(1,161	)		(407	)
Cash provided by investment to collateralize obligation		133			-
Cash paid to sellers of Appco		(30,000	)		-
Cash provided by acquisitions		3,784			-
Proceeds from sale of fixed assets		79			-
Net cash used in investing activities of continuing operations		(27,165	)		(407	)
Net cash provided by investing activities of discontinued operations		32			-
Net cash used in investing activities		(27,133	)		(407	)

Cash flows from financing activities:
Proceeds from issuance of common stock		5,000			-
Proceeds from sale leaseback transaction		15,000			-
Proceeds from related party notes		1,736			-
Proceeds from issuance of long-term debt		15,000			7,484
Proceeds from lines of credit, net of repayments		11,608			(3,188	)
Payments on long-term debt		(7,655	)		(13,205	)
Capitalized loan fees		(775	)		(684	)
Purchase of treasury stock		(248	)		(109	)
Net cash provided by (used in) financing activities of continuing operations		39,666			(9,702	)
Net cash used in financing activities of discontinued operations		(687	)		-
Net cash provided by (used in) financing activities		38,979			(9,702	)

Titan Global Holdings, Inc.

Unaudited Consolidated Statements of Cash Flows Continued

(In thousands)

	Nine Months Ended
	5/31/2008		5/31/2007

Net increase (decrease) in cash and cash equivalents	$	1,998	$	(13	)
Cash and cash equivalents at beginning of period including cash of discontinued operations		1,190		1,401

Cash and cash equivalents at end of period including cash of discontinued operations	$	3,188	$	1,388

Cash and cash equivalents at end of period of discontinued operations	$	189	$	-

Cash and cash equivalents at end of period of continuing operations	$	2,999	$	1,388

Supplemental disclosures of cash flow information:
Interest Paid	$	1,994	$	2,385
Income Tax Paid	$	-	$	-

Non-cash activities:
Issuance of redeemable preferred stock for acquisition of note receivable	$	7,245	$	-
Issuance of common stock for capitalized debt costs	$	-	$	15
Net assets acquired through asset purchase agreement	$	-	$	3,401
Issuance of common stock for acquisition of note receivable	$	4,000	$	-
Issuance of common stock for reducing redeemable preferred stock	$	-	$	253
Issuance of common stock to Chief Executive Officer	$	-	$	305
Issuance of common stock in connection with lender credit facility	$	-	$	505
Property transferred in sale leaseback transaction	$	15,000	$	-

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

TITAN GLOBAL HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

Note 1 - Basis of Presentation and Nature of Business

Basis of Presentation

The accompanying unaudited consolidated financial statements of Titan Global Holdings, Inc. and its subsidiaries, (“Titan”, “We” or the “Company”), have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation are included herein. Operating results for the three-month and nine-month period ended May 31, 2008 are not indicative of the results that may be expected for the fiscal year ending August 31, 2008. These unaudited 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, 2007 as filed with the Securities and Exchange Commission on November 29, 2007. All significant intercompany accounts and transactions have been eliminated in preparation of the consolidated financial statements. All amounts referenced below are stated in thousands except shares and per share amounts unless otherwise noted.

The preparation of unaudited consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Such estimates relate primarily to the estimated lives of equipment and improvements, reserves for accounts receivable and inventory, allocation of purchase price for acquisitions, impairment of intangible assets, valuation of derivatives, fair value of equity instruments issued and sales returns.

Nature of Business

Organization:

The Company was formed on March 1, 1985 as a Utah corporation. In August, 2002, the Company acquired Titan West in a merger transaction with a subsidiary of the Company. Prior to this merger, the Company had no active business operations. On November 4, 2005, the name of the corporation was changed from Ventures-National Incorporated to its present name.

Nature of Operations:

The Company operates in four market segments - (i) Titan Global Energy Group, (ii) Titan Communications (iii) Titan Global Brands, and (iv) Titan Electronics and Homeland Security.

Energy Segment

The Company, through its Appalachian Oil Company (“Appco”) subsidiary is a petroleum distributor in the Southeastern United States. The operations include retail convenience stores and wholesale petroleum distribution. As of May 31, 2008, the retail division operated 54 convenience store locations in Tennessee, Kentucky, and Virginia, offering merchandise, foodservice, motor fuel and other services and the wholesale petroleum distribution division provided liquid motor fuel products for 170 accounts located in Tennessee, Kentucky, Virginia and North Carolina. We believe Appco’s unique retail/wholesale business model, scale, and merchandise offerings, combined with selected acquisition opportunities, position Appco for ongoing growth in sales higher margins. Appco is expanding the offerings of biofuels products such as E10 (90% petroleum, 10% ethanol), E85 (15% petroleum and 85% ethanol) and biodiesel to create a pre-eminent integrated distribution model leveraging renewable energy sources.

Communications Segment

The Company, through its Planet Direct (f/k/a Pinless, Inc.) subsidiary, provides prepaid international phone cards, and prior to February 2008, its Oblio Telecom (“Oblio”), Titan Wireless and StartTalk subsidiaries, provided prepaid international phone cards and prepaid wireless services. The communications division creates and distributes prepaid offerings that provide first and second generation Americans efficient means to complete international calls and to maintain wireless services. These prepaid communications products are sold directly to wholesale distributors in all 50 United States and Puerto Rico.

During the three months ended February, 2008, the Company’s communications division experienced a significant decrease in sales and collections of outstanding accounts receivable. Many of the long-standing distributors of Oblio’s products stopped placing orders for new product and stopped sending payments for previously placed orders. While management is vigorously pursuing legal action against many of these customers, the extended collection process has significantly disrupted the operating cash flow cycle of the prepaid international long distance portion of the Company’s communication’s division. These issues along with losses experienced in its network operations have resulted in the Company ceasing to do business as Oblio in the prepaid international long distance market. As such the Company evaluated the division’s goodwill and other intangible assets for impairment based on changes in the business model. Based on the determination of management, the Company impaired all of the goodwill and certain intangible assets of Oblio as of November 30, 2007.

Simultaneously, the Company determined to cease the distribution of code division multiple access “CDMA” prepaid wireless handsets and the related airtime through its subsidiary Titan Wireless RM, Inc, due to the increasing capital requirements associated with the business model at Titan Wireless, the Company’s wireless operating subsidiary. As such, the Company evaluated goodwill and other assets for impairment based on changes in its business model. Accordingly, the Company incurred an impairment charge of $14,572 related to the write-off of all the goodwill and intangible assets of Oblio and Titan Wireless during the three months ended November 30, 2007. On January 25, 2008, substantially all of the operating assets of the wireless related activities of the communications division were sold in an Asset Purchase Agreement to Boomerang Wireless, Inc. The purchase price was $1,000 (net of $737 release of liability) consisting of a $1,000 promissory note, a release of liability for asserted salary and bonus claims of $737 and the assumption of certain liabilities.

In February 2008, the Company created Titan Communications, Inc. (“Titan Communications”) and began operations in the Company’s Pinless Inc. subsidiary as Planet Direct Inc., entered into strategic relationships with several prepaid international long distance telecommunications providers and began establishing relationships with new distributors.

In addition, the Company’s Titan Communications subsidiary is creating a new VOIP based platform to terminate international long distance telecommunication services to serve the prepaid international long distance calling card industry as well as provide wholesale termination to other telecommunications companies. Titan Communications has yet to derive any revenue from its newly created VOIP platform. Titan Communications is in the process of purchasing hardware, programming software and establishing a network of service providers facilitating the operation of the platform.

Global Brands Segment

The Company has two subsidiaries in its Global Brands segment, USA Detergents (“USAD”) (see additional discussion in Note 2) and Titan Apparel, Inc. (“TAPP”) (see additional discussion in Note 2). USAD is headquartered in North Brunswick, New Jersey and is a manufacturer and distributor of value-branded home care products that leverages brand extensions and licensing agreements with consumer product conglomerates. As discussed in Note 15, the Company determined that it was not feasible to fund the operations of USAD and is no longer operating this subsidiary.

In connection with the formation of our Global Brands division and the related acquisition of USA Detergents on October 16, 2007, goodwill in the amount of $6,569 was established as of the acquisition date as part of the purchase price allocation. During the three months ended February 29, 2008, the Company evaluated the working capital requirements of USAD and determined that it was not feasible to fund the operations of USAD. During the due diligence phase of the acquisition of USAD and prior to acquisition, the Company made certain assumptions regarding the working capital necessary to revitalize the core business of USAD. During the execution phase of the post-acquisition reorganization plan, the Company was unable to successfully negotiate work out payment plans with key suppliers. As such, management determined to cease operations in its current structure. Accordingly, the Company incurred an impairment charge for $6,569 of goodwill related to the USAD acquisition in the three months ended November 30, 2007.

TAPP is headquartered in Santa Barbara, California and is an owner of several footwear brands and the Global Feet retail store chain and an authorized footwear marketer. TAPP designs, develops and markets stylish footwear for men, women and children.

Electronics and Homeland Security Segment

The Company, through its Titan East, Titan Electronics and Titan Nexus subsidiaries, manufactures printed circuit boards for quick-turn, prototype market and the defense supplier markets. The Company’s 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. The Company's time sensitive and high quality manufacturing services enable its 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. Additionally, Titan East serves military and defense industry customers that are required via regulation to purchase printed circuit boards from companies that hold certain certifications from the United States Department of Defense. Titan PCB East currently has military certifications 31032 and 55110.

On May 20, 2008, the Company entered into an Asset Purchase Agreement with Denis McCarthy dba Time Sensitive Circuits to sell substantially all of the assets of Titan East. The purchase price required no cash to be paid to the Company, but called for the infusion of $300 of working capital by the purchaser and the assumption of certain liabilities including accounts payable, a portion of the Greystone revolving credit facility approximating $1,100 and approximately $268 of the Greystone term debt. As of July 15, 2008, this transaction has not been completed. See additional discussion in Note 2.

Liquidity:

As of May 31, 2008, the Company had a working capital deficit of $26,762 including current assets and current liabilities from discontinued operations, a working capital deficit of $18,988 excluding current assets and current liabilities from discontinued operations, a stockholders’ deficit of $56,186 and an accumulated deficit of $85,357. The Company incurred a net loss of $34,657 and used cash from continuing operations of $10,692 for the nine months ended May 31, 2008. The Company is also past due on a significant amount of trade payables and is not making payments on certain outstanding debt because of its current cash flow constraints.

The Company’s principal sources of liquidity are the existing cash and cash equivalents, cash generated from operations and cash available from borrowings under the revolving credit facility and from related parties. The Company may also generate liquidity from future offerings of debt and/or equity. As of May 31, 2008, the Company had a total of $2,999 in unrestricted cash and cash equivalents. As of May 31, 2008, the Company also had restricted cash and cash equivalents and short-term investments of $617 that included funds to collateralize fuel bonds issued by a surety for Appco.

Since December 2007, the Company made significant cost reductions in the communications division and the global brands division. In the communications division, the Company reduced staffing in the Richardson, Texas facility in connection with retooling the business; focusing on selling prepaid international calling cards that terminate on the networks of third parties. In addition, staff reductions were made when the wireless related assets were sold on January 25, 2008. Staff reductions were made in the global brands division in North Brunswick, New Jersey when our USAD operations were closed. We have realized lower general and administrative expenses in those divisions with the intent of reducing the negative operating cash flow of these segments and our business as we redefine those operations through new business ventures, modified operating structures, sale to a third party, or liquidation. In the instances where business liquidation is considered necessary by management, our senior lender will in most cases receive the majority of the proceeds from liquidation. While the trade accounts payable and related accrued expenses for the communications division have been recorded at the full amount of the amounts owed, management intends to negotiate with many of the unsecured creditors and attempt to settle these liabilities for less than face value. For the operations of our USAD subsidiary, a bankruptcy trustee has been appointed and is working through the process of an orderly liquidation of the assets to satisfy USAD’s obligations. As management determines and has an understanding of the ultimate settlement amount of the associated liabilities of USAD, liquidation accounting rules will prevail and liabilities will be recorded at their anticipated settlement amounts. Given the recent cost containment measures implemented during the nine months ended May 31, 2008, management believes that our existing cash and investments, liquidity available under our revolving credit facility, ability to utilize term debt financing, ability to raise capital from the equity markets, ability to obtain funding from certain significant stockholders and or other related parties and cash flows from our remaining operations, namely the Energy segment, will be sufficient to meet our operating and capital requirements through at least the next twelve months. However, if we are not successful in continuing to reduce our costs and improve our related cash flows, it may be necessary to raise additional capital that may be dilutive to existing shareholders.

Note 2 – Acquisitions and Divestitures

Acquisition of Appalachian Oil Company

The Company formed Titan Global Energy Group to acquire and manage complementary energy sector assets. On September 17, 2007, the Company completed the acquisition of all of the issued and outstanding shares of capital stock of Appalachian Oil Company, Inc. (“Appco”), a corporation formed under the laws of Tennessee, from the James R. Maclean Revocable Trust, Sara G. Maclean, the Linda R. Maclean Irrevocable Trust and Jeffrey H. Benedict. The Company’s results of operations for the nine months ended May 31, 2008 include Appco’s results from the purchase date to the end of the reporting period. The purchase price paid for the shares under the Appco stock purchase agreement, as amended, was $30,000 in cash, of which $1,000 will be escrowed for 18 months following the closing of the acquisition in order to secure the Company’s potential claims against the Appco sellers for any breach of their representations, warranties and covenants under the stock purchase agreement. In addition, the Company incurred $1,947 in closing costs related to the acquisition.

Appco is headquartered in Blountville, Tennessee and is primarily engaged in the distribution of petroleum fuels in eastern Tennessee, southwestern Virginia, eastern Kentucky, western North Carolina and southern West Virginia and in the operation of retail convenience stores in some of those regions. Appco is a part of the Titan Energy division.

The acquisition was accounted for as a purchase. The purchase price allocated to the acquired assets and assumed liabilities were determined using management estimates based on a model developed by a professional valuation group. The Company has allocated the purchase price as follows:

Cash	$	5,719
Investment securities		2,597
Accounts receivable		5,545
Inventory		7,888
Real estate and fixed assets		27,434
Definte lived intangible assets		900
Goodwill		7,177
Indefinite-lived intangible assets		2,100
Other assets		681
Accounts payable		(16,969	)
Notes payable		(9,177	)
Other liabilities		(1,948	)
Purchase price	$	31,947

The sources of funding for the purchase price were as follows:

Sources of funds for closing:
Cash	$	2,092
Investment securities		2,481
Greystone revolving debt facility		14,909
Yorkville Advisors proceeds from sale of real estate		15,000
Greystone term loan		5,000
Accounts payable		750
Retirement of notes payable		(8,285	)
Purchase price	$	31,947

Sale and Leaseback of Real Estate

Immediately following the closing of the acquisition of Appco on September 17, 2007, Appco and its wholly-owned subsidiary Appco-KY, Inc. (“Appco-KY”) entered into a purchase and sale agreement with YA Landholdings, LLC and YA Landholdings 7, LLC pursuant to which Appco and Appco-KY sold certain property located in Kentucky, Tennessee and Virginia for $15,000 in cash. The proceeds were utilized to fund a portion of the acquisition cost of Appco. Certain properties were then leased back to Appco by YA Landholdings, LLC for a term of 20 years pursuant to the terms of a Land and Building Lease Agreement. The Land and Building Lease Agreement also contains four (4) five (5) year options to extend the term of the lease to a maximum of 40 years. The annual lease payments during each of the first five years of the term of the lease is $1,650. There was no gain or loss recorded associated with this transaction.

Acquisition of USA Detergents

The Company formed Titan Global Brands Division to integrate, protect and expand brand management capabilities and to identify and purchase other consumer product brands that can leverage and optimize growth from the Company's distribution channels. On October 16, 2007, the Company exercised its option to acquire 80% of the issued and outstanding capital of USA Detergents, Inc. (“USAD”) in exchange for one dollar pursuant to the Stock Purchase Agreement dated July 30, 2007 by and among the Company, USAD and USAD Metro Holdings, LLC, as amended. The Company’s results of operations for the nine months ended May 31, 2008 include USAD’s results from the date the Company exercised its option to the end of the reporting period classified as discontinued operations. See additional discussion in Note 22.

USAD is headquartered in North Brunswick, New Jersey and is a manufacturer and distributor of value-branded home care products that leverages brand extensions and licensing agreements with consumer product conglomerates.

Cash	$	6
Accounts receivable		4,367
Inventory		4,650
Property, plant and equipment		2,145
Definte lived intangible assets		2,560
Goodwill		6,569
Other assets		1,317
Accounts payable		(10,161	)
Notes payable		(1,300	)
Revolving credit facility		(10,153	)
Purchase price	$	-

Acquisition of Secured Convertible Debt of Nexus Nano Electronics and Subsequent Surrender of Assets

On November 2, 2007, Titan Nexus, Inc. (“Titan Nexus”), an indirect subsidiary of the Company, entered into a limited recourse assignment (the “Assignment”) with YA Global Investments, L.P. (“YA Global”). Pursuant to the Assignment, Titan Nexus was assigned all rights, title and interest to YA Global’s secured convertible debt position in Nexus Nano Electronics, Inc. (“Nexus Nano”), in the aggregate amount of $11,245, including principal and interest. The obligations are secured by all of Nexus Nano’s assets.

In consideration for the Assignment (i) the Company issued YA Global 2,000,000 shares of common stock, valued at $2.00 per share, the price of the stock at the time of the closing, and (ii) Titan Electronics, a direct subsidiary of the Company, issued YA Global 103,503 shares of Titan Electronics series A convertible preferred stock valued at $7,245.

On November 5, 2007, the Company formed Titan Electronics Group (“Titan EG”). Titan EG is currently a division of the Company and is a wholly owned subsidiary. Titan Nexus, along with the Company’s legacy subsidiaries, Titan East and Titan Electronics are now a part of Titan EG. The Company anticipates that Titan EG will be divested and spun off into a separate entity via a stock dividend.

On November 30, 2007, Titan Nexus completed the final step in the acquisition of the assets of Nexus Nano, a manufacturer of custom circuit boards for aerospace, defense and other industries. The surrender of assets was completed by agreement between Nexus Nano as debtor and Titan as creditor. The purchase price allocated to the surrendered assets and assumed liabilities was based on fair value as of the surrender date as determined by management. The fair value of the surrendered assets is presented below:

Cash	$	3
Accounts receivable		338
Inventory		1,173
Fixed assets		1,533
Goodwill		8,571
Other assets		27
Accounts payable		(10	)
Short term debt		(180	)
Long term debt		(210	)
Value of common and preferred stock issued	$	11,245

Acquisition of Assets in Global Brands Segment via a Secured Party Transfer of Global Brand Marketing, Inc. Collateral from Greystone Business Credit II, L.L.C.

On December 14, 2007, the Company formed Titan Apparel, Inc. (“TAPP”) and acquired the collateral of Global Brand Marketing Inc. (“GBMI”), a California Corporation, through a Secured Party Bill of Transfer with Greystone Business Credit II, L.L.C. (“GBC”). The purchase price of the collateral was $7,961 and was financed through a Loan and Security Agreement with GBC. The Company’s results of operations for the nine months ended May 31, 2008 include TAPP’s results from the date of formation to the end of the reporting period.

TAPP is headquartered in Carpinteria, California and is an owner of several footwear brands and the Global Feet retail store chain and an authorized footwear marketer. TAPP designs, develops and markets stylish footwear for men, women and children. The primary reason for the acquisition was to facilitate the development of the Company’s Global Brands segment with an opportunistic acquisition of undervalued assets accompanied by a successful seasoned management team. The acquisition was accounted for as a purchase. The purchase price allocation of the acquired assets was determined by management. There were no definite or indefinite lived intangible assets established as part of the purchase price allocation. Management allocated the purchase price to the most liquid assets first at their respective fair values as of the date of the acquisition and then to the non-current assets (fixed assets) at their respective fair values as of the date of acquisition in succession until the carrying value of the acquired assets equaled the purchase price. The Company has allocated the purchase price as follows:

Cash	$	153
Accounts receivable		3,459
Inventory		3,437
Fixed assets		912
Purchase price	$	7,961

Proforma Operating Results

Unaudited proforma operating results for the Company, assuming the acquisition of Appco occurred as of September 1, 2006, the beginning of fiscal year 2007, are presented below. The proforma operating results for Nexus Nano are not included due to immateriality. The proforma operating results for TAPP are not included because the predecessor company does not have the accounting records necessary to produce financial statements for the necessary periods.

	Three Months		Nine Months
	Ended		Ended
	5/31/2007		5/31/2007
Net sales	$	146,810	$	398,400
Net earnings (loss) applicable to common stockholders		5,083		(3,408	)
Net earnings (loss) applicable to common stockholders per share:
Basic earnings (loss) per common share	$	0.10	$	(0.07	)
Diluted earnings (loss) per common share	$	0.04	$	(0.07	)

Divestiture of CDMA Wireless Assets

On January 25, 2008, the Company’s subsidiary, Titan Wireless RM, Inc., completed a sale of certain assets for $1,000 and the assumption of certain liabilities to Boomerang Wireless, Inc. The Company received a Promissory Note from Boomerang for $1,000 bearing interest at the prime interest rate plus four percent and the note is fully reserved as of the date of acquisition. A reserve was established for the note based on the poor credit worthiness of Boomerang and its lack of stable financing. The Promissory Note is to be paid to the Company in four annual installments with interest in arrears beginning on December 31, 2008. The Company has obtained UCC-1 security interests in the accounts receivable, inventory, equipment and other assets of Boomerang as collateral to the Promissory Note. Boomerang also assumed certain liabilities of Titan Wireless RM, Inc as additional consideration to the Company. The Company retained its accounts receivable and retained its legacy wireless brand names Bravo Cellular and Picante Movil. The divestiture of the wireless assets was not treated as discontinued operations because this component of the Company and the Communications Segment is not clearly distinguishable from the rest of the Communications Segment by having its own financial statements. The Company recorded a gain on disposal of assets of $2,030 as a result of the transaction as liabilities assumed by the buyer were greater than the carrying value of assets divested.

Titan PCB East Asset Purchase Agreement

On May 20, 2008, the Company entered into an Asset Purchase Agreement with Denis McCarthy dba Time Sensitive Circuits, a management led buy-out team (“TSC”), to sell substantially all of the assets of the Company’s Titan PCB East subsidiary. The agreement calls for the assumption by TSC of Titan PCB East’s debt with GBC and certain other liabilities. As of July 15, 2008, the transaction had not closed due to uncertainties surrounding principally provisions of the agreement regarding obtaining approval for the transaction by GBC and resolving open issues with the landlord of the operation’s facilities in Amesbury, Massachusetts. Management continues to account for the operations of Titan PCB East as continuing because the sale of the asset group is not probable due to the identified uncertainties.

Note 3 – Recent Accounting Pronouncements

SFAS No. 141(R)

SFAS No. 141(R) - In December 2007, the FASB issued FASB 141(R), "Business Combinations" of which the objective is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. The new standard requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed (including contingent payments); requires expensing of all costs incurred in the transaction; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination.

This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date.

The Company is currently evaluating SFAS 141(R), and has not yet determined its potential impact on its future results of operations or financial position.

Note 4 – Income (Loss) per Common Share

The Company computes net 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 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 available to common stockholders 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 months ended May 31, 2008 consisted of employee options/warrants to purchase 1,342,500 common shares, warrants to purchase 12,230,000 common shares and preferred stock convertible into 3,229,738 common shares) are not considered in the computations. During the three months ended May 31, 2007 the common stock equivalents that were anti-dilutive and therefore not considered in the calculations consisted of warrants to purchase 10,200,000 shares and preferred stock convertible into 3,027,250 common shares. During the period when they would be anti-dilutive, common stock equivalents (which during the nine months ended May 31, 2008 consisted of employee options/warrants to purchase 1,582,500 common shares, warrants to purchase 22,250,000 common shares and preferred stock convertible into 3,229,738 common shares) are not considered in the computations. During the period when they would be anti-dilutive, common stock equivalents (which during the nine months ended May 31, 2007 consisted of options to purchase 845,000 common shares, warrants to purchase 11,100,000 common shares, and preferred stock convertible into 3,027,250 common shares) are not considered in the computations.

Note 5 - Inventory

Inventory consisted of the following:

	5/31/2008			8/31/2007

Raw materials and finished subassemblies	$	2,408		$	597
Work in process		808			566
Finished goods		12,241			564
		15,457			1,727
Less inventory reserves		(1,901	)		(64	)
	$	13,556		$	1,663

The reserve for obsolescence of $1,901 and $64 at May 31, 2008 and August 31, 2007, respectively, related primarily to raw material inventory in the Electronics and Homeland Security division.

Note 6 - Greystone Business Credit

Communications and Electronics and Homeland Security Divisions

On December 29, 2006, the Company, together with all of its subsidiaries, entered into a credit facility with Greystone. The new credit facility with Greystone initially included a revolving line of credit (“Revolver”) in the maximum amount of $15,000 and also includes senior term loans of up to $7,950.

The revolver expires in December 2009, subject to earlier termination under certain circumstances. The revolving credit facility bears interest at a rate of 1.5%, plus the prime interest rate. Interest payments on the revolver are due monthly with principal paid at maturity. Revolver loans will be advanced based upon 85% of eligible accounts receivable and up to a maximum of 85% of eligible inventory, subject to certain limitations. The Company is obligated to use any refunds on commercial taxes including Universal Service Fees (“USF”) to repay the term loans.

The senior term loans bear interest at a rate of 6%, plus the prime interest rate, provided that such rate is reduced by .5% for each reduction of principal by $1,000. The senior term loans were initially to be paid off in 48 equal installments of $135 per month which will result in repayment of the principal. At May 31, 2008, the Term Loan A had an interest rate of 11% and Term Loan B had an interest rate of 10%.

The Company granted a security interest in all of its assets to Greystone as security for the financing facility. Such security included a pledge of all trademarks and the stock of all subsidiaries.

The Company paid a commitment fee of $369 and will pay an annual commitment fee of ½% of the facility, payable on each anniversary. A loan servicing fee of .3% is payable each month based on the amount outstanding under the revolving facility. There is also a $20 per month administrative fee. In the event of a termination of the facility, an early termination fee will be payable. Such fee equals 1% of the maximum revolving facility and the term loans if the termination occurs during the first year. As additional consideration for the facility, the Company issued to Greystone: (i) 500,000 shares of common stock valued at $505 which was recorded as a debt discount, and (ii) a warrant to purchase 500,000 shares of common stock at a price of $1.00 per share, exercisable for a period of five years which was recorded as a derivative liability. The Company is obligated to register the shares of common stock and the common stock underlying the warrant.

On February 14, 2007, the Company entered into Amendment #1 with Greystone. Through the amendment, Greystone increased the Company’s Revolver line of credit from $15,000 to $18,000 and provides for senior term loans of up to $7,608. The Company is required to have a minimum unused availability under the line in increasing amounts between $200 and $1,000.

On June 1, 2007, the Company entered into Amendment #2 with Greystone. Through the amendment, the Company received approval from Greystone to transfer 100% of the issued and outstanding shares of common stock related to StartTalk from Oblio to Titan Global Holdings.

On June 11, 2007, the Company received the proceeds from tax refunds owed related to Federal Excise Tax (“FET”). The Company used $3,232 of the proceeds to repay Term Loan B in full.

On July 25, 2007, the Company entered into Amendment #3 with Greystone. Through the amendment, Greystone agreed to re-establish Term Loan B and advance the Company up to $1,500. On August 23, 2007, the Company entered into Amendment #4 with Greystone. Through the amendment, Greystone agreed to increase Term Loan B by $500 up to a maximum of $2,000. The monthly principal payment for Term Loan A is $18 and the new monthly principal payment for reestablished Term Loan B is $83. The amended senior Term Loan B is to be paid off in 24 equal installments, which will result in repayment of the principal. The terms for Loan A were not changed.

On September 17, 2007, the Company entered into Amendment #5 with Greystone. Through the amendment, Greystone consented to the debt issuance in favor of YA Global Investments, L.P. of $6,000 and agreed to a Term Loan C advance of $5,000. This three-year note carries an annual interest rate of 1.5% in excess of the prime interest rate and is fully collateralized with $5,000 of cash held in a restricted account. The entire balance of Term Loan C is due and payable on the maturity date of the loan.

On October 17, 2007, the Company entered into Amendment #6 with Greystone. Through the amendment, Greystone consented to the formation of Titan Card Services, Inc.

On October 16, 2007, the Company entered into Amendment #7 with Greystone. Through the amendment, Greystone reduced the amount of the minimum unused availability to $0 and agreed to increase the minimum unused availability by $16 each month up to a maximum amount of $750. In addition, the repayment schedule was modified for Term Loan B to $43 per month.

On November 30, 2007 the Company entered into Amendment #8 with Greystone. The amendment decreased the interest rate on Term Loan C from 1.5% above the prime rate to 0.75% per annum. The interest rate on Term Loan C was lowered to 0.75% because the loan was 100% collateralized by cash held in a non-interest bearing escrow at Greystone which approximates the market rate of interest for loans with this type of collateral.

On March 3, 2008, effective December 2007, the Company entered into Amendment #9 with Greystone. Through the amendment, Greystone consented to the formation of Titan Communications, Inc.

On March 3, 2008, effective February 11, 2008, the Company entered into Amendment #10 with Greystone. The amendment created Term Loan D, as an advance to Titan Nexus and increased the revolver amount to $20,000; $7,000 to the Electronics and Homeland Security segment and $13,000 to the Communications segment. Term Loan D shall be repaid in monthly installments beginning March 1, 2008 with the balance due on the maturity date of February 1, 2011. The amendment also modified the interest rates as follows: all revolving loans have an interest rate of 1.5% per annum in excess of the prime rate except the revolving loans owed by Titan Nexus in excess of $1,000 which have an interest rate of 4.5% per annum in excess of the prime rate and the interest rates shall not be lower than 6.0% per annum, the interest rate on Term Loan A shall be 6.0% per annum in excess of the prime rate and shall be reduced by one-half of one percent for every $1,000 reduction in the term loan but not lower than 5.0% per annum in excess of the prime rate, the interest rate for Term Loan B is 5.0% per annum in excess of the prime rate, the interest rate for Term Loan C is 0.75% per annum and the interest rate for Term Loan D is 6.0% per annum in excess of the prime rate. `

As of May 31, 2008, Term Loans A and B are recorded at $2,629 and the revolver has a balance of $15,247 with an excess available credit of $0 based on actual borrowing capacity. Interest rates on the revolver were 3.5% on $11,830 and 6.5% on $3,417.

On March 5, 2008, Term Loan C’s outstanding balance of $5,000 was paid in full. Term Loan D has an outstanding balance of $778 and an interest rate of 11% as of May 31, 2008.

Debt Covenant Restrictions Related to Communications and Electronics and Homeland Security Debts

Maximum Cumulative Net Loss:		$1,000 on a cumulative basis for the period from September 1, 2006 through the end of the Term

Maximum Leverage Ratio:		Not applicable

Limitation on Purchase Money Security Interests:		$1,000

Limitation on Equipment Leases:		$1,000

Additional Financial Covenants:		None

The Company has met all covenant terms except the maximum cumulative net loss. The Company has received a written waiver from Greystone related to this covenant through May 31, 2009. No penalties have been assessed related to this violation.

Energy Division

On September 17, 2007, the Company acquired Appco. As part of the acquisition, the Company entered into a credit facility including a revolving line of credit in the maximum amount of $20,000 less the outstanding balance under Term Notes A, B and C under the Loan and Security Agreement dated as of December 29, 2006 (see above). The credit facility also includes term loans of up to $5,200. An aggregate of approximately $14,909 was advanced under the loan and credit facility related to the initial Appco acquisition. Advances will be based upon (i) 90% of eligible accounts receivable, and (ii) the sum of up to 45% of eligible convenience store inventory plus up to 75% of eligible fuel inventory. The borrower is required to have a minimum outstanding balance of $10,000. The revolving credit facility and the term loans bear interest at a rate of 1.5%, plus the prime interest rate. A loan servicing fee of .25% is payable each month based on the average daily outstanding balance outstanding under the revolving facility and the term loans. In the event of a termination of the facility, an early termination fee will be payable. Such fee equals 1% of the maximum revolving facility and the term loans if the termination occurs during the first year, which is reduced to 0.50% if termination occurs in the second year and 0.25% if terminated thereafter. The borrower will also be assessed credit accommodation fees of 2% of the face amount of the letter of credit for up to 60 days and 1% of the face amount of such letter of credit for each 30 day period thereafter. The loan and line of credit is due September 16, 2012.

The Company issued Greystone a warrant to purchase 500,000 shares of common stock at a price of $2.00 per share, exercisable for a period of five years. Titan is obligated to register the common stock underlying the warrant within six months of the closing or by March 17, 2008. As of July 14, 2008, the common stock underlying the warrant has not yet been registered. No penalties have been assessed by Greystone related to this obligation.

At May 31, 2008 the revolver had an outstanding balance of $10,293 and the term notes had a carrying value of $4,035 (net of discount of $523) and an excess availability and an excess available credit of $0 based on actual borrowing capacity. The interest rate on the revolver and term loans was 7.5% at May 31, 2008.

Global Brands Division Including Discontinued Operations of USAD

On October 16, 2007 the Company assumed a note as a result of the USAD acquisition. The note was held by Greystone and had an issue date of December 27, 2006 in the amount of a $10,000 line of credit which will mature on January 1, 2010. The line of credit includes $500 for equipment advances. Advances on the revolver are based on a formula related to certain levels of eligible accounts receivable and inventory (as defined in the agreement). The agreement has a term of three years with automatic three-year extensions unless either party gives notice to the other of its intention to terminate the agreement.

Advances under the equipment advance facility are repayable in 84 monthly installments of principal and interest commencing February 1, 2007; however, such indebtedness, if any, will become due and payable on the earlier of (a) repayment of all revolver advances and the termination of any commitment by Greystone to make revolver advances under the agreement, and (b) the agreement maturity date. All advances bear interest at the prime rate plus 1% per annum.

The Company also assumed four term notes designated A, B, C & D which have an interest rate of 6.0%. As of May 31, 2008 the revolver has an outstanding balance of $5,330 and the term notes have a balance of $3,885. The monthly principal payment for Term Loan A, B, C & D is $72. As collateral for advances under the credit facility, the Company has granted Greystone a security interest in all of its assets. The revolver and lines have an excess available credit of $0 based actual borrowing capacity. The interest rate on the revolver and term loans was 6.0% at May 31, 2008.

On December 14, 2007, the Company through its subsidiary TAPP entered into a Loan and Security Agreement in connection with a Secured Party Bill of Transfer of the collateral of GBMI with Greystone. The credit facility includes a revolving line of credit in the maximum amount of $14,000. The credit facility also includes a term loan of up to $2,000. Loans will be advanced on the revolver based on a formula related to certain levels of eligible accounts receivable and inventory as defined in the agreement. The agreement has a maturity date of December 29, 2009. The revolving credit facility bears interest at 3% per annum in excess of the prime rate for a period of six months from the date of the loan and security agreement and 5% thereafter and the term loan bears interest at a rate of 5% per annum in excess of the prime rate for a period of six months from the date of the loan and security agreement and 7% thereafter. The agreement contains a provision for a net sales participation fee calculated as 5% of net sales to be applied to the outstanding balance of the term loan until the term loan is paid in full and thereafter paid as a fee. The agreement contains a provision for a sharing fee calculated as 25% of the net profits for the first four full fiscal quarters occurring after the loan agreement payable when the financial statements of the eligible fiscal quarter are delivered. As collateral for advances under the credit facility, TAPP has granted Greystone a security interest in all of its assets including all trademarks and patents. The Company guaranteed the obligations of TAPP up to $250. At May 31, 2008 the revolver had an outstanding balance of $5,707 and the term note had a balance of $1,825 and an excess available credit of $0 based on actual borrowing capacity. The interest rates on the revolving credit facility and term loans were 8% and 10%, respectively, at May 31, 2008.

Note 7 – YA Global

On September 17, 2007, the Company executed a secured convertible debenture in the principal amount of $6,000, all of which was advanced immediately. The Company pledged all of its assets and rights to secure this debenture subordinate to Greystone. Interest on the debenture accrues at 10% per annum. The debenture is convertible at the option of the holder into shares of common stock of Titan at a price of $2.25 per share. The debenture matures on September 17, 2010. Beginning on May 1, 2008 and continuing on the first business day of each successive month, the Company will make payments by converting such installment payment into shares of common stock provided certain equity conditions are met. The conversion price is equal to the lower of (i) $2.25 per share, or (ii) 90% of the lowest daily volume weighted average price of the common stock during the 15 consecutive trading days immediately preceding the conversion date. The Company may also at its option choose to redeem a portion or all of the installment payment by paying such amounts in cash plus a redemption premium of 10%. The Company may defer the payment of any installment payment to the maturity date if the volume weighted average price of the common stock equals 110% of the applicable conversion price for the consecutive 5 trading days prior to the notice due date for the applicable installment payment. Each installment amount shall be equal to all accrued and unpaid interest, plus the lesser of (a) the product of (i) $200 multiplied by a fraction of which the numerator is the original principal amount and the denominator of which is the aggregate purchase price paid under the Purchase Agreement and (b) the principal amount of the Debenture on the installment payment date.

The Company has the right to redeem a portion or all amounts outstanding under the Debenture prior to the maturity date at a premium of 10% provided that (i) the Volume Weighted Average Price (VWAP) of Titan’s Common Stock is less than the conversion price of $2.25; (ii) no event of default has occurred and (iii) the underlying Registration Statement is effective.

The Company also issued YA Global warrants to purchase 525,000 shares of common stock at a price of $2.47 per share and 525,000 shares of common stock at a price of $2.81 per share, exercisable for a period of five years. Titan is obligated to register the common stock underlying the warrant within 90 days of the closing. The Company has not yet registered the common stock underlying the warrants. The Company has received a waiver from YA Global related to this deficiency. No penalties have been assessed related to this violation.

The note was issued with a beneficial conversion feature. At issuance, the note was recorded at $1,831 with an associated discount of $4,169. The discount will be amortized over the 36 month term of the note. At May 31, 2008, the note had a recorded balance of $2,141 with an associated unrecognized discount of $3,859, no payments have been made and the Company has not been notified of any defaults.

Note 8 – Seller-Financed Notes and Preferred Stock

Seller-financed debt was provided in connection with the acquisition of Oblio on August 12, 2005, and the Company issued to the Seller, F&L, LLP (“F&L”) formerly known as Oblio Telecom, LLP, an 18-month promissory note in the principal amount of $2,500. The note matured on February 12, 2007 and carried an interest rate of 1% per annum. The note was recorded upon issuance at its fair value of $2,245, and the associated discount of $255 was amortized over the 18-month term of the note. The effective interest rate on the note was approximately 7.50%.

Additional seller financing was provided upon the closing of the Oblio acquisition in the amount of $2,323 in a contractual short term obligation that was not interest-bearing. On December 14, 2005, a promissory note was executed acknowledging this amount due to the Seller. The Note bears interest of 4%, and had an initial maturity date of May 31, 2006 which was extended to March 31, 2009.

On December 29, 2006, F&L agreed to amend the terms of the Series A Preferred Stock originally issued to them as part of the Oblio acquisition. The provisions related to potential additional value of the preferred shares as a result of attainment of certain financial goals were eliminated and the stated value of the preferred stock was reduced from $9,000 to $4,500. The preferred stock agreement was modified as follows:

The amended Series A Preferred Stock includes the first tranche only and is a fixed 3,000 shares with a stated value of $1.50 per share.

Holders of the Series A Preferred are entitled to preferential cash dividends out of the Company’s funds at an annual rate of 3% of the then current stated value, payable quarterly.

All shares must be redeemed by March 31, 2009.

The Series A Preferred is convertible into a number of shares of Common Stock equal to the then stated value (plus accrued and unpaid dividends) divided by $1.50 (the “Conversion Price”). The Conversion Price is subject to adjustments as a result of, among other things, stock splits and reclassifications and contains initial anti-dilution provisions including adjustments to the Conversion Price in the event of the Company issuing Common Stock at prices below the initial Conversion Price.

The Series A Preferred is non-voting, subordinate to all Greystone debt and has a preference in liquidation of $12,345 as of May 31, 2008.

On the same date, pursuant to the amendment, F&L agreed to extend the maturity date of the notes to March 31, 2009, and increase the interest rate to 5% per annum. Oblio will make monthly payments of $179, commencing January 31, 2007. In connection with the amendment, the Company issued 250,000 shares of common stock valued at $253 to F&L LLP. In addition, the Company agreed to guaranty the payment to be made by Oblio. No payments have been made since July 2007 and the Company is currently being sued by F&L, as discussed in Note 19.

In accordance with SEC Accounting Series Release No. 268, Presentation in Financial Statements of "Redeemable Preferred Stock", the Company has classified this preferred stock as well as the accrued dividends as long-term liability. Additionally, due to the potential variability of the Conversion Price as discussed above, the Company is required to record the embedded conversion feature of the Series A Preferred as a liability at fair value and to re-measure that value each reporting period with changes being charged to operations.

As of May 31, 2008, the Company has recorded $3,570 as debt related to the note and $4,845 related to the preferred stock (which includes $345 in accrued dividends). No dividend payments have been made as of July 15, 2008.

Note 9 – Deferred Purchase Consideration

On May 11, 2007, the Company acquired certain assets of Ready Mobile, LLC. Pursuant to the terms of the Asset Purchase Agreement, the Company agreed to pay consideration equal to 55% of earnings before interest, taxes, depreciation and amortization (EBITDA) for the first 36 months subsequent to the closing, payable monthly in arrears. As of August 31, 2007, the Company had accrued $3,401 for deferred purchase consideration which was management’s estimate of the total amount to be paid for the asset purchase.

As discussed further in Note 15, the Company determined to cease the distribution of CDMA prepaid wireless handsets and the related airtime through its subsidiary Titan Wireless RM, Inc, due to the increasing capital requirements associated with the business model at Titan Wireless, the Company’s wireless operating subsidiary. As such, the Company impaired the goodwill and intangible assets related to Ready Mobile asset purchase as of November 30, 2007. This impairment was offset by a reduction of the Deferred Purchase Consideration to $267 as of November 30, 2007. Furthermore, as the remaining assets associated with the wireless operations were sold on January 25, 2008, (see additional discussion in Note 2), the accrual for deferred purchase consideration was reduced to $0 as of January 25, 2008.

Note 10 – Titan Electronics Convertible Preferred Stock

On November 30, 2007, Titan Electronics, a direct subsidiary of the Company and the parent company of Titan Nexus, issued YA Global 103,503 shares of its series A convertible preferred stock (“Titan Electronics Preferred Stock”), which contains the following provisions:

• upon any dissolution, liquidation, winding-up or change of control of Titan Electronics, the Titan Electronics Preferred Stock has a liquidation value of $70 per share, or an aggregate of $7,245;

• The Titan Electronics Preferred Stock is convertible into shares of Titan Electronics common stock and initially each share converts into 70 shares of common stock. At such time as the common stock commences trading, the conversion ratio shall be amended to the product of the stated value, divided by the lower of (i) the value weighted average price VWAP of the Titan Electronics common stock for the first 30 trading days, (ii) the VWAP value weighted average price for the Titan Electronics common stock for the 20 trading days ending on the date which is one year after the initial trading date, or (iii) 85% of the lowest volume weighted average price during the 20 trading days immediately preceding the conversion date; provided that in no event shall such amount be less than the figure obtained by dividing $2,000 by the number of shares of common stock of Titan Electronics outstanding on a fully diluted basis, not including shares issuable to YA Global or their assignee. The Titan Electronics Preferred Stock contains customary value weighted anti-dilutions provisions. Holders of Titan Electronics Preferred Stock may not convert into shares of Titan Electronics common stock which would result in the holder owning more than 4.99% of the then outstanding shares of common stock, except on 65 days’ prior notice;

• The Titan Electronics Preferred Stock votes together with the Titan Electronics common stock and has the same number of votes as the number of shares of common stock into which the shares are convertible;

• Titan Electronics has the right to redeem the Titan Electronics Preferred Stock on 30 days notice at any time in cash equal to the stated value of the shares being redeemed; and

• In the event at any time after the date which is 18 months from the issuance date of the shares of Series A Preferred Stock, the Holder has the right to put the shares to Titan Electronics solely in the event (i) Titan Electronics has not acquired materially all of the assets of Nexus Nano, and (ii) the Titan Electronics common stock is not then trading. The redemption price equals the stated value.

Note 11 – Long-Term Debt

Long-term debt consisted of the following:

Issue	Expiration			Outstanding at
Date	Date		Instrument	5/31/2008
08/12/2005		03/31/2009	$4,823 Seller-Financed Debt	$	3,570
12/29/2006		02/01/2011	$20,000 Secured Revolving Note		15,247
12/29/2006		02/01/2011	$7,608 Term Notes A & B		2,629
09/17/2007		09/17/2012	$20,000 Secured Revolving Note		10,293
09/17/2007		09/17/2012	$5,200 Term Notes		4,558
09/17/2007		09/17/2010	$6,000 Convertible Debentures		6,000
11/30/2007		08/31/2010	Other		270
12/14/2007		12/29/2009	$14,000 Secured Revolving Note		5,707
12/14/2007		12/29/2009	$2,000 Term Notes		1,825
02/11/2008		02/01/2011	$830 Term Note D		778
Total debt					50,878
Less discount from warrants and derivatives					(4,383	)
Total carrying value of debt					46,495
Less current portion of long-term debt					(6,732	)
Total long-term debt				$	39,763

Long-term debt repayments are due as follows:

Fiscal Year	F&L Note		YA Global		Other		Greystone Revolvers		Greystone Term Debt		Total Long- Term Debt
2008	$	3,570	$	-	$	120	$	-	$	3,042	$	6,732
2009		-		-		120		-		1,226		1,346
2010		-		-		30		5,707		2,899		8,636
2011		-		6,000		-		15,247		1,331		22,578
2012		-		-		-		10,293		1,293		11,586
	$	3,570	$	6,000	$	270	$	31,247	$	9,791	$	50,878

Note 12 - Derivative Financial Instrument Liability

Pursuant to SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, and EITF Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, A Company’s Own Stock, the Company has identified certain embedded and free-standing derivative instruments. Generally, where the ability to physical or net-share settle an embedded conversion option or free standing financial instrument is not deemed to be within the control of the Company, the embedded conversion option is required to be bifurcated and both the free-standing instruments and bifurcated conversion feature are accounted for as derivative liabilities.

At each reporting date, the Company estimates the fair values of all derivatives and changes in the fair value are charged to operations. For embedded and free-standing derivatives valued using the Black-Scholes option pricing model the following assumptions were used: (1) contractual term of 3 to 7 years; (2) volatility of 115%, (3) risk free interest rates between 4.11% and 4.70% and (4) dividend rate of 0%.

The fair value of the individual long-term embedded and free standing derivatives at May 31, 2008 is as follows:

Issue Date	Expiration Date	Instrument	Exercise Price per Share		5/31/2008
9/17/07	9/17/12	Long-term fair value of conversion feature of convertible debenture			$	5,795
Long-term embedded derivatives						5,795

3/24/06	3/24/13	6,750,000 Warrants	$	0.23	$	2,699
10/12/06	10/12/11	250,000 Warrants	$	1.00		63
10/12/06	10/12/11	250,000 Warrants	$	1.10		66
12/29/06	12/29/11	500,000 Warrants	$	1.00		143
9/17/07	9/17/12	500,000 Warrants	$	2.00		124
9/17/07	9/17/12	525,000 Warrants	$	2.47		117
9/17/07	9/17/12	525,000 Warrants	$	2.81		108
Total long-term free-standing derivatives						3,320

8/12/05	3/31/09	Long-term fair value of conversion feature of Oblio Series A Preferred Stock	$	1.50	$	-

Total embedded and free-standing derivative liabilities					$	9,115

Note 13 – Related-Party Notes Payable

On September 28, 2007, the Company entered into a 6.5% promissory note with Frank Crivello, managing partner of the Crivello Group (a stockholder). The maturity date of the note was March 28, 2008. As of May 31, 2008, the outstanding balance of the note payable was $283. Payment on the note has not been made and the revised maturity date has not been determined as of July 15, 2008.

On February 25, 2008, the Company, through its Titan PCB East subsidiary, entered into a 10% promissory note with The Irrevocable Children’s Trust (a stockholder). The note has a six-month term with all interest and principal due at maturity. As of May 31, 2008, the outstanding balance of the promissory note payable was $214.

On February 26, 2008, the Company, through its Titan Electronics subsidiary, entered into a 10% promissory note with The Irrevocable Children’s Trust (a stockholder). The note has a six-month term with all interest and principal due at maturity. As of May 31, 2008, the outstanding balance of the promissory note payable was $200.

On February 29, 2008, the Company entered into a 10% promissory note with The Irrevocable Children’s Trust (a stockholder). The note has a six-month term with all interest and principal due at maturity. As of May 31, 2008, the outstanding balance of the promissory note payable was $448.

On February 29, 2008, Titan Electronics received a cash advance of $20 from Mike Kadlec on a $70 promissory note dated March 4, 2008. The $70 promissory note was replaced by an installment note dated May 23, 2008 for $390. The installment note has a maturity date of May 23, 2010, bears interest at 8.5% payable monthly beginning July 15, 2008 and calls for monthly payments of $15 for the first twelve months and $17.5 for months thirteen through twenty-four. During the three months ended May 31, 2008, additional cash advances were made under the note totaling $349 bringing the total amount of cash advances to $369, which was outstanding at May 31, 2008. Mike Kadlec is currently the President for Titan Electronics.

On March 4, 2008, Titan Electronics entered into a $67 promissory note dated March 4, 2008 with Ed Peterson The note bears interest at an annual rate of 10% and matures on September 4, 2008. Interest is payable monthly and the principal amount is due at maturity. As of May 31, 2008 the outstanding balance of the promissory note payable was $67. Ed Peterson is currently the Vice President of Operations for Titan Electronics.

Effective March 4, 2008, Titan Electronics entered into a $55 promissory note with Stephen Kennedy. The note bears interest at an annual rate of 10% and matures on September 4, 2008. Interest is payable monthly and the principal amount is due at maturity. As of May 31, 2008, the outstanding balance of the promissory note payable was $55. Stephen Kennedy is currently the Vice President of Sales for Titan Electronics and is a Director of the Company.

In connection with the Asset Purchase Agreement with Denis McCarthy dba Time Sensitive Circuits, as of May 31, 2008, Denis McCarthy has advanced Titan PCB East, $100 to be used as working capital. Repayment terms have not been specified as of July 14, 2008 in the event that the transaction does not close.

Note 14 – Short-Term Notes Payable

The Company has entered into 12-month financing agreements with several vendors to purchase fixed assets for its electronics and homeland security division. As of May 31, 2008, $73 is outstanding under these short-term notes payable.

As discussed in Note 2, the Company assumed certain short-term notes payables in the acquisitions of USAD and the surrender of assets of Titan Nexus. As of May 31, 2008, the Company has recorded $1,259 related to these short-term notes payable.

Note 15 – Impairment of Goodwill and Intangible Assets

Subsequent to November 30, 2007, the Company’s communications division experienced a significant decrease in sales and collections of outstanding accounts receivable. Many of the long-standing distributors of Oblio’s products stopped placing orders for new product and stopped sending payments for previously placed orders. While we are vigorously pursuing legal action against many of these customers, the extended collection process significantly disrupted the operating cash flow cycle of the prepaid international long distance portion of our communication division. These issues along with losses experienced in its network operations have resulted in the Company ceasing to do business as Oblio in the prepaid international long distance market. As such, the Company evaluated the division’s goodwill and other intangible assets for impairment based on changes in the business model. Based on the determination of management, the Company fully impaired the goodwill and all of the intangible assets of Oblio with the exception of the trade names as of November 30, 2007. Management determined to retain the trade names associated with Oblio and to continue to market them under Titan Communications and/or Pinless, Inc., dba Planet Direct.

Simultaneously, the Company determined to cease the distribution of CDMA prepaid wireless handsets and the related airtime through its subsidiary, Titan Wireless RM, Inc., due to the increasing capital requirements associated with the business model at Titan Wireless, the Company’s wireless operating subsidiary. As such, the Company evaluated goodwill and other assets for impairment based on changes in its business model. Accordingly, the Company incurred an impairment charge for $14,572 of goodwill and intangible assets related to the Oblio and Titan Wireless as of November 30, 2007.

In connection with the formation of our global brands division and related acquisition of USA Detergents on October 16, 2007, goodwill in the amount of $6,569 was established as of the acquisition date as part of the purchase price allocation. During the due diligence phase of the acquisition of USAD and prior to acquisition, the Company made certain assumptions regarding the working capital necessary to revitalize the core business of USAD. During the execution phase of the post-acquisition reorganization plan, the Company was unable to successfully negotiate work-out payment plans with key suppliers. The Company reevaluated the working capital requirements of this subsidiary and determined it was not feasible to fund the operations of USAD. As such, management determined to cease operations in its current structure. Accordingly, the Company incurred an impairment charge for $6,569 of goodwill related to the USA Detergents acquisition as of November 30, 2007. See additional discussion at Note 22.

Note 16 - Stock Options and Stock-Based Compensation

The Company accounts for its stock-based compensation arrangements in accordance with the provisions of SFAS No. 123(R), Share-Based Payment. The Company recognizes compensation expense of a stock-based award over the vesting period based on the fair value of the award on the grant date, net of forfeitures. The fair value of stock options granted is calculated under the Black-Scholes option-pricing model. No stock-based compensation awards were granted during the nine months ended May 31, 2008.

Note 17 - Universal Service Fund Refund

In 1997, the FCC issued an order, referred to as the Universal Service Order that requires all telecommunications carriers providing interstate telecommunications services to periodically contribute to universal service support programs administered by the FCC, the Universal Service Funds (“USF”). The Company is currently exempt from remitting USF contributions on the vast majority of its revenues in the prepaid international long distance calling card portion of our communications division due to the Limited International Revenue Exemption (LIRE) whereby in excess of 88% of the originated calls are terminated internationally. On March 18, 2007 Oblio entered into a settlement and release agreement for USF charges included in billings in 2006 and 2007 with Sprint Communications Company, L.P. These amounts were recorded as USF recoverable as of August 31, 2007. In the three months ended November 30, 2007, Oblio determined that no further USF credits were recoverable and wrote off the remaining $1,402 of USF recoverable to cost of sales.

Note 18 – Treasury Stock

On May 9, 2007, the Company’s Board of Directors approved a 4,000,000 share open market buyback program. The Board cited its attractive share price, as well as, reported record financial revenue results and strategic progress from its various business units in making this decision. As of May 31, 2008, the Company had repurchased 1,274,157 shares for $1,660 including transaction costs under the repurchase program. The Company also repurchased 50,000 shares of employee stock options for $55 in June 2007.

Total Number of

Maximum Number

Shares Purchased

of Shares that May

Total Number of

as Part of Publicly

Yet Be Purchased

Average Price

Announced Plans

Under the Plans or

Period

Purchased

Paid per Share

or Programs

Programs

05/09/07

08/31/07

1,087,307

1.35

1,037,307

09/01/07

11/30/07

24,850

1.62

24,850

12/01/07

02/29/08

212,000

0.98

212,000

03/01/08

05/31/08

Total

1,324,157

1.30

1,274,157

2,725,843

Note 19 - Litigation

ALLSTATE PRINTING & PACKAGING, INC

On March 25, 2008, the Company’s subsidiary, Oblio, was notified, via a process server, that it was being sued by Allstate Printing & Packaging, Inc. (“Allstate”). Allstate is seeking $86 for alleged unpaid invoices for services rendered in Passaic County: Superior Court, NJ. This action is currently pending. The Company has accrued the amounts alleged to be due in its accounts payable at May 31, 2008.

AMERTEL COMMUNICATIONS, INC

On April 2, 2008, the Company’s subsidiaries, Oblio and Titan Wireless, were notified, via a process server, that it was being sued by Amertel Communications, Inc. (“Amertel”). Amertel is seeking $275 for alleged unpaid refunds for products purchased in the US District Court, MD. This action is currently pending. The Company disputes the amounts alleged to be due, and Management is unable to estimate the ultimate liability, if any, related to this claim at May 31, 2008.

ASIA TELECOM CORPORATION

On March 7, 2008, Oblio filed a lawsuit in Dallas County, Texas, against Asia Telecom Corporation (“Asia Telecom”) seeking to recover $753 for unpaid product. Asia Telecom has filed a special appearance claiming that it does not have sufficient contacts with the State of Texas to warrant being sued in a Texas Court. The hearing on Asia Telecom’s special appearance is scheduled for July 25, 2008.

AT&T CORP.

On December 5, 2006, the Company’s subsidiary, Oblio Telecom, Inc. (“Oblio”), filed a Demand for Arbitration with the American Arbitration Association against AT&T Corp. (“AT&T”). Oblio sought a refund of amounts paid to AT&T for the period from 1999 to October 2006 for USF charges paid to AT&T pursuant the Purchase Order Agreement, which sets forth the parties’ business relationship. The fees paid to AT&T for AT&T’s Enhanced Prepaid Card Service (“Prepaid Card Service”) included USF and other Federal Communications Commission (the “FCC”) charges. AT&T retained this revenue instead of making the required contributions to the USF and other FCC programs based on AT&T’s argument that its Prepaid Card Service was exempt under the law.

On October 12, 2007, Oblio entered into a Settlement Agreement (the “Settlement Agreement”) with AT&T, effective as of October 11, 2007. Pursuant to the Settlement Agreement, AT&T agreed to waive and discharge its right to receive $7,200 and Oblio issued a promissory note for the payment of the balance of $600 in interest to AT&T in full settlement of the Partial Final Award issued in the arbitration proceeding on the counter claims brought by AT&T against Oblio and in full settlement of the Oblio’s Universal Service Fund claim against AT&T. As Oblio had already recorded its liability in its accounts payable, the $6,600 net reduction in accounts payable reduced cost of sales during the three months ended November 30, 2007.

Oblio has remitted $500 to AT&T in compliance with the Settlement Agreement as of May 31, 2008. Additionally, the Company has recorded $100 as a liability to AT&T as of May 31, 2008 for the remainder of the amounts due AT&T per the Settlement Agreement.

BARRON S. WALL, INC. t/a INSURANCE CONSULTING ASSOCIATES

On March 7, 2008, the Company’s subsidiary, USAD, was notified, via a process server, that it was being sued by Barron S. Wall, Inc. t/a Insurance Consulting Associates (“Barron”). Barron is seeking $7 for alleged unpaid invoices for services rendered in Middlesex County: Superior Court, NJ. This action is currently pending. The Company has accrued the amounts alleged to be due in its accounts payable at May 31, 2008.

CLIFTON PREPAID COMMUNICATIONS CORP.

On August 21, 2007, Oblio filed suit against Clifton Prepaid Communications Corp., Clifton Pre-Paid Corp, and Aref Aref (collectively “Clifton”) for non-payment of invoices related to services rendered in the District Court, 199^th Judicial District, Collin County, Texas. Oblio seeks $2,199 in payment plus pre-judgment interest, post judgment interest at the maximum lawful rate from July 30, 2007 until judgment at the rate of six percent per annum, and reasonable and necessary attorney fees and costs. Oblio also obtained Writs of Garnishment against Clifton’s funds on deposit with Bank of America, N.A. and J.P. Morgan Chase Bank. As a result of the Writs of Garnishment, Oblio trapped approximately $150 in Clifton’s bank accounts. Clifton has unsuccessfully attempted to dissolve the Writ of Garnishment. The trial in this case is scheduled for November 2008.

As of May 31, 2008, the Company has fully reserved and allowed for the $2,199 in accounts receivable from Clifton less the amounts captured in the Writ of Garnishment.

CRESCENT FUND, INC.

On July 6, 2007, the Company filed a lawsuit against Crescent Fund, Inc. in Dallas County, Texas, seeking a declaratory judgment declaring that the Company had no remaining liability to Crescent Fund, Inc. under a Consulting Agreement entered into by and between the Company and Crescent Fund, Inc. in October 2003. On July 7, 2008, the trial court entered judgment in favor of the Company declaring that the Company had no remaining liability to Crescent Fund, Inc.

F&L, LLP

On November 27, 2007, the Company was notified, via a process server, that it was being sued by F&L, LLP (“F&L”) in the District Court of Dallas County, Texas 160^th Judicial District. F&L is seeking the Company to perform on its guarantee of notes payable from Oblio to F&L. Principal amounts due to F&L, LLP as of May 31, 2008 is $3,570. This action is currently pending. The Company has recorded the amounts due as a liability as of May 31, 2008. Oblio has also recorded accrued interest of $410 related to this obligation. On April 29, 2008, GBC Funding, LLC intervened in the lawsuit seeking to stay the lawsuit as a result of F&L’s prior agreement to subordinate its debt and collection to the rights of GBC Funding, LLC. To date, F&L has voluntarily consented to the stay. However, the Motion to Stay is currently set for hearing in August 2008.

GEOTEL INTERNATIONAL, LC

On January 31, 2008, the Company’s subsidiary, Starttalk, was notified, via a process server, that it was being sued by Geotel International, LC (“Geotel”). Geotel is seeking $73 for alleged unpaid invoices for services rendered in Miami-Dade County: Circuit Court, FL. This action is currently pending. The Company has accrued the amounts alleged to be due in its accounts payable at May 31, 2008.

HAWAII GLOBAL EXCHANGE, INC. AND TRANSPAC TELECOM, INC.

On December 21, 2007, the Company’s subsidiary Oblio, filed a lawsuit against Hawaii Global in 162^nd Judicial District Court of Dallas County, Texas. Oblio sought to recover $1,319 for unpaid product. Hawaii Global then removed the lawsuit to the United States District Court for the Northern District of Texas. Hawaii Global then moved to dismiss the Texas lawsuit based upon lack of personal jurisdiction and in the alternative to transfer the Texas lawsuit to the United States District Court of Hawaii. The District Court denied Hawaii Global’s motion to dismiss and or transfer. On January 29, 2008, the Company’s subsidiary, Oblio, was notified, via a process server, that it was being sued by Hawaii Global Exchange, Inc. and Transpac Telecom, Inc. (“Transpac”). Transpac is alleging violation of the Communications Act, breach of oral contract, promissory estoppel, and intentional interference with contractual relations and/or prospective economic advantage in US District Court, HI. Oblio then filed a motion to dismiss the Hawaii lawsuit based upon lack of personal jurisdiction or, in the alternative, to transfer the Hawaii lawsuit to Texas. Although Hawaii Global and Transpac have opposed the motion to dismiss, they have consented to the transfer of the Hawaii lawsuit to the Northern District of Texas. The Hawaii lawsuit has been transferred and consolidated with the Texas Lawsuit. Hawaii Global has joined the Company, Bryan Chance, Kurt Jensen, Frank Crivello, and David Marks as parties to the lawsuit. The Company disputes these allegations and will defend itself, and Management is unable to estimate the ultimate liability, if any, related to this claim at May 31, 2008.

JACO ELECTRONICS, INC.

On September 1, 2006, a subsidiary of the Company, Titan Nexus, Inc. f/k/a Nexus Nano Electronic, Inc. (“Nexas Nano”) filed suit against Jaco Electronics, Inc. (“Jaco”) in the United States District Court for the Southern District of New York, alleging that Jaco had made certain misrepresentations in connection with an Asset Purchase Agreement executed in September 2004. Jaco denied the allegations and asserted counterclaims against Nexus Nano and other related entities. On June 27, 2008, the Company, Jaco, and others entered into a Settlement Agreement that provided for the release of claims between the parties and included a five-year Supply Agreement between Jaco, Titan Nexus, Inc. d/b/a NEO EMS, Inc., and Nexus Custom Electronics, Inc.

LANHAM ACT LAWSUIT

On February 15, 2008, Oblio filed a lawsuit in the United States District Court for the Northern District of Texas against various individuals and entities alleging trademark infringement under the Lanham Act. Many of the defendants have filed motion to dismiss which are currently pending before the Court.

LATIN AMERICAN VOIP, INC

On December 26, 2007, the Company and its subsidiaries, Oblio and Starttalk were notified, via a process server, that it was being sued by Latin American VOIP, Inc (“Latin American VOIP”). Latin American VOIP is seeking $723 for alleged unpaid invoices for services rendered in Palm Beach County: Circuit Court, Florida. This action is currently pending. The Company has accrued $630 of the amounts alleged to be due in its accounts payable as of May 31, 2008 and is disputing the difference of $93.

LEVEL 3 COMMUNICATIONS, LLC

On November 2, 2007, the Company’s subsidiary, Oblio, was notified, via a process server, that it was being sued by Level 3 Communications, LLC (“Level 3”). Level 3 is seeking $2,379 for alleged unpaid invoices for services rendered in Broomfield County: District Court, CO. On May 14, 2008, Oblio entered into an Agreed Judgment in the amount of $2,042. As of May 31, 2008, Oblio has accrued the amount of the Agreed Judgment in accounts payable.

RICO LAWSUIT

On February 15, 2008, Oblio filed a lawsuit in the United States District Court for the Northern District of Texas against various individuals and entities alleging a conspiracy to defraud Oblio under the Racketeering, Influence Corruption Act (“RICO”). Many of the defendants have filed motion to dismiss which are currently pending before the Court.

STX COMMUNICATIONS, INC

On January 16, 2008, STX Communications, LLC d/b/a STX Phone Cards (“STX”) sought a Temporary Restraining Order (“TRO”) in the 14^th Judicial District Court of Dallas County, Texas against the Company’s subsidiary Oblio. The TRO immediately restrained Oblio from suspending its network support for any pre-paid phone card supplied by Oblio to STX and from taking any action to impair the network supporting any pre-paid phone card supplied by Oblio to STX. On January 23, 2008, the Company was notified by its attorneys that the TRO became effective and enforceable and that the Company was in violation of its TRO and was subject to sanctions for contempt of court. The TRO has since been dissolved by agreement of the parties.

STX has added the Company, Bryan Chance, Kurt Jensen, and Frank Crivello as defendants. STX claims that Oblio breached a contract to provide network support for prepaid phone cards, and to accept returns of the cards as necessary. STX also alleges that Oblio has been unjustly enriched by STX’s payments for cards, and that Oblio breached the implied warranty of merchantability and the express warranty to provide network support for the cards, and that Oblio’s failure to provide network support breached a duty of care owed to STX. STX also claims that Titan, Chance and Crivello tortiously interfered with the Oblio/STX contract and caused Oblio to purposefully interrupt network support for the cards sold to STX. Finally, STX alleges all defendants tortiously interfered with STX’s business relationships with STX’s distributors and end consumers by playing recorded messages for end consumers to return their cards, and changing rate decks on the cards from the posted rates. STX’s actual damages are not specified, but it seeks not less than $1,200 in exemplary damages, together with interest, and attorney’s fees.

Oblio has filed a counter-claim against STX, alleging STX failed to pay for the cards it purchased. Oblio also claims STX, together with Tawfik and Raimondo, STX’s chief officers, fraudulently induced Oblio to sell pre-paid phone cards for certain foreign markets at a loss, in exchange for STX’s promise to place Oblio products in more lucrative local markets. STX’s failure to place Oblio’s products in the promised markets caused Oblio damages in an amount not less than $10.

The case is currently set for trial on September 29, 2008, but the parties have agreed to request a continuance setting the trial for the week of April 20, 2009.

TOUCH TELL, INC.

On December 21, 2007, Oblio filed suit in Dallas County, Texas, against Touch Tell, Inc. (“Touch Tell”) for $1,300 in unpaid product. Oblio also initially obtained a pre-judgment Writ of Garnishment against Touch Tell’s bank trapping $1,300. Touch Tell filed a counterclaim that claims that after allowing for credits, deactivations, and returns, Oblio owes Touch Tell approximately $268. Touch Tell successfully reduced the amount of the garnishment to $477. At May 31, 2008, Oblio has recorded accounts receivable from Touch Tell equal to the garnishment of $477. No amounts have been recorded or accrued related to the counter claim. The case is now set for trial in November 2008.

WESTERN PRINT & MAIL, LLC

On January 25, 2008, the Company’s subsidiary Titan Wireless was notified, via a process server, that it and Ready Mobile, LLC were being sued by Western Print & Mail, LLC (“Western”). Western is seeking $71 including late charges from Ready Mobile, LLC. Western is seeking $183 from Titan Wireless, which includes the $71 from Ready Mobile, LLC and $112 including late charges from Titan Wireless, for alleged unpaid invoices for services rendered in Iowa District Court for Linn County. This action is currently pending. The Company has not accrued any amounts related to the charges incurred by Ready Mobile, LLC. As per the asset purchase agreement with Ready Mobile, LLC, this liability was not assumed, and therefore is not a responsibility of the Company. In addition, the Titan Wireless liability was assumed by Boomerang Wireless, Inc. on January 25, 2008 with the sale of certain CMDA assets as discussed in Note 2.

OTHER LEGAL MATTERS

As of May 31, 2008, the Company has fully reserved and allowed (through its allowance for doubtful accounts $15,736 and its allowance for sales returns $3,672) $19,408 in accounts receivable recorded for the communications division matters referenced above including Clifton.

Note 20 – Contingency

In January 2007, prior to the Company’s purchase of Appco, Appco entered into a settlement agreement with one of its cigarette vendors totaling $2,500. The settlement was in response to an investigation by the Federal Bureau of Alcohol, Tobacco and Firearms related a buy-down marketing program and certain contractual limitations with a cigarette vendor. Appco satisfies this obligation through the application of marketing funds that would have been otherwise received from the vendor through a marketing program. As of May 31, 2008, $691 of the original settlement obligation remains unpaid of which $163 is a current liability.

Note 21 - Segment Information

The Company considers itself in four distinct operating segments.

The Company, through its subsidiaries Titan Electronics, PCB East and Titan Nexus, is a fabrication service provider of time sensitive, high tech, prototype and pre-production printed circuit boards, providing time-critical printed circuit board manufacturing services to original equipment manufacturers, contract manufacturers and electronic manufacturing services providers. The Company considers this its electronics and homeland security business segment.

The Company, through its subsidiaries Titan Communications and Pinless, dba Planet Direct, is engaged in the creation, marketing, and distribution of prepaid telephone other related activities. The Company considers this its communications business segment.

The Company, through its Appco subsidiary, distributes petroleum fuels and operates retail convenience stores. The Company considers this its energy business segment.

The Company, through its Titan Apparel subsidiary headquartered in Santa Barbara, California designs, develops and markets stylish footwear for men, women and children. The Company acquired certain assets in TAPP in a transaction on December 14, 2007. The Company’s USAD subsidiary headquartered in North Brunswick, New Jersey, manufactures and distributes value-branded home care products that leverages brand extensions and licensing agreements with consumer product conglomerates was previously included in this segment but is considered discontinued operations. The Company considers this its global brands business segment.

	Three Months Ended
	5/31/2008
	E & HS			Comm			Energy			Brands			Corp.			Total
Sales :	$	6,977		$	42		$	120,336		$	957		$	-		$	128,312
Interest expense:		142			1,009			446			152			326			2,075
Net income (loss ) from continuing operations :		(1,161	)		(2,549	)		(154	)		(1,739	)		(523	)		(6,126	)
Loss from discontinued operations		-			-			-			(1,139	)		-			(1,139	)
Assets :		16,479			11,570			41,036			13,846			(5,325	)		77,606
Accounts receivable, net:		3,784			740			5,271			1,080			-			10,875
Inventory, net		1,886			5			9,598			2,067			-			13,556
Equipment and improvements , net:		2,782			325			11,088			872			118			15,185
Depreciation expense:		267			46			615			90			13			1,031
Goodwill and indefinite lived intangible assets :		8,571			-			9,277			-			-			17,848
Definite lived intangible assets , net		-			3,778			666			-			-			4,444

	Three Months Ended
	5/31/2007
	E & HS		Comm			Energy		Brands		Corp.			Total
Sales :	$	6,174	$	24,627		$	-	$	-	$	-		$	30,801
Interest expense:		1,992		(1,039	)		-		-		-			953
Net income (loss ):		2,031		4,498			-		-		(1,792	)		4,737
Assets :		6,747		47,187			-		-		130			54,064
Accounts receivable, net:		3,588		11,379			-		-		-			14,967
Inventory, net		1,225		911			-		-		-			2,136
Equipment and improvements , net:		1,648		647			-		-		-			2,295
Depreciation expense:		171		41			-		-		-			212
Goodwill and indefinite lived intangible assets :		-		6,661			-		-		-			6,661
Definite lived intangible assets , net:		-		18,352			-		-		-			18,352

	Nine Months Ended
	5/31/2008
	E & HS		Comm			Energy			Brands			Corp.			Total
Sales:	$	22,168	$	34,897		$	312,881		$	2,358		$	-		$	372,304
Interest expense:		572		2,272			1,669			321			882			5,716
Net income (loss) from continuing operations:		5,317		(17,187	)		(2,640	)		(3,139	)		(4,554	)		(22,203	)
Loss from discontinued operations		-		-			-			(12,454	)		-			(12,454	)
Net income (loss):		5,317		(17,187	)		(2,640	)		(15,593	)		(4,554	)		(34,657	)
Impairment of intangibles:		-		14,572			-			-			-			14,572
Assets:		16,479		11,570			41,036			13,846			(5,325	)		77,606
Accounts receivable, net:		3,784		740			5,271			1,080			-			10,875
Inventory, net		1,886		5			9,598			2,067			-			13,556
Equipment and improvements, net:		2,782		325			11,088			872			118			15,185
Depreciation expense:		715		283			1,895			154			37			3,084
Goodwill and indefinite lived intangible assets:		8,571		-			9,277			-			-			17,848
Definite lived intangible assets, net		-		3,778			666			-			-			4,444

	Nine Months Ended
	5/31/2007
	E & HS			Comm		Energy		Brands		Corp.			Total
Sales:	$	16,726		$	80,138	$	-	$	-	$	-		$	96,864
Interest expense:		1,962			1,213		-		-		9			3,184
Net income (loss)		(2,898	)		6,907		-		-		(3,278	)		731
Assets:		6,747			47,187		-		-		130			54,064
Accounts receivable, net:		3,588			11,379		-		-		-			14,967
Inventory, net		1,225			911		-		-		-			2,136
Equipment and improvements, net:		1,648			647		-		-		-			2,295
Depreciation expense:		171			41		-		-		-			212
Goodwill and indefinite lived intangible assets:		-			6,661		-		-		-			6,661
Definite lived intangible assets, net:		-			18,352		-		-		-			18,352

All the Company's facilities are located in the United States and the majority of the Company's sales are made within the United States.

Note 22 - Discontinued Operations and Bankruptcy Filing in Global Brands Segment

Facts and Circumstances

During the second quarter of fiscal 2008, the Company ceased its manufacturing operations for filling and packaging USAD liquid products. The Company has segregated the operating results of USAD from the results of continuing operations and classified them as discontinued operations for the three- and nine-month periods ended May 31, 2008. As USAD was acquired on October 17, 2007, during the current fiscal period, prior period operating results were not restated. On February 12, 2008, several suppliers of USAD filed an involuntary Chapter 7 bankruptcy petition with the United States Bankruptcy Court in the District of Delaware. During the third fiscal quarter of 2008, the Company converted the Chapter 7 bankruptcy filing to a Chapter 11 bankruptcy filing and pursued other alternatives for the assets of USAD. On June 13, 2008, the bankruptcy was converted back to a Chapter 7 bankruptcy and the court appointed a trustee to oversee the liquidation of the remaining assets. The Company is exploring opportunities to maximize the value of the brands by outsourcing filling and packaging of USAD brands, licensing USAD brands to other manufacturers, and other alternatives. Management continues to account for the operations of USAD as discontinued operations because management is unable to estimate and reflect realizable values of USAD’s assets and the settlement amounts of USAD’s liabilities that may result from the bankruptcy proceedings.

Financial Detail of the Discontinued Operations

The results of operations of the discontinued USAD are as follows:

	Three			Nine
	Months			Months
	Ended			Ended
	5/31/2008			5/31/2008
Sales - Global brands division	$	193		$	5,433
Cost of sales - Global brands division		793			6,660
		(600	)		(1,227	)
Operating expenses :
Sales and marketing		1			970
General and administrative expenses		357			2,435
Bad debt expense		-			567
Impairment of intangibles		-			6,569
Amortization of intangibles		-			193
		358			10,734
Loss from operations		(958	)		(11,961	)
Other income (expenses):
Other income		-			51
Interest expense		(181	)		(544	)
Loss from discontinued operations	$	(1,139	)	$	(12,454	)

The principal balance sheet items of the assets held for sale are stated below:

	May 31,
	2008
Current assets
Cash and cash equivalents	$	189
Accounts receivable, trade (less allowance for doubtful accounts of $1,814)		1,221
Inventory, net		3,112
Prepaid expenses and other current assets		158
Total current assets	$	4,680
Non-current assets
Equipment and improvements , net	$	1,929
Definite-lived intangible assets , net		2,367
Other assets		93
Total non-current assets	$	4,389
Current liabilities
Accounts payable -trade	$	8,598
Accrued liabilities		1,670
Short-term notes payable		1,250
Current portion of long-term debt		936
Total current liabilities	$	12,454
Non-current liabilities
Lines of credit	$	5,331
Long-term debt		2,950
Other long-term liabilities		560
Total non-current liabilities	$	8,841

Long-term debt consisted of the following:

10/16/2007 01/01/2010 $10,000 Secured Revolving Note	$	5,331
10/16/2007 01/01/2010 $4,087 Term Notes		3,885
Total debt		9,216
Less current portion of long-term debt		(936	)
Total long-term debt	$	8,280

Long-term debt repayments are due as follows:

Fiscal	Greystone		Greystone		Total Long-
Year	Revolvers		Term Debt		Term Debt
2008	$	-	$	936	$	936
2009		-		863		863
2010		5,331		2,086		7,417
	$	5,331	$	3,885	$	9,216

Note 23 - Subsequent Events

On June 24, 2008, the Company acquired all of IVI Communications, Inc. (“IVI”) outstanding Series A and B Preferred Stock from former holders. The Preferred Stock includes the right to vote a majority of IVI’s shares for any action to be taken by shareholders. The purchase price of the preferred stock was $0. IVI was formed in September 1995 to acquire traditional local and regional Internet access Service Providers (ISP’s) in the Western States to achieve economies of operation and accelerated growth through centralized management. In addition, the Company entered into a loan and security agreement with IVI for $100,000, bearing interest at 13% to be used to fund corporate expenses primarily associated with fulfilling IVI’s obligations for periodic reporting requirements with the Securities and Exchange Commission.

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 other portions of this report contain forward-looking information that involve risks and uncertainties. The Company's 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 “Forward Looking Information/Risk Factors. ” This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with its unaudited consolidated financial statements and the related notes included elsewhere in this report.

Overview

All amounts excluding share and per share amounts referenced below are stated in thousands unless otherwise noted.

Summary Corporate Background

The Company is a diversified holding company with a dynamic portfolio of subsidiaries in the energy, communications, apparel, electronics and homeland security industries. The Company is committed to serving its broad base of customers and end consumers through a variety of wholesale and retail offerings. The Company has recruited and acquired through acquisitions a talented team of dedicated employees.

The Company was organized under the laws of the State of Utah on March 1, 1985, with the primary purpose of seeking potential business enterprises which in the opinion of the Company's management would prove profitable. The Company was largely inactive through 2001.

The Company began its electronics and homeland security division in 2001 through SVPC Partners LLC, a Delaware limited liability company that commenced its operations in July 2001 ("SVPC"). SVPC began acquiring technology equipment, processes, customer lists and orders from competitors but was 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 Circuit Systems, Inc. ("CSI") pursuant to a combined approved bankruptcy court sale. After acquiring SVPC Circuit Systems, Inc. and certain assets of CSI, Titan acquired certain system integration division assets out of bankruptcy from creditors of Paragon Electronic Systems, Inc.

On June 28, 2002, the Company entered into a letter of intent with Titan PCB West, Inc., a manufacturer of time sensitive, high tech, prototype and pre-production printed circuit boards.

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

In connection with the Merger, AcquisitionCo merged with and into Titan PCB West through the exchange of 6,880,490 shares of its Common Stock for all of Titan PCB West's outstanding shares of common stock.

On August 12, 2002, Titan PCB West acquired certain intangible assets contributed by Louis George, the Company's President and Chief Executive Officer, 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.

On February 27, 2003, through the Company's subsidiary, Titan PCB East, the Company acquired substantially all of the assets of Eastern Manufacturing Corporation, an Amesbury, Massachusetts-based manufacturer of rigid-flex printed circuits using a patented manufacturing process (the "HVR Flex Ô Process"), for approximately $500 in a foreclosure sale from Eastern Manufacturing Corporation's secured lender Eastern Bank. The acquired assets included equipment, work-in-progress, inventory, technology and patent licenses and customer lists. In connection with this acquisition, the Company assigned Eastern Manufacturing Corporation's rights under a license agreement with Coesen Inc., a New Hampshire corporation ("Coesen Inc."), to manufacture PCBs using the HVR Flex Ô Process to Titan PCB East and Titan PCB East was granted an option to purchase certain real estate assets. The Company financed the acquisition of Eastern Manufacturing Corporation's assets through the issuance and sale on February 27, 2003 of secured promissory notes by Titan PCB East to a limited number of accredited investors in a private placement.

Effective March 5, 2003, the Company purchased shares of common stock of Coesen Inc. 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 Titan common stock and $5 in cash. In connection with the share purchase, David M. Marks, one of Titan’s Directors, was elected to the Board of Directors of Coesen Inc. and Mr. Doane resigned as a director of Coesen Inc. In consideration for the license rights to the proprietary technology of Coesen Inc., the Company has agreed to pay Coesen Inc. a royalty in the amount of 2.0% of revenues derived from the Company's sale of products using this technology, payable on a quarterly basis, subject to Coesen Inc. forgiving the royalty payment should certain directors of Coesen Inc. be under employment contracts with us.

In 2005, the Company launched its communications division by acquiring Oblio Telecom, Inc.

On July 28, 2005, Farwell Equity Partners, LLC (“Farwell”) and its newly formed acquisition subsidiary, Oblio entered into an Asset Purchase Agreement with Oblio Telecom L.L.P. (“Seller”) and its sole owners, Sammy Jibrin and Radu Achiriloaie (“Selling Owners”), for the purchase of substantially all of the assets of Seller. This transaction closed on August 12, 2005, upon Oblio obtaining financing for the acquisition. Also, effective on August 12, 2005 and immediately following the aforementioned closing, Farwell contributed its 1,000 shares of the common stock of Oblio to Titan, which stock represents all of the authorized and outstanding common stock of Oblio. Upon receipt of the Oblio common stock by Titan, Oblio became a wholly-owned subsidiary of Titan.

Through the Oblio acquisition, the Company also acquired Pinless, Inc. Pinless offers customers the ability to access prepaid international calling features via e-commerce or Pinless residential dialing. Pinless supports first and second generation Americans that have established credit and prefer the convenience of managing their account purchases of prepaid communications services and products online through our website WhyUseIt.com.

On April 17, 2006, the Company established StartTalk, Inc. to own and operate switching equipment. This switching equipment enables the Company to rapidly deploy and efficiently deliver prepaid international telecommunications services at favorable cost structures. StartTalk owns, operates and leases switching equipment in two strategic locations in the United States.

On September 28, 2006, the Company established Titan Wireless Communications, Inc. Titan Wireless is the Company’s prepaid wireless communications subsidiary and is a Mobile Virtual Network Operator (“MVNO”). Titan Wireless marketed its MVNO through two brands, BRAVO cellular and Picante Movil.

On May 11, 2007, the Company through its subsidiary Titan Wireless acquired certain assets of Ready Mobile, LLC. Ready Mobile is in the business of creating, marketing, and distributing prepaid telephone products for the wireless markets. Pursuant to the terms of the Asset Purchase Agreement dated as of April 9, 2007, the Company agreed to pay consideration equal to 55% of earnings before interest, depreciation, taxes, and amortization (EBITDA) for the first 36 months subsequent to the closing, payable monthly in arrears. The EDITDA calculation is based on revenue from the acquired distribution channels off set by a formula based expense structure. The assets acquired include all fixed assets, equipment, furniture, fixtures, and leasehold improvements located at Ready Mobile’s offices in Hiawatha, Iowa, and used by Ready Mobile in connection with its business. The Company also acquired all contracts and intellectual property of Ready Mobile used in the operation of the business. Substantially all of the assets of Titan Wireless were sold to Boomerang Wireless in an asset purchase agreement on January 25, 2008 for a $1,000 promissory note, a release of liability for asserted salary and bonus claims of $737 and the assumption of certain liabilities.

On July 23, 2007, the Company formed a new division, the Titan Energy Group (“Titan Energy”). Titan Energy’s focus will be on acquiring and managing complementary energy sector assets, which falls in line with the Company’s strategy to aid growth through strategic acquisitions.

On August 7, 2007, the Company formed a new division, Titan Global Brands (“Titan Brands”). Titan Brands will focus on integrating, protecting and expanding brand management capabilities and leveraging and optimizing growth from the Company's distribution channels.

On September 4, 2007, the Company formed Titan Card Services, Inc. ("Card Services"). Card Services is a division of the Company and is a wholly owned subsidiary. Card Services’ focus will be to capitalize on the burgeoning multibillion dollar international prepaid money transfer sector. Given the Company’s familiarity with the prepaid sector and the specific needs of its core demographic customer base, which includes first and second generation Americans, the Company's senior management identified a significant need in this growing market to transfer funds internationally. For competitive reasons, Titan will not release details of these products and their pricing at this time.

On September 17, 2007, the Company completed the acquisition of all of the issued and outstanding shares of capital stock of Appalachian Oil Company, Inc. (“Appco”), a corporation formed under the laws of Tennessee, from the James R. Maclean Revocable Trust, Sara G. Maclean, the Linda R. Maclean Irrevocable Trust and Jeffrey H. Benedict. The purchase price paid for the shares under the Appco stock purchase agreement, as amended, was $30,000 in cash, of which $1,000 will be escrowed for 18 months following the closing of the acquisition in order to secure the Company’s potential claims against the Appco sellers for any breach of their representations, warranties and covenants under the stock purchase agreement. Appco is headquartered in Blountville, Tennessee and is primarily engaged in the distribution of petroleum fuels in eastern Tennessee, southwestern Virginia, eastern Kentucky, western North Carolina and southern West Virginia and in the operation of retail convenience stores in some of those regions. Appco is a part of the Titan Energy division.

On October 16, 2007, the Company exercised its option to acquire 80% of the issued and outstanding capital of USA Detergents, Inc. (“USAD”) in exchange for one dollar pursuant to the Stock Purchase Agreement dated July 30, 2007 by and among the Company, USAD and USAD Metro Holdings, LLC, as amended. USAD is headquartered in North Brunswick, New Jersey and is a manufacturer and distributor of value-branded home care products that leverages brand extensions and licensing agreements with consumer product conglomerates. On February 12, 2008, several suppliers of USAD filed an involuntary Chapter 7 bankruptcy petition with the United States Bankruptcy Court in the District of Delaware. During the third fiscal quarter of 2008, the Company converted the Chapter 7 bankruptcy filing to a Chapter 11 bankruptcy filing and pursued other alternatives for the assets of USAD. On June 13, 2008, the bankruptcy was converted back to a Chapter 7 bankruptcy and the court appointed a trustee to oversee the liquidation of the remaining assets. The Company is exploring opportunities to maximize the value of the brands by outsourcing filling and packaging of USAD brands, licensing USAD brands to other manufacturers, and other alternatives

On November 2, 2007, Titan Nexus, Inc. (“Titan Nexus”), an indirect subsidiary of Titan Global Holdings, Inc. (the “Company”), entered into a limited recourse assignment (the “Assignment”) with YA Global Investments, L.P. (“YA Global”). Pursuant to the Assignment, Titan Nexus was assigned all rights, title and interest to YA Global’s secured convertible debt position in Nexus Nano Electronics, Inc. (“Nexus Nano”), in the aggregate amount of $11,245, including principal and interest. The obligations are secured by all of Nexus Nano’s assets. In consideration for the Assignment (i) Titan issued YA Global 2,000,000 shares of common stock, valued at $2.00 per share, the price of the stock at the time of the closing, and (ii) Titan PCB West, Inc. (“Titan Electronics”), a direct subsidiary of the Company and the parent company of Titan Nexus, issued YA Global 103,503 shares of Titan PCB West series A convertible preferred stock.

On November 5, 2007, the Company formed Titan Electronics Group (“Titan EG”). Titan EG is currently a division of the Company and is a wholly owned subsidiary. Titan Nexus, along with the Company’s legacy subsidiaries, Titan East and Titan Electronics, Inc. are now a part of the Titan EG. The Company anticipates that this entity will be divested and spun off into a separate entity via a 100% stock dividend in FY 2008.

On November 30, 2007, Titan Nexus completed the final step in the acquisition of the assets of Nexus Nano Electronics, Inc. ("Nexus"), a manufacturer of custom circuit boards for aerospace, defense and other industries. The surrender of assets was completed by agreement between Nexus as debtor and Titan as creditor.

On December 14, 2007, Titan Apparel, Inc. (“Titan Apparel”), a wholly owned subsidiary of Titan Global Holdings, Inc., acquired substantially all of the assets of Global Brand Marketing Inc (“Global”). Global, located in Santa Barbara, CA, owns the brands Dry-shod, No Mass, Mehandi and Funflopps. Global operates under the banner Global Feet and sells its footwear products in 130 countries worldwide. The purchase price of $7,961 was financed through a credit facility with Greystone Business Credit II L.L.C.

During January 2008, the Company created Titan Communications, Inc. (“Titan Communications”) and began operations in the Company’s Pinless Inc. subsidiary as Planet Direct Inc. Through these subsidiaries, the communications division will further its strategic endeavors in the prepaid international long distance marketplace and began exploring new relationships outside our historical distribution and supply channels.

On April 25, 2008, PCB West, Inc. changed its name to Titan Electronics, Inc.

Business Overview

The Company is in the early stage of operations and, as a result, the relationships between revenue, cost of revenue, and operating expenses reflected in the financial information included in this Form 10-Q do not represent future expected financial relationships. Much of the cost of revenue and operating expenses reflected in its consolidated financial statements are costs based on the integration of the acquired companies and assets that comprise its operations. Accordingly, the Company believes that, at the Company's current stage of operations, period-to-period comparisons of results of operations are not meaningful.

The Company’s business strategy is to create shareholder value in each of its operating divisions, which include energy, communications, electronics and homeland security and consumer products. The Company may continue to evaluate acquisition, spin-off, and/or divestiture opportunities in its operating divisions. Additionally, the Company may pursue acquisition opportunities in new market segments.

The Company’s business strategy, by division, is to:

Titan Global Energy Group

Titan Global Energy Group was formed in the fourth quarter of fiscal year 2007. Titan Global Energy Group is a division engaged in the acquisition and management of complementary energy sector assets. On September 17, 2007 Titan Global Energy Group completed the acquisition of Appco. Appco, formed in 1923 and based in Blountville, Tennessee, is a regional petroleum company that owns and operates an extensive petroleum product distribution network that is comprised of 160 dealers in the southeastern United States. Appco operates 54 convenience store locations in Tennessee, Kentucky and Virginia. Appco has more than 550 employees and maintains long standing partnerships with strategic terminal operators and major oil companies.

Titan Global Energy Group’s business strategy is to:

Integrate the operations and distribution network of Appco.

Increase the integration of biofuel products through strategic agreements and acquisitions that will enhance core profitability at wholesale and retail distribution and environmental responsibility in the markets we serve.

Integrate vertically in the supply chain of purchasing petroleum.

Increase inside store margins and volume through alignment with strategic distribution partners, product placement and aggressive liquid fuel pricing.

Titan Communications Division

Titan Communications Division is comprised of prepaid international long distance distribution, international long distance network operations and prepaid wireless distribution. The Company started its Communications Division with the purchase of the assets of Oblio Telecom in August 2005. Oblio Telecom was comprised of a strategic relationship with a tier one communications provider and a distribution network of over 60,000 retail locations for prepaid international long distance products. Subsequent to the acquisition of Oblio Telecom, the Company expanded relationships to another strategic tier one provider, began international network operations through its subsidiary Starttalk, Inc, and purchased assets of Ready Mobile, LLC to expand its prepaid wireless distribution of CDMA handsets. In the 2^nd quarter of fiscal 2008, the Company created Titan Communications, Inc., began operating its Pinless, Inc. subsidiary as Planet Direct, entered into a strategic relationship with a tier one international long distance telecommunications provider, ceased doing business as Oblio Telecom, divested of the wireless assets and suspended the international network operations.

Titan Communications Division business strategy is to:

Evaluate the viability of the Company’s Oblio Telecom subsidiary and its distribution network.

Create new distribution opportunities for prepaid international long distance products through new channels to include point of sale activated products.

Enter strategic relationships with carriers and other entities to secure high quality, cost effective termination of international long distance traffic.

Enter strategic relationships with tier one strategic partners to distribute prepaid international long distance products.

Identify opportunities to leverage the Company’s distribution network and valued brands with other prepaid wireless offerings such as GSM handsets and airtime or SIM cards.

Offer other prepaid services (i.e., money transfer, prepaid debit/credit cards, etc.) through existing distribution channels to first and second generation Americans.

In the quarter ended February 29, 2008, the Company created Titan Communications to further its strategic endeavors in the prepaid international long distance marketplace, and began exploring new relationships outside Oblio’s traditional distribution and supply channels. Additionally, the Company no longer had strategic relationships with tier one partners for resale of prepaid international calling cards due to disputes over USF charges (see Note 17 to the consolidated financial statements). Simultaneously, the Company experienced a significant decrease in sales and collections of outstanding accounts receivable. Many of the long-standing distributors of Oblio’s products stopped placing orders for new product and stopped sending payments for previously placed orders. While we are vigorously pursuing legal action against many of these customers, the extended collection process has significantly disrupted the operating cash flow cycle of the prepaid international long distance portion of our communication’s division. These issues along with losses experienced in its network operations have resulted in the Company ceasing to do business as Oblio in the prepaid international long distance market. As such, the Company evaluated goodwill and other assets for impairment based on changes in business model. Goodwill and other intangibles of $4,666 were determined to be impaired and were written off during the quarter ended November 30, 2007. As of May 31, 2008, the allowance for sales returns remained at $3,552 and the allowance for uncollectible accounts receivable was increased to $12,114 for Oblio Telecom.

In the second quarter of fiscal 2008, Titan Wireless, Inc. (“Titan Wireless”), the Company’s wireless operating subsidiary, determined to cease the distribution of CDMA prepaid wireless handsets and the related airtime through its subsidiary Titan Wireless RM, Inc., due to the increasing capital requirements associated with the business model. As such, the Company evaluated goodwill and other assets for impairment based on changes in its business model. Goodwill associated with the purchase of Ready Mobile, LLC and the goodwill associated with the CDMA MVNO agreement in the amount of $9,906 was expensed as impaired as of November 30, 2007. In addition, the remaining goodwill, definite and indefinite lived assets were written off against the contingent purchase price commitment established with the asset purchase from Ready Mobile, LLC. Titan Wireless has sold its CDMA wireless subscriber base and distribution network. Titan Wireless is concurrently seeking other strategic relationships to offer GSM handsets and airtime to its distribution channels, which would reduce capital costs per subscriber on an on-going basis.

Titan Electronics and Homeland Security Division

Titan’s Electronics and Homeland Security Division is comprised of Titan PCB East and Titan Electronics. These companies specialize in the manufacturing of advanced circuit boards and other high tech products for military and high-tech clients. On November 30, 2007, the Company completed its acquisition of Nexus Nano. Nexus Nano is a manufacturer of custom circuit boards for aerospace, defense and other industries.

Titan Electronics and Homeland Security Division business strategy is to:

Target potential customers and industries needing prototype boards with required turnaround times between 24 hours and the industry standard 10 days.

Aggressively market specialty manufacturing services for time sensitive, high-tech prototype and pre-production Rigid and HVR 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 the Company’s innovative “rep-centric” sales approach.

Seek continued geographic diversification of its customer base through its nationwide rep network.

Integrate operations of Nexus Nano Custom Electronics, Inc.

Titan Global Brands

Titan Global Brands was formed to integrate, protect and expand brand management capabilities and to identify and purchase other consumer product brands that can leverage and optimize growth from the Company's distribution channels. On October 17, 2007 the Company completed its acquisition of USA Detergents, Inc. (“USAD”). USAD distributed mixed truckloads of laundry, cleaner and candle brands at attractive prices and in unique merchandising configurations. By leveraging brand extensions and licensing agreements with consumer product conglomerates, USAD's brand extensions include Arm & Hammer, Aim, Close-up, Pepsodent, Betty Crocker, Snapple, Fabulous and Oxymax. Additionally, USAD owns tier one brands such as Country Air, Crystal Shine, Fine Care HS, Swiss Pine and Touch of Glass and USAD owns tier two brands such as Laundry Bright, Plumbers Aid, Power Scrub and Xtra Easy. USAD also owns 50% of net profits generated by the liquid cleaner portion of the Brillo brand. During the second quarter of fiscal 2008, the Company ceased its manufacturing operations for filling and packaging USAD liquid products. On February 12, 2008, several suppliers of USAD filed an involuntary Chapter 7 bankruptcy petition with the United States Bankruptcy Court in the District of Delaware. During the third fiscal quarter of 2008, the Company converting the Chapter 7 bankruptcy filing to a Chapter 11 bankruptcy filing and pursued other alternatives for the assets of USAD. On June 13, 2008, the bankruptcy was converted back to a Chapter 7 bankruptcy and the court appointed a trustee to oversee the liquidation of the remaining assets. The Company is exploring opportunities to maximize the value of the brands by outsourcing filling and packaging of USAD brands, licensing USAD brands to other manufacturers, and other alternatives. See additional discussion in Note 22 to the consolidated financial statements.

Subsequent to the quarter ended November 30, 2007, the Company, through its newly formed subsidiary Titan Apparel, Inc (“Titan Apparel”) acquired the assets of Global Brands Marketing, Inc. (“GBMI”). Titan Apparel, located in Santa Barbara, CA, owns the brands Dry-shod, No Mass, Mehandi and Funflopps. Titan Apparel operates under the banner Global Feet and, through its predecessor entity GBMI, sold its footwear products in 130 countries worldwide.

Titan Global Brands business unit strategy is to:

Integrate USAD brands into Company’s distribution network.

Evaluate the viability of USAD’s manufacturing facilities in New Jersey.

Evaluate other strategic partners to manufacture or license products for USAD’s valued brands.

Identify and integrate other extensions of Titan Global Brands portfolio of brands and intellectual property.

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.

In our energy division, we recognize sales of petroleum and other items when the title passes to the customer. We recognize the gross amounts earned from sales to wholesale customers as revenues. Shipping and handling costs charged to customers are included in our sales. At May 31, 2008 we had $0 allowance for returns and an allowance for doubtful accounts of $109. Actual returns may differ materially from our estimates, and revisions to the allowances may be required from time to time.

Sales in our energy division are subject to volatility based on trading prices of petroleum and the competitive forces in our markets. We expect sales to continue to remain constant in fiscal year 2008 subject to changes in trading prices of petroleum.

In the communications division, the Company recognizes revenue upon the activation of its prepaid calling cards (except StartTalk products) by the customers or the transfer of risk of loss on our prepaid wireless handsets. The Company recognizes revenue as the minutes are used on our StartTalk products as that is when the revenue is earned. StartTalk products are provided through switches that the Company owns and/or leases and thus the Company is responsible for inbound and outbound termination. The third party switches bill as minutes are used. The Company records an estimated liability for these minutes when the cards are activated. Breakage is recognized ratably over the anticipated usage of cards. Revenue is deferred on StartTalk products that have been sold but services have not yet been provided to the end customer. The Company records sales as gross sales less an allowance for returns and discounts. We provide our customers a limited right of return for calling cards and defective handsets and record an allowance against gross revenues for estimated returns at the time of the sale based on historical results and current information related to specific customer accounts. At May 31, 2008 we had an allowance for returns of $3,672 and an allowance for doubtful accounts of $15,726. Actual returns may differ materially from our estimates, and revisions to the allowances may be required from time to time.

We are currently evaluating the future direction of our prepaid international long distance business and the prepaid wireless business. We have incorporated Titan Communications, Inc., begun operating our Pinless, Inc. subsidiary as Planet Direct, entered into a strategic relationship with a tier one international long distance telecommunications provider, ceased doing business as Oblio Telecom, divested of the wireless assets and suspended the international network operations. Additionally, we are pursuing more economic means to provide prepaid wireless services to our distribution channels and customers. Specifically, we are pursuing opportunities to provide GSM services and/or other alternatives for prepaid wireless services and airtimes to our customers.

In our electronics and homeland security division, we recognize sales upon shipment to our customers. We record net sales as gross sales less an allowance for returns and discounts. At May 31, 2008 we had approximately 260 customers in our electronics and homeland security division. We provide our customers a limited right of return for defective PCBs and record an allowance against gross revenues for estimated returns at the time of sale based on its historical results. Because our 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, 2008, we had an allowance for returns of $119 and an allowance for doubtful accounts of $289. Actual returns may differ materially from our estimates, and revisions to the allowances may be required from time to time.

We expect sales to grow in our electronics and homeland security division as we continue to develop our reputation in the quick turn and prototype and defense industry markets. Additional acquisitions such as the acquisition of Nexus Custom Electronics will also increase sales as well as cause disruption as facilities, employees, and processes are integrated. We expect 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.

In our global brands division, we recognize sales at the time the merchandise is shipped to our distribution customers. At May 31, 2008 we had $0 allowance for returns and an allowance for doubtful accounts of $2,937. Actual returns may differ materially from our estimates, and revisions to the allowances may be required from time to time.

We are currently evaluating opportunities in our global brands division to outsource manufacturing of our products, license brands for other companies use in similar products and other strategic alternatives.

Cost of Sales

In our energy division, cost of sales consists of costs of acquiring petroleum and related products in our stores. Additionally, we include transportation costs of petroleum, shipping costs and handling costs in the cost of sales. Our cost of sales can fluctuate based on the changing market pricing of petroleum products on a daily basis. We effort to mitigate our risk of market fluctuations in petroleum pricing by purchasing fuel on the spot market at the refineries, through strategic relationships with terminal operators and prevailing rates on the open market.

In our communications division, cost of sales consists of network costs associated with terminating our customers’ traffic, regulatory fees, printing and shipping. The cost of wireless handsets is also included in cost of sales in our prepaid wireless division as well. Our cost of sales can fluctuate with changes in the amount of traffic to certain destinations, changes in the regulatory fees to certain destinations and method of call termination. Our network capacity utilizes least cost routing software which chooses routes real time from many suppliers for each destination to maintain a competitive cost base and acceptable call quality. If we are successful completing a strategic relationship with another tier one partner or other strategic partners, we could experience improvements in our margins.

In our electronics and homeland security 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. 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 revenues, varies depending on the complexity of the PCBs we manufacture in any given period.

In our global brands division, cost of sales includes the cost of materials, labor, outside services and overhead expenses incurred in the manufacture and filling of its products. As in our electronics division, many factors affect our gross margin, including, but not limited to, capacity utilization, production volume, production quality and yield.

Included in cost of sales is overhead which is relatively fixed on an annual basis. Materials are variable and labor is semi-variable and is influenced by the complexity of orders as well as the quantity of orders. As our electronics and homeland security 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 its target market.

Operating and Non-Operating Expenses

Each division’s operating expenses for the three months ended May 31, 2008 and 2007 are comprised of marketing, general and administrative, certain non-recurring costs and costs related to mergers and acquisitions.

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. 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 the products and company.

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. 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 do not expect a material increase in sales and marketing expense that is not consistent with an increase in our sales over a reasonable period of time. We anticipate our 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.

Interest Expense

Interest expense reflects interest paid or accrued on debt instruments, the amortization of debt issuance costs, and finance charges. Interest expense includes, for derivative instrument liabilities, the amortization of the discount from the face value of convertible debt resulting from allocating part or all of the proceeds to the derivative instruments, together with the stated interest on the instrument, which is amortized over the life of the instrument, using the effective interest method.

Gain or Loss from Derivative Liabilities

The Company reviews the terms of convertible debt and equity instruments issued to determine whether there are embedded derivative instruments, including embedded conversion or other features that are required to be bifurcated and accounted for separately as derivative financial instruments. Generally, where the ability to physical or net-share settle an embedded conversion option is not deemed to be within the control of the Company, the embedded conversion option is required to be bifurcated and accounted for as a derivative liability. In connection with the sale of convertible debt and equity instruments, we may also issue free-standing options or warrants. 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 free-standing options and warrants as derivative liabilities, rather than as equity. Certain instruments, including convertible debt and equity instruments and free-standing 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 free-standing options or warrants be accounted for as derivative instrument liabilities.

Derivative liabilities are initially measured at their fair value and then re-valued at each reporting date, with changes in the fair value reported as charges or credits to the statements of operations. For derivative liabilities related to free-standing warrants and embedded conversion features, we use the Black-Scholes option pricing model to determine the fair value. For derivative liabilities related to registration rights agreements and cash payment premiums, we used a discounted present value of expected future cash flows to determine the fair value. To the extent that the initial fair values of the bifurcated and/or free-standing derivative liabilities exceed the total proceeds received, an immediate charge to the statements of loss is recognized, in order to initially record the derivative liabilities at fair value. The discount from the face value of the convertible debt resulting from allocating part or all of the proceeds to the derivative liabilities, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to the statements of operations, using the effective interest method.

Results of Operations

As of May 31, 2008, the Company has a working capital deficit of $26,762 including current assets and current liabilities from discontinued operations, a working capital deficit of $18,988 excluding current assets and current liabilities from discontinued operations and an accumulated deficit of $85,357. The Company generated sales of $128,312 and $30,801 for the three months ended May 31, 2008 and 2007, respectively; and incurred a net loss and had net income of $7,265 and $4,771, respectively. The Company generated sales of $372,304 and $96,864 for the nine months ended May 31, 2008 and 2007, respectively; and incurred a net loss of $34,657 and had net income of $832, respectively. In addition, the Company used $10,692 and generated $10,096 of cash flows from continuing operations during the nine months ended May 31, 2008 and 2007, respectively.

Three Months Ended May 31, 2008 Compared to the Three Months Ended May 31, 2007

The following table sets forth the results of operations for the three months ended May 31, 2008 and 2007 and should be read in conjunction with our consolidated financial statements and the related notes appearing elsewhere in this report.

	Three Months Ended
	5/31/2008					5/31/2007
Sales - Energy division	$	120,336		94	%	$	-		-	%
Sales - Communications division		42		0			24,627		80
Sales - Electronics and homeland security division		6,977		5			6,174		20
Sales - Global brands division		957		1			-		-
Total sales		128,312		100			30,801		100

Cost of sales - Energy division		113,687		89			-		-
Cost of sales - Communications division		20		0			15,742		51
Cost of sales - Electronics and homeland security division		7,094		6			5,826		19
Cost of sales - Global brands division		640		0			-		-
Total cost of sales		121,441		95			21,568		70

Gross profit		6,871		5			9,233		30

Operating expenses:
Sales and marketing		593		*			406		1
General and administrative		10,388		8			3,210		10
Bad debt expense		1,071		1			2,008		*
Amortization of intangibles		494		*			1,369		4
Total operating expenses		12,546		10			6,993		23

Operating income (loss)		(5,675	)	(4	)		2,240		7
Other income		377		*			22		*
Interest expense		(2,075	)	(2	)		(953	)	(3	)
Gain on value of derivative instruments		1,247		1			3,462		11
Net income (loss) from continuing operations	$	(6,126	)	(5)	%	$	4,771		15	%

Loss from discontinued operations		(1,139	)	(1	)		-		-
Net income (loss)	$	(7,265	)	(6)	%	$	4,771		15	%

Sales. Sales increased by $97,511 or 317% from $30,801 in the three months ended May 31, 2007 to $128,312 in the three months ended May 31, 2008. Sales increased primarily due to the formation of our Titan Energy division and the acquisition of Appco on September 17, 2007 and the formation of our Global Brands division, Titan Apparel and the related acquired assets. Sales decreased in the communications division due to the Company ceasing business as Oblio in December 2007 and rebuilding the communications segment of our business over the ensuing months since the revision of the marketing strategy for our prepaid international calling card business. In addition, the communications division sold its wireless related assets in the second quarter of fiscal 2008. As such, sales in the communication division decreased by $24,585 or 100% from $24,627 in the three months ended May 31, 2007 to $42 in the three months ended May 31, 2008.

Cost of Sales. Cost of sales increased $99,873 or 463%, from $21,568 in the three months ended May 31, 2007 to $121,441 in the three months ended May 31, 2008, and as a percentage of sales increased from 70% in the three months ended May 31, 2007 to 95% in the three months ended May 31, 2008. The cost of sales increased due to the formation of our Titan Energy division and the acquisition of Appco on September 17, 2007 and the formation of our Global Brands division, Titan Apparel and the related acquired assets. Cost of sales in the communication division decreased $15,722 or 100%, from $15,742 in the three months ended May 31, 2007 to $20 in the three months ended May 31, 2008. Costs of sales decreased in the communications division due to the significantly lower sales in the comparable periods. The increase in cost of sales as a percent of sales is due to a higher percentage of sales in the current period from our energy division primarily made up of lower margin fuel sales compared to the prior period that was comprised primarily of sales in our communications division. In the prior period, the communications division primarily sold products serviced by third party carriers and had fixed margins albeit higher margins than our current product mix.

Sales and Marketing. Sales and marketing expenses increased by $187 or 46% in the three months ended May 31, 2007 to $593 in the three months ended May 31, 2008. As a percentage of sales, sales and marketing expense decreased from 1% in the three months ended May 31, 2007 to less than 1% in the three months ended May 31, 2008. The decrease in sales and marketing expense as a percent of sales is due to the lower sales and marketing expense as a percent of revenue in our energy division, which was formed in fiscal 2008 as compared to our historical operations where the majority of the sales and marketing expense was incurred in our electronics and homeland security division. The energy division had sales of $120,336 for the three-month period ending May 31, 2008 and sales and marketing expenses of $21 or 0.017% whereas our electronics and homeland security division had sales of $6,977 and sales and marketing expenses of $525 or 7.5%. In the prior period, the sales from our electronics and homeland security division made up a larger percentage of total sales and therefore increased the combined sales and marketing expense as a percent of sales in the aggregate.

General and Administrative Expenses. General and administrative expenses increased $7,178 or 224% from $3,210 in the three months ended May 31, 2007 to $10,388 in the three months ended May 31, 2008. As a percentage of sales, general and administrative expense was slightly lower for the comparable periods due to cost reductions in the communications division. General and administrative expense increases were attributable to the acquisitions that occurred during the 2008 fiscal period. Acquired entity general and administrative expenses increased $8,505, electronics and homeland security general and administrative expenses increased $323 and the communications division general and administrative expenses decreased $1,592 in the three months ended May 31, 2008 compared to the three months ended May 31, 2007. General and administrative expenses increased in the electronics and homeland security division due to staff additions and decreased in the communications division due to the sale of the wireless assets, staff reductions in the Richardson, Texas facility and other cost cutting measures.

Bad Debt Expense. Bad debt expense decreased $937 or 47% from $2,008 in the three months ended May 31, 2007 to $1,071 in the three months ended May 31, 2008. Bad debt expense for the prior period was established in the communications division in connection with a dispute with one of our wholesale providers. In the current period, an additional allowance for bad debt was established in the communications division due to the release of a portion of a pre-judgment garnishment obtained in connection with one of the lawsuits associated with accounts receivable. While management will continue its collection efforts, an adjustment to the established allowance for doubtful accounts will be made when and if those certain accounts are collected or are deemed to be collectible. Oblio has allowed $12,114 for uncollectible accounts and $3,552 for sales returns related to these disputes.

Amortization of Intangibles. Amortization of intangibles decreased $875 or 64% from $1,369 in the three months ended May 31, 2007 to $494 in the three months ended May 31, 2008. Amortization of intangibles decreased during the three months ended May 31, 2008 due to the impairment recorded during the quarter ended November 30, 2007 in the communications division. Intangible assets that were being amortized in the prior period were impaired in a prior quarter and are therefore no longer being amortized.

Interest Expense. Interest expense increased $1,122 or 118%, from interest expense of $953 in the three months ended May 31, 2007 to $2,075 in the three months ended May 31, 2008. Interest expense increased primarily due to the debt used to finance our acquisition in our Titan Energy division, Titan Apparel, and Titan Nexus.

Gain or Loss from Derivative Liabilities. Derivative liabilities are initially measured at their fair value and then re-valued at each reporting date, with changes in the fair value reported as charges or credits to the statements of loss. The Company recognized a gain from the change in fair value of its derivative liabilities of $1,247 in the three months ended May 31, 2008 and a gain from the change in fair value of derivative liabilities of $3,462 in the three months ended May 31, 2007.

Nine Months Ended May 31, 2008 Compared to the Nine Months Ended May 31, 2007

The following table sets forth the results of operations for the nine months ended May 31, 2008 and May 31, 2007 and should be read in conjunction with our consolidated financial statements and the related notes appearing elsewhere in this report.

	Nine Months Ended
	5/31/2008					5/31/2007
Sales - Energy division	$	312,881		84	%	$	-		-	%
Sales - Communications division		34,897		9			80,138		83
Sales - Electronics and homeland security division		22,168		6			16,726		17
Sales - Global brands division		2,358		1			-		-
Total sales		372,304		100			96,864		100

Cost of sales - Energy division		296,738		80			-		-
Cost of sales - Communications division		24,392		7			64,333		66
Cost of sales - Electronics and homeland security division		21,379		6			16,014		17
Cost of sales - Global brands division		1,981		1			-		-
Total cost of sales		344,490		93			80,347		83

Gross profit		27,814		7			16,517		17

Operating expenses:
Sales and marketing		1,859		0			1,481		2
General and administrative		30,135		8			8,055		8
Bad debt expense		9,869		3			2,130		*
Impairment of intangibles		14,572		4			-		-
Amortization of intangibles		2,452		1			4,038		4
Total operating expenses		58,887		16			15,704		16

Operating income (loss)		(31,073	)	(8	)		813		1
Other income		1,583		0			43		*
Interest expense		(5,716	)	(2	)		(3,184	)	(3	)
Gain on disposal of assets		2,004		1			-		-
Gain (loss) on value of derivative instruments		10,999		3			(4,630	)	(5	)
Gain on extinguishment of debt		-		-			7,790		8
Net income (loss) from continuing operations	$	(22,203	)	(6)	%	$	832		1	%

Loss from discontinued operations		(12,454	)	(3	)		-		-
Net income (loss)	$	(34,657	)	(9)	%	$	832		1	%

Sales. Sales increased by $275,440 or 284% from $96,864 in the nine months ended May 31, 2007 to $372,304 in the nine months ended May 31, 2008. Sales increased primarily due to the formation of our Titan Energy division and the acquisition of Appco on September 17, 2007. In addition, the communications division is transitioning from selling products terminating on owned and or leased switching gear through its Oblio subsidiary to product offerings with service provided by third party telecommunication providers through Planet Direct. As such, sales in the communication division decreased by $45,241 or 56% from $80,138 in the nine months ended May 31, 2007 to $34,897 in the nine months ended May 31, 2008. Sales in the electronics division increased by $5,442 or 33% from $16,726 in the nine months ended May 31, 2007 to $22,168 in the nine months ended May 31, 2008

Cost of Sales. Cost of sales increased $264,143 or 329%, from $80,347 in the nine months ended May 31, 2007 to $344,490 in the nine months ended May 31, 2008, and as a percentage of sales increased from 83% in the nine months ended May 31, 2007 to 93% in the nine months ended May 31, 2008. The cost of sales increased due to the formation of our Titan Energy division and the acquisition of Appco on September 17, 2007. Cost of sales in the communication division decreased $39,941 or 62%, from $64,333 in the nine months ended May 31, 2007 to $24,392 in the nine months ended May 31, 2008. Costs of sales decreased in the communications division due to the decrease in sales in part but also to increased margins for the nine months ended May 31, 2008 as compared to the corresponding prior period. The increased margin is due to prepaid international calling card minute delivery modifications in the 2008 period for products managed on owned and or leased switching gear. In the prior period, the vast majority of the sales were generated from products serviced by third parties and the communications division primarily served as a distributor with primarily fixed margins. Cost of sales in the electronics division increased $5,365 or 34%, from $16,014 in the nine months ended May 31, 2007 to $21,379 in the nine months ended May 31, 2008. The cost of sales increase in the electronics division was attributable to an increase in sales over the comparable periods. The increase in cost of sales as a percent of sales is due to a higher percentage of sales in the current period from our energy division primarily made up of lower margin fuel sales compared to the prior period that was comprised primarily of sales in our communications division.

Sales and Marketing. Sales and marketing expenses increased by $378 or 26%, from $1,481 in the nine months ended May 31, 2007 to $1,859 in the nine months ended May 31, 2008. As a percentage of sales, sales and marketing expense decreased from 2% in the nine months ended May 31, 2007 to less than 1% in the nine months ended May 31, 2008. This decrease is primarily attributable to lower sales and marketing expenses as a percent of sales in our Titan Energy division in the nine months ended May 31, 2008 as compared to the nine months ended May 31, 2007 offset by sales and marketing expenses in our newly formed Titan Global Brands division.

General and Administrative Expenses. General and administrative expenses increased $22,080 or 274% from $8,055 in the nine months ended May 31, 2007 to $30,135 in the nine months ended May 31, 2008. As a percentage of sales, general and administrative expense was consistent for the comparable periods. General and administrative expense increases were attributable to the acquisitions that occurred during the 2008 fiscal period offset by decreases in general and administrative expenses in the communications division. Acquired entity general and administrative expenses constituted $23,019 of the general and administrative expenses increase offset by decreases in the communications division for the nine months ended May 31, 2008 when compared to the prior period.

Bad Debt Expense. Bad debt expense increased $7,739 or 363% from $2,130 in the nine months ended May 31, 2007 to $9,869 in the nine months ended May 31, 2008. As a percentage of sales, bad debt expense increased due to an increase in the allowance for doubtful accounts in our communications division. In connection with the dispute with several of the wholesale providers in the communications division, management determined that the collection of customer receivables was considered doubtful and an appropriate reserve was established. While management will continue its collection efforts, an adjustment to the established allowance for doubtful accounts will be made when and if those certain accounts are collected or are deemed to be collectible. Oblio has allowed $12,114 for uncollectible accounts and $3,552 for sales returns related to these disputes.

Amortization of Intangibles. Amortization of intangibles decreased $1,586 or 39% from $4,038 in the nine months ended May 31, 2007 to $2,452 in the nine months ended May 31, 2008. Amortization of intangibles decreased during the nine months ended May 31, 2008 due to the impairment recorded during the quarter ended November 30, 2007 in the communications division.

Interest Expense. Interest expense increased $2,532 or 80%, from interest expense of $3,184 in the nine months ended May 31, 2007 to $5,716 in the nine months ended May 31, 2008. Interest expense increased primarily due to the debt used to finance our acquisition in our Titan Energy division, Titan Apparel, and Titan Nexus.

Gain on Disposal of assets. Gain on disposal of assets increased $2,004 from $0 in the nine months ended May 31, 2007. The gain on disposal of assets is due to the sale of substantially all of our prepaid wireless assets on January 25, 2008. A portion of the consideration on the sale of the wireless assets was a $1,000 promissory note. An allowance was established on the date of the closing for the full amount of the $1,000 promissory note. A reserve was established for the note based on the poor credit worthiness of Boomerang and its lack of stable financing. The gain on disposal of assets equals the liabilities assumed by the buyer less the carrying amounts of the divested assets.

Gain or Loss from Derivative Liabilities. Derivative liabilities are initially measured at their fair value and then re-valued at each reporting date, with changes in the fair value reported as charges or credits to the statements of loss. The Company recognized a gain from the change in fair value of its derivative liabilities of $10,999 in the nine months ended May 31, 2008 and a loss from the change in fair value of derivative liabilities of $4,630 in the nine months ended May 31, 2007.

Impairment Charge. Impairment charge was $14,572 for the nine months ended May 31, 2008. During the quarter ended November 30, 2007, the Company created Titan Communications to further its strategic endeavors in the prepaid international long distance marketplace and began exploring new relationships outside our legacy traditional distribution and supply channels. Additionally, Oblio experienced a significant decrease in sales and collections of outstanding accounts receivable. Many of the long-standing distributors of Oblio’s products stopped placing orders for new product and stopped sending payments for previously placed orders.

While we are vigorously pursuing legal action against many of these customers, the extended collection process has significantly disrupted the operating cash flow cycle of the prepaid international long distance portion of our communication’s division. These issues along with losses experienced in its network operations have resulted in the Company ceasing to do business as Oblio in the prepaid international long distance market. As such, the Company evaluated goodwill and other assets for impairment based on changes in business model. Accordingly, the Company incurred an impairment charge for $14,572 of goodwill and intangibles related to the Oblio Telecom and Titan Wireless.

Additionally, subsequent to November 30, 2007, Titan Wireless, the Company’s wireless operating subsidiary, determined to cease the distribution of CDMA prepaid wireless handsets and the related airtime through its subsidiary Titan Wireless RM, Inc, due to the increasing capital requirements associated with the business model. As such, the Company evaluated goodwill and other assets for impairment based on changes in its business model.

Liquidity and Capital Resources

Our principal sources of liquidity are our existing cash and cash equivalents, cash generated from operations, and cash available from borrowings under our $13,000 revolving credit facility in our communications division, our $7,000 revolving credit facility in our electronics and homeland securities division, our $20,000 revolving credit facility in our energy division, and our $14,000 revolving credit facility in our global brands division for the continuing operations. As of May 31, 2008, the Company had no excess availability based on collateral limits under its revolving credit facilities. We may also generate liquidity from offerings of debt and/or equity in the capital markets. As of May 31, 2008, we had a total of $2,999 in unrestricted cash and cash equivalents. As of May 31, 2008, we also had restricted cash and cash equivalents and short-term investments of $617 that included funds to collateralize fuel bonds issued by a surety for Appco. See additional discussion in Note 6 to the consolidated financial statements.

During the nine months ended May 31, 2008, the Company made significant cost reductions in the communications division and the global brands division. In the communications division, the Company reduced staffing in the Richardson, Texas facility in connection with retooling the business; focusing on selling prepaid international calling cards that terminate on the networks of third parties. In addition, staff reductions were made when the wireless related assets were sold on January 25, 2008. Staff reductions were made in the global brands division in North Brunswick, New Jersey when our USAD operations were closed. We have realized lower general and administrative expenses in those divisions with the intent of reducing the negative operating cash flow of these segments and our business as we redefine those operations through new business ventures, modified operating structures, sale to a third party, or liquidation. In the instances where business liquidation is considered necessary by management, our senior lender will in most cases receive the majority of the proceeds from liquidation. While the trade accounts payable and related accrued expenses for the communications division have been recorded at the full amount of the amounts owed, management intends to negotiate with many of the unsecured creditors and attempt to settle these liabilities for less than face value. For the operations of our USAD subsidiary, a bankruptcy trustee has been appointed and is working through the process of an orderly liquidation of the assets to satisfy USAD’s obligations. As management determines and has an understanding of the ultimate settlement amount of the associated liabilities of USAD, liquidation accounting rules will prevail and liabilities will be recorded at their settled amounts. Given the recent cost containment measures implemented during the nine months ended May 31, 2008, management believes that our existing cash and investments, liquidity available under our revolving credit facility, ability to utilized term debt financing, ability to raise capital from the equity markets, ability to obtain funding from certain significant stockholders and or other related parties and cash flows from our remaining operations, namely the Energy segment, will be sufficient to meet our operating and capital requirements through at least the next twelve months. However, if we are not successful in continuing to reduce our costs and improve our related cash flows, it may be necessary to raise additional capital that may be dilutive to existing shareholders.

As of May 31, 2008, the Company had a working capital deficit of $26,762 including discontinued operations, a working capital deficit of $18,988 from continuing operations and an accumulated deficit of $85,357. In addition, the Company used $9,848 in continuing operations during the nine months ended May 31, 2008.

We are in the process of reinvigorating the distribution of prepaid international calling cards. We have signed distribution contracts with several telecommunications providers that support the prepaid international calling card business. We have exclusive territory for one of the distribution contracts that offers extremely competitive minute delivery structures. We remain optimistic that we can and will rebuild this segment of our operations. In addition, we are evaluating additional communications carriers to revitalize our trusted brands in the prepaid international long distance markets. We are evaluating opportunities and implementing cost cutting measures in our electronics and homeland security division through various means. We also plan to pursue other strategic acquisitions in our energy division. We anticipate financing any purchases of assets, and any related working capital and/or initial operating cost needs, with cash from operations, our existing cash, cash equivalents and short-term investments, borrowings under our revolving credit facility, and proceeds from offerings of debt and/or equity securities. The amounts we may seek to raise through any such offerings may be substantial. There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all. Further, equity financing may result in dilution to existing shareholders and may involve securities that have rights, preferences, or privileges that are senior to our common stock.

Operating Activities. Cash used in operating activities from continuing operations was $10,692 during the nine months ended May 31, 2008 compared to cash generated in operating activities from continuing operations of $10,096 during the nine months ended May 31, 2007. The increase in cash used by operations was primarily due to our net loss during the nine months ended May 31, 2008 compared to the nine months ended May 31, 2007.

Investing Activities. Cash used in investing activities from continuing operations was $27,165 during the nine months ended May 31, 2008 compared to cash used in investing activities of $407 during the nine months ended May 31, 2007. The increase in cash used in investing activities was due primarily to cash payments related to the Appco acquisition. The Company paid $30,000 to the sellers of Appco. In the prior period, equipment and improvements expenditures were $407 compared to $1,161 in the current nine-month period. This increase is due primarily to the construction of a new convenience store in our energy division. These increases were offset by cash provided by acquisitions of $3,784.

Financing Activities. Cash provided by financing activities from continuing operations during the nine months ended May 31, 2008 was $39,666 compared to cash used in financing activities of $9,702 during the nine months ended May 31, 2007. The increase in cash provided by financing activities is due to an increase in revolving lines of credit and term debt financing and the proceeds from the sale-leaseback transaction related to acquisitions. The Company raised $5,000 through an equity raise. The Company issued 2,500,000 shares valued at $2.00 per share to YA Global on November 9, 2007.

Impact of Inflation

The cost of our products produced in our electronics and homeland security division is influenced by the cost of a wide variety of raw materials, including precious metals such as gold used in plating, copper and brass used for contacts, and plastic material used in molding connector components. Generally, increases in the cost of raw materials, labor and services have been offset by price increases, productivity improvements and cost saving programs. We have no assurance, however, that we will be able to similarly offset such cost increases in the future.

The cost of our products produced in our energy segment is influenced by the cost of fuel. Crude oil and domestic wholesale petroleum markets are volatile. General political conditions, acts of war or terrorism and instability in oil producing regions, particularly in the Middle East, Russia and South America, could significantly impact crude oil supplies and wholesale petroleum costs. Significant increases and volatility in wholesale petroleum costs could result in significant increases in the retail price of petroleum products and in lower motor fuel gross margin per gallon. Increases in the retail price of petroleum products could impact consumer demand for motor fuel and convenience merchandise.

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 for the electronics and homeland security. The Company expects to experience sales upswings in its energy division during the summer peak vacation months. Typically the fuel and convenience store industries experience the largest volumes during those months.

Critical Accounting Policies

The SEC has 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, the Company's most critical accounting policies include: revenue recognition, which affects sales, inventory valuation, which affects its cost of sales and gross margin; and allowance for doubtful accounts and stock-based compensation, which affects general and administrative expenses. The methods, estimates and judgments the Company uses in applying these most critical accounting policies have a significant impact on the results the Company reports in its consolidated financial statements.

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.

In our electronics and homeland security division, we recognize revenue upon shipment to our customers. We record sales as gross sales less an allowance for returns and discounts. We provide our customers a limited right of return for defective PCBs and record an allowance against gross revenues for estimated returns at the time of sale based on historical results. Because our customers quickly test the PCBs delivered, the majority of returns for defects occur within the first 15 days following shipment.

In our global brands division, we recognize sales at the time the merchandise is shipped to our distribution customers.

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 adversely impact our reported results. If a customers’ account is deemed to be uncollectible by management, the account is charged off against the allowance. The allowance is then re-assessed and adjusted accordingly.

Inventory Valuation

In our communications division, our policy is to value activated prepaid international card and wireless handset inventory at the lower of cost or market on a card-by-card basis on a first in first out basis.

In our electronics and homeland security division, 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. We also value work-in-process and finished goods utilizing a standard cost system which we believe approximates cost. This policy requires us to make estimates regarding the market value of its inventories, including an assessment of excess or obsolete inventories. We determine excess and obsolete inventories based on an estimate of the future demand for its products within a specified time horizon, generally 12 months.

In our global brands division, inventories are stated at the lower of cost, determined by using the first-in, first-out method, or market. The Company periodically reviews inventory for slow-moving or obsolete items and such items are written down to net realizable value upon that determination.

In our energy division, liquid fuel and all other inventories are valued at the lower of cost, using the first-in, first-out (FIFO) method, or market.

Long-lived Assets

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Determining whether impairment has occurred typically requires various estimates and assumptions, including determining which cash flows are directly related to the potentially impaired asset, the useful life over which cash flows will occur, their amount, and the asset’s residual value, if any. In turn, measurement of an impairment loss requires a determination of fair value, which is based on the best information available. We use internal discounted cash flow estimates, quoted market prices when available and independent appraisals as appropriate to determine fair value. We derive the required cash flow estimates from our historical experience and our internal business plans and apply an appropriate discount rate.

Goodwill and Intangible Assets

We test goodwill for impairment annually and whenever events or circumstances make it more likely than not that impairment may have occurred, such as a significant adverse change in the business climate or a decision to sell or dispose of a reporting unit. Determining whether an impairment has occurred requires estimating the fair value of the respective reporting unit, which we estimate using a discounted cash flow method. When available and as appropriate, we use comparative market multiples to corroborate discounted cash flow results. In applying this methodology, we rely on a number of factors, including actual operating results, future business plans, economic projections and market data.

If this analysis indicates goodwill is impaired, measuring the impairment requires a fair value estimate of each identified tangible and intangible asset. In this case we supplement the cash flow approach discussed above with independent appraisals, as appropriate.

Stock-based Compensation

We account for stock-based compensation according to SFAS 123(R) (revised 2004), “Share Based Payment” by using the modified-prospective method. Stock-based compensation expense recognized in the consolidated statement of operations for the periods ended May 31, 2008 includes compensation expense for stock-based payment awards granted prior to, but not yet vested, as of May 31, 2008, based on the grant date fair value estimated in accordance with SFAS 123(R).

As stock-based compensation expense recognized in the consolidated statement of operations for the periods ended May 31, 2008 is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. SFAS 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ form those estimates.

Derivative Liabilities

In connection with the sale of convertible debt and equity instruments, we may also issue free-standing 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 free-standing options and warrants as derivative liabilities, rather than as equity. Certain instruments, including convertible debt and equity instruments and free-standing 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 free-standing options or warrants be accounted for as derivative instrument liabilities.

To the extent that the initial fair values of the bifurcated and/or free-standing derivative liabilities exceed the total proceeds received, an immediate charge to the statement of loss is recognized, in order to initially record the derivative liabilities at fair value. The discount from the face value of the convertible debt resulting from allocating part or all of the proceeds to the derivative liabilities, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to the statements of loss, 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 liabilities are classified in the balance sheet as current or non-current based on the classification of the host instrument.

Fuel Cost Hedges

The Company’s energy segment makes limited use of derivative instruments to offset the exposure associated with oil prices that arise from liquid fuel inventory. The Company’s energy segment does not engage in speculative derivative activities or derivative trading activities nor does it use derivatives with leverage features. These derivatives are designated as fair value hedges, and therefore gains and losses resulting from the change in the fair values of the derivatives are offset in income by the gains and losses arising from the changes in fair value of the underlying hedged items.

Income Taxes

Under the asset and liability method of SFAS No. 109, Accounting for Income Taxes, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, and their respective tax basis. Deferred tax assets, including tax loss and credit carry-forwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. Realization of the deferred tax asset is dependent upon generating sufficient taxable income in future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109 (“FIN 48”), on September 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS no. 109 and prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Additionally, FIN 48 provides guidance on subsequent derecognizing of tax positions, financial statement classification, recognition of interest and penalties, accounting in interim periods and disclosure and transition requirements. There was no impact on the Company’s financial statements as a result of the implementation of FIN 48.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various types of market risks in the normal course of business, including the impact of changes in commodity prices and interest rates. We may hedge market price fluctuations associated with physical purchases of fuel products by using derivative instruments including futures. We are exposed to changes in interest rates as fluctuations in market interest rates may lead to significant fluctuations in the fair value of our notes payable as many of our instruments are tied to the prime lending rate.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures: Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the period covered by this Quarterly Report, that ensure that information relating to the Company which is required to be disclosed in this Quarterly Report is recorded, processed, summarized and reported, within required time periods. Due to inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that compliance with the policies or procedures may deteriorate.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were not adequate and effective to ensure that material information relating to the Company and its consolidated subsidiaries would be accumulated and communicated to them by others within those entities, particularly during the period in which this Quarterly Report was being prepared, to allow timely decisions regarding required disclosure. The matters identified are with regard to insufficient documentation of our board of directors meetings, insufficient documentation of employee stock options and warrants granted, lack of documentation regarding approval of non-standard adjusting journal entries, insufficient documentation evidencing the research and proper application of revenue recognition issues, insufficient documentation of the accounting review and approval processes and insufficient documentation of acquisition and purchase price allocation accounting. 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.

Changes in internal controls: There have been no changes in the Company’s internal control over financial reporting during the three months ended May 31, 2008 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

All amounts excluding share and per share amounts referenced below are stated in thousands unless otherwise noted.

From time to time, the Company may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. While management does not believe these matters will have a material effect on the Company’s financial statements, litigation is subject to inherent uncertainties, and an adverse result could arise from time to time that may harm the Company’s business, financial condition and results of operations. The Company and its subsidiaries are involved in the following:

ALLSTATE PRINTING & PACKAGING, INC

AMERTEL COMMUNICATIONS, INC

ASIA TELECOM CORPORATION

AT&T CORP.

BARRON S. WALL, INC. t/a INSURANCE CONSULTING ASSOCIATES

CLIFTON PREPAID COMMUNICATIONS CORP.

As of May 31, 2008, the Company has fully reserved and allowed for the $2,199 in accounts receivable from Clifton less the amounts captured in the Writ of Garnishment.

CRESCENT FUND, INC.

F&L, LLP

GEOTEL INTERNATIONAL, LC

HAWAII GLOBAL EXCHANGE, INC. AND TRANSPAC TELECOM, INC.

JACO ELECTRONICS, INC.

LANHAM ACT LAWSUIT

LATIN AMERICAN VOIP, INC

LEVEL 3 COMMUNICATIONS, LLC

RICO LAWSUIT

STX COMMUNICATIONS, INC

STX has added the Company, Bryan Chance, Kurt Jensen, and Frank Crivello as defendants. STX claims that Oblio breached a contract to provide network support for prepaid phone cards, and to accept returns of the cards as necessary. STX also alleges that Oblio has been unjustly enriched by STX’s payments for cards, and that Oblio breached the implied warranty of merchantability and the express warranty to provide network support for the cards, and that Oblio’s failure to provide network support breached a duty of care owed to STX. STX also claims that Titan, Chance and Crivello tortiously interfered with the Oblio/STX contract and caused Obli to purposefully interrupt network support for the cards sold to STX. Finally, STX alleges all defendants tortiously interfered with STX’s business relationships with STX’s distributors and end consumers by playing recorded messages for end consumers to return their cards, and changing rate decks on the cards from the posted rates. STX’s actual damages are not specified, but it seeks not less than $1,200 in exemplary damages, together with interest, and attorney’s fees.

The case is currently set for trial on September 29, 2008, but the parties have agreed to request a continuance setting the trial for the week of April 20, 2009.

TOUCH TELL, INC.

On December 21, 2007, Oblio filed suit in Dallas County, Texas, against Touch Tell, Inc. (“Touch Tell”) for $1,300 in unpaid product. Oblio also initially obtained a pre-judgment Writ of Garnishment against Touch Tell’s bank trapping $1,300. Touch Tell filed a counterclaim that claims that after allowing for credits, deactivations, and returns, Oblio owes Touch Tell approximately $268. Touch Tell successfully reduced the amount of the garnishment to $477. At May 31, 2008, Oblio has recorded accounts receivable from TouchTell equal to the garnishment of $477. No amounts have been recorded or accrued related to the counter claim. The case is now set for trial in November 2008.

WESTERN PRINT & MAIL, LLC

OTHER LEGAL MATTERS

ITEM 1A. RISK FACTORS

Set forth below are material changes from risk factors previously disclosed in the Company’s Form 10-KSB for the year ended August 31, 2007. The risk factors below discuss risks with respect to acquisitions completed in the period covered by this report. In addition to the other information set forth in this report, you should carefully consider the factors discussed in our Annual Report on Form 10-KSB for the year ended August 31, 2007, which could materially affect our business, financial condition or future results.

Risks Relating to the Company’s Energy Division:

The convenience store industry is highly competitive and impacted by new entrants and our failure to effectively compete could result in lower sales and lower margins.

The convenience store industry in the geographic areas in which we operate is highly competitive and marked by ease of entry and constant change in the number and type of retailers offering products and services of the type we sell in our stores. We compete with other convenience store chains, independently owned convenience stores, motor fuel stations, supermarkets, drugstores, discount stores, dollar stores, club stores and mass merchants. In recent years, several non-traditional retailers, such as supermarkets, club stores and mass merchants, have impacted the convenience store industry, particularly in the geographic areas in which we operate, by entering the motor fuel retail business. These non-traditional motor fuel retailers have captured a significant share of the motor fuels market, and we expect their market share will continue to grow. In some of our markets, our competitors have been in existence longer and have greater financial, marketing and other resources than we do. As a result, our competitors may be able to respond better to changes in the economy and new opportunities within the industry. To remain competitive, we must constantly analyze consumer preferences and competitors’ offerings and prices to ensure that we offer a selection of convenience products and services at competitive prices to meet consumer demand. We must also maintain and upgrade our customer service levels, facilities and locations to remain competitive and attract customer traffic to our stores. We may not be able to compete successfully against current and future competitors, and competitive pressures faced by us could have a material adverse effect on our business and results of operations and our ability to service our outstanding indebtedness.

Historical prices for motor fuel have been volatile and significant changes in such prices in the future may adversely affect our profitability.

Crude oil and domestic wholesale petroleum markets are volatile. General political conditions, acts of war or terrorism and instability in oil producing regions, particularly in the Middle East, Russia and South America, could significantly impact crude oil supplies and wholesale petroleum costs. Significant increases and volatility in wholesale petroleum costs could result in significant increases in the retail price of petroleum products and in lower motor fuel gross margin per gallon. Increases in the retail price of petroleum products could impact consumer demand for motor fuel and convenience merchandise. This volatility makes it extremely difficult to predict the impact future wholesale cost fluctuations will have on our operating results and financial condition. In addition, a sudden shortage in the availability of motor fuel could adversely affect our business because our retail stores typically have a three to four day supply of motor fuel and our motor fuel supply contracts do not guarantee an uninterrupted, unlimited supply of motor fuel. A significant change in any of these factors could materially impact our motor fuel gallon volumes, motor fuel gross profit and overall customer traffic, which in turn could have a material adverse effect on our business and results of operations and our ability to service our indebtedness.

Wholesale cost increases and excise tax increases on cigarettes could adversely impact our revenues and profitability.

Significant increases in wholesale cigarette costs and tax increases on cigarettes may have an adverse effect on unit demand for cigarettes. Cigarettes are subject to substantial and increasing excise taxes on both a state and federal level. Increased excise taxes may result in declines in overall sales volume as well as reduced gross profit percent. Currently, major cigarette manufacturers offer rebates to retailers. We include these rebates as a component of our gross margin from sales of cigarettes. In the event these rebates are no longer offered, or decreased, our wholesale cigarette costs will increase accordingly. In general, we attempt to pass price increases on to our customers. However, due to competitive pressures in our markets, we may not be able to do so. These factors could materially impact our retail price of cigarettes, cigarette unit volume and revenues, merchandise gross profit and overall customer traffic, which could in turn have a material adverse effect on our business and results of operations and our ability to service our indebtedness.

Future legislation and campaigns to discourage smoking may have a material adverse effect on our revenues and gross profit.

Future legislation and national, state and local campaigns to discourage smoking could have a substantial impact on our business, as consumers adjust their behaviors in response to such legislation and campaigns. Reduced demand for cigarettes could have a material adverse effect on sales of, and margins for, the cigarettes we sell.

The wholesale motor fuel distribution industry is characterized by intense competition and fragmentation and our failure to effectively compete could result in lower margins.

The market for distribution of wholesale motor fuel is highly competitive and fragmented, which results in narrow margins. We have numerous competitors, some of which may have significantly greater resources and name recognition than us. We rely on our ability to provide value-added reliable services and to control our operating costs in order to maintain our margins and competitive position. If we were to fail to maintain the quality of our services, customers could choose alternative distribution sources and our margins could decrease. Furthermore, there can be no assurance that major oil companies will not decide to distribute their own products in direct competition with us or that large customers will not attempt to buy directly from the major oil companies. The occurrence of any of these events could have a material adverse effect on our business and results of operations and our ability to service our indebtedness.

Our motor fuel operations are subject to inherent risk, and insurance, if available, may not adequately cover any such exposure. The occurrence of a significant event that is not fully insured could have a material adverse effect on our business.

We operate retail outlets that sell refined petroleum products and distribute motor fuel to our wholesale customers. The presence of flammable and combustible products at our facilities provides the potential for fires and explosions that could destroy both property and human life. These products, almost all of which are liquids, also have the potential to cause environmental damage if improperly handled or released. Insurance is not available against all operational risks, especially environmental risks, and there is no assurance that insurance will be available in the future. In addition, as a result of factors affecting insurance providers, insurance premiums with respect to renewed insurance policies may increase significantly compared to what we currently pay. The occurrence of a significant event that is not fully insured could have a material adverse effect on our business and results of operations and our ability to service our indebtedness.

Decreases in consumer spending, travel and tourism in the areas we serve could adversely impact our business.

In the convenience store industry, customer traffic is generally driven by consumer preferences and spending trends, growth rates for automobile and commercial truck traffic and trends in travel, tourism and weather. Changes in economic conditions could adversely impact consumer spending patterns and travel and tourism in our markets, which could have a material adverse effect on our business and results of operations and our ability to service our indebtedness.

The industries in which we operate are subject to seasonal trends, which may cause our operating costs to fluctuate, affecting our cash flow.

We experience more demand for our merchandise, food and motor fuel during the late spring and summer months than during the fall and winter. Travel, recreation and construction are typically higher in these months in the geographic areas in which we operate, increasing the demand for the products that we sell and distribute. Therefore, our revenues are typically higher in the second and third quarters of our fiscal year. As a result, our results from operations may vary widely from period to period, affecting our cash flow.

Compliance with and liability under state and federal environmental regulations, including those that require investigation and remediation activities, may require significant expenditures or result in liabilities that could have a material adverse effect on our business.

Our business is subject to various federal, state and local environmental laws and regulations, including those relating to underground storage tanks, the release or discharge of hazardous materials into the air, water and soil, the generation, storage, handling, use, transportation and disposal of hazardous materials, the exposure of persons to hazardous materials, and the health and safety of our employees. A violation of, liability under or compliance with these laws or regulations or any future environmental laws or regulations, could have a material adverse effect on our business and results of operations and our ability to service our outstanding indebtedness, including the notes.

Certain environmental laws, including CERCLA, impose strict, and under certain circumstances, joint and several, liability on the owner and operator as well as former owners and operators of properties for the costs of investigation, removal or remediation of contamination and also impose liability for any related damages to natural resources without regard to fault. In addition, under CERCLA and similar state laws, as persons who arrange for the transportation, treatment or disposal of hazardous substances, we also may be subject to similar liability at sites where such hazardous substances come to be located. We may also be subject to third party claims alleging property damage and/or personal injury in connection with releases of or exposure to hazardous substances at, from or in the vicinity of our current or former properties or off-site waste disposal sites. The costs associated with the investigation and remediation of contamination, as well as any associated third party claims, could be substantial, and could have a material adverse effect on our business and results of operations and our ability to service our outstanding indebtedness, including the notes. In addition, the presence or failure to remediate identified or unidentified contamination at our properties could potentially materially adversely affect our ability to sell or rent such property or to borrow money using such property as collateral.

We are required to make financial expenditures to comply with regulations governing underground storage tanks adopted by federal, state and local regulatory agencies. Compliance with existing and future environmental laws regulating underground storage tank systems of the kind we use may require significant capital expenditures in the future. These expenditures may include upgrades, modifications, and the replacement of underground storage tanks and related piping to comply with current and future regulatory requirements designed to ensure the detection, prevention, investigation and remediation of leaks and spills.

In addition, the Federal Clean Air Act and similar state laws impose requirements on emissions to the air from motor fueling activities in certain areas of the country, including those that do not meet state or national ambient air quality standards. These laws may require the installation of vapor recovery systems to control emissions of volatile organic compounds to the air during the motor fueling process. While we believe we are in material compliance with all applicable regulatory requirements with respect to underground storage tank systems of the kind we use, the regulatory requirements may become more stringent or apply to an increased number of underground storage tanks in the future, which would require additional, potentially material, expenditures.

Failure to comply with the other state and federal regulations we are subject to may result in penalties or costs that could have a material adverse effect on our business.

Our business is subject to various other state and federal regulations including, but not limited to, employment laws and regulations, minimum wage requirements, overtime requirements, working condition requirements, citizenship requirements and other laws and regulations. Any appreciable increase in the statutory minimum wage rate, income or overtime pay, adoption of mandated health benefits, or changes to immigration laws and citizenship requirements would likely result in an increase in our labor costs and such cost increase, or the penalties for failing to comply with such statutory minimums or regulations, could have a material adverse effect on our business and results of operations and our ability to service our outstanding indebtedness.

Terrorist attacks and threatened or actual war may adversely affect our business.

Our business is affected by general economic conditions and fluctuations in consumer confidence and spending, which can decline as a result of numerous factors outside of our control. Terrorist attacks or threats, whether within the United States or abroad, rumors or threats of war, actual conflicts involving the United States or its allies, or military or trade disruptions impacting our suppliers or our customers may adversely impact our operations. As a result, there could be delays or losses in the delivery of supplies to us, decreased sales of our products and extension of time for payment of accounts receivable from our customers. Specifically, strategic targets such as energy related assets (which could include refineries that produce the motor fuel we purchase or ports in which crude oil is delivered) may be at greater risk of future terrorist attacks than other targets in the United States. These occurrences could have an adverse impact on energy prices, including prices for our products, and an adverse impact on the margins from our operations. In addition, disruption or significant increases in energy prices could result in government imposed price controls. Any or a combination of these occurrences could have a material adverse effect on our business and results of operations and our ability to service our outstanding indebtedness.

Risks Relating to the Company’s Global Brands Division:

We may discontinue products or product lines, which could result in returns, asset write-offs and shutdown costs. We may also engage in product recalls which would reduce our cash flow and earnings.

In the past, we have discontinued certain products and product lines which resulted in returns from customers, asset write-offs and shutdown costs. We may suffer similar adverse consequences in the future to the extent we discontinue products that do not meet expectations or no longer satisfy consumer demand. Product returns, write-offs or shutdown costs would reduce cash flow and earnings. Product efficacy or safety concerns could result in product recalls or declining sales, which also would reduce our cash flow and earnings.

We face intense competition in a mature industry and we may be required to increase expenditures and accept lower profit margins to preserve or maintain our market share. Unless the markets in which we compete grow substantially, a loss of market share will result in reduced sales levels and declining operating results.

U.S. markets for consumer products are considered mature and commonly characterized by high household penetration, particularly with respect to our most significant product categories, such as laundry detergents, deodorizers, household cleaning products, toothpastes, antiperspirants and deodorants. Our unit sales growth in domestic markets will depend on increased use of our products by consumers, product innovation and our ability to capture market share from competitors. We may not succeed in implementing strategies to increase domestic revenues.

The consumer products industry, particularly the laundry detergent and personal care categories, is intensely competitive. To protect existing market share or to capture increased market share, we may need to increase expenditures for promotions and advertising and introduce and establish new products. Increased expenditures may not prove successful in maintaining or enhancing market share and could result in lower sales and profits. Many of our competitors are large companies, including Church and Dwight, The Procter & Gamble Company, Unilever, Inc., The Clorox Company, Colgate-Palmolive Company, Johnson & Johnson, S.C. Johnson & Son, Inc., many of which have greater financial resources than we do. These competitors have the capacity to outspend us should they attempt to gain market share. If we lose market share and the markets in which we compete do not grow, our sales levels and operating results will decline.

Providing price concessions or trade terms that are acceptable to our trade customers, or the failure to do so, could adversely affect our sales and profitability.

Consumer products, particularly those that are value-priced like many of our products, are subject to significant price competition and in recent years have been characterized by price deflation. From time to time, we may need to reduce the prices for some of our products to respond to competitive and customer pressures and to maintain market share. Any reduction in prices to respond to these pressures would harm profit margins. In addition, if our sales volumes fail to grow sufficiently to offset any reduction in margins, our results of operations would suffer.

Because of the competitive environment facing retailers, many of our trade customers, particularly our high-volume retail store customers, have increasingly sought to obtain pricing concessions or better trade terms. To the extent we provide concessions or better trade terms, our margins are reduced. Further, if we are unable to maintain terms that are acceptable to our trade customers, these trade customers could reduce purchases of our products and increase purchases of products from our competitors which would harm our sales and profitability.

A continued shift in the retail market from food and drug stores to club stores and mass merchandisers could cause our sales to decline.

Our performance also depends upon the general health of the economy and of the retail environment in particular and could be significantly harmed by changes affecting retailing and by the financial difficulties of retailers. Industry wide, consumer products such as those marketed by us are increasingly being sold by club stores and mass merchandisers, while sales of consumer products by food and drug stores comprise a smaller proportion of the total volume of consumer products sold. Sales of our products are stronger in the food and drug channels of trade and not as strong with the club stores and mass merchandisers. Although we have taken steps to improve sales by club stores and mass merchandisers, if we are not successful in improving sales to these channels, and the current trend continues our financial condition and operating results could suffer.

Environmental matters create potential liability risks.

We must comply with various environmental laws and regulations in the jurisdictions in which we operate, including those relating to the handling and disposal of solid and hazardous wastes and the remediation of contamination associated with the use and disposal of hazardous substances. A release of such chemicals due to accident or an intentional act could result in substantial liability to governmental authorities or to third parties. We have incurred, and will continue to incur, capital and operating expenditures and other costs in complying with environmental laws and regulations. It is possible that we could become subject to additional environmental liabilities in the future that could cause a material adverse effect on our results of operations or financial condition.

Failure to maximize or successfully assert intellectual property rights could materially adversely affect our competitiveness.

We rely on trademark, trade secret, patent and copyright laws to protect our intellectual property rights. We cannot be sure that these intellectual property rights will be maximized or that they can be successfully asserted. There is a risk that we will not be able to obtain and perfect our own intellectual property rights, or, where appropriate, license intellectual property rights necessary to support new product introductions. We cannot be sure that these rights, if obtained, will not be invalidated, circumvented or challenged in the future. In addition, even if such rights are obtained in the United States, the laws of some of the other countries in which our products are or may be sold do not protect intellectual property rights to the same extent as the laws of the United States. Our failure to perfect or successfully assert intellectual property rights could make us less competitive and could have a material adverse effect on our business, operating results and financial condition.

Our Future Success Depends on Our Ability to Respond To Changing Consumer Demands, Identify and Interpret Fashion Trends and Successfully Market New Products

The Company competes with numerous other marketers of footwear, some of which are larger and have greater resources than the Company. Product performance and quality, including technological improvements, product identity, competitive pricing and the ability to adapt to style changes are all important elements of competition in the footwear industry. The footwear industry in general is subject to changes in consumer preferences with respect to the popularity of particular designs and categories of footwear. The Company strives to maintain and improve its competitive position through promotion of brand awareness, sourcing efficiencies, and the style, comfort and value of its products. Future sales by the Company will be affected by its continued ability to sell its products at competitive prices and to meet shifts in consumer preferences. If the Company is unable to respond effectively to competitive pressures and changes in consumer spending, the Company's business, results of operations and financial condition will be adversely affected.

Our Business May Be Negatively Impacted as a Result of our Failure to Retain Customers and Get Repeat Business

The Company's financial success is directly related to the willingness of its customers to continue to purchase its products. The Company does not typically have long-term contracts with its customers. Sales to the Company's customers are generally on an order-by-order basis and are subject to rights of cancellation and rescheduling by the customers. Failure to fill customers' orders in a timely manner could harm the Company's relationships with its customers. Furthermore, if any of the Company's major customers experience a significant downturn in its business, or fails to remain committed to the Company's products or brands, then these customers may reduce or discontinue purchases from the Company, which could have an adverse effect on the Company's business, results of operations and financial condition.

The Company sells its products to wholesale customers and extends credit based on an evaluation of each customer's financial condition, usually without requiring collateral. The financial difficulties of a customer could cause the Company to stop doing business with that customer or reduce its business with that customer. The Company's inability to collect from its customers or a cessation or reduction of sales to certain customers because of credit concerns could have an adverse effect on the Company's business, results of operations and financial condition.

Our Business May Be Negatively Impacted because of Changes in the Economy

Our business depends on the general economic environment and levels of consumer spending in the United States and other parts of the world that affect not only the ultimate consumer, but also retailers, who are our primary direct customers. Purchases of footwear tend to decline in periods of recession or uncertainty regarding future economic prospects, when consumer spending, particularly on discretionary items, declines. During periods of recession or economic uncertainty, we may not be able to maintain or increase our sales to existing customers, make sales to new customers, open and operate new retail stores, maintain sales levels at our existing stores, maintain or increase our international operations on a profitable basis, or maintain or improve our earnings from operations as a percentage of net sales. In addition, the continued threat of terrorist attacks throughout the world similar to those on September 11, 2001, and the military action, or possible military action, taken by the United States and other nations in Iraq or other countries may cause significant disruption to commerce throughout the world. As a result, our operating results may be adversely and materially affected by downward trends in the domestic economy or the occurrence of events that slow the global economy or, more particularly, result in delays or cancellations of purchase orders for our products.

Our Business Could Be Harmed if We Fail To Maintain Proper Inventory Levels

The Company's ability to manage its inventories properly is an important factor in its operations. Inventory shortages can impede the Company's ability to meet at-once orders and can adversely affect the timing of shipments to customers and diminish brand loyalty. Conversely, excess inventories can result in increased interest costs as well as lower gross margins due to the necessity of lowering prices in order to liquidate excess inventories. If the Company is unable to effectively manage its inventory, its business, results of operations and financial condition will be adversely affected.

We Face Intense Competition, Including Competition from Companies with Significantly Greater Resources than Ours, and If We Are Unable To Compete Effectively with These Companies, Our Market Share May Decline and Our Business Could Be Harmed

We face intense competition in the footwear industry from other established companies. A number of our competitors have significantly greater financial, technological, engineering, manufacturing, marketing and distribution resources than we do. Their greater capabilities in these areas may enable them to better withstand periodic downturns in the footwear industry, compete more effectively on the basis of price and production and more quickly develop new products. In addition, new companies may enter the markets in which we compete, further increasing competition in the footwear industry.

We believe that our ability to compete successfully depends on a number of factors, including the style and quality of our products and the strength of the brand names we sell, as well as many factors beyond our control. We may not be able to compete successfully in the future, and increased competition may result in price reductions, reduced profit margins, loss of market share and an inability to generate cash flows that are sufficient to maintain or expand our development and marketing of new products, which would adversely impact our revenues and the trading price of our stock.

Our Business Could Be Harmed If Our Contract Manufacturers or Suppliers Violate Labor, Trade or Other Laws

We require our independent contract manufacturers, suppliers and licensees to operate in compliance with applicable laws and regulations. Manufacturers are required to certify that neither convicted, forced or indentured labor (as defined under United States law) nor child labor (as defined by law in the manufacturer’s country) is used in the production process, that compensation is paid in accordance with local law and that their factories are in compliance with local safety regulations. Although we promote ethical business practices and our sourcing personnel periodically visit and monitor the operations of our independent contract manufacturers, suppliers and licensees, we do not control them or their labor practices. If one of our independent contract manufacturers, suppliers or licensees violates labor or other laws or diverges from those labor practices generally accepted as ethical in the United States, it could result in adverse publicity for us, damage our reputation in the United States or render our conduct of business in a particular foreign country undesirable or impractical, any of which could harm our business.

In addition, if we, or our foreign manufacturers, violate United States or foreign trade laws or regulations, we may be subject to extra duties, significant monetary penalties, the seizure and the forfeiture of the products we are attempting to import or the loss of our import privileges. Possible violations of United States or foreign laws or regulations could include inadequate record keeping of our imported products, misstatements or errors as to the origin, quota category, classification, marketing or valuation of our imported products, fraudulent visas or labor violations. The effects of these factors could render our conduct of business in a particular country undesirable or impractical and have a negative impact on our operating results.

Our Retail Stores Depend Heavily On the Customer Traffic Generated By Strip or Shopping Malls and By Tourism

Our retails stores are located in strip malls and shopping malls we depend on obtaining prominent locations and the overall success of the malls to generate customer traffic. We cannot control the development of new malls, the availability or cost of appropriate locations within existing or new malls or the success of individual malls. Some of our stores occupy street locations that are heavily dependent on customer traffic generated by tourism. Any substantial decrease in tourism resulting from political, social or military events, a downturn in the economy or otherwise, is likely to adversely affect sales in our existing stores, particularly those with street locations. The effects of these factors could hinder our ability to open retail stores in new markets or reduce sales of particular existing stores, which could negatively affect our operating results.

The Success of Our Business May Be Affected By Our Failure to Obtain Major Brand Licenses

We anticipate deriving significant revenues and earnings in the future from an exclusive licensing agreement with a brand name or names to produce and sell branded footwear. We may not be able to obtain licensing agreements with other major brand names. If we are unable to obtain these licensing agreements, it could have a material adverse effect on our future sales and our business.

Natural Disasters or a Decline in Economic Conditions in California Could Increase Our Operating Expenses or Adversely Affect Our Sales Revenue

A substantial portion of our operations are located in California, including 2 of our retail stores, our headquarters in Santa Barbara and our current distribution center in the Los Angeles Metropolitan area. Because a significant portion of our net sales is derived from sales in California, a decline in the economic conditions in California, whether or not such decline spreads beyond California, could materially adversely affect our business. Furthermore, a natural disaster or other catastrophic event, such as an earthquake or wild fires affecting California, could significantly disrupt our business including the operation of our only domestic distribution center. We may be more susceptible to these issues than our competitors whose operations are not as concentrated in California.

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

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS

31.1 - Certification of 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)

SIGNATURES

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

TITAN GLOBAL HOLDINGS, INC.

By:	/s/ Bryan Chance
	Bryan Chance
	Chief Executive Officer and
	President
	(Principal Executive Officer)

TITAN GLOBAL HOLDINGS, INC.

By:	/s/ Scott Hensell
	Scott Hensell
	Chief Financial Officer
	(Principal Financial and
	Accounting Officer)

SUBSIDIARIES

Oblio Telecom, Inc.

Titan Communications, Inc.

Titan Electronics, Inc. (formerly Titan PCB West, Inc.)

Titan PCB East, Inc.

Titan Nexus, Inc.

Titan Wireless Communications, Inc. (Titan Wireless RM, Inc.)

StartTalk, Inc.

Planet Direct Inc. (formerly Pinless, Inc.)

Appalachian Oil Company, Inc.

Appco-KY, Inc.

USA Detergents, Inc.

Titan Apparel, Inc.

America’s Value Brands Inc.

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. freshman Avg

Titan Global (TTGH) Inactive 10-Q2008 Q3 Quarterly report

Content analysis